1. business and industrial
2. company
3. annual report

COVER SHEET
1 2 9 4 2
SEC Registration Number
MA R C V E N T U R E S
( f o r m e r l y
H OL D I N GS , I N C .
A J O . N E T
HO L D I NG S , I N C . )
(Company’s Full Name)
1 6 t h
F l o o r
P a s e o
d e
C i t i b a n k
R o x a s
T o w e r
M a k a t i
C i t y
(Business Address: No. Street City/Town/Province)
1 2
3 1
Month
Day
Carlos C. Syquia
836-8609 or 856-7976
(Contract Person)
(Company Telephone Number)
2 0 -
I S
(Form Type)
0 6
2 9
Month
Day
(Fiscal Year)
(Annual Meeting)
Definitive Information
Statement
Secondary License Type, If Applicable)
N/A
Corporation Finance
Department
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
N/A
2168
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 20-IS
INFORMATION STATEMENT PURSUANT TO SECTION 20
OF THE SECURITIES REGULATION CODE
1.
Check the appropriate box:
[] Preliminary Information Statement
[X] Definitive Information Statement
2.
MARCVENTURES HOLDINGS, INC.
Name of the Registrant as specified in its charter
3.
PHILIPPINES
Province, country or other jurisdiction of incorporation or organization
4.
SEC Identification Number _____12942________
5.
BIR Tax Identification Code ___470-000-104-320___
6
16 Floor, Citibank Tower, Paseo de Roxas, Makati City
Address of principal office
th
Postal Code 1227
7.
(02) 836-8609 or 856-7976
Registrant’s telephone numbers, including area code
8.
June 28, 2013 at 3:00 pm, at the at the Metropolitan Club, Inc., Estrella corner
Amapola Sts., Guadalupe Viejo, Makati City
Date, time and place of the meeting of security holders
9.
Approximate date on which the Information Statement is first to be sent or given to security
holders – June 3, 2013
10.
Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the
RSA (information on number of shares and amount of debt is applicable only to corporate
registrants):
Title of Each Class
Number of Shares of Common Stock
Outstanding or Amount of Debt Outstanding
Common Stock
1,735,636,781*
Debt Outstanding
* As of April 30, 2013
Are any or all of registrant's securities listed in a Stock Exchange?
YES [X] NO [ ]
If yes, disclose the name of such Stock Exchange and the class of securities therein:
Philippine Stock Exchange - Common Stock
2
INFORMATION STATEMENT
(SEC FORM 20-IS)
A. GENERAL INFORMATION
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
Item 1. DATE, TIME AND PLACE OF MEETING OF SECURITY HOLDERS
Marcventures Holdings, Inc. (the “Company”, the “Registrant” or “MARC”) will be holding its annual
stockholders meeting on June 28, 2013. The following are the details:
Date of meeting
Time of meeting
Place of meeting
:
:
:
Approximate date of mailing of this
Statement
:
Registrant’s Mailing Address
:
June 28, 2013
3:00 P.M.
Metropolitan Club, Inc., Estrella corner
Amapola Sts., Guadalupe Viejo, Makati
City.
June 3, 2013
th
16 Floor, Citibank Tower, Paseo de
Roxas, Makati City
Item 2. DISSENTERS’ RIGHT OF APPRAISAL
The Corporation Code limits the exercise of the appraisal right by any dissenting stockholder to the
following instances:
a. In case any amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in
respect superior to those of outstanding shares of any class, or of extending or shortening
the term of corporate existence (Section 81);
b. In case of the sale, lease, exchange, transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate property and assets (Section 81);
c.
In case of merger or consolidation (Section 81);
d. In case of investments in another corporation, business or purpose (Section 42).
Since the matters to be taken up do not include any of the foregoing, the appraisal right will not be
available.
However, if at any time after this Information Statement has been sent out, an action which may
give rise to the right of appraisal is proposed at the meeting, any stockholder who voted against the
proposed action and who wishes to exercise such right must make a written demand, within thirty
(30) days after the date of the meeting or when the vote was taken, for the payment of the fair
market value of his shares. Upon payment, he must surrender his certificates of stock. No
payment shall be made to any dissenting stockholder unless the Company has unrestricted
retained earnings in its books to cover such payment.
Item 3. INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED
UPON
No director or officer of the Company at any time since the beginning of the last fiscal year or any
nominee for election as a director of the Company or any associate of any of the foregoing persons
has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be
acted upon in the stockholders’ meeting other than their re-election to their respective positions.
No director has informed the Company in writing that he intends to oppose any action to be taken at
the meeting.
4
B. CONTROL & COMPENSATION INFORMATION
Item 4. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
(1)
The Registrant has 1,735,676,781 outstanding common shares as of April 30, 2013. Each
common share shall be entitled to one vote with respect to all matters to be taken up during the
annual stockholders’ meeting.
(2)
The record date for determining stockholders entitled to notice and to vote during the annual
stockholders meeting and also to this information statement is on May 27, 2013.
(3)
The election of the board of directors for the current fiscal year will be taken up and all
stockholders have the right to cumulate their votes in favor of their chosen nominees for
director in accordance with Section 24 of the Corporation Code. Section 24 provides that a
stockholder, may vote such number of shares registered in his name as of the record date for
as many persons as there are directors to be elected or he may cumulate said shares and give
one candidate as many votes as the number of directors to be elected multiplied by the number
of his shares shall equal, or he may distribute them on the same principle among as many
candidates as he shall see fit. The total number of votes cast by such stockholder should not
exceed the number of shares owned by him as shown in the books of the corporation multiplied
by the whole number of directors to be elected.
(4) Security Ownership of Certain Record and Beneficial Owners and Management
Security ownership of certain record (“r”) and beneficial (“b”) owners of five percent (5%) or more
of the outstanding capital stock of the Registrant as of April 30, 2013:
Title of
Class
Name , address of
record owner and
relationship with
Issuer
Common
PCD Nominee
Corporation
(Filipino)
Name of
Beneficial
Owner &
Relationship
with Record
Owner
The Company
has no
knowledge of
other persons
with lodged
shares who are
the beneficial
owners of more
than 5% of its
outstanding
capital stock.
Citizenship
No. of Shares Held
Percent
Filipino
1,700,048,308
97.95%
Filipino
600,000,000
(Lodged with PCD
34.57%
PCD authorizes
its trading
participants to
vote the shares
registered in
their name.
Common
Common
Mario G. Vijungco.
Chairman
Dy Chi Hing
Mr. Vijungco is
currently the
Chairman of
Marcventures
Holdings, Inc.
Nominee Corporation)
218,500,000
12.59%
(Lodged with PCD
Nominee Corporation)
5
Common
Erlinda D. Vijungco
45,000,000
2.59%
(Lodged with PCD
Nominee Corporation)
Common
Sonia T. Techico
130,000,000
7.49%
(Lodged with PCD
Nominee Corporation)
Common
Arturo L. Tiu
98,929,000
5.70%
(Lodged with PCD
Nominee Corporation)
As of 30 April 2013, the foreign ownership level of Marcventures Holdings, Inc. (MARC) is 33,471,612
shares or equivalent to 1.93%.
Security Ownership of Management – Record “r” and Beneficial “b” (direct/indirect)
owners as of April 30, 2013:
Title of Class Name of Beneficial Owner
Common
Mario G. Vijungco.
Chairman
Common
Ramon A. Recto
President
Common
Joel A. Banares Director
Common
Dy Chi Hing Director
Common
Raul Ma F. AnonasDirector
Common
Roberto A. Atendido
Director
Amount and nature of
ownership (Indicate record
(“r”) and/or beneficial (“b”)
Citizenship
Percent of
Class
Filipino
34.57%
45,000,000 –“r” (indirect) thru
Erlinda Vijungco)
1 – “r” (direct)
Filipino
2.59%
0.00%
1 – “r” (direct)
Filipino
0.00%
218,500,000 - “r” (direct)–
Filipino
12.59%
600,000,000– “r” (direct)
130,000,000 – (indirect thru
Sonia T. Techico)
5,405,001– “r” (direct)
Filipino
0.31%
1 – “r” (direct)
Filipino
0.00%
7.49%
453,000 “b”(indirect thru AOB
Management Corp.)
0.03%
1.22%
20,943,605 “b”(indirect thru
Asian Alliance) Investment
Corp.)
Common
Common
Common
Common
Rafael Yaptinchay
Director
Carlos C. Syquia
Treasurer
Roberto V. San Jose
Corporate Secretary
Ana Katigbak
Asst. Corporate Secretary
TOTAL
568,182 – “r”
(direct)
100,100 – “r” (direct)
Filipino
0.01%
-0-
Filipino
0.00%
-0-
Filipino
0.00%
999,573,286
21,596,605
”r”
“b”
0.03%
%
%
6
Voting trust holders of 5% or More
No person holds more than five per centum (5%) of a class under a voting trust agreement or
similar arrangement.
Changes in control
There are no arrangements which may result in a change in control of the registrant.
Item 5. DIRECTORS AND EXECUTIVE OFFICERS
Board of Directors and Executive Officers
The names, ages, citizenship, position and business experience of all directors and executive
officers held for the past five (5) years (except those years stated otherwise) are as follows:
Name
Age
Citizenship
Position
Mario G. Vijungco
Ramon A. Recto
Dy Chi Hing
Joel A. Bañares
Rafael Yaptinchay
Raul Ma. Anonas
Roberto Atendido
Carlos C. Syquia
Andres A. del Rosario
Roberto V. San Jose
Ana A. Katigbak
62
80
67
55
62
50
65
71
49
71
44
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Chairman
President
Director
Independent Director
Independent Director
Director
Director
Treasurer
Asst. Treasurer
Corporate Secretary
Asst. Corporate Secretary
Mario G. Vijungco was elected Chairman in March 2010. In the past 5 years, Mario G. Vijungco
has been a prominent entrepreneur with previous various business interests in logging, prawn
culture, copra trading, and retail/wholesale of heavy equipment spare parts. He owned and
operated a logging concession under Ventura Timber Corporation, the original owner of MPSA 01693-XI.
Ramon A. Recto was elected President in March 2010. In the past 5 years,Mr. Recto has been
director of Crown Equities and Premiere Horizon Alliance Corp.(formerly Premiere Entertainment
Philippines). He is also Chairman and President of CME Technologies, Inc. He was formerly the
President of Lepanto Consolidated Mining Corporation..
Dy Chi Hing was elected Director in March 2010. In the past 5 years, Mr. Dy Chi Hing has been
Chairman and CEO of So-Nice International Corporation, and has been in the import and trading
business since 1968. He is an honorary member and financial consultant of the Filipino-Chinese
Chamber of Commerce and Industry, and is an active member and one of the co-founders of the
Meat Importer Traders Association (MITA).
Joel A. Bañares was elected Independent Director in February 2010. Mr. Banares is currently a
director of Palm Thermal Consolidated Holdings Corp., a subsidiary of A Brown Company Inc.
involved in power generation, Managing Director of St. Arnold Development Corp., and consultant
to other power and infrastructure ventures. Apart from his current positions, he is also a Fellow of
the Institute of Corporate Directors (ICD). Mr. Banares served as Undersecretary of Finance from
1998 to 2001 and Chief Finance Officer of the National Grid Corporation of the Philippines from
2009 to 2010.
Rafael Yaptinchay was elected Independent Director in March 2010. In the past 5 years, Mr.
Yaptinchay has been President and Director of the Meridien Properties Group of Companies where
he has been connected since 1988. He is also Treasurer of the Century Properties Group of
Companies.
Raul Ma. Anonas was elected Director in August 2010. In the past 5 years, Mr. Anonas has been
President of Rajawali Resources Holdings Inc.(formerly Rajawali Distributors Inc.). He is currently
Director and Chief Financial Officer of Premiere Horizon Alliance Corp.(formerly Premiere
7
Entertainment Philippines) and Digiwave Solutions Inc. (a 100% owned subsidiary of PHAC). He is
also a director of the following companies: First Ardent Development Corp., New Marketlink
Pharmaceutical Corp, Megavia Motor Company, Megavia Corporation, Humabon Distributors Inc
Mr. Anonas was previously employed at Citibank Philippines as Vice President of Corporate
Finance.
Roberto Atendido Mr. Atendido has the distinction of being a former President of the Investment
House Association of the Philippines. He is concurrently President of Asian Alliance Investment
Corp. and Asian Alliance Holdings & Development Corp., Chairman of Carac-An Development
Corporation, Vice Chairman/Director of Sinag Energy Philippines, Inc. (formerly Energy
Management & Conservation Corp.),and President/Chairman of Myka Advisory & Consultancy
Services, Inc. He is currently Director of Paxys Inc., PICOP Resources, Inc., GEM Communications
Holdings Corporation, Zest Air, Inc., Marcventures Holdings, Inc., and Beneficial Life Insurance
Co., Inc. . He was previously the President of Insular Investment & Trust Corporation, Managing
Director of Asian Oceanic Holdings (Phils.) Inc., Managing Director of PT Duta Perkasa Chandra
Inti Leasing (Indonesia), Vice President of PCI Capital Asia Ltd. (Hong Kong) and Bancom
International, Ltd. (Hong Kong). Mr. Atendido holds a Masters Degree in Business Management
from the Asian Institute of Management.
Andres del Rosario was appointed as Assistant Treasurer in May 4, 2011. In the past 5 years, he
has been connected with Asian Alliance Investment Corporation. He was formerly employed with
Worldsec International Securities Philippines Inc. and Citibank N.A. He received his Bachelor of
Arts degree from Ateneo de Manila University.
Carlos C. Syquia was elected Treasurer of the Company in November 2000. Mr. Syquia is
Chairman of the Board of Trustee of the Metropolitan Club, Inc.and Director of ATC Securities Inc.
He holds a BS degree in Commerce from De La Salle University and an MBA degree from the
Wharton School of Business, University of Pennsylvania.
Roberto V. San Jose is the Corporate Secretary of the Company and has held the office since
2010. He is Chairman of Mabuhay Holdings Corporation; a director of Interport Resources
Corporation and Anglo-Philippine Holdings Corporation; and Corporate Secretary of Alsons
Consolidated Resources Inc., Anglo-Philippine Holdings Corporation, Beneficial Life Insurance
Corporation., Inc., FMF Development Corporation, Premiere Horizon Alliance Corporation, Solid
Group Inc., United Paragon Mining Corporation and Vulcan Industrial and Mining Corp. He is also
either a director, corporate secretary, or an officer of various companies which are clients of the law
firm of Castillo Laman Tan Pantaleon & San Jose, of which he is presently a Senior Consultant. He
is a member of the Integrated Bar of the Philippines.
Ana Maria A. Katigbak is the Assistant Corporate Secretary of the Company and has held the
office since 1997. She is a partner in Castillo, Laman, Tan, Pantaleon & San Jose Law Offices and
also acts as Corporate Secretary of Minerales Industrias Corporation, and Assistant Corporate
Secretary of Energy Development Corporation, Mabuhay Holdings, Inc., Paxys Inc., Premiere
Horizon Alliance Corporation, Solid Group, Inc. and Vulcan Industrial and Mining Corp. She is a
member of the Integrated Bar of the Philippines.
Nomination Committee and Nominees for Election as Members of the Board of Directors
The Nominations Committee has screened the Directors named above for re-election on June 28,
2013. The Nominations Committee determined that the candidates possess all the qualifications
and none the disqualifications as director or independent director.
None of the directors and executive officers named above is related.
8
Independent Directors
As of the date of this Information Statement, the Nominations Committee has received and
approved the nominations of the following nominees for independent directors of the Company:
1. Joel A. Bañares
Mr. Bañares possessed all the qualifications and none of the disqualifications as independent
director since his election in the year 2010.
2. Rafael Yaptinchay
Mr. Yaptinchay possessed all the qualifications and none of the disqualifications as
independent director since his election in the year 2011.
Both were nominated by Mr. Ramon Recto.
The nominator is not related to the persons he has nominated for independent director.
The nomination and election of independent director shall be in accordance with Section 38, as
amended of Republic Act 8799 or the Securities Regulation Code.
The Nomination Committee is composed of Mr. Mario G. Vijungco as Chairman and Messrs.
Ramon A. Recto and Joel A. Banares as members.
In compliance with SEC Notice dated October 20, 2006, the Company will submit updated
Certifications of Qualification for the Independent Directors within 30 days from their election.
In accordance with SEC Memorandum Circular No.9 Series of 2011, both Independent Directors
(ID) have not exceeded the five (5) year term limit. Furthermore, the Company understands that
after a term of five years, an ID can serve for another five years after a “cooling off” period of two
(2) years provided, that during such period, the ID concerned has not engaged in any activity that
under existing rules disaqualifies a person from being elected as ID in the same company.
Period in Which Directors and Executive Officers Should Serve
The directors and executive officers should serve for a period of one (1) year.
Term of Office of a Director
The seven (7) directors shall be stockholders and shall be elected annually by the stockholders
owning majority of the outstanding capital stock for a term of one (1) year and shall serve until the
election and qualification of their successors.
Any vacancy in the board of directors other than removal or expiration of term may be filled by a
majority vote of the remaining members thereof at a meeting called for that purpose if they still
constitute a quorum, and the director or directors so chosen shall serve for the unexpired term.
Significant Employees
The Registrant considers the contribution of every employee important to the fulfillment of its goals.
Involvement in Certain Legal Proceedings
As of December 31, 20 2012, the Company is not a party to any legal proceedings. It is not
involved in any pending legal proceedings with respect to any of its properties. It is not involved in
any claims or lawsuits involving damages that may materially affect it or its subsidiaries.
To the knowledge and/or information of the Company, none of its nominees for election as directors,
its present members of the Board of Directors or its executive officers, is presently or during the last
five (5) years been involved in any material legal proceeding in any court or government agency on
the Philippines or elsewhere which would put to question their ability and integrity to serve
Marcventures Holdings Inc. and its stockholders.
9
The Company is not aware of: (a) any bankruptcy petition filed by or against any business of which
a director or executive officer or person nominated to be become a director or executive officer was
a general partner or executive officer either at the time of the bankruptcy or within two years prior to
that time; (b) any conviction by final judgment, including the nature of the offense, in a criminal
proceeding, excluding traffic violations and other minor offenses; (c) 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 (d) 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.
As of December 31, 2012, Marcventures Mining & Development Corporation (MMDC), a whollyowned subsidiary, is currently involved in three [3] pending issues:
Petition filed by Cantilan Irrigation System Federation of Irrigators Association [CISFIA] Surigao del
Sur Irrigators Federation Association [SURIF] Cabcant Irrigators Association, Inc., Buyaan Irrigators
Association, Inc., CarCanMadCarLan Baywatch Foundation, Inc. [CBFI], Lovers of Nature
Foundation, Inc. before the Office of the Secretary, Department of Environment and Natural
Resources. Atty. Anselmo C. Abungan, OIC, Asst. Secretary, Office of the Secretary, DENR,
dismissed this Petition on 17 December 2012, per Decision received by the Company on 14
January 2013. The Petitioners filed a Motion For Reconsideration.
Case filed by Jaime “Datu Dagsaan” Bat-ao, Liquisa Irrigators Association represented by Peter
William Olan, Nagkahugpong Managatay Para sa Kalambuan [NAGMAKAAYO] represented by
Crisologo E. Aniono, Sr.; Lydia L. Lascano and Nick Matthew Q. Irriberi, a minor represented by his
father, Vicente Cirilo Irriberi, before the Regional Trial Court, Branch 41, Cantilan, Surigao del Sur,
docketed as Civil Case No. 224. The newly designated Presiding Judge, Rufo U. Naragas,
voluntarily inhibited from handling the case per Order dated 14 February 2013.
Opposition filed by the Cantilan Irrigation System Federation of Irrigators Association [CISFIA]
before the National Water Resources Board [NWRB] docketed as WPA No. XIII-SDS=2009-02-036
relative to the application of Marcventures Mining and Development Corporation (MMDC) for water
rights. This opposition has nothing to do with the present mining activities of MMDC. The Company
was notified only recently of the opposition to MMDC’s application for water rights. As of today, it
is still pending and the Company has not received any order form NWRB or pleadings from the
Oppositor.
During the past five (5) years and as of the date of filing of this report, MMDC and the Company are
unaware of any involvement of any of its director, any nominee for election as director and,
executive officer in any bankruptcy petition, conviction by final judgment in any criminal proceeding,
any order, judgment or decree of any court of competent jurisdiction permanently or temporarily
enjoining, barring, suspending or otherwise limiting their involvement in any type of business,
securities, commodities or banking activities, nor in any proceeding involving violation of securities
or commodities laws or regulations.
Family Relationships
There are no family relationships either by consanguinity or affinity among the above named
directors and executive officers.
Certain Relationships and Related Transactions
The Company obtained non-interest bearing advances from stockholders which are payable on
demand. Such advances were used by the Company in day to day operations, general
administrative expenses, and for payroll As of December 31, 2012, such advances from
stockholders amounted to ₱41.71 million.
10
Significant transactions with related parties include the following:
Marcventures Mineral
Holdings Inc.
(MMHI)
Year
Classification
2012
Advances to
related
parties
2011
Carac - an Develompent
Corp.
(Carac)
2012
Advances to
related
parties
2011
Marcventures
Resources
Holdings Inc.
(MRHI)
2012
Marcventures Minerals
Holdings Inc.
(MMHI)
2012
Related
party
payables
2011
Related
party
payables
2011
Mario Vijungco
2012
2011
Related
party
payables
Terms and
condition
Unsecured,
noninterest
bearing
and with no
fixed
repayment
term.
Unsecured,
noninterest
bearing
and with no
fixed
repayment
term.
Unsecured,
noninterest
bearing
and with no
fixed
repayment
term.
Unsecured,
noninterest
bearing
and with no
fixed
repayment
term.
Unsecured,
noninterest
bearing
and with no
fixed
repayment
term.
Bad debts
for the year
Amount of
transaction
Outstanding
Balance
P
=−
P
=−
P
= 6,596,294
6,596,294
−
6,596,294
−
1,010,408
1,291,591
−
254,424
281,183
−
−
105,209
−
−
105,209
−
−
17,354
−
−
17,354
−
25,678,622
41,558,074
−
62,965
19,034,452
Advances to MMHI and Carac pertain to ventures entered into by the Subsidiary and have been
discontinued. These advances are deemed to be worthless and the Subsidiary has already
provided an allowance for impairment losses in full (See Note 7).
Advances to MRHI pertain to ventures entered into by the Subsidiary and have been discontinued.
Advances from stockholder represent cash advances made to the Group by Mario J. Vijungco, a
majority stockholder of the Parent Company.
Salaries paid to key management personnel amounted to P
= 7,386,000 and P
= 4,470,000 for the years
ended December 31, 2012 and 2011, respectively.
Intercompany advances eliminated on the consolidated statement of financial position amounted to
P
= 402,945,017 and P
= 434,445,017 as of December 31, 2012 and 2011, respectively.
The Company’s legal counsel is the law firm of Castillo Laman Tan Pantaleon and San Jose Law
Offices. Reasonable legal fees are paid to the firm for their legal services. Castillo Laman Tan
Pantaleon and San Jose Law Offices has no direct or indirect interest in the Company.
Other than the foregoing, there has been no transaction outside of the ordinary course of business
during the last two years, nor is any transaction presently proposed, to which the Company was or
11
is to be a party in which any director or executive officer of the Company, or owner of more than
10% of the Company’s voting securities or any member of the immediate family of any of the
foregoing persons had or is to have a direct or indirect material interest. In the ordinary and regular
course of business, the Company had or may have had transactions with other companies in which
some of the foregoing persons may have an interest.
Please refer to Note No.17, (notes to Audited Financial Statements)
Resignation or Refusal to Stand for Re-election by Members of the Board of Directors
The board of directors accepted the resignation of Mr. Cristino Panlilio when he was appointed as
Undersecretary of the Dept. of Trade and Industry / Managing Head of the Board of Investments as
disclosed in the Company’s 17-C Report in August 2011.
Item 6. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
The following table summarizes certain information regarding compensation paid or accrued during
the last three fiscal years and to be paid in the ensuing fiscal year to the Company’s President and
each of the Company’s three other highest compensated executive officers:
Table Summary of Compensation
SALARY
BONUS
OTHER
COMPENSATION
TOP FIVE HIGHLY
COMPENSATED EXECUTIVES:
Mario Vijungco – Chairman
Ramon Recto – President
Alfredo Lozano Jr. – Asst. to the
Chairman
Carlos Syquia – Treasurer
Andres del Rosario – Asst.
treasurer
All above named officers as a
group
*2011
-
-
2012
₱5,490,000
₱150,000
₱390,000
2013
Estimated
₱8,000.000
.
