ISM COMMUNICATIONS CORPORATION ITOGON … Form 17-A 2012.pdf · ISM COMMUNICATIONS CORPORATION ......

SEC Number 808

File Number

________________________________________________

ISM COMMUNICATIONS CORPORATION (formerly, ITOGON-SUYOC MINES, INC.)

________________________________________________ (Company’s Full Name)

The Penthouse, Alphaland Southgate Tower

2258 Chino Roces Avenue corner EDSA, Makati City _________________________________________________

(Company’s Address)

338-5599 ______________________________________

(Telephone Number)

December 31

(Fiscal Year Ending) (month & day)

SEC Form 17-A (Annual Report) ______________________________________

Form Type

______________________________________ Amendment Designation (if applicable)

December 31, 2012 ______________________________________

Period Ended Date

N/A __________________________________________________

(Secondary License Type and File Number)

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SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141

OF THE CORPORATION CODE OF THE PHILIPPINES 1. For the fiscal year ended December 31, 2012 2. SEC Identification Number 808 3. BIR Tax Identification No. 000-162-935V 4. ISM COMMUNICATIONS CORPORATION (FORMERLY ITOGON-SUYOC MINES, INC.)

Exact name of issuer as specified in its charter

Philippines 5. Province, country or other jurisdiction of incorporation or organization 6. Industry Classification Code: ___________________(SEC Use Only) The Penthouse, Alphaland Southgate Tower, 2258 Chino Roces Avenue corner EDSA, Makati City 7. Address of principal office (632) 338-5599 1232 8. Registrant’s telephone number Zip Code Itogon-Suyoc Mines, Inc., 17th Floor, The Enterprise Center Tower 1, 6766 Ayala Avenue, Makati City 1226 9. Former name, former address, and former fiscal year, if changed since last report 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA

Title of each Class

Number of shares of

common stock outstanding

Common 1,916,216,149

11. Are any or all of the securities listed on the Philippine Stock Exchange? Yes 12. Indicate whether the issuer:

a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines during the preceding 12 months (or for such shorter period the registrant was required to file such reports)

Yes b) has been subject to such filing requirements for the past 90 days Yes

11. The aggregate market value of the voting stock held by non-affiliates of the registrant. Shares held by Non-affiliates

Market value Per Share as of 31 December 2012

Total Market Value

404,033,992 Php2.59 Php1,046,448,039.28

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Part I – BUSINESS AND GENERAL INFORMATION

Item 1. Business A. Transformation from a mining company into a telecommunications company

ISM Communications Corporation (“ISMCC”, “ISM”, the “Company” or the “Corporation”) was, originally, a mining company incorporated in March 1925, under the name “Itogon-Suyoc Mines, Inc.”.

During meetings held on June 22 and July 25, 2001, the Board of Directors and stockholders of ISMCC approved a Memorandum of Agreement (“MOA”) between ISMCC and PhilWeb Corporation (“PhilWeb” or “PWC”, formerly “PhilWeb.Com, Inc.”). Under the terms of the MOA, PWC shall manage the transformation of ISMCC from a mining company to a company engaged in information technology, multimedia telecommunications, and other similar industries, including the identification and negotiation with potential investors who will infuse the necessary capital or assets for projects in such industries. In order to implement the MOA, the articles of incorporation of ISM were amended to enable it to undertake its new venture. ISM also divested of all its mining operations, including all its mining-related assets and liabilities. These acts were approved by the stockholders of the Company during a meeting on July 25, 2001. On April 10, 2002, the stockholders of ISM approved a Restructuring Plan, which was later on approved by the Philippine Securities and Exchange Commission (”SEC”) on June 7, 2002. In accordance with the Restructuring Plan, effective October 1, 2002, the activities of ISM have been entirely focused on building the products and services of its new line of business. ISM ceased its mining operations and assigned all of its rights over its two mining properties (“Sangilo” and “Suyoc”) located in the Province of Benguet, including all tangible and intangible assets pertaining to the mining operations, to Itogon-Suyoc Resources, Inc. (“ISRI”).

B. Acquisition of Stakes in Eastern Telecommunications Philippines, Inc. a. ISM-Aerocom Share Swap (17.7% of ETPI)

On July 11, 2005, ISM entered into a Memorandum of Agreement with Aerocom Investors and Management, Inc. (“Aerocom”) where the latter agreed to transfer and convey to ISM 4,600,557 fully paid common Class “A” shares of Eastern Telecommunications Philippines, Inc. (“ETPI”) in exchange for approximately 6.8 billion newly issued and registered shares of ISM. This was consummated on December 3, 2007 with the listing at the Philippine Stock Exchange (“PSE”) of the 6,816,761,093 newly issued shares of ISM in favor of Aerocom. b. Acquisition of AGNP (40% of ETPI)

In September 2005, the stockholders of ISM approved the increase in authorized

capital stock from P300 million to P1.2 billion divided into 120 billion shares at P0.01 par value each, the issuance of about 6.8 billion ISM shares in favor of Aerocom in exchange for approximately 4.6 million Class “A” common shares of ETPI, the

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issuance of approximately 45.7 billion shares at par value, equivalent to about US$8.2 million to Ashmore Investment Management Ltd. (“Ashmore”), Boerstar Corporation (“Boerstar”) and Araza Resources Corporation (“Araza”) and the acceptance of subscription by way of a rights offering of 30 billion shares at par value (P0.01 per share) in favor of stockholders (but excluding the new investors: Ashmore, Boerstar and Araza).