₱200,000
₱ 500,000
*2011
-
-
₱590,000
2012
₱5,490,000
2013
Estimated
₱8,000,000
₱500,000.
-
₱560,000
All officers and directors as
group unnamed
₱500,000
₱700,000
*Aside from per diems, no other salaries were given for the year 2011.
Note: [1] Aside from the officers and executives mentioned above, the Company does not employ
any other executive officers or directors.
The amounts reflected as compensation of the named executive officers have been approved by
the Company’s Board of Directors. There is no contract covering their managerial and consultancy
services with the Company and they hold office by virtue of their election to office. The Company
12
has no agreements with its named executive officers regarding a compensatory plan or
arrangement exceeding P10,000.00 resulting from the resignation, retirement, termination of
employment, or change-in-control of the Company.
The amount of other compensation includes per diems of directors at the rate of P10,000.00 per
director per meeting. Such per diems amounted to P P 240,000.00 in 2011 P 390,000.00 in 2012
and P 500,000.00 in 2013(estimated).
Item 7. INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Mendoza Querido & Co. (“MQC”)is currently the Company’s Independent
Public Accountant. Representatives of MQC will be present during the annual meeting and will be
given the opportunity to make a statement if they desire to do so. They are also expected to
respond to appropriate questions if needed.
Management will request the stockholders for authority to appoint the external auditors for the
current year in order that the review of compensation arrangements may be completed.
There was no event in the past years where MQC and the Corporation had any disagreements with
regard to any matter relating to accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
The 2011-2012 audit of the Corporation by MQCC is in compliance with SRC Rule 68, Paragraph
3(b)(iv) which provides that the external auditor should be rotated every five (5) years or earlier or
the handling partner shall be changed. At present, MQC’s account partner handling the
Corporation is Richard S. Querido and he has been the handling partner since June 2010. He is
due for rotation in 2015. A two year cooling off period shall be observed in the re-engagement of
the same signing partner or individual.
The following are members of the Audit Committee:
Chairman: Joel A. Banares (Ind. Dir.)
Members: Mr. Rafael Yaptinchay (Ind. Dir.)
Ramon A. Recto
Item 8. COMPENSATION PLANS
No action is proposed to be taken during the stockholders’ meeting with regard to any bonus, profit
sharing, pension/retirement plan, granting of any extension of options, warrants or rights to
purchase any securities.
C. ISSUANCE AND EXCHANGE OF SECURITIES
No matter will be taken up involving any issuance or exchange of securities.
D. OTHER MATTERS
Item 11. ACTION WITH RESPECT TO REPORTS
The minutes of the last annual stockholders’ meeting held on June 29 2012 and the Company’s
Annual Report, which includes the Audited Financial Statements for 2012 will be submitted for
approval by the stockholders. The minutes discuss the following matters taken up at the previous
stockholders’ meeting held on June 29, 2012: (i) approval of minutes of previous stockholders’
meeting; (ii) Approval of Management Report and Audited Financial Statements (iii) Amendment of
the By-laws to change the date of the annual stockholders’ meeting from any day in the month of
November, to any day in the month of June of each year.
13
Approval of the Minutes of the Annual Stockholders’ Meeting held on June 29, 2012 constitutes a
ratification of the accuracy and faithfulness of the Minutes to the events which transpired during the
meeting.
Approval of the Annual Report of Management constitutes a ratification of the Company’s
performance during the fiscal year as contained in the Annual Report. The acts of Management to
be ratified, include the following: (i) election of directors; (ii) appointment of auditors; (iii) extension
of the present convertible notes and warrants; (iv) approval of corporate guaranty in favor of
financial institutions in relation to applications for credit facilities of its subsidiary MMDC; (v)
approval of pledge of shares of its subsidiary to financial institutions.
A copy of the Company’s 2012 Annual Report on SEC Form 17 A is available upon the written
request of the stockholders addressed to the Corporate Secretary.
Item 12. MATTERS NOT REQUIRED TO BE SUBMITTED
All corporate actions to be taken up at the annual stockholders’ meeting this June 28, 2013 will be
submitted to the stockholders of the Registrant for their approval in accordance with the
requirements of the Corporation Code.
Matters not required to be submitted are the Call to Order and Certification of Notice and Quorum.
Item 13. VOTING PROCEDURES
As to each matter, which is to be submitted to a vote of security holders, the following information
will be furnished:
(a)
Vote required for Approval
The affirmative vote of stockholders representing at least a majority of the
outstanding voting common shares of the Registrant is required for the
approval of the following matters:
i.
Minutes of Previous Annual Stockholders’ Meeting;
ii. Management Annual Reports for the preceding year;
iii. All Acts and Resolutions of the Board of Directors and Management
since the last Annual Stockholders’ Meeting;
iv. Authorization to act as corporate guaranty of MMDC
v. Appointment of External Auditors.
During the election of directors, every stockholder entitled to vote shall have the
right to vote the number of shares of stock standing, in his own name on the stock
books of the Corporation; and said stockholder may vote such number of shares
for as many persons as there are directors to be elected or he may cumulate said
shares and give one candidate as many votes as the number of directors to be
elected multiplied by the number of shares shall equal, or he may distribute them
on the same principle among as many candidates as he shall see fit: Provided,
That the total number of votes cast by him shall not exceed the number of shares
owned by him as shown in the books of the Corporation multiplied by the whole
number of directors to be elected.
The Chairman shall ensure that two seats or at least 20% of the number of
directors to be elected, whichever is lesser, shall be allotted for the election of
independent directors as required by the SRC and Corporation’s Code of
Corporate Governance.
(b)
Method by which Votes will be counted
At each meeting of the stockholders, every stockholder shall be entitled to
vote in person or by proxy, for each share of stock held by him, which has
voting power upon the matter in question.
14
2012 ANNUAL REPORT TO SECURITY HOLDERS
I.
Consolidated Audited Financial Statements
The Consolidated Audited Financial Statements of Marcventures Holdings, Inc. (the “Company”) for
the year ended as of December 31, 2012 and unaudited financial statements for the period ended
March 31, 2013 are attached to this report.
The Company undertakes to timely file the Interim Financial Statements under SEC Form 17-Q for
the period ended March 31, 2013 and furnish the same to any stockholder upon written request
addressed to the Corporate Secretary.
.
II.
Disagreements with Accountants on Accounting and Financial Disclosures
There was no event in the past years where Mendoza Querido & Co. (‘MQC”) the Company’s
Independent Public Accountant and the Company had any disagreements with regard to any matter
relating to accounting principles or practices, financial statement disclosure or auditing scope or
procedure.
III.
Management’s Discussion and Analysis
FINANCIAL CONDITION AND RESULTS OF OPERATION:
Three months ended March 31, 2013 compared with three months March 31, 2012
Results of Operation:
For the period January-March 2013, MMDC had no mining or extraction activities due to seasonal
heavy rains in the area. Operations focused on preparatory activities for the beginning of its mining
season that coincides with the relatively drier months of April-November. Preparatory activities
consisted primarily of maintenance operations for the various mountain roads that form part of the
haulage network, as well as the Company’s causeway. Rehabilitation works were also performed
on the Company’s fleet of heavy equipment.
For the quarter ending March 31, 2013, intermittent weather conditions and heavy downpour
impeded the mining activities of MMDC. These weather related delays decrease the number of
days for the company to operate. As a result the company recorded a consolidated net loss of
₱26.7 million, equivalent to 8.04% decrease in retained earnings and a net loss of ₱24.8 million in
March 2012.
Administrative expenses increased to ₱23.1 million from ₱21.5 million for the comparative period in
2012, equivalent to 7.44% increase from the comparable period in 2012. A considerable portion of
expenses is attributable to the payment of salaries and wages amounting to ₱3.3 million or
equivalent to 14.15% and representation expense amounting to ₱3.4 million or 14.76% of the total
2013 expenses.
STATEMENT OF FINANCIAL POSITION
March 31, 2013 vs. December 31, 2012
Assets
As of March 31, 2013, the total assets of the Company increased to ₱2,734.4 million from ₱2,697.1
million as of December 31, 2012. The 1.38% increase was mainly due to the increase in nickel ore
inventories amounting to ₱69.4 million, which represent an increase of 366.15% from the inventory
level as of December 31, 2012. The increase in total assets is also attributable to the increase in
other current assets of ₱8.4 million or equivalent to 23.94 % arising from an increase in advances
to suppliers and contractors and prepayments (which pertain to advance payment made to
contractors for mining related services) and Inventories consisting of spare parts supplies,
lubricants, electrical and laboratory supplies. On the other hand, non current assets increased by
₱4.7 million or equivalent to 3.15%, due to an increase in accumulated Input tax amounting to
₱4.6 million.
16
Liabilities
As of March 31, 2013, the total liabilities of the Company was ₱583.6 million which is 12.31%
higher than ₱519.6 million as of December 31, 2012. The increase in total liabilities is attributable
to the increase in current liabilities of ₱21.8 million or equivalent to 6.6% and non current liabilities
amounting to ₱231.5 million or equivalent to 22.28% arising from an increase in interest bearing
loan amounting to ₱45.6 million and increase in customer deposit on the purchase of future ore
shipments amounting to ₱57.3 million. Furthermore, a decrease of ₱6.1 million or 14.5% on
related party transaction was due to partial payment of advances from the stockholders.
Equity
The stockholders’ equity amounting to ₱2,150.8 million is lower by 1.23% or ₱26.7 million from
₱2,177.5 million in December 31, 2012. The company recorded a consolidated net loss amounting
to ₱26.7 million which resulted in a decrease of the company’s retained earnings to ₱305.3 million
as of March 31, 2013, 8.04% lower from retained earnings of ₱322.0 million as of December 31,
2012.
Statement of Cash Flows
The net cash used in operating activities amounted to ₱2.7million as of the three months ended
March 31, 2013 compared net cash generated from operating activities amounted to ₱21.7million
for the same period ending March 31, 2012. The decrease in cash was due to decrease in trade
and other payable.
Net cash used in investing activities amounted to ₱2.7million and₱44.7 million for the three months
ended March 31, 2013 and 2012 respectively.
Net cash provided by financing activities amounting to ₱39.5 million for the three months period
ending March 31, 2013pertains to the receipt of proceeds from interest bearing loans. In 2012 of
the same period, net cash used in financing activities amounting to ₱76.3 million was due to
settlement of interest bearing loans and the issuance of capital stock from conversion of debt to
equity.
The foregoing investing and financing activities resulted in the March 31, 2013 and 2012 cash and
cash equivalent to amount to ₱10.7 million and ₱64.7million respectively.
Results of operations
December 31,
2012
2011
(one year)
(one year)
REVENUES:
Sales - Ore
Cost of Sales
Gross Profit
EXPENSES:
Administrative & Operating expenses
NET PROFIT
₱ 697,491,039 ₱ 842,901,957 ₱
484,807,547
532,979,157
212,683,492
309,922,800
June 30
2011
(one year)
-
59,936,373
44,539,108
46,943,000
152,747,119
265,383,692
(46,943,000)
(16,169,372)
(25,162,640)
(9,272,668)
COMPREHENSIVE INCOME ( LOSS) FOR THE PERIOD
136,577,747
240,221,052
(56,215,668)
859,128
118,264
(510,200)
COMPREHENSIVE INCOME -NET OF TAX
₱
-
Add:( Less ) Other Income (Expenses)
PROVISION FOR INCOME TAX-Deferred
Increase ( Decrease)
%
June vs Dec. 2011
2012 vs. 2011
₱ 137,436,875 ₱ 240,339,316 ₱ (55,705,468) ₱
(145,410,918)
(48,171,610)
-17.25% ₱ 842,901,957.00
-9.04%
532,979,157.00
(97,239,308)
-31.38%
15,397,265
309,922,800.00
34.57%
(2,403,892.00)
(112,636,573) #DIV/0!
-42.44%
8,993,268
-35.74%
312,326,692.00
(103,643,305)
-43.14%
296,436,720.00
740,864
626.45%
628,464.00
(102,902,441)
(15,889,972.00)
-42.82% ₱ 296,044,784.00
2012
Marcventures Mining and Development Corporation (“MMDC”), a 100%-owned subsidiary of MHI
engaged in nickel-mining in Surigao del Sur, shipped 637,932.82 WMT of nickel ore for the year
ended Dec. 31, 2012, resulting in sales of ₱697.41 million and a consolidated net income of
₱137.44 million. In the previous year, it shipped 628,098 WMT, thus recording revenues of
₱842.90 million and consolidated net income of ₱240.34 million. Due to the dramatic decline in
17
nickel prices, revenues and net profit dropped by 17.25% and 42.82%, respectively, despite a slight
increase in volume shipped in 2012.
Furthermore, the income generating activities of MMDC raised MHI’s total consolidated assets to
₱2,697.11 million, equivalent to an increase of 5.16% or an additional ₱132.37 million increase
from ₱2,564.74 million as of December 31, 2011.
Total Liabilities of MHI decreased by 6.54% from ₱555.94 million as of December 31, 2011 to
₱519.60 million as of December 31, 2012.
Stockholders’ equity increased by 8.4% to ₱2,177.52 million as of December 31, 2012 or an
additional ₱137.44 million from ₱2008.80 million as of December 31, 2011.
2011
MMDC made its first shipment in August 2011. For the year, it made a total of 12 shipments
containing 628,098 WMT of nickel ore, resulting in sales of ₱842.90 million and a net income of
₱240.34 million This turned around MHI’s recorded accumulated deficit of ₱73.87 million as of
June 30, 2011 to positive retained earnings of ₱194,564 million as of December 2011.
Furthermore, the income generating activities of MMDC brought total consolidated assets of MHI to
₱2,564.74 million, which was equivalent to an increase of 18.89% or an additional ₱407.47 million
increase from ₱2,157.28 million as of June 30, 2011.
Total Liabilities of MHI increased from ₱461.91 million as of June 30, 2011 to ₱555.94 million as
of December 31, 2011 . The increase was attributable to loan from Philippine Veterans Bank in the
amount of ₱75 million.
MHI’s stockholders’ equity increased by 18.49% to ₱2,008.80 million as of December 31, 2011 or
an additional ₱313.43 million from ₱1,695.37 million as of June 30, 2011. The increase was due
to income generated by MMDC amounting to ₱240.34 million which resulted in retained earnings
in the amount of ₱194.56 million as of December 31, 2011 or an increase of ₱268.43 million from a
deficit of ₱73.87 million as of June 30, 2011. Furthermore, the conversion by investors of their
private loan placements into equity resulted in an increase in Capital Stock to ₱1,721.46 million and
Additional Paid- In Capital of ₱92.78 million.
2010
The Company had no income generation from projects. Its mining subsidiary, MMDC, was still in its
development phase and did not officially begin commercial operations until 2011. Total revenues
for 2010 amounting to ₱ 19.43 million were generated from the sale of available-for-sale securities,
sale of property, dividend income, and interest income. Total loss for the Period stood at ₱ 14.19
million. The Company’s Basic Loss Per Share amounted to ₱0.049
Consolidated Balance Sheet
December 31,
2012
2011
Current Assets
Non Current Assets
₱
76,904,967 ₱
443,649,126 ₱
2,620,207,714
2,121,093,159
Horizontal Analysis
Increased ( Decreased)
%
2 0 12 v s . 2 0 11
2 0 12 v s . 2 0 11
(366,744,159)
499,114,555
-82.67%
23.53%
Total Assets
2,697,112,681
2,564,742,285
132,370,396
5.16%
Current Liabilities
Non Current Liabilities
Total Stockholders' Equity
330,251,728
189,345,239
2,177,515,714
383,317,037
172,621,405
2,008,803,843
(53,065,309)
16,723,834
168,711,871
-13.84%
9.69%
8.40%
132,370,396
5.16%
Total Liabilities and Stockholders' Equity ₱ 2,697,112,681 ₱ 2,564,742,285 ₱
18
2012
Assets
As of December 31, 2012, the consolidated total assets of the Company increased to ₱2,697.11
million from ₱2,564.74 million as of December 31, 2011. The 5.16% increase was mainly due to the
increase in property and equipment from ₱725.09 million to ₱1,176.23 million, or equivalent to a
62.22% increase. The increase in Property and Equipment was due to the acquisition of various
equipment amounting to ₱243.43 million and cost of matting amounting to ₱207.71 million which is
charged to mine development cost as these were utilized in the major expansion of MMDC’s
various stockyards in the form of matting – a layer of nickel ore several meters thick blanketing the
ground that prevents dilution of the ore stockpile currently being stored or beneficiated. The
increase in total assets is also attributable to the increase in other current asset amounting to
₱12.24 million or equivalent to 53.17% arising from an increase in advances to suppliers and
contractors and prepayments (which pertain to advance payments made to contractors for
mining related services) and Inventories consisting of spare parts supplies, lubricants, electrical and
laboratory supplies. On the other hand, non current assets increased by ₱47.98 million or
equivalent to 47.39%, due to an increase in accumulated Input tax amounting to ₱46.78 million.
Liabilities
As of December 31, 2012, the total liabilities of the Company amounted to ₱519.60 million which
is 6.54% lower than ₱555.9 million as of December 31, 2011. The decrease was due to the full
settlement of interest bearing loan to Philippine Veterans Bank and Asian Alliance Investment
Corp. amounting to ₱97.3 million. The decrease is also attributable to the decrease in Notes
Payable by ₱26.3 million due to the conversion of certain investors of their convertible loan into
equity. Furthermore, an increase in related party transactions of ₱22.55 million or 118.49% largely
refer to the advances made from the stockholders.
An increase of 9.69% in total non current liabilities was due to the increase in interest bearing loan
of ₱39.42 million which is 73.68% higher than ₱ 22.70 million of the same period last year.
Equity
The stockholders’ equity amounting to ₱2,177.52 million is higher by 8.4% or ₱168.71 million from
₱2,008.8 million in December 31, 2011. The increase was on the account of income generated
from the sale of nickel ore by its subsidiary. The total comprehensive income for the year
amounting to ₱137.44 million resulted in an increase in the Company’s Retained Earnings to
₱332.00 million. Some investors opted to convert their convertible loans into equity which resulted
in an increase in Capital Stock to ₱1,735.7 million and an increased in Additional Paid- In Capital
account to ₱109.8 million.
On March 2, 2011 SEC approved Marcventures Holdings Inc. application for the change of financial
year from fiscal year June 30 to Calendar year December 31, and on January 3, 2012 the Bureau
of Internal Revenue approved the change in accounting period.
2011
The current assets of the Company increased to ₱443.65 as of Dec.31, 2011 from ₱176.72 as of
June 30, 2011. The increase is attributable to the inventory which consist of nickel ore stockpile
amounting to ₱137.99 million and trade and other receivables in the amount of ₱16.41 million.
Property and equipment increased to ₱725.1 million in December 31, 2011 from ₱656.15 million in
June 30, 2011, mainly due to
site of the causeway purchases of mining equipment, service
vehicles and laboratory equipment which caused the Property and Equipment to increase by 10.5%
as compared to June 30, 2011.
Total Liabilities of the Company increased from ₱461.91 million for the period June 30, 2011 to
₱555.94 million for the period December 31, 2011 . The increase was from loan availed from
Philippine Veterans Bank in the amount of ₱75 million.
The stockholders’ equity increased by 18.49% to ₱2,008.80 million as of December 31, 2011 or an
additional ₱313.43 million from ₱1,695.37 million as of June 30, 2011. The increase was due to
income generated by its subsidiary amounting to ₱240.34 million which resulted in the
company’s retained earnings in the amount of ₱194.56 million as of December 31, 2011 or an
19
increase of ₱268.43 million from a deficit of ₱73.87 million as of June 30, 2011. Furthermore,
investors who opted to convert their private placement into equity resulted in an increase in Capital
Stock to ₱1,721.46 million and Additional Paid- In Capital of ₱92.78 million.
2010
Total assets of the Company increased to ₱1,778.55 million from ₱92.672 million. This was largely
brought about by the business combination of the Company and the investor group, Marcventures
Mining & Development Corporation. Explored mineral resources are valued at ₱1,294.77 million.
Advances to MMDC amount to ₱ 408.50 million. Property, Plant, and Equipment likewise increased
to ₱56.99 million from ₱0.21 million last year.
Total Liabilities stood at ₱16.22 million, comprised mainly of accrued expenses of MMDC.
Stockholders Equity has increased to ₱1,800.89 million brought about by the business combination
with MMDC.
Consolidated Cash Flow
December 31,
2012
2011
(one year)
(one year)
Cash provided by (used in) operating activities
₱
Cash used in investing activities
Cash provided by (used in ) financing activities
Net Increase (Decrease) in Cash and cash equivalent
Cash and cash equivalent - beginning of the period
Cash and cash equivalent - end of the period
₱
146,607,446 ₱
(290,546,768)
(7,074,162)
(151,013,484)
164,141,034
13,127,550 ₱
June 30,
2011
(one year)
345,294,419 ₱
(7,548,231)
(424,581,339)
(240,351,864)
197,620,875
256,111,940
118,333,955
8,211,845
45,807,079
40,833,733
164,141,034 ₱
49,045,578
2012
Statement of Cash Flows
The net cash flows generated from operating activities, particularly the sale of nickel ore and
interest income amounted to ₱146.61 million in 2012 as compared to ₱345.29 million in December
2011 and ₱ 7.55 million used in June 2011. The decrease in cash was due to decrease in sale of
nickel ore and payment of interest expense.
Net cash used for investing activities amounted to ₱290.55 million, ₱ 424.58 million and ₱240.35
million for the year December 2012 and 2011 and June 2011 respectively. Investing activities for
the most part include the acquisition of property and equipment and the corresponding VAT input
on the purchases of property and equipment.
Net cash used in financing activities amounting to ₱7.07 million in 2012 pertains to the settlement of
interest bearing loans and notes payable. Net cash provided by financing activities amounting to
₱197.62 million in December 31, 2011 was from loan availed from Philippine Veterans Bank and
proceeds of convertible loan and ₱256.11 million in June 2011 was largely due to the receipts from
the issuance of capital stock from the conversion of debt to equity.
The foregoing investing and financing activities resulted in the December 31, 2012, 2011 and June
2011 cash and cash equivalent to amount to ₱13.13 million, ₱164.14 million, and ₱49.05 million
respectively.
2011
The proceeds generated from the convertible loans amounting to ₱249.8 million obtained by the
company was used for land acquisition in view of the planned Carrascal Causeway where several
hectares of coastal property were purchased for the purpose of road right of way and the
construction site of the causeway. The company also purchased mining equipment, service
vehicles and laboratory equipment and also used for working capital and capital expenditures of
MMDC.
20
2010
The proceeds from the issuance of common stock were used to fund the continuing exploration,
development, and mining operations of its subsidiary, MMDC. The Company ended its fiscal year
with ₱40,833,733 in cash.
Key Performance Indicators (KPI’s)
Marcventures Holdings Inc.’s management uses the following KPIs for Marcventures Holdings Inc.
and its subsidiaries: a) revenues, b) net income/loss after tax, c) debt-to-equity ratio (computed as
total liabilities divided by total Stockholders’ Equity), d) current ratio (computed as total current
assets divided by total current liabilities), and e) Return on Assets (computed as net income divided
by the book value of assets).
a) Revenues - These cover income receipts from all sources. See discussion on Revenues
at “Management Discussion and Analysis ---- Results of Operations” section.
b) Net Income/Loss After Tax – is the earnings/loss of the company after income tax
expense and minority interest.
c) Debt-to-equity ratio - gives an indication of the extent of financial leverage of the
company. This ratio takes into account total liabilities in relation to Stockholders’ Equity
as reflected in the Balance Sheet.
d) Current ratio –is an indicator of the company’s ability to repay its short-term debt. This
ratio is based on the level of Current Assets and Current Liabilities as reported in the
Balance Sheet.
e) Return / (Loss) on Assets – This is calculated by dividing its company’s net income (loss)
by its total assets.
Comparative figures of the Top Five key performance indicators (KPI) for the fiscal years
ended December 31, 2012 and December 31, 2011
December 31, 2012
December 31, 2011
Net Income
Current assets
Current Liabilities
Total Liabilities
₱137,436,875
76,904,967
330,251,728
519,596,968
₱240,339,316
443,649,126
383,317,037
555,938,443
Stockholder’s equity
2,177,515,713
2,008,803,843
1,735,676,781 shares
1,721,460,874 shares
Outstanding number of shares
December 31, 2012
1
Current ratio
2
Book value per share
3
Debt to equity
4
Profit per share
5
Return on Asset
December 31, 2011
0.23:1
1.25
0.24:1
0.079
5.2%
1.16:1
1.17
0.28:1
0.140
10.73%
Note:
1.