On November 11, 2005, ISM entered into a Deed of Sale Agreement with Australian Gigahertz Network International Pty Ltd. (“AGNI”), wherein the latter agreed to sell its entire interest in the outstanding capital stock of its wholly owned subsidiary, A. G. N. Philippines, Inc. (“AGNP”), consisting of the entire issued 100,000 common shares of AGNP. In addition, ISM assumed the loan advances of AGNI to AGNP (the “AGNP Loan”). AGNP is a holding company, which owns 10,400,000 Class “B” shares of ETPI, representing 40% of the latter’s total outstanding shares. In consideration of the sale, ISM paid AGNI in 2006 a total amount of US$8,211,679.00 as purchase price. On December 14, 2006, the SEC approved the increase in ISM’s authorized capital stock from P300 million to P1.2 billion, divided into 120,000,000,000 shares at P0.01 par value per share. Subsequently, the company issued to private investors, Araza, Boerstar, EMDCD Ltd. (“EMDCD”) and Asset Holder PCC No. 2 Ltd re: Ashmore Asian Recovery Fund (“ARF”), the aggregate of 43,127,603,300 shares out of the increased capital. EMDCD and ARF were nominees of Ashmore. The proceeds from the above mentioned subscriptions from private investors were used to acquire 100% ownership in AGNP and the assumption of the AGNP Loan. Also, out of increase in authorized capital, ISM offered 30 billion shares to all its stockholders as of record date of June 8, 2007 (excluding Araza, Boerstar, EMDCD and ARF) at an offer price of P0.01 per share. The rights offering was fully subscribed and raised P300 million. After completing all of regulatory requirements, the rights offer shares were listed with PSE on July 9, 2007. c. Acquisition of Stake of Smart Communications, Inc. (9.8% of ETPI) An additional 2,548,000 Class “A” shares of ETPI, which is equivalent to 9.8% of the latter’s total outstanding shares, were acquired from Smart Communications, Inc. on October 22, 2007 for P100 million. d. Acquisition of Stake of the Republic of the Philippines (through the Privatization Management Office) (10.2% of ETPI) An additional 2,652,000 Class “A” shares of ETPI, which is equivalent to 10.2% of the latter’s total outstanding shares, were acquired from the Republic of the Philippines (through the Privatization Management Office) on March 6, 2008 for P104.1 million.

C. Increase in authorized capital to P1.8 billion On November 8, 2007, the board of directors and stockholders approved the increase in ISM’s authorized capital stock from P1.2 Billion divided into 120,000,000,000 shares at a par value of P0.01 per share to P1.8 Billion divided into 180,000,000,000 shares with a par value of P0.01 per share. This was approved by the SEC on August 6, 2008.

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Out of the increase in authorized capital stock, Ashmore (through its nominees, EMDCD and ARF) subscribed to an aggregate of 16,127,737,226 newly issued shares at a subscription price of P0.0274 per share. PSE approved the listing of the afore-mentioned shares on March 20, 2009.

D. Increase in authorized capital to P2.8 billion On June 23, 2008, the board of directors approved the issuance of new shares by way of rights offering in favor of all stockholders. On January 14, 2009, the PSE approved the listing of additional 65,554,832,528 common shares, with a par value of P0.01 per share to cover its 1:1.92 stock rights offering to all eligible stockholders of record as of February 4, 2009, at an offer price of P0.01 per share. The offer period for the rights offering ended last February 16, 2009 with the offering fully subscribed. The increase in capital stock of P655.5 million resulted from ISM’s issuance of 65.5 billion rights offer shares at P0.01 per share.

E. Increase in the par value of the common shares of the Company to Php1.00 per share On September 9, 2010, the SEC approved the Company’s application for the amendment of its Articles of Incorporation to reflect the increase in par value of its common shares from P0.01 per share to P1.00 per share. As a result of the increase in the par value, the following changes in the capital stock of the Company were effected:

Before the increase in par value

After the increase in par value

Number of authorized shares

280 billion shares 2.8 billion shares

Number of shares issued (inclusive of treasury shares)

182,636,865,800 shares

1,826,268,659 shares

Number of shares subscribed

9,000,068,290 shares 90,000,682 shares

Number of treasury shares

5,115,990 shares 53,192 shares

Number of shares outstanding

191,636,934,090 shares

1,916,216,149 shares

No fractional shares were issued to the stockholders of the Company in the conversion of the number of shares. The Company acquired the resulting fractional shares as additional treasury shares.

F. Acquisition of stake in Acentic GmbH On January 12, 2010, ISM and PhilWeb completed the purchase of a 65% stake in German information technology firm, Acentic GmbH (“Acentic”) for about P1.3 billion. The Company used internally-generated funds to fund its share of the acquisition of this investment. Acentic is the product of the 2003 merger of four interactive TV (“Itv”) companies – Prodac, VMS, Ciscom and Granada Business

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Technology. Following this, PhilWeb and ISM are set to launch Acentic Asia, a subsidiary of Acentic, which is envisioned to serve as Acentic’s gateway to Asia. The Company is confident that there are strong synergies between PhilWeb and Acentic. Acentic is one of Europe’s leading providers of in-room entertainment. It offers digital and Internet protocol (IP) converged services to hotels, tourism outfits and healthcare facilities. Its digital television services and high-speed Internet access are found in many of the world’s leading hotel rooms including Accor, Dorint, Intercontinental Hotel Group, Hilton, Hyatt, Marriott, Movenpick and Starwood, in more than 30 countries across Europe, the Middle East and Africa. Acentic is the number two operator by room base across Europe, the market leader in Germany and the second largest in the United Kingdom. The UK, which accounted for 67% of Acentic’s EBITDA in 2009, is by far the most profitable market for hotels in Europe due to its greater number of group-based hotels which have a broader supply of entertainment systems, allowing for more pull-through revenues and related margins. Acentic has approximately 1,100 hotels and 176,000 hotel rooms under contract across Europe, the Middle East and Africa, which will serve as an instant platform for PhilWeb’s gaming offerings. Acentic also has operating subsidiaries in 8 European markets – UK, Germany, France, Poland, Italy, Spain, Netherlands and Austria, a good take-off for PhilWeb’s growth plans. To date, Europe is still the largest geographical market for the hotel industry with 6.6 million rooms, compared to the America’s 6.5 million rooms and the Asia-Pacific region’s 4.5 million rooms. The European pay-TV industry is a fragmented market with no dominant leader. The Company can look forward to a strong and stable revenue base with Acentic’s long-term contracts with the world’s leading hotel chains. Currently, 38% of the base operating revenue is guaranteed and for the past year, new businesses contracted had a guaranteed average 55% of operating revenue. Majority of contracts are renewed at maturity, highlighting the strength of Acentic’s commercial relationships. In the year ending 2009, Acentic was on tract to post an EBITDA of €10M, from revenues of €46M. Through the years, Acentic has demonstrated technological leadership through its innovative products such as the Acentic Panorama. Over 71% of Acentic’s installed base uses digital systems. The remaining analogue systems will be converted to digital, therefore providing enhanced margins through the superior digital guest offering. This will require significant capital expenditures over the next two years. Acentic’s growth was also made possible by the proven ability of its executives to integrate a number of underperforming businesses, reduce costs while maintaining high levels of customer service, and develop market-leading technologies to support future growth. This partnership will definitely enhance the revenues and growth potentials of both PhilWeb and Acentic, whose combined expertise should lead to more gaming possibilities across Asia and Europe.

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G. Sale of 40% interest in ETPI

On December 16, 2010, the Executive Committee authorized the Company to sell 100% of its interest in AGNP to Vega Telecom, Inc. (“Vega”), under such terms and conditions which Mr. Eric O. Recto, the President of the Company, may deem to be in the best interest of the Company. AGNP was the corporate vehicle through which the Company held a 40% interest in ETPI. On December 29, 2010, the Company and Vega executed the sale documents for this transaction. Consequently, as of December 30, 2010, the Company’s interest in ETPI was reduced to 37.7%.