2.
3.
4.
5.
Current assets / current liabilities
Stockholder’s Equity / Total outstanding number of shares
Total Liabilities / Stockholder’s Equity
Net Income ( Loss ) / Total outstanding number of shares
Net income / average total assets
21
Other Information
Any Known Trends, Events or Uncertainties (Material Impact on Liquidity)
In general, Management is not aware of any material event or uncertainty that has affected the
current interim period/or would have a material impact on future operations of the Company.
The company does not expect any liquidity or cash problem within the next twelve months.
Non-payment by a nickel ore buyer may lead to liquidity problems, but these risks are currently
minimized by a requirement of down payment or deposit on future deliveries to the buyer.
Lower nickel ore prices may also affect cash flows, but the presence of high grade saprolite nickel
ore reserves mitigate this as there is a continuous demand for the product.
Since the Company will earn its revenues in dollars, a significant depreciation in the dollar may
adversely affect the financial viability of mining operations. The company will take exchange rate
risk management measures under advisement from its financial advisors.
Discussion and Analysis of Material Events and Uncertainties
Other material events and uncertainties known to management that would address the past and
would have an impact on the Company’s future operations are discussed below.
1. Except as disclosed in the management discussion and notes to the financial
statements, there are no other known events that will trigger direct or contingent
financial obligation that is material to the company, including any default or acceleration
of an obligation.
2. There is no material off-balance sheet transaction, arrangement, obligation, and other
relationship of the company with unconsolidated entities or other persons created
during the reporting period.
3. There are no material commitments for capital expenditures at the present time. Any
expenses that may occur are expected to be sourced from internally generated funds.
4. Except as disclosed in the management discussion and notes to the financial
statements, there are no other known trends, events or uncertainties that have had or
that are reasonably expected to have a material favorable or unfavorable impact on
revenues or income from operations.
5. All significant elements of income or loss from continuing operations are already
discussed in the management discussion and notes to financial statements. Likewise
any significant elements of income or loss that did not arise from the registrant’s
continuing operations are disclosed either in the management discussion or notes to
financial statements.
6. The operations of MMDC are constrained by the weather, with mining activities only
during the dry season.
Outlook
MMDC’s mineral property remained undeveloped for many years due to the relatively low price of
nickel which made production uneconomical. Since then, nickel prices have increased, and
together with new technologies in refining nickel limonite ore, created a strong demand for nickel
ores, especially from China. The economic viability of nickel limonite ore spurred the Company to
conduct further explorations of the mineral property, which led to the discovery of large volumes of
high-grade saprolite nickel ore.
22
The future of MMDC will largely be dictated by the demand for and price of nickel and the ability of
the Company to successfully develop and enlarge its ore body to enable it to continuously ship
larger quantities over time.
Last January 2013, MMDC completed its Competent Person’s report on the new geologic resource
resulting from its Major Exploration Program. MMDC’s measured, indicated, and inferred geologic
resource now stands at 45.3 Million wet metric tons of nickel ore.
FINANCIAL STATEMENTS
A copy of the consolidated financial statements of the Company and its subsidiary as of 31
December 2012 is attached hereto.
The management is not aware of any significant or material events or transactions not included nor
disclosed in the consolidated financial statements in compliance with the SRC Rule 68.
INFORMATION ON INDEPENDENT ACCOUNTANT AND OTHER RELATED MATTERS
External Audit Fees and Services
Audit Fees
Audit-Related Fees
Tax Fees
Total
Year Ended December 31,
2012
₱180,000.00
Year Ended December 31,
2011
₱150,000.00
0
₱180,000.00
₱ 150,000.00
Audit Fees. Represents professional fees of the external auditor for the audit services rendered on
Company’s Annual Financial Statements for the year 2012.
Audit-Related Fees. Represents the out of pocket expenses of the individuals who will perform
the audit, it also includes postage and reproduction of Financial Statements as billed by the external
auditor.
Tax Fees. Represents professional fees for tax advisory/consultation services rendered.
Audit services provided to the Company by external auditor have been pre-approved by the Audit
Committee. The Audit Committee has reviewed the magnitude and nature of these services to
ensure that they are compatible with maintaining the independence of the external auditor .
Changes in and disagreements with Accountants on Accounting and financial Disclosure
There was no event in the past years where the external auditor and the Registrant had any
disagreements with regard to any matter relating to accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
IV. BRIEF DESCRIPTION OF THE NATURE OF THE BUSINESS
Background
The Company was incorporated and registered with the Securities and Exchange Commission
(SEC) on August 7, 1957. In 1997, the stockholders and the SEC approved the extension of the
Company’s term of existence for another 50 years or until August 7, 2057.
Its primary purpose is to acquire by purchase, exchange, assignment, gift or otherwise, and to hold,
own and use for investment or otherwise, and to sell, assign, transfer, exchange, lease, let,
develop, mortgage, pledge, traffic, deal in, and with, and otherwise operate, manage, enjoy and
dispose of, any and all properties of every kind and description and wherever situated, including
land as and to the extent permitted by law, including but not limited to, buildings, tenements,
warehouses, factories, edifices and structures and other improvements and bonds, debentures,
promissory notes, shares of stock, or other securities or obligations, created, negotiated or issued
23
by any corporation, association or other entity, foreign or domestic and while the owner, holder or
possessors thereof, to exercise all rights, powers and privileges of ownership or any other interest
therein, including the right to receive, collect and dispose of, any and all rentals, dividends, interest
and income derived therefrom, and the right to vote on any proprietary or other interest, on any
shares of the capital stock, and upon any bonds, debentures or other securities having voting
power, so owned or held; and provided it shall not engage in the business of an open-end or closeend investment company as defined in the Investment Company Act (Republic Act 2629), or act as
a securities broker or dealer.
On December 15, 2009, the Company entered into a Memorandum of Agreement (MOA) between
the shareholders of Marcventures Mining and Development Corporation (MMDC) and their partners
to exchange their ownership of MMDC for a total value of P
= 1.3 billion consisting of: (i) new
Company shares worth P
= 100 million representing the full payment of the balance for the
subscription to the increase in authorized capital stock; (ii) additional Company shares worth P
= 1.15
billion to be issued from the authorized capital stock as increased, and the new par value of the
Company after its corporate restructuring; and (iii) 448 membership certificates of The Metropolitan
Club, Inc. (Metroclub Certificates) with an agreed net value of P
= 50 million together with the
Company’s rights, obligation and interests.
During the annual stockholders meeting held on February 10, 2010, the Company’s stockholders
approved the acquisition of 100% ownership of MMDC. In relation to the MMDC acquisition, the
stockholders approved the following specific transactions: (i) the subscription by the MMDC
shareholders, or their nominees or designees, to 450.0 million shares at the new par value of Php
0.01 per share or total par value of Php 45.0 billion out of the increase in authorized capital stock of
Php 1.8 billion, of which the amount of Php 350.0 million will be paid in cash, and the balance of
Php 100.0 million to be payable upon SEC approval of the increase by way of assignment of
153,846 MMDC shares; (ii) the subscription by the MMDC shareholders, or their nominees or
designees, to an additional 115.0 billion shares at a par value of Php 0.01 per share from the
authorized capital stock, as increased, in consideration for the assignment of 1,769,231 MMDC
shares at an agreed value of Php 1.15 billion; and (iii) the approval and ratification of the
assignment of the 488 Metroclub membership certificates together with all rights and obligations
under AJO’s contract with Philtown, including the assumption by the assignee of AJO’s liabilities to
Philtown in the amount of Php 17.5 million, in consideration for the assignment and transfer of
76,923 MMDC shares at an agreed value of Php 50.0 million.
On March 30, 2010, the SEC approved the change in corporate name from “AJO.net Holdings, Inc.”
to “Marcventures Holdings, Inc.,” and the amendment of the Company’s primary purpose to include
land ownership. The SEC also approved the equity restructuring of the Company by way of: (i) the
decrease of the authorized capital stock from P2,000,000,000.00 divided into 20,000,000,000
common shares to P200,000,000.00 divided into 20,000,000,000 common shares through the
reduction of the par value of the common shares from P0.10 to P0.01; followed by (ii) the increase
of the authorized capital stock from P200,000,000.00 divided into 20,000,000,000 common shares
to P2,000,000,000.00 divided into 200,000,000,000 common shares.
On September 6, 2010, the SEC issued the Confirmation of Valuation for the issuance of
115,000,000 new common shares in consideration of the assignment of 1,769,231 MMDC shares.
The SEC also approved the full payment of 101,000,000 shares subscribed by Mr. Mario G.
Vijungco to the increase in authorized capital stock (dated March 30, 2010) by way of assignment
of 153,846 MMDC shares.
On September 30, 2010, the SEC approved the change in par value of the shares from Php 0.01 to
Php 1.00 per share.
th
The Company’s registered office is located the 16 Floor Citibank Tower, 8741 Paseo de Roxas,
Makati City, Metro Manila
Business
Marcventures Holdings, Inc. is a holding company primarily involved in nickel mining operations in
Surigao del Sur, Philippines, through its wholly-owned subsidiary, Marcventures Mining &
Development Corporation (MMDC). MMDC is primarily involved in exploration, mining, and
development of a nickel mine located in Surigao del Sur and covering an area of 4,799 hectares.
24
Products/Sales
The principal markets for nickel ore production from the Philippines are currently China and Japan.
The proximity of the Philippines to China results in lower freight costs, thus the preference by
Chinese companies of Philippine-sourced nickel ore. The Company does not anticipate any
problem meeting the requirements of Chinese importers due to the high level of ore reserves.
Japanese companies on the other hand have been in the past ten (10) years a consistent buyer of
Philippine saprolite ore which are used to produce primary nickel.
The Company relies 100% on foreign sales to Asian clients. It started shipments in August 2011.
Nickel ore is directly shipped to buyers. Other than the foregoing, the Company has no other
product or service.
Competition
The company is primarily engaged in shipping nickel ore in the Asian region - mainly to Chinese
and Japanese clients. The primary differentiator that will give an industry player a leg up on its
competitors is the nickel grade of its ore and the corresponding pricing. The market leader in nickel
ore shipments from the Philippines is Nickel Asia Corporation, which is several times larger than the
Company. The Company believes it is able to compete due to the quality of its ore, fair pricing, and
the high demand for nickel ore which exceeds the supply the Philippines is able to provide.
Sources and availability of Raw Materials
The Company’s nickel ore is extracted from MMDC’s mine in Surigao del Sur covered by Mineral
Production Sharing Agreement (MPSA) No. 016-93-XI.
Equipment, spare parts, and other operating supplies are readily available both locally and abroad.
Primary suppliers include Dyteban Hardware, Juchem Enterprises, Sungold Commercial, Datalan
Communications Services, Johnco Marketing, Caltex, and Jetty.
Sales Contracts
The company has entered into a 3-year off-take agreement with Dunfeng International (Phils.) Inc.
for the sale of 1 million Wet Metric Tons of nickel ore per year on a best effort basis starting on
2012. This will consist of both low grade and high grade nickel ore. For 2013, the company has
also entered into a 1 year contract for the sale of 450,000 wet metric tons of nickel ore of various
grades with Yin Yi Philippine Mining Inc. Any excess production the company makes on top of its
commitments to these two buyers will be sold to spot buyers in the nickel ore market.
Properties
Office Space
The Company currently leases its office space located at Unit 16A Citibank Tower, 8741 Paseo de
Roxas, Makati City. The office space has a total area of 307.9 square meters. The lease of the
space is for three (3) years starting March 15, 2011 to March 14, 2014. The rent is Php 169,144.32
per month inclusive of twelve percent (12%) value-added taxes, less five percent (5%) withholding
tax.
MMDC Properties
Owned
The table below sets forth a summary of the properties owned by MMDC.
Payee
Joel Arreza
Heirs of Basillisa M. Petros
Isabel Bambina Angeles
William Agyan/ Calixtrato
Hunahunan
Area Size
(sq. m.)
238
38,856
26,000
12,460
Amount
Location
300,000.00
4,000,000.00
270,000.00
216,120.00
Magosilom, Cantilan
Consuelo, Cantilan
Cabangahan, Cantilan
Cabangahan, Cantilan
25
Alfonso Ascarez Jr
Virgilio Tuldanes
Romulo G. Urbiztondo
Tomasito Bat-ao
Venancio Ating Jr
Fabian Ating
Marlon Sumberan
Francisco Sumberan
Francisco Sumberan
Wenifredo Bat-ao
Calicstrato Hunahunan
Winefredo Bat-ao
Calicstrato Hunahunan
Cayetana Ampo
Felino Bat-ao
Rodrigo Tawide
Juanita Agyang
Bci
6,510
48,758
17,895
7,177
3,893.60
4,487.17
11,.692
13,463
12,696
2,855
6,762
2,855
6,762
4,341
3,538
10,962
2,487
House& lot
115,200.00
4,875,800.00
1,789,500.00
143,540.00
77872.00
89,743.40
146,920.00
134,630.00
126,960.00
28,550.00
67,620.00
28,550.00
67,620.00
43,410.00
35,380.00
109,620.00
24,870.00
180,000.00
Cabangahan, Cantilan
Bon-ot, Carrascal
Bon-ot, Carrascal
Cabangahan, Cantillan
Cabangahan, Cantilan
Cabangahan, Cantilan
Cabangahan, Cantilan
Cabangahan, Cantilan
Cabngahan, Cantilan
Cabanghan, Cantilan
Cabangahan, Cantilan
Cabangahan, Cantilan
Cabangahan, Cantilan
Cabangahan, Cantilan
Cabanghan, Cantilan
Cabangahan, Cantilan
Cabangahan, Cantilan
Bayogo, Madrid
Leased
The table below presents a summary of the properties currently being leased by MMDC.
Land/Owner/Payee
No. of
Years of
Contract
10
Area
Size (sq.
m)
3,703.00
Date Start
of
Contract
10/1/2010
Amount
of Rent
(PhP)
3,703.00
Year ln
Increase
(%)
None
Pablo B. Arpilleda,
Jr.
Punella Ilagan
10
4,848.00
9/1/2010
4,848.00
None
10
1,621.00
9/1/2010
1,621.00
None
Cosme Emboc
1
2,312.00
9/1/2010
2.312.00
None
Ryan Huniog
1
1,037.00
9/1/2010
1,037.00
None
Pablo Huniog
1
1,420.00
9/1/2010
1,420.00
None
Roberto Dagno
10
1,194.00
9/1/2010
1,194.00
None
Antonio Huniog Jr.
10
4,743.00
9/1/2010
4,743.00
None
Antonio Huniog Jr.
1
2,300.00
9/1/2010
2,300.00
None
Mike Bat-ao
10
345.00
9/1/2010
500.00
None
Jimmy Sandag
10
1,057.00
9/1/2010
1,057.00
None
Lucas Angeles
10
1,979.00
9/1/2010
1,979.00
None
Banjelito Sandag
10
462.00
9/1/2010
500.00
None
Lucas Angeles
1
561.00
9/1/2010
561.00
None
Danilo Hunahunan
10
281.00
9/1/2010
500.00
None
Polito Bat-ao
10
192.00
9/1/2010
500.00
None
Ronnie Huniog
10
1,934.00
9/1/2010
1,934.00
None
Jemelito Cordita
10
3,288.00
9/1/2010
3,288.00
None
Juan Bucarile, Sr.
Location
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
Pili,
Panikian
26
10
4,603.00
9/1/2010
4,603.00
None
Dioneto Cordita
Myrna Ortiz
10
50,000.00
9/1/2010
25,000.00
5%
Julian Cabadonga
10
1,565.00
9/1/2010
1.565.00
None
Charita Roculas
10
11,905.00
10/1/2010
11,905.00
10%
Alfredo Guiral
10
1,390.00
10/1/2010
2,000.00
None
Edelyn Huerte
10
2,5757.00
9/1/2010
2,575.00
None
Alberta Y. Jacobe
Agustin P. Luarez
Helenita
Younglove-Kyle
Allan D. Ajit
Decena A. Jubac
Alfredo Ajit
Fermin A. Ajit
Eladio Quajao
Emelia C. Moreno
Marcos Quajao
Arturo Buar
Arturo Buar
Luna Y. Bobias
Alfredo
Comparativo
Annabelle A.
Yparragurre
Josefa C. Acedo
Diosdado Solejon
Librada C. Rafaila
Bernard Ardel
Bobias
Winefredo
Dagasdas
BenitoDagasdas
POrferio Bonani
Bisa Pebojot Rodilla
Robinson
M.Consad
Merlinita Sampinit
Bonifacio D. Ciez
Lolito Cotecson
Carmelita Ladroma
Galdo
Lolitao Cotecson
Charita Marzon
Rogelio C. Asupra
Richard Polida
Paz Cosmiano
Valeriano Aranas
Lolito Cotecson
Annabelle A.
Yparraguirre
Pablo B. Arpilleda,
Jr.
5
10
5
696.96
1,636.20
811.60
3/1/2011
3/1/2011
3/1/2011
1,000.00
1,636.20
1,000.00
10%
10%
10%
Pili,
Panikian
Banban,
Panikian
Banban,
Panikian
Banban,
Panikian
Banban,
Panikian
Banban,
Panikian
Gamuton
Gamuton
Gamuton
5
5
5
5
5
5
5
5
5
5
5
1,103.26
1,852.86
746.64
1,490.86
825.12
1,119.54
2,742.69
1,288.91
1,288.91
4,803.51
817.69
3/1/2011
3/1/2011
3/1/2011
3/1/2011
3/1/2011
3/1/2011
3/1/2011
3/1/2011
3/1/2011
3/1/2011
3/1/2011
1,103.26
1,852.86
1000.00
1490.86
1,000.00
1,119.54
2,724.69
1,288.91
1,288.91
4,803.51
1,000.00
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
Gamuton
Gamuton
Gamuton
Gamuton
Gamuton
Gamuton
Gamuton
Gamuton
Gamuton
Gamuton
Gamuton
5
606.01
3/1/2011
1,000.00
10%
Gamuton
10
5
5
5
63.99
501.56
489.91
1,919.42
3/1/2011
3/1/2011
3/1/2011
3/1/2011
500.00
700.00
500.00
1,919.42
10%
10%
10%
10%
Gamuton
Bon-ot
Bon-ot
Bon-ot
5
400.32
3/1/2011
500.00
10%
Bon-ot
5
5
5
5
446.32
1,520.13
2,274.67
3,346.38
3/1/2011
3/1/2011
3/1/2011
3/1/2011
500.00
1,520.13
1,520.13
3,346.38
10%
10%
10%
10%
Bon-ot
Bon-ot
Bon-ot
Bon-ot
5
5
5
6 months
573.80
1,416.51
2,537.12
2,427.00
3/1/2011
3/1/2011
3/1/2011
3/21/2011
1,000.00
1,416.51
2,537.12
3,000.00
10%
10%
10%
10%
Bon-ot
Bon-ot
Bon-ot
Bon-ot
10
10
10
10
10
10
5
5
10,152.00
4,539.00
12,293.00
9,800.00
18,153
18,000.00
2,537.12
606.01
11/3/2010
3/8/2011
3/12/2011
10/16/2010
3/7/2011
3/7/2011
3/1/2011
3/1/2011
16,000.00
7,000.00
15,000.00
15,000.00
50,000.00
51,010.00
2,537.12
1,000.00
10%
10%
10%
10%
10%
10%
10%
10%
Bon-ot
Bon-ot
Bon-ot
Bon-ot
Bon-ot
Bon-ot
Bon-ot
Gamuton
10
4,848.00
9/1/2010
4,848.00
None
Pili,
Panikian
The renewals of the above leases are subject to agreement by the parties.
The above leased properties are used by MMDC for roads and stockpile areas.
27
MMDC will acquire and/or lease additional properties to be utilized for roads and stockpile areas
when needed for its operations. The cost of such acquisitions will depend on negotiations with
prospective owners and lessors. MMDC plans to finance such acquisitions from internally
generated funds.
Mining Properties
The Company’s wholly-owned subsidiary, MMDC was granted by the Department of Environment
and Natural Resources (DENR) of the Philippine National Government MPSA No. 016-93-XI
covering an area of approximately 4,799 hectares located in Cantilan, Surigao Del Sur. As the
holder of the said MPSA, MMDC has the exclusive right to conduct and develop mining operations
within the mineral property over a period of twenty five (25) years from July 1, 1993. MMDC has
identified Nickel Ore as the primary mineral that will be extracted from the mine and sold to third
parties due to the abundance and favorable characteristics of nickel within the mineral property.
Deed of Assignment to MMDC
MPSA No. 016-93-XI was originally granted to Ventura Timber Corporation (Ventura) on July 1,
1993. In January 1995, a Deed of Assignment was executed by and between Ventura and MMDC,
wherein Ventura assigned to MMDC all its rights, title and interest in and to MPSA No. 016-93-XI.
The Deed was duly registered with the Mines and Geosciences Bureau (MGB) Regional Office
(RO) No. XIII on February 9, 1995, and was subsequently approved on January 15, 2008, making
MMDC the official contractor of the mineral property. The Company’s Chairman, Mario Vijungco,
was the former owner of Ventura Timber Corporation, the original holder of MPSA 016-93-XI.
Note that MPSA 016-93-XIII and MPSA 016-93-XI refers to one and the same mining property. At
that time MMDC and Ventura executed abovementioned Deed of Assignment, Surigao del Sur was
still included as part of Region XI. On February 25, 1995, the CARAGA Region (Region XIII) was
created through Republic Act No. 7901, which included five provinces, namely: Agusan del Norte,
Agusan del Sur, Surigao del Norte, Surigao del Sur and Dinagat Islands. In this Prospectus, the
Company refers to the mining property as MPSA 016-93-XI to avoid confusion.
The Partial Declaration of Mining Project Feasibility of MMDC was approved by the MGB on
October 23, 2009 authorizing MMDC to proceed with the development and operating periods of the
MPSA, including extraction and commercial disposition of nickel ore and associated minerals within
the 300 hectare portion of its contract area. The remaining portion of the contract area is still under
exploration period.
Following is a summary of the major details covered by the Partial Declaration of Mining Project
Feasibility:
Project
Product
Production Rate
Ore Reserves
Mine Life
Cantilan Nickel Project
Nickel Laterite
1,200,000 WMT per year
11.60 million WMT @ 1.50%
10 years
Government Approvals; Effect of Existing or Probable Government Regulations on the
Business
The Company is already in possession of its Mineral Production Sharing Agreement, Environmental
Compliance Certificate, and has been given Notice to Proceed with its mining operations by the
Mines & Geosciences Bureau of the Department of Environment and Natural Resources.
Government regulations’ effect on the Company is primarily on the costs of compliance which are
appropriately reflected in the Company’s books either as an expense or as a capital asset under the
GAAP.
Determination of the effect of probable government regulations cannot be known until specific
provisions are made clear.
28
Costs and Effects of Compliance with Environmental Laws
The Company is strongly committed to its policy of protecting and enhancing the environment. As of
December 2012, it spent Php 26.198 million in accordance with its Environmental Protection and
Enhancement Program.
Business Transactions with Related Parties
The Company obtained non-interest bearing advances from stockholders which are payable on
demand. Such advances were used by the Company in day to day operations, general
administrative expenses, and for payroll. Such advances amounted to P6,496,255 and P9,621,255
as of December 31, 2012 and December 31, 2011 respectively.
Development Activities
The Company has not spent any amount on development activities. However, its wholly owned
subsidiary, MMDC, spent a total of Php 413 million for mine development from 2008 to 2011.
There were no revenues for MMDC during that period.
Risks of Mining
Exploration, Development and Operations Risk
There are numerous hazards and risks normally encountered in the exploration, development, and
production of nickel. These include and are not limited to unusual and hindering geologic
formations, erosion, unfavorable weather conditions, flooding and other occurrences that may arise
out of the drilling and removal of material. Any such occurrence may cause damage to mines and
other production facilities, which may result in environmental damage, and legal liability. The
company has in place its Environmental Protection and Enhancement Plan which has resulted in
structures built to prevent siltation and untoward flooding of the mine site, a Safety and Health
Program, and a Crisis Management Team in place.
Risks in the Estimation of Ore Reserves and Mineral Resources
The evaluation of the Company’s ore reserves and mineral resources is established on the results
and estimates of several geological and exploration works as well as rigorous studies conducted by
competent geologists and mining engineers. Nonetheless, the reported figures for ore reserves are
only estimates and are therefore not precise calculations. The Company conducts in-fill drilling to
validate the estimates further, and conducts a continuous exploration program to continually
increase
its
estimated
mineral
reserves.
Volatility of Commodity Prices
Significant declines in the price of nickel may render exploration, development, and production
activity uneconomical until the price recovers. Life-of-mine estimates may have to be recalculated.
Such conditions may result in a material and adverse effect on the financial performance of the
Company. The Company can enter into longer term, fixed price contracts with buyers to mitigate
this risk.
Exchange Rate Risk
There can be no assurance that: (a) the Peso will not be subject to continued appreciation or
volatility; (b) the current exchange rate policy will remain the same; (c) the Government will act
when necessary to stabilize the value of the Peso, or that any such action, if taken, will be
successful. Since the Company will earn its revenues in dollars, a significant depreciation in the
dollar may adversely affect the financial viability of mining operations. The company will take
exchange rate risk management measures under advisement from its financial advisors.
Weather
Extended rainy seasons may limit extraction and haulage. The company has measures and plans
in place that can increase daily production rates when weather hampers extraction and haulage
activities. Buffer equipment is in place to increase the equipment complement of any particular shift.
29
Additional shifts will also be employed in order to meet production targets. However, these can only
mitigate the effects of the weather on production and haulage to a certain degree.
Employees
Parent Company
The Company currently has a total of 9 employees, consisting of 4 executive /managerial position,
2 in accounting/clerical, 2 in administrative, 1 messenger personnel. For the ensuing 12 months,
the Company anticipates it will have the same number of employees. There is no employees’
union. There are no employees who are subject to any Collective Bargaining Agreement (“CBA”).
The Company was not threatened by any strike in the past three years. The Company has not
given any supplemental benefits or incentive arrangements with its employees. The Company
believes relations with the employees are good.
Marcventures Mining & Development Corporation:
As of December 31, 2012, MMDC has a total of 1,168 employees. Of this number, 315 are regular,
174 are probationary, and 679 are contractual employees. Twenty five (25) employees perform
administrative work and the rest are involved directly in mine site operations.
There is no employees’ union nor is there a collective bargaining agreement with the employees.
There has not been a strike in MMDC’s history.
Mineral Reserves and Estimates
The Company, through its subsidiary Marcventures Mining & Development Corporation, holds
Mineral Production Sharing Agreement No. 016-93-XIII which covers 4,799 hectares in the province
of Surigao Del Sur. It is physiologically located within the Diwata Mountain Range.
Estimates of the MPSA’s mineral resources and reserves are as follows:
RESOURCES
Volume
Measured & Indicated
Saprolite:
2.88 million WMT at 1.9%
Nickel, 11.81% Iron
Limonite
15.99 million WMT at 1.08%
Nickel and 44.48% Iron
Inferred
Saprolite:
4.49 million WMT at 1.73% and
13.08% Iron
Limonite:
21.96 million WMT at 1.00%
Nickel and 47.93% Iron
These estimates were prepared by Mr. Radegundo de Luna, a Competent Person in Geology,
to study the exploration data on the mineral property and verify its nickel resources.
Volume
RESERVES
11.6 million WMT laterite ore
Ore Grade
Average 1.5% Ni grade
Area
120 hectares
These estimates were prepared by Engr. Orlando S. Cruz, a Competent Person – Mining Engineer.
30
Legal Proceedings
As of date, Marcventures Mining & Development Corporation (MMDC), a wholly-owned subsidiary,
is involved in three [3] pending issues:
a. Petition filed by Cantilan Irrigation System Federation of Irrigators Association [CISFIA]
Surigao del Sur Irrigators Federation Association [SURIF] Cabcant Irrigators Association,
Inc., Buyaan Irrigators Association, Inc., CarCanMadCarLan Baywatch Foundation, Inc.
[CBFI], Lovers of Nature Foundation, Inc. before the Office of the Secretary, Department of
Environment and Natural Resources. Atty. Anselmo C. Abungan, OIC, Asst. Secretary,
Office of the Secretary, DENR, dismissed this Petition on 17 December 2012, per Decision
received by the Company on 14 January 2013. The Petitioners filed a Motion For
Reconsideration.
b. Case filed by Jaime “Datu Dagsaan” Bat-ao, Liquisa Irrigators Association represented by
Peter William Olan, Nagkahugpong Managatay Para sa Kalambuan [NAGMAKAAYO]
represented by Crisologo E. Aniono, Sr.; Lydia L. Lascano and Nick Matthew Q. Irriberi, a
minor represented by his father, Vicente Cirilo Irriberi, before the Regional Trial Court,
Branch 41, Cantilan, Surigao del Sur, docketed as Civil Case No. 224. The newly
designated Presiding Judge, Rufo U. Naragas, voluntarily inhibited from handling the case
per Order dated 14 February 2013.
c.
Opposition filed by the Cantilan Irrigation System Federation of Irrigators Association
[CISFIA] before the National Water Resources Board [NWRB] docketed as WPA No. XIIISDS=2009-02-036 relative to the application of Marcventures Mining and Development
Corporation for water rights. This opposition has nothing to do with the present mining
activities of MMDC. We were just notified of an opposition of MMDC’s application for water
rights. As of today, the matter is still pending and neither has the Company received any
order from the Board or pleadings from the Oppositor.
Other than the foregoing, MMDC and the Company have no other actual, pending or threatened
litigation. Likewise, MMDC and the Company are unaware of any involvement of their respective
executives, directors and/or officers in any legal proceeding for the past five (5) years.
The Company has not made any announcements publicly with regards to any new product or
service (whether in the planning stage, or any existence of prototypes).
V.
Directors and Executive Officers of the Registrant
The Names and Business Background of the registrant’s directors and executive officers are
discussed in the information statement on page nos. 7-8.
VI.
Market Price Of And Cash Dividends On Registrant’s Common Equity
The principal market for the registrant’s common stock is the Philippine Stock Exchange
(“PSE”). The Company’s stock symbol is “MARC”.
Stock Prices – Common Shares
The following table sets forth the high and low closing sales prices per share of the Common
Shares listed on the PSE during the respective periods indicated as per published financial
sources.
Price per Share (In Pesos)**
High
Low
2011
January – March
April – June
July – September
October – December
2.21
2.00
2.57
2.25
1.86
1.73
1.73
1.80
31
2012
January – March
April – June
July - September
October to December
3.50
3.82
2.75
2.35
1.80
2.35
2.17
1.71
2013
January to March
2.08
1.68
**Note: On, September 30, 2010, the Securities and Exchange Commission approved
the change in par value of its capital stock from ₱0.01 to ₱1.00 which resulted in a
corresponding adjustment in the total number of shares Issued and outstanding. Hence,
prices from January 2010 to September 2010 have been adjusted for the aforesaid change
in par value.
Latest Market Price
On April 30, 2013 trading date, the closing market price of the Company’s common stock was
₱1.70 per share.).
Stockholders
The number of shareholders of record as of December 31, 2012 was 2,170. The outstanding
shares as December 31, 2012 are 1,735,676,781 common shares, 98.07% of which are owned by
Filipinos.
The top 20 registered common stockholders as of April 30, 2013, are as follows:
Name
Total Holdings
No. Of Shares
1
PCD NOMINEE CORPORATION ( FILIPINO)
2
PCD NOMINEE CORP. (NON-FILIPINO)
1,700,048,308
3
ATC SECURITIES, INC.,
912,397
4
MANUJ AMARNANI,
110,000
5
BENJAMIN S. GELI,
100,000
6
JOHN C. JOVEN,
100,000
7
ANSALDO GODINEZ & CO., IN
96,055
8
ANTONIO RAMON C. LOPEZ,
60,000
9
PACIFICO B. TACUB,
50,000
10
ARNOLD JANSSEN T. BANTUGA
45,000
11
TERESITA N. LIM,
40,000
12
VICENTE GOQUIOLAY & CO.,
39,599
13
ALBERTO MENDOZA&/OR JEAN
30,000
14
INDEPENDENT REALTY CORPOR
20,400
15
ROSENDO LIM,
20,000
16
RAMON SALVADOR,
20,000
17
ROMEO B. MOLANO,
16,000
18
CHIONG & CO., INC.,
13,787
19
AO I LOK,
13,000
20
YU & CO., INC.,
33,365,504
11,568
1,735,111,618
Percentage
to Total
97.95%
1.92%
0.05%
0.01%
0.01%
0.01%
0.01%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
99.97%
The Company has no other class of registered securities outstanding aside from common shares.
32
Dividends Declared
Registrant: There are no dividends in arrears. Neither is there any default in principal or interest
with respect to any security of the Registrant. The Company has only one class of stock that is the
common shares. Common shareholders are not entitled to cumulative dividends.
MMDC: MMDC has no dividends in arrears. Neither is there any default in principal or interest with
respect to any security of MMDC. MMDC has only one class of stock, which are the common
shares. Common shareholders are not entitled to cumulative dividends.
Sales of Unregistered or Exempt Securities
“In 2011, the Company’s Board of Directors authorized Management to raise funds by way of
private placement of the Company’s Convertible Promissory Notes cum Warrants up to an amount
of P250 million, with the following basic features:

Term: One (1) to two years;

Interest: 10% to 12% p.a.

Conversion Option: The lender shall have the option to convert all or a portion of the
Principal of the Promissory Note into fully paid shares of stock of the Company (the
"Conversion Shares") at any time prior to the maturity of the loan. The conversion
price shall be at P 2.20per share, equivalent to 8x estimated earnings per share for
2011.

Warrants: Upon conversion of all or a portion of the Promissory Note, the lender
shall be entitled to a warrant to subscribe to one (1) MHI share, for every four (4)
Conversion Shares at a price of P 2.20 per share. The warrants are subject to a two
(2) year exercise period.

Prepayment: The Company has the option to prepay all or a portion of the Principal
of the Promissory Note at any time, exclusive of any Interest due at the time of
prepayment. In case of pre-payment, the lender is given fifteen (15) calendar days
from receipt of the Company's notice of prepayment within which to exercise the
Conversion Option.

Default: In case of default the lender shall be entitled to convert all or a portion of
the loan into fully paid and non-assessable shares of the common stock of the
Company at a price of P2.20 per share or at the prevailing market price at the
Philippine Stock Exchange on the conversion date, whichever is lower.

Proceeds from the Convertible Promissory Notes were used to fund working capital
requirements and for the acquisition of necessary hauling, mining and other
equipment.

Registration and Listing of Underlying Shares: Registration with the Securities and
Exchange Commission and listing with the Philippine Stock Exchange will be
effected when practicable prior to the maturity of the Promissory Note or upon
exercise of the conversion option.
The Company raised P249.80 million through the placement of the aforesaid Convertible
Promissory Notes with selected institutional and individual lenders over a period of six months.
The outstanding amount of Promissory Notes amounted to P176.120 million as of December 31,
2011.
As of December 31, 2011, 20,454,545 new shares were issued by the Company as a result of
the conversion of certain Promissory Notes
The number of common shares that may be issued as of December 31, 2011 as a result of
further conversion of the Convertible Promissory Notes and exercise of related warrants is as
follows:
33
- conversion of outstanding promissory notes
: 80,054,545
- warrant shares arising from possible conversion : 20,013,636
- Total
: 100,068,181
The outstanding amount of Promissory Notes amounted to P149.8 million as of December 31,
2012.
As of December 31, 2012, 14,215,908 new shares were issued by the Company as a result of the
conversion of Promissory Notes thus increasing Total Issued and Outstanding shares of the
Company to 1,735,676,782 as of December 31, 2012 from 1,721,460,874 as of December 31,
2011.
On March 4, 2013, the Company disclosed that the Board of Directors of Marcventures Holdings,
Inc. (the “Company”), with the consent of majority of the creditors concerned, approved the
extension of the term of the loan agreements issued under Convertible Loan Series 2 by a period
not exceeding one (1) year, in view of the need of the Company for funds. The other terms of
Convertible Loan series 2 remain the same.
VII.
Corporate Governance
The Company uses the evaluation system established by SEC in its Memorandum Circular No. 5,
series of 2003, including the accompanying Corporate Governance Self-Rating Form (CG-SRF) to
measure or determine the level of compliance of the Board of Directors and top-level management
with the Company’s Corporate Governance Manual. The Company undertakes a self-evaluation
process every semester and any deviation from the Company’s Corporate Governance Manual is
reported to the Management and the Board together with the proposed measure to achieve
compliance. The Company did not materially deviate from its Corporate Governance Manual for
the last fiscal year. The Company is in compliance with the leading practices on good corporate
governance embodied in the CG-SRF. Employees and officers undergo professional development
programs subject to meeting the criteria set by the Company. The Board determines succession
plan for senior management as the need arises. The Company shall adopt such improvement
measure on its corporate governance, as it may be necessary from time to time.
VIII.
Name and Address – Request for SEC 17-A Annual Report
Any Stockholder, upon request, will be provided with a copy of the Company’s Annual
Report in SEC Form 17-A without charge. The name and address of the person to whom such
written request is to be directed is as follows:
Carlos C. Syquia
Corporate Information Officer
MARCVENTURES HOLDINGS, INC.
th
16 Floor, Citibank Tower, Paseo de Roxas, Makati City
34
Marcventures Holdings, Inc.
th
Head Office: 16 Floor, Citibank Tower, Paseo de Roxas, Makati City,
Telefax Nos. (02) 836-8609 or 856-7976
Common Stock:
The Company’s common stock are listed and traded at the Philippine Stock
Exchange.
Stockholders Services and Assistance
STOCK TRANSFER SERVICES, INC. (STSI) serves as the Company’s stock
transfer agent registrar. For inquiries regarding dividend payments, change of
address and account status lost or damaged stock certificates please write or call:
Mr. Ricardo D. Regala
General Manger
34-D Rufino Pacific Tower, 6784 Ayala Avenue, Makati City
Tel No. (02) 403-2410/403-2412
Fax No. (02) 403-2414
35
36
37
COVER SHEET
1 2 9 4 2
SEC Registration Number
M A R C V E N T U R E S
H O L D I N G S ,
I N C .
A N D
S U B S I D I A R Y
( F O R M E R L Y :
A J O . N E T
H O L D I N G S ,
I N C .)
(Company’s Full Name)
U N I T
6 F ,
8 1 0 1
P E A R L
P A S I G
6 T H
F L R .
D R I V E ,
P E A R L
P L A Z A
O R T I G A S
C T R .
C I T Y
(Business Address: No. Street City/Town/Province)
ATTY. ANA MARIA A. KATIGBAK
817-6791
(Contact Person)
(Company Telephone Number)
0 6
Month
3 0
A A F S
Day
Month
(Form Type)
(Fiscal Year)
Day
(Annual Meeting)
N/A
(Secondary License Type, If Applicable)
N/A
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
Foreign
MQ
&
T
F
20
21
MQ
&
T
F
22
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
2012
2011
ASSETS
Current Assets
Cash and cash equivalents (Note 6)
Trade and other receivables - net (Note 7)
Inventory (Note 8)
Other current assets - net (Note 10)
Total Current Assets
Noncurrent Assets
Property, plant and equipment - net (Note 11)
Explored mineral resources - net (Notes 4 and 5)
Other noncurrent assets (Note 13)
Total Noncurrent Assets
P13,127,549
=
13,629,849
14,898,292
35,249,277
76,904,967
=164,141,033
P
22,090,819
234,403,818
23,013,456
443,649,126
1,176,231,407
1,294,766,157
149,210,150
2,620,207,714
=2,697,112,681
P
725,093,051
1,294,766,157
101,233,951
2,121,093,159
=2,564,742,285
P
=263,161,743
P
25,501,911
−
41,588,074
330,251,728
=261,154,059
P
76,808,572
26,320,000
19,034,406
383,317,037
149,800,000
149,800,000
39,422,676
122,563
189,345,239
22,698,842
122,563
172,621,405
1,735,676,782
109,837,311
332,001,621
2,177,515,714
=2,697,112,681
P
1,721,460,874
92,778,223
194,564,746
2,008,803,843
=2,564,742,285
P
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables (Note 16)
Interest-bearing loans (Note 15)
Notes payable (Note 14)
Related party payable (Note 17)
Total Current Liabilities
Noncurrent Liabilities
Notes payable - net of current portion (Note 14)
Interest-bearing loans - net of current portion
(Note 15)
Related party payables (Note 17)
Total Noncurrent Liabilities
Equity
Capital stock (Note 18)
Additional paid-in capital (Note 18)
Retained earnings
Total Equity
See accompanying Notes to Consolidated Financial Statements.
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2012
(With comparative figures for the years ended December 31, 2011, June 30, 2011 and 2010)
December 31
2012
REVENUES
Sale of ore
Miscellaneous income
Dividend income
COST AND EXPENSES
Cost of sales (Note 19)
Shipping and loading (Note 20)
Excise and other taxes
Royalties
Social development and management
program
General and administrative (Note 21)
INCOME (LOSS) FROM OPERATIONS
OTHER INCOME (EXPENSE) NET (Note 23)
INCOME (LOSS) BEFORE TAXES
PROVISION FOR INCOME
TAX - DEFERRED (Note 26 )
NET INCOME (LOSS)
June 30
2011
2010
P
=697,491,039
−
−
P
=697,491,039
=842,901,957
P
−
−
=842,901,957
P
=−
P
60,836
−
60,836
=−
P
−
422,000
422,000
377,162,684
81,553,291
17,735,149
6,974,910
394,840,651
104,628,874
18,972,405
8,429,020
−
−
−
−
−
−
−
−
1,381,513
59,936,373
6,108,207
44,539,108
−
46,943,000
−
33,704,096
544,743,920
577,518,265
46,943,000
33,704,096
152,747,119
265,383,692
(46,882,164)
(33,282,096)
(25,162,640)
(9,333,504)
19,006,250
136,577,747
240,221,052
(56,215,668)
(14,275,846)
859,128
118,264
137,436,875
240,339,316
−
−
(16,169,372)
COMPREHENSIVE LOSS
Fair value loss
TOTAL COMPREHENSIVE
INCOME (LOSS)
2011
P
= 137,436,875
510,200
(55,705,468)
−
87,655
(14,188,191)
(633,013)
=240,339,316
P
(P
=55,705,468)
(P
=14,821,204)
Basic earnings (loss) per share (Note 24)
=0.079
P
=
P0.140
(P
=0.033)
(P
=0.049)
Diluted earnings (loss) per share (Note 24)
=0.075
P
=
P0.132
(P
=0.030)
(P
=0.049)
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2012
(With comparative figures for the years ended December 31, 2011, June 30, 2011 and 2010)
Balance at June 30, 2009
Refund of deposits
Balance before capital restructuring
Effect of decrease in par value
Effect of quasi-reorganization
Issuance of new shares
Minority interest
Total comprehensive loss for the year
Balance at June 30, 2010
Decrease in minority interest
Full payment of subscription receivable
Total comprehensive loss for the year
Balance at June 30, 2011
Balance at December 31, 2010
Conversion of private placements
Net loss for the year
Decrease in non-controlling interest
Balance at December 31, 2011
Conversion of private placements
Exercise of underlying warrants
Net income for the year
See accompanying Notes to Consolidated Financial Statements.
Capital Stock
(Note 18)
=509,879,811
P
−
509,879,811
(459,056,968)
−
1,650,000,000
−
−
1,700,822,843
183,486
−
1,701,006,329
1,701,006,330
20,454,544
−
−
1,721,460,874
8,009,090
6,206,818
−
=1,735,676,782
P
Additional
Paid-in
Capital
=273,037
P
−
273,037
459,056,968
(441,097,236)
50,000,000
−
−
68,232,769
−
−
68,232,769
68,232,769
24,545,454
−
−
92,778,223
−
17,059,088
=109,837,311
P
Deficit
=−
P
−
−
−
−
−
50,000,000
−
50,000,000
(50,000,000)
−
−
−
(45,774,570)
−
240,339,316
−
194,564,746
−
−
137,436,875
=332,001,621
P
Minority
Interests
=7,500,000
P
(7,500,000)
−
−
−
−
−
−
−
−
−
−
−
49,573,953
(49,573,953)
−
−
−
−
=−
P
Total
(P
=444,439,223)
−
(444,439,223)
−
441,097,236
−
−
(14,821,204)
(18,163,191)
−
−
(55,705,468)
(73,868,659)
1,773,038,482
44,999,998
240,339,316
(49,573,953)
2,008,803,843
8,009,090
23,265,906
137,436,875
=2,177,515,714
P
-7-
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012
(With comparative figures for the years ended December 31, 2011, June 30, 2011 and 2010)
December 31
2012
June 30
2011
2010
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before income tax
P
= 136,577,747
=240,221,052
P
(P
=56,215,668)
(P
=14,275,846)
25,833,206
17,066,333
−
−
−
9,791,793
Depreciation (Note 21)
6,549,845
3,606,336
2,490,544
113,741
Provision for retirement benefits (Note 21)
1,768,238
602,978
1,909,432
−
Adjustments for:
Interest expense (Note 23)
Impairment loss
50,000
−
Provision for mine site rehabilitation
(Note 23)
Interest income (Note 23)
1,628,000
(325,502)
−
(278,941)
−
(238,821)
Fair value loss
−
−
Gain on sale of property, plant and equipment
(Note 23)
Gain on sale of available for sale securities
−
−
−
9,527,081
(32,857)
9,527,081
(2,961,522)
(16,258,611)
172,031,534
270,744,839
(32,768,496)
(34,093,552)
3,232,931
Operating income (loss) before working capital
−
−
(128,301)
(633,013)
changes
Working capital changes:
Decrease (increase) in:
Trade and other receivables (Note 7)
Inventory (Note 8)
Other current assets (Note 10)
Increase (decrease) in trade and other
payables (Note 16)
Net cash provided by (used in) operations
Interest received
Interest paid
8,460,970
(11,513,202)
(2,902,127)
5,247,021
(131,516,466)
(80,833,656)
(4,727,175)
(37,520,262)
(12,235,821)
(1,388,554)
172,115,150
325,502
(25,833,206)
245,377,200
368,365,196
278,941
(23,349,718)
147,229,885
−
(4,940,265)
14,730,218
(6,794,656)
362,805
(21,070,668)
128,301
(913,215)
(50,000)
−
−
(79,181)
(299,072)
146,607,446
345,294,419
(7,548,231)
(21,291,439)
Available for sale securities
−
−
−
17,655,946
Property, plant and equipment
−
−
1,270,000
3,045,816
(1,454,764)
Income tax paid
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceed from sale of available for sale of:
Decrease (increase) in :
Other noncurrent assets (Note 13)
Available for sale securities
Deferred mine exploration cost
Investment and advances in subsidiary
Additions to property, plant and
equipment (Note 11)
Disposal of investment
Effect of acquisition of subsidiary
(47,117,072)
−
−
−
(94,234,684)
(9,524,956)
−
−
(3,636,239)
−
−
−
(43,829,103)
11,586,415
(243,429,696)
−
−
(320,821,699)
−
−
(237,985,625)
−
−
(23,739,741)
(3,048,316)
(4,798,140)
Net cash used in investing activities
(290,546,768)
(424,581,339)
(240,351,864)
(44,581,887)
(forwarded)
-1-
(continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments of):
Interest bearing loans (Note 15)
Notes payable (Note 14)
Related party transactions
Issuance of subscription receivable
Increase (decrease) in advances from Philtown
Collection of subscription receivable
Refund of deposit for future subscription
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END
OF YEAR (Note 6)
(34,582,827)
4,954,996
22,553,669
(7,074,162)
197,620,875
544,054
249,800,000
5,584,400
−
−
183,486
−
256,111,940
(151,013,484)
118,333,954
8,211,845
11,707,775
164,141,033
45,807,079
40,833,733
29,125,958
P
=13,127,549
=164,141,033
P
=49,045,578
P
=40,833,733
P
−
−
See accompanying Notes to Consolidated Financial Statements.