H. Acquisition of controlling interest in the Philippine Bank of Communications On June 13, 2011, the Executive Committee authorized the Chairman and/or the President of the Company, in conjunction with other investors (the “ISM Group”), to participate in the auction conducted by Macquarie Capital Advisers (“Macquarie”) for the sale of approximately 97.28% of the outstanding capital of Philippine Bank of Communications (“PBCOM” or the “Bank”) under such terms and conditions that management may deem to be in the best interest of the Corporation. On June 22, 2011, Macquarie informed the ISM Group of the results of the auction where it was selected as PBCOM’s Strategic Third Party Investor (“STPI”). On July 26, 2011, the ISM Group entered into a Memorandum of Agreement with the major shareholders of PBCOM to formalize the acquisition, subject to the appropriate regulatory approvals. The ISM Group agreed to purchase a total of 47,909473 common shares and 120,000,000 preferred shares or a total of 167,909,473 voting shares of the Bank (the “Sale Shares”) at a purchase price of Php27.88 per share, regardless of class, or for a total purchase price of Php4,681,316,107.24. This includes the Company’s share of approximately 37.11% of the Bank. Thereafter, the ISM Group filed the necessary applications with the regulatory agencies – the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission and the Philippine Deposit Insurance Commission, for their respective approvals of the acquisition. The ISM Group was able to obtain all the said approvals on December 22, 2011. The sale of the Sale Shares was crossed thru the facilities of the Exchange on December 23, 2011. Thus, instead of the projected 37.11% ownership in the Bank, the effective ownership of the Companay after the said transaction is 36.64%. On April 12, 2012, the Company invested additional P22.71 million representing 814,666 new voting shares at P27.88 per share of PBCOM. As at December 31, 2012, the equity interest of the Company remains the same as the application for the increase in the authorized capital stock of PBCOM is still pending approval from the SEC. The increase in the authorized capital stock of PBCOM was approved by the SEC on March 11, 2013. Thus, as a result, considering the additional subscription from other investors, the Company’s stake in PBCOM was reduced to 21.38% effective on the said approval date.

I. Sale of remaining 17.7% interest in ETPI On June 28, 2011, the Executive Committee authorized the Company to sell its remaining 37.7% controlling stake in ETPI under such terms and conditions no less favorable than the sale of the earlier 40% interest. On October 22, 2011, the Company

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sold the said stake in ETPI to San Miguel Equity Securities, Inc. With this sale, the Company has fully divested its interest in ETPI.

Competitive Business Condition and the Registrant’s Competitive Position in the Industry and Methods of Competition

The Company currently has no operations.

Sources and Availability of Raw Materials and Names of Principal Supplier

ISMCC is a holding company that does not require raw materials in its operations. It is not dependent on any principal supplier.

Dependence on One or a Few Major Customers and Identification of Such

ISM, as a holding company, has no sales of its own hence, there are no customers that accounts for 20% or more of its sales.

Patents, Trademarks, Licenses, Franchises, Concessions, and Royalty Agreements ISM’s application for registration of its trademarks with the Intellectual Property Office of the Philippines was approved by the said office last April 13, 2009.

Pending Applications for Registration of Trademarks The Company has no pending trademark application.

Need for Governmental Approval of Principal Products or Services; Effect of Existing or Probable Governmental Regulations on the Business

The Company does not need any governmental approval in its products or services. In the event any of its future operations require government approval, ISMCC intends to comply with such requirement.

Estimate of Amount Spent for Research and Development Activities in the Next Three Years The Company does not expect to make any significant investment or expenditure for research and development.

Costs and Effects of Compliance with Environmental Laws The Company currently has no operations and thus do not require an environmental compliance certificate from the Department of Environment and Natural Resources. In the event that environmental laws and regulations cover any of its future operations, the Company intends to comply with such requirements.

Business Transactions with Related Parties The Company has no material business transactions with related parties.

Labor

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The Company has no full time employees as of December 31, 2012. There is no union and neither a collective bargaining agreement with its employees. There have been no strikes or threats to strike in the past four years. Supplemental benefits given to qualified employees include stock option plan, among others.

Material Events The significant contracts and commitments entered into by the Company are as follows:

a. Memorandum of Agreement between the Company and PWC whereby the Company appointed PWC to manage the transformation of the Company from a mining company to a company engaged in information technology, multi-media, telecommunications, or other similar industries, as well as to identify and negotiate with investors who will infuse the necessary capital or assets for such project.

b. As a member of the ISM Group, the Company, thru the authorized

representative of the ISM Group entered into a Memorandum of Agreement dated July 26, 2011 for the acquisition of the controlling interest in PBCOM. The Company committed to purchase a total of 37.11% of PBCOM. In connection with this acquisition, the Company, together with the other members of the ISM Group, also entered into an Amendment to the 2004 Financial Assistance Agreement with PBCOM and the PDIC wherein it agreed to be bound by the 2004 Financial Assistance Agreement executed by the previous major shareholders of PBCOM for the rehabilitation of the bank.

c. The Company, on December 16, 2010, sold 40% (held thru AGNP) of its stake in

ETPI to Vega Telecom, Inc.

d. The Company, on October 22, 2011, entered into a deed of sale with San Miguel Equity Securities, Inc. wherein it sold its remaining 37.77% stake in ETPI in favor of the latter. By virtue of this sale, the Company has completed the divestment of its entire stake in ETPI.

Item 2. Properties

In accordance with the Restructuring Plan, ISMCC ceased its mining operations and assigned all of its rights over its two mining properties (“Sangilo” and “Suyoc”) located in the Province of Benguet, including all tangible and intangible assets pertaining to the mining operations, to ISRI. As consideration for the aforementioned mining-related assets assigned by ISMCC, ISRI assumed certain liabilities of ISMCC. As of December 31, 2012, the Company reported property and equipment (net of depreciation) of P5.7 million primarily composed of computer equipment, transportation equipment, network and data communication equipment, and other fixed assets, net of accumulated depreciation and impairment losses.

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No extraordinary purchase or sale of plant and equipment are expected beyond those in the regular course of operations of the Company. All purchases will be financed through internally generated funds and existing capitalization.

Item 3. Legal Proceedings As of December 31, 2012, there are no material lawsuits or claims against ISMCC.

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Part II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market Price, Dividends and Related Stockholder Matters Market Information

ISMCC’s shares of common stock are listed in the Philippine Stock Exchange. The following table sets forth the high and low closing sales prices per share of the common shares listed on the PSE during the respective periods indicated according to published financial sources.

Price per Share

High Low

2012 First Quarter (ending March 2012) Second Quarter (ending June 2012) Third Quarter (ending September 2012) Fourth Quarter (ending December 2012)

3.15 3.10 2.99 2.69

3.12 2.65 2.99 2.59


3.08 3.75 3.50 3.38

3.04 3.70 3.01 3.30


6.75 5.75 4.80 4.60

4.50 4.70 3.60 3.30

The closing price of the Company’s common shares as of April 12, 2013 (the latest practicable trading date) was Php2.11 per share (high of Php2.19 and low of Php2.10).

Dividends ISMCC has not declared any dividends for the last four (4) fiscal years and subsequent quarter.

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There are no restrictions that limits the ability to pay dividends on common equity or that are likely to do so in the future.

Holders There were 4,293 shareholders of record holding the Company’s outstanding capital stock of 1,916,216,149 common shares as of March 31, 2013.

Top 20 Stockholders

The top 20 registered stockholders of record as of March 31, 2013 (based on an outstanding capital stock of 1,916,216,149 net of 53,192 shares held in treasury) were:

Name of Shareholder No. of Shares %

1. Pcd Nominee Corporation 1,022,707,502 53.37%

2. Asset Holder Pcc No.2 Limited Re Ashmore Asian Recovery Fund 196,618,486 10.26%

3. Emdcd Ltd. 196,618,486 10.26%

4. Boerstar Corporation 105,474,116 5.50%

5. Sagitro, Inc. 100,000,000 5.22%

6. Philweb.Com, Inc. 90,003,539 4.70%

7. Araza Resources Corporation 82,164,016 4.29%

8. Aerocom Investors & Managers, Inc. 68,167,610 3.56%

9. Siis Investment Holdings Limited 22,857,142 1.19%

10. The First Resources Management & Sec. Corp.

18,531,250

0.97%

11. Tan, Luciano H. 997,284 0.05%

12. Ortigas, Ignacio Rafael M. & Xavier Ignacio M. Ortigas 577,606 0.03%

13. Ortigas, Ignacio R. 571,879 0.03%

14. Cham, Allen 537,332 0.03%

15. Sproule, Scott Andrew 500,000 0.03%

16. Montilla, Jose Luis O. 301,000 0.02%

17. Ortigas, Rafael B. 301,000 0.02%

18. Lim, Amparo 221,406 0.01%

19. Arthur Winikoff Fao Obmvm 167,300 0.01%

20. Dees Securities Corporation 126,471 0.01%

Recent Sales of Unregistered Securities:

There has been no sale in the past three years of any unregistered securities of ISMCC or securities that has not been approved exempt from such registration requirements.

Item 6. Management’s Discussion and Analysis of Financial Condition and Results of

Operations

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The current capitalization of the Company, and expected future revenues from its various investment activities are projected to sufficiently meet the Company’s operating cash requirements. The Company intends to utilize internally generated funds to finance the acquisition of computer and other equipment, if any. These acquisitions, and facilities, are not expected to be of material amounts. The Company does not expect to conduct any product research and development in the foreseeable future. No extraordinary purchase or sale of plant and equipment are expected beyond those in the regular course of the Company’s operations. All purchases will be financed through internally-generated funds and existing capitalization. Hiring of employees will be done in the regular course of business, if necessary. There are no known trends, events or uncertainties that are reasonably expected to have a material impact on the Company’s revenues or continuing operations.