75,631,056
121,119,998
18,369,821
(17,500,000)
−
(204,420,687)
−
(161,498,212)
450,000,000
1,000,000
−
(7,500,000)
77,581,101
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Marcventures Holdings, Inc. (Formerly: AJO.net Holdings, Inc.), the Parent Company, was
incorporated and registered with the Securities and Exchange Commission (SEC) on August 7, 1957,
with a primary purpose to acquire by purchase, exchange, assignment, gift or otherwise, and to hold,
own and use for investment or otherwise, and to sell, assign, transfer, exchange, lease, let, develop,
mortgage, pledge, traffic, deal in, and with, and otherwise operate, manage, enjoy and dispose of, any
and all properties of every kind and description and wherever situated, including land as and to the
extent permitted by law, including but not limited to, buildings, tenements, warehouses, factories,
edifices and structures and other improvements and bonds, debentures, promissory notes, shares of
stock, or other securities or obligations, created, negotiated or issued by any corporation, association
or other entity, foreign or domestic and while the owner, holder or possessors thereof, to exercise all
rights, powers and privileges of ownership or any other interest therein, including the right to receive,
collect and dispose of, any and all rentals, dividends, interest and income derived therefrom, and the
right to vote on any proprietary or other interest, on any shares of the capital stock, and upon any
bonds, debentures or other securities having voting power, so owned or held; and provided it shall not
engage in the business of an open-end or close-end investment company as defined in the Investment
Company Act (Republic Act 2629), or act as a securities broker or dealer.
Marcventures Mining & Development Corporation (MMDC), a wholly-owned Subsidiary of the
Parent Company and incorporated in the Philippines, is engaged primarily to carry on the business of
mining, smelting, extracting, smelting mineral ores such as, but not limited to nickel, chromites,
copper, gold, manganese and other similar ores and/natural metallic or non-metallic resource from
the earth, to operate, manage and/or engage in the business of smelting, and/or operate smelting
plant, to refine and/or convert metals, ore, and other precious metals into finished products within the
commerce of man.
On March 30, 2010, the SEC approved the Parent Company’s change in name from AJO.net
Holdings, Inc. to Marcventures Holdings, Inc. and further approved the Parent Company’s change in
primary purpose to include land ownership.
On July 19, 2010, the Subsidiary was registered with the Board of Investments (BOI) in accordance
with the provisions of the Omnibus Investments Code of 1987, as amended, as a New Producer of
Nickel Laterite Ore. As a BOI registered entity, the Subsidiary is entitled to an Income Tax Holiday
(ITH) for four (4) years from July 2010 or actual start of commercial operations, whichever is earlier
but in no case earlier than the date of registration.
Mining Claims and Properties
MMDC has been granted by the Department of Environmental and Natural Resources (DENR) of
the Philippine National Government a Mineral Production Sharing Agreement (MPSA) No. 016-93XIII covering an area of approximately 4,799 hectares located in Cantilan Surigao Del Sur. As the
holder of the said MPSA, MMDC has the exclusive right to conduct and develop mining operations
within the mineral property over a period of 25 years from July 1, 1993. MMDC has identified
Nickel Ore as the primary mineral that will be extracted and sold to third parties due to the
abundance and favorable characteristics of nickel within the mineral property.
-2-
The MPSA was originally granted to Ventura Timber Corporation on July 1, 1993. In January 1995,
a deed of assignment (Deed) was executed, wherein Ventura assigned to MMDC all its rights, title
and interest in and to MPSA No. 016-93-XIII. The Deed was duly registered with the Mines and
Geosciences Bureau (MGB) Regional Office (RO) No. XIII on February 9, 1995, and was
subsequently approved on January 15, 2008, making the Subsidiary the official contractor of the
mineral property.
On October 23, 2009 the Partial Declaration of Mining Feasibility of the Subsidiary in connection
with the MPSA No. 016-93-XIII was approved by the Director of MGB and the Subsidiary is
henceforth authorized to proceed to the Development and Operating Periods of MPSA No. 016-93XIII, including the extraction and commercial disposition of nickel ore and associated minerals within
the 300-hectare portion of the contract area subject to certain conditions.
The Parent Company’s registered office is located at 16th floor Citybank Tower, 8741 Paseo
de Roxas, Makati City.
On March 2, 2011, the SEC approved the Parent Company’s application for the change of financial
year from fiscal year June 30 to calendar year December 31.
The consolidated financial statements as at December 31, 2012 and 2011 were approved and
authorized for issue by the Board of Directors on April 11, 2013.
2. Summary of Significant Accounting Policies
The significant accounting policies that have been used in the preparation of the consolidated
financial statements are summarized below. These policies have been consistently applied to all years
presented, unless otherwise stated.
Basis of Preparation of Consolidated Financial Statements
The consolidated financial statements of the Group have been prepared in accordance with Philippine
Financial Reporting Standards (PFRS). PFRS are adopted by the Financial Reporting Standards
Council (FRSC) from the pronouncements issued by the International Accounting Standards Board
(IASB).
The consolidated financial statements have been prepared on the historical cost basis, except for the
revaluation of certain financial assets and explored mineral resources that have been measured at a
certain valuation method. The measurement bases are more fully described in the accounting policies
that follow.
Presentation of Financial Statements
The consolidated financial statements are presented in accordance with PAS 1 (Revised 2007),
Presentation of Financial Statements. The Group presents all items of income and expenses in a
single statement of comprehensive income. Two comparative periods are presented for the statements
of financial position when the Group applies an accounting policy retrospectively, make a
retrospective restatement of items in its financial statements, or reclassifies items in the financial
statements.
-3-
Functional and Presentation Currency
These consolidated financial statements are presented in Philippine pesos, the Group’s functional
presentation currency, and all values represent absolute amounts except when otherwise indicated.
New Accounting Policies Adopted
The Group adopted the following new revisions and amendments to PFRS that are relevant to the
Group and either effective or early adopted for financial statements for the annual period beginning
on or before December 31, 2012:
PAS 24 (Revised 2009)
PAS 27 (Revised 2011)
PFRS 10 (Revised 2011)
PFRS 12
PFRS 13 (Revised 2011)
Various Standards
Related Party Disclosures
Separate Financial Statements
Consolidated Financial Statements
Disclosure of Interest in other Entities
Fair Value Measurement
2011 Annual Improvements to PFRS
Discussed below are the effects on the financial statements of the new and amended standards.
PAS 24 (Revised 2009), “Related Party Disclosures”, amends the requirements of the previous
version of IAS 24 to (a) provide a partial exemption from related party disclosure requirements for
government-related entities, (b) clarify the definition of a related party and (c) include an explicit
requirement to disclose commitments involving related parties. The revision of this standard does not
have any significant effect in the 2012 and 2011 consolidated financial statements.
PAS 27 (Revised 2011), “Separate Financial Statements”, amended version of PAS 27 which now
only deals with the requirements for separate financial statements, which have been carried over
largely unamended from PAS 27 Consolidated and Separate Financial Statements. Requirements for
consolidated financial statements are now contained in PFRS 10 Consolidated Financial Statements.
The standard requires that when an entity prepares separate financial statements, investments in
subsidiaries, associates, and jointly controlled entities are accounted for either at cost, or in
accordance with PFRS 9, Financial Instruments.
The standard also deals with the recognition of dividends, certain group reorganisations and includes
a number of disclosure requirements. The revision of this standard does not have any significant
effect in the 2012 and 2011 consolidated financial statements.
PFRS 10 (Revised 2010), “Consolidated Financial Statements”, requires a parent to present
consolidated financial statements as those of a single economic entity, replacing the requirements
previously contained in PAS 27 Consolidated and Separate Financial Statements and SIC-12
Consolidation - Special Purpose Entities.
The standard identifies the principles of control, determines how to identify whether an investor
controls an investee and therefore must consolidate the investee, and sets out the principles for the
preparation of consolidated financial statements.
-4-
The standard introduces a single consolidation model for all entities based on control, irrespective of
the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or
through other contractual arrangements as is common in 'special purpose entities'). Under PFRS 10,
control is based on whether an investor has (a) power over the investee, (b) exposure, or rights, to
variable returns from its involvement with the investee, and (c) the ability to use its power over the
investee to affect the amount of the returns. The revision of this standard does not have any
significant effect in the 2012 and 2011 consolidated financial statements.
PFRS 12, “Disclosure of Interests in Other Entities”, requires the extensive disclosure of information
that enables users of financial statements to evaluate the nature of, and risks associated with,
interests in other entities and the effects of those interests on its financial position, financial
performance and cash flows.
In high-level terms, the required disclosures are grouped into the following broad categories:
 Significant judgements and assumptions - such as how control, joint control, significant
influence has been determined;
 Interests in subsidiaries - including details of the structure of the group, risks associated with
structured entities, changes in control, and so on;
 Interests in joint arrangements and associates - the nature, extent and financial effects of
interests in joint arrangements and associates (including names, details and summarised
financial information);
 Interests in unconsolidated structured entities - information to allow an understanding of the
nature and extent of interests in unconsolidated structured entities and to evaluate the nature
of, and changes in, the risks associated with its interests in unconsolidated structured entities.
The Group’s adoption of PFRS 12 do not result in any material adjustment in its financial statements
as the change in accounting policy only affects presentations aspects.
PFRS 13, “Fair Value Measurement”, replaces the guidance on fair value measurement in existing
IFRS accounting literature with a single standard.
The PFRS is the result of joint efforts by the IASB and FASB to develop a converged fair value
framework. The IFRS defines fair value, provides guidance on how to determine fair value and
requires disclosures about fair value measurements. However, PFRS 13 does not change the
requirements regarding which items should be measured or disclosed at fair value.
PFRS 13 applies when another PFRS requires or permits fair value measurements or disclosures
about fair value measurements (and measurements, such as fair value less costs to sell, based on fair
value or disclosures about those measurements). With some exceptions, the standard requires entities
to classify these measurements into a 'fair value hierarchy' based on the nature of the inputs:
 Level 1 - quoted prices in active markets for identical assets or liabilities that the entity can
access at the measurement date
 Level 2 - inputs other than quoted market prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly
 Level 3 - unobservable inputs for the asset or liability
-5-
Entities are required to make various disclosures depending upon the nature of the fair value
measurement (e.g. whether it is recognised in the financial statements or merely disclosed) and the
level in which it is classified.
Annual improvements
PAS 12
PAS 19 (Revised 2011)
Income Taxes
Employee Benefits
PAS 12, “Income Taxes”, amends IAS 12 Income Taxes to provide a presumption that recovery of
the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property
will, normally, be through sale.
As a result of the amendments, SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable
Assets would no longer apply to investment properties carried at fair value. The amendments also
incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly
withdrawn.
PAS 19, “Employee Benefit”, an amended version of IAS 19 Employee Benefits with revised
requirements for pensions and other postretirement benefits, termination benefits and other changes.
The key amendments include:




Requiring the recognition of changes in the net defined benefit liability (asset) including
immediate recognition of defined benefit cost, disaggregation of defined benefit cost into
components, recognition of remeasurements in other comprehensive income, plan
amendments, curtailments and settlements (eliminating the 'corridor approach' permitted by
the existing PAS 19)
Introducing enhanced disclosures about defined benefit plans
Modifying accounting for termination benefits, including distinguishing benefits provided in
exchange for service and benefits provided in exchange for the termination of employment
and affect the recognition and measurement of termination benefits
Clarifying various miscellaneous issues, including the classification of employee benefits,
current estimates of mortality rates, tax and administration costs and risk-sharing and
conditional indexation features
Standards effective in 2012 but not relevant to the Group
The following amendments, interpretations and improvements to published standards are mandatory
for accounting periods beginning on or after January 1, 2013 but not adopted and relevant to Group’s
consolidated financial statements:
PAS 28 (Revised 2011), “Investments in Associates and Joint Ventures” this Standard supersedes
PAS 28 Investments in Associates and prescribes the accounting for investments in associates and
sets out the requirements for the application of the equity method when accounting for investments in
associates and joint ventures.
-6-
The standard defines 'significant influence' and provides guidance on how the equity method of
accounting is to be applied (including exemptions from applying the equity method in some cases). It
also prescribes how investments in associates and joint ventures should be tested for impairment.
The significant accounting policies and practices of the Group are set forth to facilitate the
understanding of the consolidated financial statements:
Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and its
subsidiary, MMDC. The consolidated financial statements as of December 31, 2012 and
2011 comprise the financial statement with the same reporting period for the Parent Company and
Subsidiary. These statements are prepared using uniform accounting policies for like transactions
and other events in similar circumstances. All significant intercompany accounts, transactions and
balances are eliminated in these consolidated financial statements. The subsidiary is consolidated
from the date on which control is transferred to the Parent Company and ceases to be consolidated
from the date on which control is transferred out of the Parent Company.
The significant accounting policies and practices of the Group are set forth to facilitate the
understanding of the consolidated financial statements:
Cash and Cash Equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid
investments readily convertible to known amounts of cash and which are subject to insignificant risk
of changes in value.
Business Combinations
The consolidated financial statements accounted business combination by applying the purchase
method. This involves recognizing identifiable assets (including previously unrecognized
intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of
acquired business at fair value, including assets and liabilities not previously recognized in the
Subsidiary or acquiree’s financial statements. Any excess of the cost over the acquirer’s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities so recognized was
accounted for as “explored mineral resources” in the statement of consolidated financial position, as
this asset meets the definition of an intangible asset that is controlled and provides economic benefits,
separate and arises from its mineral property rights and claims, and its fair value was measured
reasonably.
If the initial accounting for business combination can be determined only provisionally by the end of
the period by which the combination is effected because either the fair values to be assigned to the
acquiree’s identifiable assets , liabilities or contingent liabilities or the cost of combination can be
determined only provisionally, the Parent Company accounts the combination using provisional
values. Adjustments to those provisional values as a result of completing the initial accounting shall
be made within twelve (12) months from the acquisition date. The carrying amount of an identifiable
asset, liability or contingent liability that is recognized as a result of completing the initial accounting
shall be calculated as if its fair value at the acquisition date had been recognized from that date and
explored mineral resources or any gain recognized shall be adjusted from the acquisition date of the
identifiable asset, liability or contingent liability being recognized or adjusted. All acquisition-related
costs on the business combination are expensed.
Explored Mineral Resources
-7The Subsidiary’s financial statement did not recognize in its books the mineral resources from its
mineral property right but was recognized in the business combination with the Parent Company and
conforms to the PFRS 3.
This requires the Parent Company to use recognition and measurement practices that are part of
those accounting policies in PFRS 6, Exploration for and Evaluation of Mineral Resources and PAS
38, Intangible Assets. The measurement and recognition of explored mineral resource is based
on an independent valuation over the mineral property of MMDC as supported by the Mineral
Production Sharing Agreement (MPSA) and the expected value of the mineable ore reserve in the
explored area if the Mineral Property (see Note 5 for the discussion of the valuation of this intangible
asset). MPSA can be transferred for value and the mineable mineral ore reserve identified in the
explored area of the Mineral Property can be extracted, produced and sold.
Measurement after recognition of Explored Mineral Resources
After initial recognition, the explored mineral resources shall be carried at its cost less any
accumulated impairment losses.
Impairment of Explored Mineral Resources
The Parent Company’s financial statements recognized exploration and evaluation assets to perform
an impairment test on those assets when facts and circumstances suggest that the carrying amount of
the assets may exceed their recoverable amounts. It varies the recognition of impairment from that in
PAS 36, but measures the impairment in accordance with this standard once the impairment is
identified.
For purposes of explored mineral resources, when identifying exploration and evaluation assets that
may be impaired, one or more of the following facts and circumstances indicate that the parent
company should test its assets for impairment.




The period for which the entity has the right to explore in the specific areas has expired
during the period or will expire in the near future, and is not expected to be renewed.
Substantive expenditure on further exploration for and evaluation of mineral resources in the
specific area is neither budgeted nor planned.
Exploration for the evaluation of mineral resources in the specific area have not led to the
discovery of commercially viable quantities of mineral resources and the entity has decided
to discontinue such activities in the specific area; and
Sufficient data exist to indicate that, although a development in the specific area is likely to
proceed, the carrying amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale. Management believes that there is
significant reason not to recognize impairment in this asset.
Details of impairment testing on explored mineral resources are discussed in Note 5.
Financial Assets
Financial assets, which are recognized when the Group becomes a party to the contractual terms of
the financial instruments, include cash and other financial instruments. Financial assets, other than
hedging instruments, are classified into the following categories: financial assets at fair value through
profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial
-8-
assets. Financial assets are assigned to the different categories by management on initial recognition,
depending on the purpose for which the investments were acquired. The designation of financial
assets is re-valued at every reporting period at which date a choice of classification or accounting
treatment is available, subject to compliance with specific provisions of applicable accounting
standards.
Regular purchases and sales of financial assets are recognized on their trade date. All financial assets
that are not classified as at fair value through profit or loss are initially recognized at fair value plus
any directly attributable transaction costs. All financial assets carried at fair value through profit or
losses are initially recorded at fair value and transaction costs related to it are recognized in profit or
loss.
A more detailed description of the four categories of financial assets are as follows:
(a) Financial Assets At Fair Value through Profit or Loss
This category include financial assets that are either classified as held for trading or are
designated by the entity to be carried at fair value through profit or loss upon initial recognition.
All derivatives fall into this category, except for those designated and effective as hedging
instruments. Assets in this category are classified as current if they are either held for trading or
are expected to be realized within 12 months from the end of the reporting period.
Financial assets at fair value through profit or loss are measured at fair value, and changes
therein are recognized in profit or loss. Financial assets (except derivatives and financial
instruments originally designated as financial assets at fair value through profit or loss) may be
reclassified out of fair value through profit or loss category if they are no longer held for the
purpose of being sold or repurchased in the near term.
(b) 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 arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the receivables. They are included in
current assets, except for maturities greater than 12 months after the reporting period which are
classified as non-current assets.
Loans and receivables are subsequently measured at amortized cost using the effective interest
method, less impairment loss, if any. Any change in their value is recognized in profit or loss.
Impairment loss is provided when there is objective evidence that the Group will not be able to
collect all amounts due to it in accordance with the original terms of the receivables. The amount
of the impairment loss is determined as the difference between the assets’ carrying amount and
the present value of estimated cash flows.
(c) Held-to-maturity Investments
This category includes non-derivative financial assets with fixed or determinable payments and a
fixed date of maturity that the Group has the positive intention and ability to hold to maturity.
Investments intended to be held for an undefined period are not included in this classification.
Held-to-maturity investments are included in non-current assets under Financial Assets account
-9-
in the statement of financial position, except those maturing within 12 months from the reporting
period, which are presented as part of current assets.
Subsequent to initial recognition, the investments are measured at amortized cost using the
effective interest method, less impairment losses, if any. Impairment loss, which is the difference
between the carrying value and the present value of estimated cash flows of the investment, is
recognized when there is objective evidence that the investment has been impaired. Any changes
to the carrying amount of the investment, including impairment loss, are recognized in profit or
loss.
(d) Available-for-sale Financial Assets
This category includes non-derivative financial assets that are either designated to this category
or do not qualify for inclusion in any of the other categories of financial assets. They are included
in non-current assets under the Financial Assets account in the statement of financial position
unless management intends to dispose of the investment within 12 months from the reporting
period.
All available-for-sale financial assets are measured at fair value, unless otherwise disclosed, with
changes in value recognized in other comprehensive income, net of any effects arising from
income taxes. When the asset is disposed of or is determined to be impaired the cumulative gain
or loss recognized in other comprehensive income is reclassified from revaluation reserve to
profit or loss and presented as a reclassification adjustment within other comprehensive income.
All income and expenses, including impairment losses, relating to financial assets that are recognized
in profit or loss are presented as part of Finance Costs or Finance Income in the consolidated
statement of comprehensive income.
Non-compounding interest, dividend income and other cash flows resulting from holding financial
assets are recognized in profit or loss when earned, regardless of how the related carrying amount of
financial assets is measured.
Reversal of impairment loss is recognized in other comprehensive income, except for financial assets
that are debt securities which are recognized in profit or loss only if the reversal can be objectively
related to an event occurring after the impairment loss was recognized.
Determination of Fair Value
The fair value for financial instruments that are actively traded in organized financial markets is
determined by reference to quoted market bid prices at the close of business on the consolidated
statement of financial position date. For investments and all others financial instruments where there
is no active market, fair value is determined using generally acceptable valuation technique. Such
techniques include using arm’s length market transactions; reference to the current market value of
another instrument, which are substantially the same; discounted cash flow analysis and other
valuation models.
Fair value measurements are disclosed by source of inputs using three-level hierarchy for each class
of financial instrument. Fair value measurement under Level 1 is based on quoted prices in active
markets for identical financial assets or financial liabilities; Level 2 is based on inputs other than
quoted prices included in Level 1 that are observable for the financial asset or financial liability that
are not based on observable market data.
- 10 -
- 11 ‘Day 1’ Profit
Where the transaction price in a non-active market is different from the fair value of the other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Group recognizes the difference
between the transaction price and fair value (a ‘Day 1’ profit) in profit or loss unless it qualifies for
recognition as some other type of asset. In cases where use is made of data which are not observable,
the difference between the transaction price and model value is only recognized in profit or loss when
the inputs become observable or when the instrument is derecognized. For each transaction, the
Group determines the appropriate method of recognizing the ‘Day 1’ profit amount.
Inventory
Mine products inventory, which consists of nickel ore is stated at the lower of cost, determined using
the weighted average method or net realizable value (NRV). NRV for the mine products is the selling
price in the ordinary courses of the business, less the estimated cost necessary to make the sale.
Mine products inventory are valued using the weighted average method.
Input Tax Recoverable
Input tax recoverable is stated at 12% starting February 2006 of the applicable purchase of cost of
goods and services, net of output tax liabilities and allowance for probable losses. Input tax
recoverable represents the value-added tax (VAT) paid on purchases of goods and services, which
can be recovered as a tax credit against future tax liabilities of the Group upon approval by the
Bureau of Internal revenue (BIR) and/or the Philippine Bureau of Customs.
Prepayments
Prepayments include expenses already paid but not yet incurred. These are measured at cost less
impairment loss, if any.
Deferred Mine Exploration Cost
Expenditures for exploration works on mining properties (i.e., acquisition of rights to explore,
topographical, geological, and geophysical studies, exploratory drilling, trenching, sampling, and
activities in relation to evaluating the technical feasibility and commercial viability of extracting a
mineral resource) are deferred as incurred and included under “Deferred Mine Exploration Cost”
account in the statement of financial position. If and when recoverable reserves are determined to be
present in commercially producible quantities, the deferred exploration expenditures and subsequent
mine development costs are capitalized as part of the mine and mining properties account classified
under property and equipment and are stated at cost less accumulated depletion and impairment loss,
if any.
A valuation allowance is provided for unrecoverable deferred mine exploration costs based on the
Parent Company’s assessment of the future prospects of the exploration project. Full provision is
made for the impairment unless it is probable that such costs are expected to be recouped through
successful exploration and development of the area of interest, or alternatively, by its sale. If the
project does not prove to be viable, all revocable cost associated with the project and the related
impairment provisions are written off. When a project is abandoned, the related deferred mine
exploration costs are written off.
- 12 -
Property, Plant and Equipment
Property, plant and equipment are carried at cost, excluding the costs of day-to-day servicing, less
accumulated depreciation and impairment losses, if any. Cost of an item of property, plant and
equipment comprises of its purchase price and any cost attributable in bringing the asset to its
intended location and working condition. Cost also includes any asset retirement obligation and
interest on borrowed funds used.
Subsequent costs are capitalized as part of the property, plant and equipment account, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of
the item can be measured reliably. All other repairs and maintenance are charged against current
operations as incurred.
Foreign exchange differentials arising from the acquisition of property, plant and equipment are
charged against current operations and are no longer capitalized.
Depreciation commences once the property, plant and equipment are available for use and is
computed on the straight line basis over the following estimated useful lives of the assets regardless
of utilization. The useful life of each of the property, plant and equipment is estimated based on
period over which the asset is expected to be available for use. Such estimation is based on collective
assessment of industry practice and experience with similar assets.
The carrying value of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recovered.
Depletion of mine site development costs are calculated using the unit-of- production method based
on the estimated recoverable reserves. The estimated recoverable reserves, useful lives, and
depreciation and amortization methods are reviewed periodically to ensure that the estimated
recoverable reserves, residual values period and methods of depletion and depreciation are consistent
with the expected pattern of economic benefits from the item of property and equipment. The assets
residual values is reviewed and adjusted, if appropriate, at each reporting date.
Construction in-progress is included in property, plant and equipment and stated at cost which
includes cost of construction and other direct costs. Construction in-progress is not depreciated until
such time the relevant assets are ready for operational use.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset)
is included in the consolidated statement of comprehensive income in the year the asset is
derecognized.