Performance for the Year Ended December 31, 2012 Income and Expenses The Company recorded a net income of P259.4 million in 2012. Net Income was substantially contributed by the Company’s equity in net earnings from PBCom and partially offset by the equity losses from Acentic. PBCom made a net income of P968 million in 2012, 22% higher than 2011. The income was driven by the bank’s better performance in trading, investments and lending activities. Cash and Cash Equivalents The Company reported total cash and cash equivalents of P 553.7 million. The reported balance is P 75.2 million lower than that of 2011. The decreased was mainly due to the expenses incurred by the Company and the acquisition of additional investment to PBCom of 22 million. Receivables – net Net receivables decreased by P651.4 million mainly due to the collection from Vega Telecom Inc. of P640 million. This proceed was used to pay off the borrowing from BOC. Property and Equipment – net As of December 31, 2012, property and equipment, net of depreciation, posted at P5.7 million primarily consisting of ISMCC’s computer equipment, Network and Data Equipment, Transportation Equipment and other fixed assets, net of accumulated depreciation and impairment losses. Investment in associates and shares of stock

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The account at December 31 consists of the following: a) Investment in Acentic GmbH On December 22, 2009, the Company entered into an agreement relating to the sale and purchase in January 2010 of certain shares of Acentic GmbH with LBC Capital Sarl (LBC Capital), Host Union and Philweb Corporation. On January 11, 2010, the Company completed the acquisition on 32.5% of Acentic GmbH, a Germany based company engaged in hotels and other multi-dwelling establishment thru Host Union in the amount equivalent to P660 million. On November 15, 2012, ISMCC entered into an Investment Agreement with Wagas Consultants Limited (WCL), a company organized and existing under the laws of the British Virgin Islands, for the acquisition by ISMCC of 100% ownership of WCL in exchange for ISMCC’s investment in Host Union. The carrying value as at December 31, 2012 amounted to P606.8 million. b) Investment in Philippine Bank of Communications (PBCOM) ISMCC acquired 36.64% equity interest in PBCOM in 2011. The transfer of ownership was approved by the Bangko Sentral ng Pilipinas (BSP) on December 23, 2011. On April 12, 2012, the Company invested additional P22.71 million representing 814,666 new voting shares at P27.88 per share . As at December 31, 2012, the equity interest of the Company remains the same as the application for the increase in the authorized capital stock of PBCOM is still pending approval from the SEC. The increase in the authorized capital stock of PBCOM was approved by the SEC on March 11, 2013. Thus, as a result, the Company’s stake in PBCOM was reduced to 21.44%. The carrying value as at December 31, 2012 amounted to P2,349.5 million. c) Investment in Alpha Force Security Agency, Inc. Earlier in 2011, ISMCC acquired 10% equity interest in Alpha Force Security Agency, Inc. for a total consideration of P1.00 million. Other Non-Current Assets Other non-current asset pertains to escrow fund. An escrow agreement was entered to by ISMCC together with the other buyers of PBCOM on July 21, 2011 with PBCOM as the fund agent. Escrow fund includes excess of the contribution, net of settlement of acquisition cost and related expenses, and interest income earned. The fund was distributed to the investors in January 2012. Accounts Payable and Accrued Expenses The 71% (P85.4 million) reduction in trade payables and accrued expenses was mainly due to the payment of outstanding payables and settlement of obligation arising from escrow agreement of P38.9 million. Notes Payable

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The 59% reduction in notes payable was due to the settlement of the P600 million BOC loan in October 2012. Stock Options All stock options vested have expired but none has been exercised. The total amount was reversed to Additional Paid Capital in accordance with the rules of IFRS.

Performance for the Year Ended December 31, 2011 The Company made investments in the Philippine Bank of Communications (“PBCom”), Alpha Force Security Agency, Inc. (“Alpha Force”) and RRE Capital Ventures Corporation (“RRE”). The Company’s investment in Acentic GmBh (“Acentic”), which was previously classified as “held for sale”, was equitized based on management’s recommendation and as approved by the Executive Committee of the Board of Directors of the Company to hold the investment on a long-term basis. The remaining 37.7% share in ETPI was sold to San Miguel Equity Securities, Inc. in October 2011. Cash and Cash Equivalents The Company reported total cash and cash equivalents of P 629 million. The reported balance is P 809 million lower than that of 2010. The decreased was mainly due to the acquisition of 36.64% equity interest in PBCom. Receivables – net Net receivables increased by P 311 million mainly from the sale of the remaining 37.7% stake with ETPI. Investment Held for sale The decrease in investment held for sale of P596 million was caused by the reclassification of investment in Acentic into investment in associate as approved by the Executive Committee of the Board of Directors of the Company. Please see note regarding investment in Acentic below. Property and Equipment – net As of December 31, 2011, property and equipment, net of depreciation, posted at P8.8 million primarily consisting of ISMCC’s computer equipment, Network and Data Equipment, Transportation Equipment and other fixed assets, net of accumulated depreciation and impairment losses. Investment in associates and shares of stock The account at December 31 consists of the following:

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a) Investment in Acentic On December 22, 2009, the Company entered into an agreement relating to the sale and purchase in January 2010 of certain shares of Acentic GmbH with LBC Capital Sarl (LBC Capital), Host Union and Philweb Corporation. On January 11, 2010, the Company completed the acquisition on 32.5% of Acentic GmbH, a Germany based company engaged in hotels and other multi-dwelling establishment thru Host Union in the amount equivalent to P660 million. The above investment was presented as “Investment held for sale” in the 2010 financial statements following the commitment of the Company’s management on June 16, 2010, to a plan to sell the assets. Efforts to sell the investment have commenced, and a sale was expected by 2011. However, on November 14, 2011, the BOD approved to keep the above investment and withdrew the previous authorization to sell due to economic slowdown in Europe. As a result, the investment ceases to be classified as held for sale and equity method accounting has been applied and the carrying amount of the investment previously classified as held for sale was remeasured using the equity method of accounting. The difference between the remeasured equity amount and the carrying amount of the investment amounted to P64.41 million and is included in profit or loss. The carrying value as at December 31, 2011 amounted to P654 million. b) Investment in Philippine Bank of Communications (PBCOM) ISMCC acquired 36.64% equity interest in PBCOM in 2011. The transfer of ownership was approved by the Bangko Sentral ng Pilipinas (BSP) on December 23, 2011. The carrying value as at December 31, 2011 amounted to P1.97 billion. c) Investment in RRE Capital Ventures Corporation On June 17, 2011, the Company incorporated RRE Capital Ventures Corporation (RRE), a wholly owned subsidiary. RRE’s total authorized capital subscribed and paid minimum capital of P6.25 million. As at December 31, 2011, RRE has no operations. This has not been consolidated in 2011 on the basis of immateriality. d) Investment in Alpha Force Security Agency Earlier in 2011, ISMCC acquired 10% equity interest in Alpha Force Security Agency, Inc. for a total consideration of P1.00 million. Other Non-Current Assets Other non-current asset pertains to escrow fund. An escrow agreement was entered to by ISMCC together with the other buyers of PBCOM on July 21, 2011 with PBCOM as the fund agent. Escrow fund includes excess of the contribution, net of settlement of acquisition cost and related expenses, and interest income earned. The fund was distributed to the investors in January 2012. Accounts Payable and Accrued Expenses

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The 51% (P128 million) reduction in trade payables and accrued expenses was mainly due to the payment of capital gains tax amounting to P117.5 million arising from sale of AGNP.. Stock Options Stock options of P9.9 million represents cost of stock granted to employees. As of 2011 year end, there were no stock options exercised. Income and Expenses The Company recorded a net income of P513.4 million in 2011. Net Income was substantially contributed by the Company’s gain on sale of remaining share in ETPI and equity in net earnings from PBCom and Acentic.

The Company’s Key Performance Indicators for 2012 1. Current Ratio for 2012 was at 4.27:1 which is computed as current assets (P1,991,209,339) divided by current liabilities (P465,977,494). The Group’s substantial assets are in cash and cash equivalent aggregating to P553.7 million. 2. Debt to equity ratio for 2012 was at 0.10:1 computed as total liabilities (P465,977,494) over total equity (P4,488,288,374). 3. Debt to total asset ratio for 2012 was at 0.09:1 computed as total liabilities (P465,977,494) over total asset (P4,954,265,868). 4. Asset to equity ratio for 2012 was 1.10:1 computed as total asset (P4,954,265,868) over total equity (P4,488,288,374). 5. Return on asset for 2012 was 5% computed as net income (P259,390,665) over total assets (P4,954,265,868). 6. Return on equity for 2012 was 6% computed as net income (p259,390,665) over total equity (P4,488,288,374) 7. Interest rate coverage ratio for 2012 was 5.26:1 computed as EBIT (P282,118,486) over interest expense (P53,670,211). 8. Market to book ratio of ISM’s common share was 2.59:2.46 as of December 31, 2012. Book value per share is computed as equity attributable to holders of the company (P4,488,288,374) divided by total issued shares (1,826,268,658).

The Company’s Key Performance Indicators for 2011 1. Current Ratio for 2011 was at 1.38:1 which is computed as current assets (P1,609,869,775) divided by current liabilities (P1,169,606,543). The Group’s substantial assets are in cash and cash equivalent aggregating to P629 million. 2. Debt to equity ratio for 2011 was at 0.28:1 computed as total liabilities (P1,169,606,543) over total equity (P4,228,897,709).

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3. Debt to total asset ratio for 2011 was at 0.22:1 computed as total liabilities (P1,169,606,543) over total asset (P5,398,504,252). 4. Asset to equity ratio for 2011 was 1.28:1 computed as total asset (P5,398,504,252) over total equity (P4,228,897,709). 5. Return on asset for 2011 was 10% computed as net income (P513,399,109) over total assets (P5,398,504,252). 6. Return on equity for 2011 was 12% computed as net income (P513,399,109) over total equity (P4,228,897,709). 7. Interest rate coverage ratio for 2011 was 5.81:1 computed as EBIT (P512,630,290) over interest expense (P88,183,020). 8. Market to book ratio of ISM’s common share was 3.3:2.32 as of December 31, 2011. Book value per share is computed as equity attributable to holders of the company (P4,228,897,709) divided by total issued shares (1,826,268,658).