The asset’s residual values, useful lives and methods are reviewed, and adjusted if appropriate, at
each financial year end.
Mine Site Development Cost
Cost incurred for exploration and development of mining properties are deferred as incurred. These
deferred costs are charged to expense when the results of the exploration are determined to be
negative or not commercially viable. When exploration results are positive or commercially viable,
these deferred costs are capitalized as part of mine development cost account classified under
- 13 -
property, plant and equipment and are stated at cost less accumulated depletion and impairment loss,
if any.
Depletion of mine site development cost is computed based on ore extraction over the estimated
volume of proved and probable ore reserved as estimated by the Subsidiary’s geologist.
Mine development costs are derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the assets. Any gain or loss arising on the derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the asset) is included in profit or loss in the year the item is derecognized.
Mine site development cost also includes the estimated costs of rehabilitating the mine site, for which
the Subsidiary is legally and constructively liable. These costs, included as part of mine site
development costs, are amortized using the unit-of-production method based on the estimated
recoverable reserves.
Subsequent to the business combination and acquisition date, the Parent Company recognizes based
on the business combination to MMDC relating to the fair value of property, plant and equipment
determined at the date of acquisition rather than the carrying amount in the books of MMDC prior to
the date of acquisition.
Impairment of Nonfinancial Assets other than Explored Mineral Resources
The Subsidiary’s property, plant and equipment, deferred mine development cost, and other assets
are subject to impairment testing. Individual assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
For purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). As a result, assets are tested for
impairment either individually or at the cash-generating unit level.
Impairment loss is recognized for the amount by which the asset’s or cash-generating unit’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting
market conditions less costs to sell, and value in use, based on an internal evaluation of discounted
cash flow. Impairment loss is charged pro-rata to other assets in the cash-generating unit.
All assets are subsequently reassessed for indications that an impairment loss previously recognized
may no longer exist and the carrying amount of the asset is adjusted to the recoverable amount
resulting in the reversal of the impairment loss.
Rental Deposits
Rental deposits are measured at cost less any impairment loss, if any.
Financial Liabilities
Financial liabilities are initially recognized at fair value. Financial liabilities include interest-bearing
loans and borrowing, trade and other payables and finance lease liabilities, due to related parties and
other non-current liabilities, which are measured at amortized cost using the effective interest rate
method. Short term financial liabilities with no stated interest rate are measured at the original
amount if the effect of discounting is immaterial.
- 14 -
Financial liabilities are recognized when the Group becomes a party to the contractual terms of the
instrument. All interest-related charges are recognized as an expense in profit or loss under the
caption Finance Costs in the consolidated statement comprehensive of income.
Interest-bearing loans and borrowings are raised for support of long-term funding of operations.
They are recognized at proceeds received, net of direct issue costs.
Trade payables are initially recognized at their fair value and subsequently measured at amortized
cost.
Dividend distributions to shareholders are recognized as financial liabilities upon declaration by the
Parent Company.
Impairment of Financial Assets
The Group assesses at each reporting date whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be
impaired if, and only if, there is objective evidence of impairment as a result of one or more events
that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated. Evidence of impairment may include indications that
the borrower or a group of borrowers is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganization and where observable data indicate that there is measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
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 recognized in the consolidated statements of comprehensive income, to
the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.
Derecognition of Financial Assets and Financial Liabilities
Financial asset
A financial asset (or, where applicable a part of a financial asset or part of a group of financial
assets) is derecognized where:



the right to receive cash flows from the asset has expired;
the Group retains the right to receive cash flows from the asset, but has assumed as
obligation to pay them in full without material delay to a third party under a “pass-through”
arrangement; or
the Group has transferred its right to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred
nor retained the risk and rewards of the asset but has transferred the control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, 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
Group’s continuing involvement in the asset. Continuing involvement that takes the form of a
- 15 -
guarantee over the transferred asset is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration that the Group could be required to repay.
Financial liability
A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or
has expired. Where 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 consolidated
statement of comprehensive income.
Offsetting Financial Instrument
Financial assets and financial liabilities are set off and the net amount is reported in the consolidated
statements of financial position if, and only if, there is a currently enforceable legal right to offset the
recognized amount 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 consolidated statement of financial position.
Capital Stock
Capital stock is determined using the par value of shares that have been issued.
Retained Earnings (deficit)
Retained earnings (deficit) include all current and prior period results as disclosed in the consolidated
statements of comprehensive income.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.




Sale of minerals - revenue amount from the sale of minerals such as ores, metals
minerals, hydrocarbons, acids and chemicals is recognized in the consolidated statement
of comprehensive income on the date that minerals are delivered to the customer. Revenue
is the fair value of the consideration received or receivable from gross inflow of economic
benefits during the period arising from the course of the ordinary activities of the entity
and it is shown net of taxes such as value added tax (if applicable), estimated returns,
discounts and volume rebates.
Interest income - interest is recognized on a time proportion basis using effective interest rate
that takes into account the effective yield on the asset.
Dividend income - dividend is recognized when the right to receive the payment is
established.
Miscellaneous income - revenue is recognized when earned.
Cost and Expense
Cost and expense are decreases in economic benefits during the accounting period in the form of
outflows or decreases of assets or incurrence of liabilities that result in decrease in equity, other than
those relating to distributions to equity participants. Operating expenses are recognized in the
consolidated statement of comprehensive income in the period these are incurred.
- 16 -
Short-term Employee Benefits
The Group recognizes a liability net of amounts already paid and an expense for services rendered by
employees during the accounting period. Short-term benefits given by the Group to its employees
include salaries and wages, social security, health insurance and housing contributions, short-term
compensated absences, bonuses and other non-monetary benefits.
Pension Cost
Pension cost is actuarially determined using the projected unit credit method. This method reflects
services rendered by 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 cost includes
current service cost, interest cost, expected return on any plan assets, actuarial gains and losses, past
service cost and the effect of any curtailment or settlement.
The liability recognized by the Group in respect of the defined benefit pension plan is the present
value of the defined benefit obligation at the reporting date less the fair value of the plan assets,
together with adjustments for unrecognized actuarial gains or losses and past service costs that shall
be recognized in later periods. The defined benefit obligation is calculated by independent 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 risk-free interest rates of
government bonds that have terms to maturity approximating the terms of the related pension
liabilities.
The past service cost is recognized as an expense on a straight-line basis over the average period
until the benefits become vested. If the benefits are already vested immediately following the
introduction of, or changes to, a pension plan, past service cost is recognized immediately.
Borrowing Costs
Borrowing costs are expensed in the consolidated statement of comprehensive income in the period in
which they are incurred, except to the extent that they are capitalized as being directly attributable to
the acquisition or construction of an asset which necessarily takes a substantial period of time to get
ready for its intended use.
The capitalization of borrowing costs as part of the qualifying asset commences when expenditures
for the asset are being incurred, borrowing costs are being incurred and activities that are necessary
to prepare the asset for its intended use are in progress. Capitalization of borrowing costs is
suspended or ceased when substantially all the activities necessary to prepare the qualifying asset for
its intended use are interrupted or completed.
Foreign Currency Transaction
Items included in the consolidated financial statements are measured using the currency of the
primary economic environment in which the Group operates (‘the functional presentation currency’)
which is the Philippine Peso. Monetary assets and monetary liabilities denominated in foreign
currency are translated at the exchange rate prevailing at the end of the reporting period. Exchange
gains and losses arising from foreign currency transactions are credited or changed to current
operations. Non-monetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates at the dates of initial transactions.
Provisions and Contingencies
- 17 -
Provisions are recognized when the Group has a present legal or constructive obligation as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and 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 assessment 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 an interest expense.
Contingent liabilities are not recognized in the consolidated financial statements. These are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent
assets are not recognized in the consolidated financial statements but disclosed when an inflow of
economic benefits is probable.
Income Taxes
Current income tax
Current income 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 end of the reporting
period.
Deferred income tax
Deferred income tax is provided, using the liability method, on all temporary differences at the end of
the reporting period between the tax base of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred income
tax assets are recognized for all deductible temporary differences, and carryforward benefits of the
excess of minimum corporate income tax (MCIT) over the regular corporate income tax (RCIT) and
net operating loss carryover (NOLCO), to the extent that it is probable that future taxable profit will
be available against which the deductible temporary differences, excess MCIT and NOLCO can be
utilized.
Deferred income tax liabilities are not provided on non-taxable temporary differences associated with
investments in domestic subsidiaries, associates and interest in joint ventures. With respect to
investments in other subsidiaries, associates and interests in joint ventures, deferred income tax
liabilities are recognized except when the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at end of each reporting period and
reduced to the extent that it is no longer probable that sufficient future taxable profit will be available
to allow all or part of the deferred income tax assets to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) in
effect at the end of the reporting period.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the
arrangement at inception date or whether the fulfilment of the arrangement is dependent on the use of
- 18 -
a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made
after the 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;
b. A renewal option is exercised or extension granted, unless the term of the renewal or
extension was initially included in the lease term;
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 reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios a, c or d and at the date of
renewal or extension period for scenario b.
Group as a Lessee
Operating lease payments are recognized as an expense in the statement of consolidated
comprehensive income on a straight line basis over the term of the lease.
Related Parties
Parties were 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 making financial and operating
decisions. Parties were also considered to be related if they are subject to common control or common
significant influence. Related parties may be individuals or corporate entities. Transactions between
related parties are based on terms similar to those offered to non-related parties.
Earnings (loss) per Share
Basic earnings (loss) per share is calculated by dividing the net income (loss) for the year attributable
to the common shareholders of the Group by the weighted average number of common shares
outstanding during the year, after considering the retroactive effect of stock dividend declaration, if
any.
Diluted earnings (loss) Per Share
Diluted earnings (loss) per share amounts are calculated by dividing the net income (loss) for the year
attributable to the common stockholders of the Group by the weighted average number of common
shares outstanding during the year plus the weighted average number of common shares that would
be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.
Events after the Reporting Period
Post year-end events that provide additional information about the Group’s position at the end of the
reporting period (adjusting events) are reflected in the consolidated financial statements when
material. Post year- end events that are not adjusting events are disclosed in the notes when material.
3. Significant Accounting Judgments and Estimates
The preparation of the financial statements in accordance with PFRS requires the Group to exercise
judgment, make accounting estimates and use assumptions that affect the reported amounts of assets,
liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future
events may occur which will cause the assumptions used in arriving at the accounting estimates to
- 19 -
change. The effects of any change in accounting estimates are reflected in the consolidated financial
statements as they become reasonably determinable.
Accounting estimates and judgments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effects on
amounts recognized in the consolidated financial statements:
Determining Functional Currency
Based on the economic substance of the underlying circumstances relevant to the Group, the
functional currency of the Group has been determined to be the Philippine peso. The Philippine peso
is the currency of the primary economic environment in which the Group operates.
Deferred Tax Assets and Liabilities
The Group reviews its deferred tax assets and liabilities at end of each reporting period and reduces
the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. As at December 31, 2012 and
2011, the group’s deferred tax assets recognized in the consolidated financial statements amounted to
=2,026,822 and P
P
=1,073,921, respectively (See Note 26).
Provisions and Contingencies
Judgment is exercised by management to distinguish between provisions and contingencies. Policies
on recognition and disclosure of provision and disclosure of contingencies are discussed in Note 2.
Accounting Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainties at the
end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are as follows:
Impairment of financial assets
The Group reviews its trade and other receivable at each reporting date to assess whether an
allowance for impairment should be recorded in the Group’s consolidated statements of
comprehensive income. In particular, judgment by management is required in the estimation of
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.
The level of this allowance is evaluated by management on the basis of factors that affect the
collectivity of the accounts. These factors include, but are not limited to age of balances, financial
status of counterparties, payment behavior, legal opinion on recoverability in case of legal disputes
and known market factors. The Group reviews the age and status of legal disputes and known
factors. The Group reviews the age and status of receivables, and identifies accounts that are to be
provided with allowance on a regular basis.
- 20 -
In addition to specific allowance against individual significant trade and other receivables, the Group
also makes a collective impairment allowance against exposures which, although not specifically
identified as requiring a specific allowance, have a greater risk of default than when originally
granted. This collective allowance is generally based on the age and status of the accounts.
The amount and timing of recorded expenses for any period would differ if the Group made different
judgments or utilized different estimates. An increase in allowance for impairment losses would
increase recorded expenses and decrease in net income. Total carrying value of trade and other
receivables amounted to P
=13,629,849 and P
=22,090,819 as at December 31, 2012 and 2011,
respectively. Allowance for impairment on financial assets recognized in the consolidated financial
statements as at December 31, 2012 and 2011 amounted to P
=8,235,423 (See Note 7).
Impairment of Inventory
The Subsidiary recognizes impairment on inventories whenever net realizable value of inventories
become lower than cost due to damage, physical deterioration, obsolescence, changes in price levels
or other causes. The impairment is reviewed on a monthly basis to reflect the accurate valuation in
the financial records. The carrying value of inventories in the consolidated financial statements
amounted to P
=14,898,292 and P
=234,403,818 as at December 31, 2012 and 2011
(See Note 8).
Estimated Useful Lives of Property, Plant and Equipment
The Group estimates the useful lives of property, plant and equipment based on the period over
which the property, plant and equipment are expected to be available for use. The estimated useful
lives of the property, plant and equipment are reviewed periodically and are updated if expectations
differ from previous estimates due to physical wear and tear, technical or commercial obsolescence
and legal or other limits on the use of the property, plant and equipment. In addition, the estimation
of the useful lives of property, plant and equipment is based on the collective assessment of industry
practice, internal technical evaluation and experience with similar assets. It is possible; however, that
future financial performance could be materially affected by changes in the estimates brought about
by changes in factors mentioned above. The amounts and timing of recorded expenses for any period
would be affected by changes in these factors and circumstances. The carrying value of property,
plant
and
equipment
in
the
consolidated
financial
statements
as
at
December 31, 2012 and 2011 amounted to P
=1,176,231,407 and P
=725,093,051, respectively
(See Note 11).
A reduction in the estimated useful lives of the property, plant and equipment would increase the
recorded expenses and decrease the noncurrent assets.
The estimated useful lives are as follows:
Building
Heavy and Mobile Equipment
Equipment, Furniture and Fixture
5-10 years
5-7 years
3 years
The carrying amounts of property, plant and equipment are analyzed in Note 11. Based on
management assessment as at December 31, 2012 and 2011, there is no change in the estimated
useful lives of property, plant and equipment. Actual results, however, may vary due to change in
estimates brought about by changes in factors mentioned above.
- 21 -
Recoverability and Estimates of Explored Mineral Resources
Mineral reserves and resources estimates for development projects are, to a large extent, based on the
interpretation of geological dates obtained from drill holes and other sampling techniques and
feasibility studies which derive estimates of costs based on anticipated tonnage and grades of ores to
be mined and processed, the configuration of the ore body, expected recovery rates from the ore,
estimating operating costs, estimated climatic condition and other factors. Proven reserves estimates
are attributed to future development projects only where there is a significant commitment to project
funding and extractions and for which applicable governmental and regulatory approvals have been
secured or are reasonably certain to be secured. All proven reserve estimates are subject to revision,
either upward or downward, based on new information, such as block grading and production
activities or from changes in economic factors including product prices, contract terms or
development plans. The subsidiary’s depletion expense is measured using units of production method.
Estimates of reserves for underdeveloped or partially developed area are subject to greater
uncertainty over their future life than estimates of reserves for areas that are substantially developed
and depleted. As an area goes into production, the amount of proven reserves will be subject to future
revision once additional information becomes available. As those areas are further developed, new
information may lead to revisions. The subsidiary’s provision for minesite development cost
amounted to P
=1,628,000 for the year ended December 31, 2012 (See Note 23).
Estimating Impairment of Non-Financial Assets
The Group assess at each reporting period whether there is an indication that the carrying amount of
all non-financial assets maybe impaired or that previously recognized impairment losses may no
longer exist or may have decreased. If any such indication exists, or when annual impairment testing
for an asset is required, the Group makes an estimate of the asset’s recoverable amount. There was
no impairment loss on non-financial assets recognized during the year, except for the Parent
Company’s input taxes where a valuation allowance was provided amounting to P
=607,636 as at
December 31, 2012 and 2011 (See Note 13).
Realizability of Deferred Tax Assets
Deferred tax assets are established for tax benefits related to deductible temporary differences, carry
forward of unused MCIT and NOLCO. These assets are periodically reviewed for realization.
Periodic reviews covered the nature and amount of deferred income and expense items, expected
timing when assets will be used or liabilities will be required to be reported, reliability of historical
profitability of businesses expected to provide future earning and tax planning strategies which can
be utilized to increase the likelihood that tax assets will be realized. As of December 31, 2012 and
2011, the Group did not recognize the deferred tax effect of NOLCO in the consolidated financial
statements. The tax effect of MCIT of the Parent Company recognized in the consolidated financial
statements amounted to P
=385,619 as at December 31, 2012 and 2011 (See Note 26).
Estimating Contingencies
The Group evaluates legal and administrative proceedings to which it is involved based on analysis of
potential results. Management and its legal counsels do not believe that any current proceedings will
have material adverse effects on its financial positions and results of operation. It is possible,
however, that future results of operation could be materially affected by changes in the estimates or
in the effectiveness of strategies relating to these proceedings.
- 22 -
4. Explored Mineral Resources
The explored mineral resources reported in the consolidated financial statements of financial position
amounting to P
=1,294,766,157 as at December 31, 2012 and 2011 represent the excess of shares
issued by the Parent Company to acquire 100% ownership in MMDC which meets the definition of
an intangible asset that is controlled and provide economic benefits, separable and arises from
mineral property rights and claims for which fair value was measured reasonably.
Valuation of intangible assets arising on combination
Valuation of explored mineral resources on acquisition of MMDC’s 100% ownership is primarily
attached on the target commencement of MMDC’s mine production activities by the 2 nd quarter of
2010 which will in turn start the cash flow generation of the initial explored area of about 120
hectares which is 2.5% of the area covered by the MPSA. Cost from the exploration permits are
substantially immaterial and charged to operation. In addition, this valuation does not include any
assignment to the Parent Company and/or MMDC of operating agreement an additional mining
tenement that may contain other minerals.
The Parent Company commissioned Multinational Investment Bancorporation (MIB) to prepare a
third party fairness opinion for the acquisition of 100% of MMDC and to issue its opinion regarding
a fair and reasonable value for MMDC. The transaction value of P
=1.3 billion has a 13% discount to
the fair value of P
=1.49 billion as contained in the third party fairness opinion dated February 3, 2010.
In the said report, MIB used the discounted cash flow method based on a 10-year projection period
with the following assumptions: (i) discount rate of 25%; (ii) constant nickel price of US$ 11,000 per
metric over the 10-year projection period which is at a 57% discount to the prevailing nickel price of
US$25,635 per MT as of May 4, 2010; (iii) no terminal value was assumed at the end of the 10year projection period; (iv) total production volume of 11.6 million wet MT based on a mining plan
approved by the Mines and Geosciences Bureau covering 120 hectares.
In the books of the Parent Company, the intangible asset arising from combination is recognized as
“explored mineral resources” as this asset meets the definition of an intangible asset that is controlled
and provides economic benefits, separable and arises from its mineral property right and claims, and
its fair value was measured reasonably.
5. Impairment Testing of Explored Mineral Resources
The Group recognizes explored mineral resources and performs an impairment test on those assets
when facts and circumstances suggest that the carrying amount of the assets may exceed their
recoverable amounts. It varies the recognition of impairment from that in PAS 36, but measures the
impairment in accordance with the standard once the impairment is identified. On top of those
mentioned in PFRS 6, impairment tests are performed with the key indications as discussed below:
 Uncertainty in estimation of mineral resources - technical, geologic and market date on the
Mineral Resources are estimates and there is no assurance that the anticipated tonnages and
grades will be achieved, neither is it ascertained that the indicated recovery rate will be realized.
 Discounted cash flow method - For the purposes of computing net present value using discounted
cash flow method, the valuation of intangible assets involves the extraction of non-replaceable
resource, a terminal value was not assigned to represent cash flows to be earned beyond the
projected period.
- 23 -
Market risk - There are risks arising from the possibility that the value of an investment will decrease
due to movement in market factors. The standard market risk factors relevant to the valuation of the
intangible assets are: (a) commodity risk, or risk commodity prices will change. Current surplus
demand for the commodity has caused nickel prices to reach record levels in the past few months, and
is currently in a reversion/ correction phase. Any sustained decrease in nickel prices may decrease
revenues and earnings, and (b) currency risk, or the risk that foreign exchange rates will change. The
subsidiary’s revenues are dominated in US dollar. Any sustained Peso appreciation may decrease
revenues and earnings.
Management believes that there is a significant reason not to recognize impairment in this asset as at
December 31, 2012 and 2011.
6. Cash and Cash Equivalents
This account consists of:
Cash in bank
Cash on hand
Petty cash
2012
=13,022,668
P
82,881
22,000
=13,127,549
P
2011
=164,084,330
P
34,703
22,000
=164,141,033
P
Cash with banks earns interest at the respective bank deposit rates amounting to P
=325,502 and
=278,941 for the years ended December 31, 2012 and 2011, respectively (See Note 23). Short-term
P
investments are made for varying periods up to three months depending on the immediate cash
requirements of the Group and earn interest at the respective short-term deposit rates.
Foreign exchange gain recognized for the years ended December 31, 2012 and 2011 amounted to
=10,989,235 and P
P
=1,090,997, respectively (See Note 23).
- 24 -
7. Trade and Other Receivables
This account consists of:
Accounts receivable - trade
Advances to related parties (Note 17)
Accounts receivable - employees
Accounts receivables - others
Less allowance for impairment losses
Cash advance for liquidation
Cash advance - others
2012
P9,254,835
=
7,887,885
3,247,163
80,782
20,470,665
8,235,423
12,235,242
852,563
542,044
=13,629,849
P
2011
=18,582,380
P
6,877,477
3,115,554
7,666
28,583,077
8,235,423
20,347,654
1,231,121
512,044
=22,090,819
P
There were no assets under this category that were used as a collateral or pledge on any loans or
advances as at December 31, 2012 and 2011.
As at December 31, 2012 and 2011, the aging analysis of trade receivables is as follows:
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due Total
=
P
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
’000
=−
P
P7,369
=
=−
P
=−
P
P1,886
=
=9,255
P
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due Total
=
P
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
’000
=−
P
=18,582
P
=−
P
=−
P
=−
P
=18,582
P
The carrying amount of trade and other receivables, which are expected to be settled within the next
12 months from reporting period, is a reasonable approximation of fair value
(See Note 28).
Movements of allowance for impairment losses as at December 31, 2012 and 2011 are as follows:
2012
Balance at January 1
Provisions for the year
Balance at December 31
2011
Balance at January 1
Provisions for the year
Balance at December 31
Trade
=−
P
−
=−
P
Trade
Others
=8,235,423
P
−
=8,235,423
P
Others
Total
=8,235,423
P
−
=8,235,423
P
Total
=−
P
−
=−
P
=8,235,423
P
−
=8,235,423
P
=8,235,423
P
−
=8,235,423
P
- 25 -
8. Inventory
As at December 31, 2012 and 2011, the Subsidiary’s finished goods inventory consists of nickel ore
stockpile amounting to P
=14,898,292 and P
=234,403,818, respectively. The inventory are carried at
cost.
Movements of inventory are as follows:
Balance at beginning of year
Additions during the period
Inventory available for sale
Cost of sales (Note 19)
Balance at end of year
2012
P234,403,818
=
157,657,158
392,060,976
377,162,684
=14,898,292
P
2011
P96,409,802
=
532,834,667
629,244,469
394,840,651
=234,403,818
P
There were no items under this category that was used as a pledge or security to any loans or
advances.
9. Available-for-Sale Securities
This account consists of:
Metroclub
On March 9, 2004, a “Share Purchase Agreement” was executed between the Parent Company and
the Philippine Townships, Inc. (“Philtown”). The said agreement covered the sale of the Parent
Company’s 488 regular membership shares of Metroclub to Philtown. Subsequently, the Parent
Company agreed to assign the aforementioned 488 membership shares of Metroclub to certain
shareholders in exchange for shares in MMDC under a Memorandum of Agreement dated December
15, 2009.
In June 2011, the Parent Company assigned the said Metro club shares valued at P
=67.5 Million in
exchange for 769,231 shares of MMDC valued at P
=50 Million and the assumption by the assignee of
the Parent Company’s liability to Philtown in the amount of P
=17.5 Million. The transaction resulted
to a net loss of P
=9.525 Million.
- 26 -
10. Other Current Assets
This account consists of:
2012
=11,902,937
P
24,512,158
385,619
4,933
36,805,647
1,556,370
=35,249,277
P
Advances to suppliers and contractor
Prepaid expenses and others
Deferred tax asset - MCIT (Note 26)
Prepaid tax
Less allowance for impairment losses
2011
=15,709,401
P
7,969,873
385,619
504,933
24,569,826
1,556,370
=23,013,456
P
Movements of allowance for impairment losses as at December 31, 2012 and 2011 are as follows:
2012
=1,556,370
P
−
=1,556,370
P
Balance at January 1
Provisions
Balance at December 31
2011
=1,556,370
P
−
=1,556,370
P
11. Property, Plant and Equipment
This account consists of the following:
Mine Site
Equipment
Heavy and
Development
and Furniture
transportation
Construction-
Total
cost
Land
Building
and Fixture
Equipment
in-progress
2012
=406,313,792
P
=20,473,993
P
=11,613,245
P
=22,231,795
P
=307,224,698
P
=36,751,003
P
= 804,608,526
P
14,405,500
6,223,164
4,381,843
13,177,710
192,099,140
13,142,344
243,429,701
reclassification
322,381,605
−
−
−
−
−
322,381,605
End of year
743,100,897
26,697,157
15,995,088
35,409,505
=499,323,838
P
49,893,347
1,370,419,832
23,086,925
−
1,101,822
7,359,398
47,967,330
−
79,515,475
20,506,399
−
1,424,159
8,037,720
84,704,671
−
114,672,949
43,593,324
−
2,525,981
15,397,118
132,672,001
−
194,188,424
=699,507,573
P
=26,697,157
P
=13,469,107
P
=20,013,387
P
=366,651,837
P
=49,893,347
P
= 1,172,607,704
P
Cost
Beginning of year
Acquisition
Accumulated depletion and
depreciation
Beginning of year
Depletion and
Depreciation
End of year
Net book value
- 27 -
Mine Site
Development
cost
Land
Equipment and
Heavy and
Building and
Furniture and
transportation
Construction-
December 31,
Total
improvements
Fixture
Equipment
in-progress
2011
Cost
Beginning of year
=407,409,972
P
=15,078,405
P
=1,689,493
P
=11,595,985
P
=228,520,276
P
=21,520,658
P
=685,814,789
P
−
4,299,408
7,018,752
10,635,810
78,704,422
15,230,345
115,888,737
1,096,180
2,904,999
−
−
−
2,904,999
406,313,792
20,473,993
11,613,245
22,231,795
307,224,698
36,751,003
804,608,526
1,656,771
−
427,337
4,830,794
22,748,524
−
29,663,426
21,430,154
−
674,485
2,528,604
25,218,806
−
49,852,049
Acquisition
Reclassification
End of year
(1,096,180)
Accumulated depletion
and Depreciation
Beginning of year
Depletion and
depreciation
23,086,925
−
1,101,822
7,359,398
47,967,330
−
79,515,475
=383,226,867
P
=20,473,993
P
=10,511,424
P
=14,872,397
P
=259,257,368
P
=36,751,003
P
=725,093,051
P
End of year
Net book value
There were no assets under property, plant and equipment that were used as securities to any loan
except for heavy equipments that were mortgaged with loan from UCPB obtained in 2012 and
transportation equipments that were obtained through United Coconut Planters Bank (UCPB) in
2010 (See Note 15). The carrying value of the mortgaged heavy and transportation equipment
amounted to P
=14,248,088 and P
=4,855,206 as at December 31, 2012 and 2011, respectively.
Depletion and depreciation expense amounting to P
=114,672,949 and P
=49,852,049 for 2012 and
2011, respectively were distributed as follows:
Operating expenses
Inventory
2012
=6,549,845
P
108,123,104
=114,672,949
P
2011
=3,606,336
P
46,245,713
=49,852,049
P
12. Deferred Mine Exploration Cost
Deferred mine exploration costs relate to mining projects that are currently on-going. The recovery of
these costs depends upon the success of exploration activities and future development of the
corresponding mining properties producible in commercial quantities. Allowances will be provided
for those deferred costs that are specifically identified to be unrecoverable.
Deferred mine exploration cost includes capitalized borrowing costs amounting to P
=0.223 million as
at June 30, 2011 and depreciation amounting to P
=2.246 million as at June 30, 2011. The
capitalization rates used to determine the amount of borrowing costs eligible for capitalization ranges
from 6.25% to 7.5% in 2011.
The Subsidiary’s deferred mine exploration cost amounted to P
=407,409,972 as at
December 31, 2010. These were reclassified to property, plant and equipment on the same date
(See Note 11).
- 28 -
13. Other Noncurrent Assets
This account consists of:
Input value-added tax - net
Mine rehabilitation fund
Deferred tax asset (Note 26)
Rental deposit
Monitoring trust fund
Foreign tax credit
Others
2012
=140,247,386
P
5,204,379
1,641,203
317,250
159,894
16,955
1,623,083
=149,210,150
P
2011
=93,470,187
P
5,000,000
688,302
317,250
150,000
16,955
1,591,257
=101,233,951
P
The Parent Company’s input tax amounting to P
=5,607,244 and P
=5,127,369 as at December 31, 2012
and 2011, respectively, is net of a valuation allowance amounting to P
=607,636.
Mine rehabilitation Fund
Mine rehabilitation fund (MRF) is a fund designated to ensure compliance with the approved
rehabilitation activities and schedules for specific mining project phase, including research programs
as defined in the Environmental Protection and Enhancement Program (EPEP). The RCF shall be
equivalent to 10% of the total amount needed to implement the EPEP or Five Million
(P
=5,000,000) whichever is lower. In the event of withdrawals from the RCF, the Subsidiary shall
annually replenish the RCF so as to maintain the minimum required amount thereof.
Monitoring Trust Fund
Monitoring Trust Fund (MTF) is a fund exclusively used in the monitoring program approved by the
Mine Rehabilitation Fund (MRF) Committee. It shall be in cash and in amount to be determined by
the MRF Committee which shall not be less than P
=150,000. Replenishment of the amount shall be
done monthly to correspond to the expenses incurred by the monitoring team for the month.
Others
Others primarily pertain to diesel fuel deposits of the subsidiary and rental, utility and office
renovation deposits of the Parent Company.
- 29 -
14. Notes Payable
This account consists of:
United Coconut Planters Life Insurance (UCPLI)
Wealth Securities
Asian Alliance Investment Corp. (AAIC)
Other private placements
Less current portion
2012
=100,000,000
P
30,000,000
19,800,000
−
149,800,000
−
=149,800,000
P
2011
=100,000,000
P
30,000,000
19,800,000
26,320,000
176,120,000
26,320,000
=149,800,000
P
All of the Parent Company’s unsecured notes as at December 31, 2012 and 2011 amounting to
=149.8 and P
P
=176.2, respectively have annual interest rates ranging from 10% to 12% and with
maturities of 2 years from the date of drawdown, payable in full upon maturity.
All of the above notes have the option to convert all or a portion of the principal amount of the loan
into fully paid shares of stock priced at P
=2.20 per share of MHI at any time prior to the maturity of
the loan. Upon converting all or portion of the loan, the lender shall be entitled to a warrant to
subscribe to one (1) Parent Company share, for every four (4) converted shares at a price of P
=2.20
per share. The warrants are subject to a two (2) year exercise period.
As of June 30, 2011, the Parent Company has applied the conversion of the private placements
amounting to P
=100 million into 45,454,545 shares of the Parent Company with the SEC and is
waiting for its approval.
In August 2011, the SEC approved the conversion of 20,454,545 shares of the Parent Company
pertaining to private placements amounting to P
=45,000,000.
In January 2012, the SEC approved the conversion to 8,009,090 shares of the Company pertaining to
convertible loan private placement amounting to P
=18,820,000 and conversion to 6,206,817 shares of
the Company pertaining to exercise of stock warrants.
Interest expense charged to operations amounted to P
=16,341,822 and P
=17,066,333 for the year ended
December 31, 2012 and 2011, respectively.
- 30 -
15. Interest-bearing Loans
The Company’s interest-bearing loans are as follows:
United Coconut Planters Bank (UCPB)
Orix Metro
Philippine Veterans Bank (PVB)
Asian Alliance Investment Corporation (AAIC)
Less: current portion
2012
P38,109,089
=
26,815,498
−
−
64,924,587
25,501,911
=39,422,676
P
2011
=2,412,453
P
−
75,000,000
22,094,961
99,507,414
76,808,572
=22,698,842
P
On December 2012 the Subsidiary obtained a loan from UCPB Leasing and finance Corporation
amounting to 17.8M intended for working capital requirement with an annual interest of 11.81%
maturing on November 2014. This loan is secured with the Company’s heavy equipment with the net
book value of P
=25,441,418 as of December 31, 2012.
The Subsidiary’s loan from UCPB amounting to P
=2,432,047 was intended for the acquisition of
transportation equipments in June 2010 payable in two (2) years starting June 2010 which was fully
paid on June 1, 2012 (Note 8).
The Subsidiary’s loan from Orix Metro amounting to P
=26,815,498 was intended for the acquisition
of transportation equipment with an interest of 2% maturing on October 2013.
The Subsidiary’s unsecured loan from PVB as at December 31, 2011 amounted to
=75,000,000 with annual interest of 4.9579% and with maturity date of March 1, 2012.
P
This was intended for working capital requirements. This loan was fully paid on
February 13, 2012.
The Subsidiary’s unsecured loans from AAIC as at December 31, 2011 intended for working capital
requirements amounted to P
=22,094,961 with annual average interest rate of 5% above the 360-day Tbill rate. As at December 31, 2012 and 2011 no interest was charged to the Company. The loan from
AAIC is unsecured and has no fixed payment terms. This loan was fully paid on July 26, 2012.
Interest expense charged to operations amounted to P
=9,491,384 and P
=6,283,385 for the year ended
December 31, 2012 and 2011, respectively.
- 31 -
16. Trade and Other Payables
This account consists of:
Trade payables
Deposits payable
Accrued retirement (Note 25)
SSS/PHIC/HDMF payable
Accrued expenses and other payables
2012
P54,964,153
=
193,482,201
3,979,159
780,493
9,955,737
=263,161,743
P
2011
=143,340,648
P
101,515,855
2,210,921
683,573
13,403,062
=261,154,059
P
Trade payables include payables to contractors and are noninterest-bearing and have different credit
terms. Other payables include withholding taxes and other accruals pertaining to recurring expenses.
Deposits payable pertain to advance payment made by various customers for the purchase and
shipment of the Subsidiary’s nickel products.
As at December 31, 2012 and 2011, the aging analysis of trade payables is as follows:
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
=−
P
P19,291
=
P15,853
=
P14,229
=
P5,591
=
Total
=
P’000
=54,964
P
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
=−
P
=143,295
P
=39
P
=7
P
=−
P
Total
=
P’000
=143,341
P
The carrying amount of accounts payable and other payables, which are expected to be settled within
the next 12 months from reporting period, is a reasonable approximation of fair value
(see Note
28).
17. Related Party Transactions
This represents non-interest bearing advances to and from the stockholders and its related parties for
working capital requirements. Such advances are payable on demand with no guarantees attached
and with no fixed payment terms.
- 32 -
Significant transactions with related parties include the following:
Year Classification
Marcventures Mineral
Holdings Inc.
(MMHI)
2012
Advances to
related
parties
2011
Carac - an Develompent
Corp.
(Carac)
2012
Advances to
related
parties
2011
Marcventures
Resources
Holdings Inc.
(MRHI)
2012
Marcventures Minerals
Holdings Inc.
(MMHI)
2012
Related
party
payables
2011
Related
party
payables
2011
Mario Vijungco
2012
2011
Related
party
payables
Terms and
condition
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Bad debts
for the year
Amount of
transaction
Outstanding
Balance
=−
P
=−
P
=6,596,294
P
6,596,294
−
6,596,294
−
1,010,40
8
1,291,591
−
281,183
254,424
−
−
105,209
−
−
105,209
−
−
17,354
−
−
17,354
−
25,678,62
2
41,558,074
−
19,034,452
62,965
Advances to MMHI and Carac pertain to ventures entered into by the Subsidiary and has been
discontinued. These advances are deemed to be worthless and the Subsidiary has already provided an
allowance for impairment losses in full (See Note 7).
Advances to MRHI pertain to ventures entered into by the Subsidiary and has been discontinued.
- 33 -
Advances from stockholder represent cash advances made to the Group by Mario J. Vijungco, a
majority stockholder of the Parent Company.
Salaries paid to key management personnel amounted to P
=7,386,000 and P
=4,470,000 for the years
ended December 31, 2012 and 2011, respectively.
Intercompany advances eliminated on the consolidated statement of financial position amounted to P
=
402,945,017 and P
=434,445,017 as of December 31, 2012 and 2011, respectively.
18. Equity
Capital Stock
Details of the Parent Company’s capital stock are as follows:
December 31,
2012
Common Stock - P
=1 par value
Authorized:
Balance at beginning of year
Increase in authorized capital stock
Balance at end of year
2,000,000,000
−
2,000,000,000
Number of shares
December 31,
2011
2,000,000,000
−
2,000,000,000
June 30,
2011
June 30,
2010
2,000,000,000
−
2,000,000,000
2,000,000,000
−
2,000,000,000
Number of shares
December 31,
2012
Issued and outstanding:
Balance at beginning of year
Full payment of subscription receivable
Conversion of private placements
Exercise of underlying warrants
Increase in par value from P
=0.01 to P
=1.00
Issuance of new shares
Balance at end of year
1,721,460,874
−
8,009,090
6,206,818
−
−
1,735,676,782
2011
June 30,
2011
2010
1,701,006,329 170,100,632,980
5,100,632,980
−
183,846
−
20,454,545
−
−
−
−
−
− (168,399,626,651)−
−
−
− 165,000,000,000
1,721,460,874
1,701,006,329
170,100,632,980
Movements of additional paid-in capital:
Balance at beginning year
Decrease in par value from P
=0.10 to P
=0.01
Effect of quasi reorganization
Issuance of new shares
Additions
Balance at end of year
December 31,
2011
2012
=68,232,769
P
P
= 92,778,223
−
−
−
−
−
−
24,545,454
17,059,088
=92,778,223
P
P
= 109,837,311
June 30,
2011
2010
=68,232,769
P
=273,037
P
− 459,056,968
− (441,097,236)
50,000,000
−
−
−
=68,232,769 P
P
=68,232,769
On February 10, 2010, the Board of Directors approved the decrease in authorized capital stock from
=2.0 billion to P
P
=200 million by reducing the par value of the common shares from P
=0.10 to P
=0.01.
- 34 -
Moreover, the Board of Directors approved the increase in authorized capital stock from
million to P
=2.0 billion divided by two hundred (200) billion shares.
=200
P
On March 30, 2010, the SEC approved the Parent Company’s application for corporate restructuring
thereby decreasing the authorized capital stock from P
=2.0 billion to P
=200 million by reducing the par
value of the common shares from P
=0.10 to P
=0.01. On this same day, the SEC subsequently approved
the Parent Company’s application to increase the authorized capital stock from P
=200 million divided
into twenty (20) billion shares to P
=2 billion divided into two hundred (200) billion shares. Out of the
increase in authorized capital stock, P
=450 million, divided into forty-five (45) billion shares has been
subscribed, of which P
=350 million was paid in cash, leaving a subscription balance of P
=100 million.
Moreover, the SEC approved the application of the reduction surplus of P
=459,056,968 (arising from
the reduction in the par value) to eliminate the accumulated deficit.
As discussed in Note 1, on May 19, 2010, a deed of exchange was executed between the Parent
Company and the Investor Group. The transaction involved the assignment of 1,923,077 shares of
MMDC by the Investor Group as payment to the subscription of 125 billion shares of the Parent
Company amounting to P
=1.25 billion.
On June 9, 2010, an additional five (5) billion common shares, with a par value of P
=0.01 per share
were subscribed with a price of P
=0.02 per share amounting to P
=100 million.
As of June 30, 2010, Capital stock as reflected in the consolidated statements of financial position is
net of subscription receivable amounting to P
=183,486 pertaining to 3,091,280 shares.
On September 6, 2010, the SEC approved the Parent Company’s application on the valuation of
shares of stock of MMDC in the amount of P
=1.25 billion as consideration for the additional issuance
of shares worth P
=1.15 billion and unpaid subscription of P
=100 million of the Parent Company.
On September 29, 2010, the subscription receivable amounting to P
=183,486 equivalent to 3,091,280
shares were fully paid by ATC Securities, Inc.
On September 30, 2010, the SEC approved the Parent Company’s application on the increase in par
value of the common shares from P
=0.01 to P
=1, thereby decreasing the authorized shares of stock
from 200 billion to 2 billion shares.
On August 2011, the SEC approved the conversion of 20,454,545 shares of the Parent Company
pertaining to private placements amounting to P
=45,000,000.
In January 2012, the SEC approved the conversion to 8,009,090 shares of the Company pertaining to
convertible loan private placement amounting to P18,820,000 and conversion to 6,206,817 shares of
the Company pertaining to exercise of stock warrants.
Capital stock was held by a total of 2,188 and 2,170 stockholders as of December 31, 2012,
and 2011, respectively.
- 35 -
Track record of registration:
Number of shares licensed Issue/offer price
28,975,139,248
=0.01
P
289,751,392
0.01
509,754,170
0.01
5,097,541,700
0.10
5,100,632,980
0.10
170,098,798,106
0.01
1,701,006,330
1.00
1,735,676,782
1.00
1997
1998
2010
September 1, 2003
June 30, 2009
June 30, 2010
December 31, 2011
December 31, 2012
19. Cost of Sales
This account consists of:
December 31,
Outside services
Production overhead
Contract fees
Personnel costs
Depletion and depreciation
2012
P
= 115,830,074
44,869,731
99,056,511
94,491,308
22,915,060
P
= 377,162,684
2011
=271,337,320
P
46,659,685
43,114,702
18,766,799
14,962,145
=394,840,651
P
June 30,
2011
=−
P
−
−
−
−
=−
P
2010
=−
P
−
−
−
−
=−
P
Outside services pertain to services offered by the contractors related to the mining activities of the
Subsidiary. These services include, but not limited to hauling, stevedoring, janitorial, maintenance,
security and blasting equipment rental.
20. Shipping and Loading
This account consists of:
December 31,
Outside services
Contract fees
Other services and fees
2012
P
= 47,392,924
28,221,852
5,938,515
P
= 81,553,291
2011
P88,790,180
=
13,791,921
2,046,773
=104,628,874
P
June 30,
2011
=−
P
−
−
=−
P
2010
=−
P
−
−
=−
P
- 36 -
21. General Administrative
This account consists of:
December 31,
2012
Moisture penalty
Representation
Salaries and wages
Depreciation (Note 11)
Taxes and licenses
Office supplies
Rental (Note 22)
Donation
Retirement expense (Note 25)
Professional fees
Advertising expense
Outside services
Communications, light and water
Bank charges
Membership and contribution
Transportation and travel
Repairs and maintenance
Insurance
Legal
SSS/PHIC/HDMF
13th month and other benefits
Impairment loss
Loss from sale of investment
Miscellaneous
2011
June 30,
20112
2010
P
=10,495,035
10,126,225
9,497,119
6,549,845
4,858,235
2,854,986
2,586,054
2,501,434
1,768,238
1,526,935
1,181,504
932,563
922,597
877,901
665,086
212,841
151,301
7,817
−
−
−
−
−
2,220,657
=−
P
15,378,140
700,141
3,606,336
5,038,223
527,110
1,571,525
−
602,978
2,357,082
292,005
5,553,334
937,795
560,710
1,160,844
49,061
10,597
888
1,808,814
61,380
−
−
−
4,322,145
=−
P
6,366,200
1,108,380
2,490,544
9,003,362
423,105
734,016
−
1,909,432
1,136,861
719,867
8,606,667
938,852
−
614,744
55,854
3,580
−
1,960,000
61,380
8,979
9,791,793
−
1,009,384
=−
P
119,822
1,188,305
113,741
9,842,995
121,240
101,349
−
−
19,548,314
−
−
398,530
−
101,933
158,853
−
−
−
68,854
828,551
−
827,086
284,523
P
=59,936,373
=44,539,108
P
=46,943,000
P
=33,704,096
P
22. Lease Commitments
The Group leases all of the premises occupied by their offices. The lease contracts provide for
annual rentals amounting to P
=2,154,660 as at December 31, 2012 and 2011. The standard lease
periods are from two to five years. The lease contracts contain renewal options, which give the
Group the right to extend the lease on terms mutually agreed upon by both parties.
The Group’s minimum lease payments on non-cancellable lease are as follows:
Less than one year
Between one year to five years
December 31,
2011
2012
=2,154,660
P
P
= 2,154,660
4,584,674
3,614,228
=6,739,334
P
P
= 5,768,888
June 30,
2011
=2,154,660
P
4,584,674
=6,739,334
P
2010
=218,051
P
67,500
=285,551
P
Rental expense charged to operations amounted to P
=2,586,054, P
=1,571,525, P
=734,016 in 2011 and
=101,349 for the years ended December 31, 2012 and 2011, June 30, 2011 and 2010, respectively
P
(See Note 21).
- 37 -
23. Other Income (Expense)
This account consists of:
December 31,
2012
Foreign exchange gain (loss)
Interest income
Demurrage
Provision for mine site rehabilitation
Interest expense
Gain on sale of property and equipment
Gain (loss) on sale of available securities
Others
June 30,
2011
2011
P
=10,989,235
325,502
(421,602)
(1,628,000)
(25,833,206)
−
−
398,699
=1,090,997
P
278,941
−
−
(17,066,333)
−
(9,527,081)
60,836
(P
=86,415)
238,821
−
−
−
32,857
(9,527,081)
8,314
(P
=16,169,372)
(P
=25,162,640)
(P
=9,333,504)
2010
(P
=292,184)
128,301
−
−
(50,000)
2,961,522
16,258,611
−
=19,006,250
P
24. Basic/Diluted Earnings (Loss) Per Share
The computation of the earnings (loss) per share is as follows:
December 31,
2012
Net income (loss)
Divided by weighted average
number of common shares
June 30,
2011
P
= 137,436,874
=240,339,316
P
1,735,676,782
1,721,460,874
P
= 0.079
=0.140
P
2011
(P
=55,705,468)
1,701,006,329
2010
(P
=14,821,204)
301, 006, 329
(P
=0.033)
(P
=0.049)
The computation of the diluted earnings (loss) per share is as follows
December 31,
2012
Net income (loss)
Divided by weighted average
number of common shares
P
=137,436,874
=240,339,316
P
1,820,790,418
1,826,642,693
P
= 0.075
=0.132
P
December 31,
2012
Weighted average number of
common shares for
basic earnings per share
Effect of exercise of conversion
options and warrants
Weighted average number of
common shares adjusted for
the effect of exercise of
conversion options and warrant
June 30,
2011
2011
(P
=55,705,468)
1,842,938,147
2010
(P
=14,821,204)
301, 006, 329
(P
=0.030)
(P
=0.049)
June 30,
2011
2011
2010
1,735,676,782
1,721,460,874
1,701,006,329
301, 006, 329
85,113,636
105,181,818
141,931,818
−
1,820,790,418
1,826,642,693
1,842,938,147
301, 006, 329
The Parent Company considered the effect of its potentially dilutive convertible promissory notes and
warrants. The assumed exercise of these stock options would have resulted in additional 85,113,636,
- 38 -
105,181,818 and 141,477,273 common shares as at December 31, 2012 and 2011 and June 30,
2011, respectively (See Notes 14 and 18).
25. Pension Costs
The Group has an unfunded and non-contributory defined benefit retirement plan covering
substantially all of its regular employees. The benefits are based on a certain percentage of final
monthly basic salary for every year of credited service of the employees. Discount rate of 10% was
used to get the present value of the defined benefit obligation and a 5% yearly salary increase was
estimated.
The principal actuarial assumptions used to determine the pension benefits with respect to the
discount rate, salary increases and return on plan assets were based on historical and projected
normal rates.
The Subsidiary’s retirement plan was only recognized in its 2010 financial statements thus resulting
to a prior period adjustment. This was only taken by the Parent Company in its
December 31, 2011 consolidated financial statements.
Total pension cost in the consolidated statements of comprehensive income amounted to
=1,768,238, P
P
=602,978 and P
=1,909,432 for the periods ended December 31, 2012 and 2011 and June
30, 2011, respectively (See Note 21).
Details of the Subsidiary’s retirement plan are as follows:
December 31,
2012
Current service cost
Interest cost on benefit obligation
June 30,
2011
2011
2010
P
=1,547,146
221,092
=442,184
P
160,794
=221,092
P
80,398
=401,986
P
109,633
P
=1,768,238
=602,978
P
=301,490
P
=511,619
P
Changes in the present value of the defined benefit obligation are as follows:
December 31,
2012
June 30,
2011
2011
2010
Opening defined benefit obligation
Interest cost
Current service cost
P
= 2,210,921
221,092
1,547,146
=1,607,942
P
160,794
442,184
P
=1,607,942
80,398
221,090
=1,96,325
P
109,633
401,986
Closing defined benefit obligation
P
= 3,979,159
=2,210,921
P
P
=1,909,432
=1,607,942
P
- 39 -
26. Income Taxes
a. Provision for income tax consists of:
December 31,
2011
2012
=−
P
P
=−
(118,264)
(859,128)
(P
=118,264)
(P
= 859,128)
Current
Deferred
June 30,
2011
2010
=1,217
P
(P
=79,181)
(511,417)
(8,874)
(P
=510,200)
(P
=87,655)
b. The Group’s deferred income tax assets consist of:
2011
2012
Tax effects of :
Accrued retirement
Provision for minesite
Rehabilitation
Unrealized foreign exchange loss
MCIT
=1,152,803
P
=688,302
P
488,400
−
385,619
=2,026,822
P
−
−
385,619
=1,073,921
P
The Group did not recognize the deferred tax effect on NOLCO as at December 31, 2012, 2011
and 2010 because management does not expect the carry forward tax benefit of such to be
realized prior to expiration.
Details of NOLCO and MCIT of the Parent are as follows:
Year incurred
2010
2011
2011
2012
Available Until
June 30, 2013
June 30, 2014
December 30, 2014
December 30, 2015
NOLCO
Amount
Tax effect
14,483,963
4,345,189
31,030,950
9,309,285
22,937,107
6,881,132
34,240,280
10,272,084
=102,692,300 P
P
=30,807,690
MCIT
384,403
1,216
−
−
=385,619
P
Details of NOLCO and MCIT of Subsidiary are as follows:
Year incurred
2010
Available Until
2013
NOLCO
Amount
Tax effect
11,307,765
3,392,336
MCIT
−
The reconciliation of the income tax expense computed at the statutory tax rate to the actual income
tax expense shown in the consolidated statements of comprehensive income is as follows:
- 40 -
December 31,
2012
Income (loss) tax at statutory rate
Additions to (deductions in) income (loss)
resulting from the tax effect of:
Due to income tax holiday
Nonrecognition of NOLCO
Interest income subject to final tax
and other nontaxable income
Nondeductible interest expense
and other nondeductible expense
2011
P
= 51,451,511
=72,066,316
P
(209,248,122)
−
(252,888,838)
−
(97,299)
(436,007)
157,034,782
(P
= 859,128)
181,140,265
(P
=118,264)
June 30,
2011
(P
=16,864,700)
−
8,633,595
(71,646)
2010
(P
=4,282,754)
−
4,345,189
(165,090)
7,792,551
15,000
(P
=510,200)
(P
=87,655)
27. Risk Management Objectives and Policies
General
The Group has risk management policies that systematically view the risks that could prevent the
Group from achieving its objectives. These policies are intended to manage risks identified in such a
way that opportunities to deliver the Group’s objectives are achieved. The Group’s risk management
takes place in the context of day-to-day operations and normal business processes such as strategic
planning and business planning. Management has identified each risk and is responsible for
coordinating and continuously improving risk strategies, processes and measures in accordance with
the Group’s established business objectives.
Financial Risk Management Objectives and Policies
The Group’s principal financial instruments consist of cash and cash equivalents, trade and other
receivables, notes payable, loans payable and related party payables. The primary purpose of these
financial instruments is to finance the Group’s operations. The Group has other financial instruments
such as receivable, trade and other payables and related party payables, which arise directly from its
operations. The main risks arising from the use of these financial instruments are credit risk, interest
rate risk, liquidity risk, currency risk, and market risk. Management reviews and approves the
policies for managing each of these risks which are summarized below.
Credit Risk
Credit risk represents the loss that the Group would incur if counterparty failed to perform under its
contractual obligations.
The Group’s exposure to credit risk arises from default of counterparty, with a maximum exposure
equal to the carrying amount of its financial assets. The Group assessed its receivable as collectible
and in good standing as at December 31, 2012 and 2011.
- 41 (Amounts in P
=’000)
On
demand
December 31, 2012
Cash and cash equivalents
Accounts receivable - trade
Accounts receivable - others
Advances to related parties
Accounts receivables-employees
Cash advance for liquidation
Cash advance - others
December 31, 2011
Cash and cash equivalents
Accounts receivable - trade
Accounts receivable - others
Advances to related parties
Accounts receivables- employees
Cash advance for
liquidation
Cash advance - others
Less than 3 to 6
3 months months
13,023
−
−
7,888
3,247
−
−
−
7,369
81
−
−
853
542
−
164,084
−
−
6,877
6,877
3,116
−
−
18,582
8
−
−
−
1,231
More
6 to 12 1 to 5 than 5
months years years
Total
−
−
−
−
−
−
1,886
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
− 164,084
− 18,582
8
−
−
6,877
−
6,877
−
3,116
−
1,231
13,023
9,255
81
7,888
3,247
853
542
Interest Rate Risk
As at December 31, 2012 and 2011, the Group’s loans are based on fixed rates. Management
believes that cash generated from future operations is sufficient to pay for its obligations under the
loan agreement as they fall due.
The following table sets out the maturity profile and the effective interest rate of the Group’s
financial assets and financial liabilities that are exposed to interest rate risk:
(Amounts in P
=’000)
Effective
interest
rate
December 31, 2012
Cash and cash equivalents Various
Interest-bearing loans
Notes payable
Fixed
10-12%
Related party
payables
−
December 31, 2011
Cash and cash equivalents
Various
Interest-bearing loans
Notes payable
Fixed
10-12%
Related party
payables
−
6 Months
Total
or less
=
P ’000
=
P ’000
6 to 12
months
=
P ’000
1 to 2
years
=
P ’000
2 to 5
years
=
P ’000
More
than 5
years
=
P ’000
13,023
64,925
13,023
−
−
25,502
−
−
−
−
−
39,423
149,800
−
− 149,800
−
−
41,711
−
−
41,711
−
−
164,084
99,507
164,084
−
−
76,809
−
−
−
−
−
22,699
176,120
26,320
− 149,800
−
−
19,157
−
−
−
−
19,157
Interest on financial assets classified as floating rate is repriced at intervals of less than one year.
Interest on financial assets and financial liabilities classified as fixed rate is fixed until the maturity of
- 42 -
the instrument. The other financial instruments of the Group that are not included in the above tables
are noninterest-bearing or have no fixed or determinable maturity.
Liquidity Risk
The Group manages liquidity risk by maintaining a balance between continuity of funding and
flexibility. Treasury controls and procedures are in place to ensure that sufficient cash is maintained
to cover daily operational and working capital requirements, including debt principal and interest
payments. Management closely monitors the Group’s future and contingent obligations and sets up
required cash reserves and reserve borrowing facilities as necessary in accordance with internal
policies.
The tables below summarize the maturity profile of the Group’s financial liabilities as at
December 31, 2012 and 2011 based on contractual undiscounted payments. Notes and loans payable
consist of principal and estimated future interest payments.
(Amounts in P
=’000)
On Less than
demand 3 months
3 to 6
months
6 to 12
months
1 to 5
years
More
than 5
years
Total
December 31, 2012
Trade and other payables
Interest-bearing loans
Related party payable
Notes payable
−
−
−
−
16,297 246,430
−
−
−
−
−
−
−
−
25,502
−
− 41,711
− 149,800
− 248,446
39,423 64,925
− 41,711
− 149,800
December 31, 2011
Trade and other payables
Interest-bearing loans
Related party payable
Notes payable
−
−
−
−
16,298 228,558
−
−
−
−
− 26,320
−
−
76,808
−
− 19,157
− 149,800
− 244,856
22,699 99,507
− 19,157
− 176,120
Currency Risk
The Group has transactional currency exposures. Such exposure arises from cash and cash
equivalents, accounts receivable and customer deposits in US$. For its foreign currency-denominated
trade receivables, the Parent Company ensures timely follow-up and collection to mitigate the impact
of foreign exchange fluctuations.
To mitigate the effects of foreign currency risk, the Group will seek to accelerate the collection of
foreign currency-denominated receivables and the settlement of foreign currency-denominated
payables, whenever practicable. Also, foreign exchange movements are monitored on a daily basis.
- 43 The Group’s foreign currency-denominated financial assets and liabilities and their Philippine peso
equivalents as at December 31, 2012 and 2011 are as follows:
(Amounts in P
=’000)
December 31, 2012
Foreign
Peso
Account
equivalent
Financial Assets
Cash in bank
Accounts receivable
Financial Liability
Customer deposit
December 31, 2011
Foreign
Peso
Account
equivalent
$5
225
$230
=192
P
9,255
=9,447
P
$2,148
423
$2,571
=94,378
P
18,582
=112,960
P
$4,697
=193,482
P
$2,311
=101,516
P
The exchange rates used for conversion of US$1.00 to peso equivalent were P
=41.192 and P
=43.928
as at December 31, 2012 and 2011, respectively.
Market Risk
Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result
from changes in the price of a financial instrument. The value of a financial instrument may change
as a result of changes in foreign currency exchanges rates, commodity prices, interest rates, equity
prices and other market changes.
28. Categories and Fair Values of Financial Assets and Financial Liabilities
The following methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value:
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other
payables, current portion of interest bearing loans and notes payable approximate their carrying
amounts due to relatively short-term nature of these financial instruments.
The fair values of the loans were based on the discounted value of future cash flows using the
applicable rates for similar types of loans.
(Amounts in P
=’000)
2012
Category of Financial
Instruments
Cash and cash equivalents
Trade and other receivables
Carrying Value
P13,125
=
13,630
=26,755
P
2011
Fair
Value Carrying Value
Fair
Value
=164,084
P
22,091
=186,175
P
=164,084
P
22,091
=186,175
P
P13,125
=
13,630
=26,755
P
- 44 -
Financial liabilities carried at cost
Trade and other payables
Interest-bearing loans
Notes payable
Related party payables
=248,446
P
64,925
149,800
41,711
=504,882
P
=248,446
P
64,925
149,800
41,711
=504,882
P
=244,857 P
P
=244,857
99,507
99,507
176,120
176,120
19,157
19,157
=539,641 =
P
PP
=539,641
During the periods ended December 31, 2012 and 2011, there were no transfers between Level 1 and
Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
29. Capital Management Objectives, Policies and Procedures
The Group’s capital management objectives are to ensure the Group’s ability to continue as a going
concern and to provide an adequate return to shareholders.
Governance framework
The Group has established a risk management functions with clear terms of reference and with the
responsibility for developing on market credit and liquidity and operational risk. It also supports the
effective implementation of policies.
The policies define the Group’s identification of risk and its interpretation, limit structure to ensure
the appropriate quality and diversification of assets to the corporate goals and specify reporting
requirements.
Capital management framework
The Group’s risk management function has developed and implemented certain minimum stress and
scenario tests for identifying the risks to which the Group is the exposed, quantifying their impact on
the volatility of economic capital. The results of these tests, particularly, the anticipated impact on
the realistic consolidated statement of financial position and revenue account, are reported to the
Group’s risk management function. The risk management function then considers the aggregate
impact of the overall capital requirement reviewed by the stress testing to assess how much capital is
needed to mitigate the risk of insolvency to a selected remote level.
Debt to Equity Ratio
Total liabilities
Shareholders equity
2012
=519,596,967
P
=2,177,515,714
P
24:1
2011
=555,938,443
P
=2,008,803,843
P
28:1
Regulatory framework
The operations of the subsidiary are also subject to the regulatory requirements of SEC, Bureau of
Internal Revenue and DENR. Such regulations not only prescribe approval and monitoring of
activities but also impose certain restrictive functions.
- 45 -
30. Others
Sales agreement
The subsidiary has sales agreements with two of its buyers, Dunfeng Holdings Inc., and YinYi
Philippine Mining Inc. The agreement with Dunfeng Holdings Inc. was signed last December 2011
and is for the sale of 3 million wet metric tons of nickel ore over a period of 3 years, beginning in
2012 and ending in 2014. The two agreements signed with Yinyi Philippine Mining on December
2012 and January 2013, respectively, are for the sale of 495,000 wet metric tons of nickel ore over
the year of 2013.
Reclassification of accounts
The following accounts in 2011 have been reclassified to conform with the 2012 financial statement
presentation:
Reclassified from
Related party payable
(included in noncurrent liability)
Accrued expenses and other payables
Accrued expenses and other payables
Reclassified to
Related party payable
(reclassified under
current liability)
Accrued retirement
SSS/PHIC/HDMF Payable
Amount
=19,034,452
P
2,210,921
683,573
- 46 -
MARCVENTURES HOLDINGS, INC.
RETAINED EARNINGS AVALABLE FOR DIVIDEND DECLARATION
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
Retained earnings as of December 31, 2011
Add: Net income actually earned during the period
Net income during the period closed to retained earnings
Net income during the period
Less: Non-actual/unrealized income net of tax
Share in net income of Subsidiary
Net loss actually earned during the period
Add: Dividend received from subsidiary
Total retained earnings, end available for dividend
=194,564,746
P
137,436,875
172,364,167
(34,927,292)
−
(34,927,292)
P159,637,454
=
MARCVENTURES HOLDINGS, INC.
CONGLOMERATE MAP
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
MHI
(Parent Company)
MMDC
(100%)
Marcventures Mining & Development Corporation (MMDC), a wholly-owned Subsidiary of the
Parent Company, and incorporated in the Philippines is engaged primarily to carry on the business of
mining, smelting, extracting, smelting mineral ores such as, but not limited to nickel, chromites,
copper, gold, manganese and other similar ores and/natural metallic or non-metallic resource from
the earth, to operate, manage and/or engage in the business of smelting, and/or operate smelting
plant, to refine and/or convert metals, ore, and other precious metals into finished products within the
commerce of man.
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
New Accounting Policies Adopted
PAS 1
PAS 17
PAS 18
PAS 19
PAS 23
PAS 24
PAS 27
PFRS 7
PFRS 10
PFRS 12
PFRS 13
IFRIC 19
(Revised 2007)
(Amendment)
(Amendment)
(Revised 2011)
(Revised 2007)
(Revised 2009)
(Revised 2011)
(Amendment)
(Revised 2011)
(Revised 2011)
Presentation of Financial Statements
Leases
Revenue
Employee Benefits
Borrowing Costs
Related Party Disclosures
Separate Financial Statements
Financial Instruments: Disclosure
Consolidated Financial Statements
Disclosure of Interest in other Entities
Fair Value Measurement
Extinguishing financial liability with equity instruments
New Accounting Policy Not Adopted
PFRS 2
PAS 28
IFRIC 13
IFRIC 16
PFRS 2
PAS 32
Amendment
(Revised 2011)
PAS 39
Amendment
Amendment
Amendment
Group Cash-settled Share-based Payment Transactions
Investments in Associates and Joint Ventures
Customer Loyalty Programmes
Hedges of Net Investments in a Foreign Operation
Group Cash-settled Share based Payment Transactions
Financial Instruments: Presentation - Classification of
Rights Issues
Financial Instruments; Recognition and Measurement –
Eligible Hedge Items
MARCVENTURES HOLDINGS, INC.
MEASURE OF FINANCIAL SOUNDNESS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
The Group Liquidity Ratios:
a. Current Ratio
Total Current Assets
Total Current Liabilities
December 31,
2012
=76,904,967
P
=288,663,654
P
0.27:1
December 31,
2011
=443,649,126
P
=364,282,631
P
1.22:1
December 31,
2012
=26,757,398
P
=330,251,728
P
0.08:1
December 31,
2011
=186,231,852
P
=383,317,037
P
0.49:1
December 31,
2012
=519,596,967
P
=2,697,112,681
P
0.19:1
December 31,
2011
= 555,938,442
P
=2,564,742,286
P
0.22:1
December 31,
2012
=519,596,967
P
=2,177,515,714
P
0.24:1
December 31,
2011
=555,938,442
P
=2,008,803,843
P
0.28:1
b. Quick Ratio
Quick asset
Total Current Liabilities
The Group Solvency Ratios:
a. Debt Ratio
Total Liabilities
Total Assets
b. Debt Ratio
Total liabilities
Shareholders Equity
The Group Profitability Ratios:
a. Return on Equity
Net Income
Average Shareholders’ Equity
December 31,
2012
=137,436,875
P
=2,093,159,778
P
0.07:1
December 31,
2011
=240,339,316
P
=1,852,087,141
P
0.13:1
December 31,
2012
=137,436,875
P
=2,630,927,484
P
0.05:1
December 31,
2011
=240,339,316
P
=2,361,009,613
P
0.10:1
December 31,
2012
=697,491,039
P
=1,176,231,407
P
0.59:1
December 31,
2011
=842,901,957
P
=725,093,051
P
1.16:1
b. Return on Assets
Net Income
Ave. Total Assets
c. Fixed asset turnover ratio
Revenue
Property, Plant and Equipment
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Not
Not Applicable
Adopted
Effective as of December 31, 2012
Framework for the Preparation and Presentation of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1
First-time Adoption of Philippine Financial Reporting
(Revised)
Standards
Amendments to PFRS 1 and PAS 27: Cost of an
x
X
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
Amendments to PFRS 1: Additional Exemptions for First-
X
time Adopters
Amendment to PFRS 1: Limited Exemption from
X
Comparative PFRS 7 Disclosures for First-time Adopters
Amendments to PFRS 1: Severe Hyperinflation and
x
Removal of Fixed Date for First-time Adopters
PFRS 2
Amendments to PFRS 1: Government Loans
x
Share-based Payment
x
Amendments to PFRS 2: Vesting Conditions and
x
Cancellations
Amendments to PFRS 2: Group Cash-settled Share-
x
based Payment Transactions
PFRS 3
Business Combinations
X
(Revised)
PFRS 4
Insurance Contracts
x
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
Amendments to PAS 39 and PFRS 4: Financial Guarantee
x
Contracts
PFRS 5
Non-current Assets Held for Sale and Discontinued
x
Operations
PFRS 6
Exploration for and Evaluation of Mineral Resources
X
PFRS 7
Financial Instruments: Disclosures
X
Amendments to PAS 39 and PFRS 7: Reclassification of
X
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of
X
Financial Assets - Effective Date and Transition
Amendments to PFRS 7: Improving Disclosures about
X
Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of
x
Financial Assets
Amendments to PFRS 7: Disclosures – Offsetting Financial
Assets and Financial Liabilities
Amendments to PFRS 7: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
PFRS 8
Operating Segments
PFRS 9*
Financial Instruments
Amendments to PFRS 9: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
PFRS 10*
Consolidated Financial Statements
PFRS 11*
Joint Arrangements
PFRS 12*
Disclosure of Interests in Other Entities
PFRS 13*
Fair Value Measurement
Philippine Accounting Standards
x
x
x
x
x
x
x
x
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
PAS 1
Presentation of Financial Statements
x
Amendment to PAS 1: Capital Disclosures
x
(Revised)
Amendments to PAS 32 and PAS 1: Puttable Financial
x
Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Presentation of Items of Other
Comprehensive Income
x
PAS 2
Inventories
x
PAS 7
Statement of Cash Flows
x
PAS 8
Accounting Policies, Changes in Accounting Estimates
x
and Errors
PAS 10
Events after the Reporting Period
x
PAS 11
Construction Contracts
x
PAS 12
Income Taxes
x
Amendment to PAS 12 - Deferred Tax: Recovery of
x
Underlying Assets
PAS 16
Property, Plant and Equipment
x
PAS 17
Leases
x
PAS 18
Revenue
x
PAS 19
Employee Benefits
x
Amendments to PAS 19: Actuarial Gains and Losses,
x
Group Plans and Disclosures
PAS 19
(Amended)*
Employee Benefits
x
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
PAS 20
Accounting for Government Grants and Disclosure of
x
Government Assistance
PAS 21
The Effects of Changes in Foreign Exchange Rates
x
Amendment: Net Investment in a Foreign Operation
PAS 23
x
Borrowing Costs
x
Related Party Disclosures
x
PAS 26
Accounting and Reporting by Retirement Benefit Plans
x
PAS 27
Consolidated and Separate Financial Statements
x
PAS 27
Separate Financial Statements
(Revised)
PAS 24
(Revised)
x
(Amended)*
PAS 28
Investments in Associates
x
PAS 28
Investments in Associates and Joint Ventures
x
PAS 29
Financial Reporting in Hyperinflationary Economies
x
PAS 31
Interests in Joint Ventures
x
PAS 32
Financial Instruments: Disclosure and Presentation
(Amended)*
x
Amendments to PAS 32 and PAS 1: Puttable Financial
x
Instruments and Obligations Arising on Liquidation
Amendment to PAS 32: Classification of Rights Issues
x
Amendments to PAS 32: Offsetting Financial Assets and
x
Financial Liabilities
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
PAS 33
Earnings per Share
x
PAS 34
Interim Financial Reporting
x
PAS 36
Impairment of Assets
x
PAS 37
Provisions, Contingent Liabilities and Contingent Assets
x
PAS 38
Intangible Assets
x
PAS 39
Financial Instruments: Recognition and Measurement
x
Amendments to PAS 39: Transition and Initial Recognition
x
of Financial Assets and Financial Liabilities
Amendments to PAS 39: Cash Flow Hedge Accounting
x
of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
x
Amendments to PAS 39 and PFRS 4: Financial Guarantee
x
Contracts
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets – Effective Date and Transition
Amendments to Philippine Interpretation IFRIC–9 and
PAS 39: Embedded Derivatives
x
x
x
Amendment to PAS 39: Eligible Hedged Items
x
PAS 40
Investment Property
x
PAS 41
Agriculture
x
Philippine Interpretations
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
IFRIC 1
Changes in Existing Decommissioning, Restoration and
x
Similar Liabilities
IFRIC 2
Members' Share in Co-operative Entities and Similar
x
Instruments
IFRIC 4
Determining Whether an Arrangement Contains a Lease
IFRIC 5
Rights to Interests arising from Decommissioning,
x
x
Restoration and Environmental Rehabilitation Funds
IFRIC 6
Liabilities arising from Participating in a Specific Market -
x
Waste Electrical and Electronic Equipment
IFRIC 7
Applying the Restatement Approach under PAS 29
x
Financial Reporting in Hyperinflationary Economies
IFRIC 8
Scope of PFRS 2
IFRIC 9
Reassessment of Embedded Derivatives
x
Amendments to Philippine Interpretation IFRIC–9 and
x
x
PAS 39: Embedded Derivatives
IFRIC 10
Interim Financial Reporting and Impairment
IFRIC 11
PFRS 2- Group and Treasury Share Transactions
x
IFRIC 12
Service Concession Arrangements
x
IFRIC 13
Customer Loyalty Programmes
x
IFRIC 14
The Limit on a Defined Benefit Asset, Minimum Funding
x
Requirements and their Interaction
Amendments to Philippine Interpretations IFRIC- 14,
Prepayments of a Minimum Funding Requirement
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
x
x
x
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
IFRIC 17
Distributions of Non-cash Assets to Owners
x
IFRIC 18
Transfers of Assets from Customers
x
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments
x
IFRIC 20
Stripping Costs in the Production Phase of a Surface
x
Mine
SIC-7
Introduction of the Euro
x
SIC-10
Government Assistance - No Specific Relation to
x
Operating Activities
SIC-12
SIC-13
Consolidation - Special Purpose Entities
x
Amendment to SIC - 12: Scope of SIC 12
x
Jointly Controlled Entities - Non-Monetary Contributions
x
by Venturers
SIC-15
Operating Leases - Incentives
x
SIC-25
Income Taxes - Changes in the Tax Status of an Entity or
x
its Shareholders
SIC-27
Evaluating the Substance of Transactions Involving the
Legal Form of a Lease
x
SIC-29
Service Concession Arrangements: Disclosures.
x
SIC-31
Revenue - Barter Transactions Involving Advertising
x
Services
SIC-32
Intangible Assets - Web Site Costs
x
MQ
&
T
F
65