Key variable and other qualitative and quantitative factors There are no known trends, demands, commitments events, or uncertainties that will have a material impact on the Company’s liquidity and that of its subsidiary, ETPI. There were no material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the company with unconsolidated entities or other persons created during the reporting period. The current capitalization of the Company, and expected future revenues from its various activities are projected to sufficiently meet the Company’s operating cash requirements. The Company intends to utilize proceeds from private placements and internally generated funds to finance the acquisition of computer and other equipment, if any. These acquisitions and facilities are not expected to be of material amounts. The capital expenditures of its subsidiary, ETPI, will be funded by internally generated funds and advances to be provided by the Company. These expenditures are not expected to be material in amounts. No extraordinary purchase of plant and equipment are expected beyond those in the regular course of the Company’s operations. All purchases will be financed through internally-generated funds and existing capitalization. There are no known trends, events or uncertainties that have had or that are reasonably expected to have material impact on the Company’s revenues or continuing operations. There are no significant elements of income that did not arise from the Company and its subsidiary’s continuing operations.

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There are no seasonal aspects that had a material effect on the Company’s and its subsidiary’s financial conditions or results of operations.

Item 7. Financial Statements See attached.

Item 8. Changes in and Disagreements to Accountants on Accounting and Financial

Disclosure There were neither changes in nor disagreements with accountants on accounting / financial disclosure.

Part III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Registrant

Directors and Executive Officers

ISMCC’s Board of Directors is composed of 15 members elected by and from among the Company’s stockholders. The Board is responsible for providing overall management and direction to the Company. The directors and executive officers of the Company and a brief background on each are discussed below.

Ag

e Position/Citizenship/Period Served/Term of Office

Roberto V. Ongpin 76 Chairman of the Board/Director/Filipino/13 yrs./1 yr.

Craig E. Ehrlich 57 Vice-Chairman/Director/American/10yrs./1yr. Eric O. Recto 49 President/Director/Filipino/6 yrs./1yr. Mario J. Locsin 61 Executive Vice President/Director/Filipino/3

yrs./1 yr. Gregorio Ma. Araneta III 65 Director/Filipino/8 yrs./1 yr. Walter W. Brown 72 Director/Filipino/3 yrs./1 yr. Pablo L. Lobregat 59 Director/Filipino/3 yrs./1 yr. Alberto M. Montilla 77 Director/Filipino/17 yrs./1yr. Mario A. Oreta 66 Director/Filipino/3 yrs./1 yr. Rafael B. Ortigas 41 Vice President/Director/Filipino/9 yrs./1 yr. Ignacio R. Ortigas 72 Vice President/Director/Filipino/17 yrs./1 yr. Dennis O. Valdes 51 Director/Filipino/4 yrs./1 yr. Roberto V. San Jose 71 Director/Filipino/9 yrs./1 yr. Jose Ernesto C. Villaluna, Jr. 72 Independent Director/Filipino/18 yrs./1 yr. Victor C. Macalincag Rodolfo Ma. A. Ponferrada 36 Corporate Secretary/Filipino/4 yrs./1 yr. Jovita D.S. Larrazabal 31 Assistant Corporate Secretary/Filipino/2 yr./1 yr. Zaldy M. Prieto 38 Chief Finance Officer/Treasurer/Filipino/4 yrs/1

yr.

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The number of years indicated after the position and citizenship refers to the period served as a director/officer. Mr. Roberto V. Ongpin was elected Chairman of the Board of the Company in July 2000. He is also the Chairman of the following Philippine-listed Corporations: PhilWeb Corporation (WEB), Alphaland Corporation (ALPHA), Atok-Big Wedge Co, Inc. (AB), and a Director of San Miguel Corporation (SMC), Ginebra San Miguel, Inc. (GSMI), PAL Holdings, Inc. (PAL) and Petron Corporation (PCOR). He is also the chairman of Alphaland Balesin Island Club, Inc., The City Club at Alphaland Makati Place, Inc. and Alphaland Marina Club, Inc. In Hong Kong, he is the Non-Executive Director of Shangri-La Asia and the Deputy Chairman of the South China Morning Post, both listed in the Hong Kong Stock Exchange. He is also the Chairman of Acentic GmbH (Germany) and a Non-Executive Director of Forum Energy PLC (London). Mr. Ongpin joined SGV & Co. in 1964 and was Chairman and Managing Partner of the firm from 1970 to 1979. He served as the Minister of Trade and Industry of the Republic of the Philippines from 1979 to 1986. Mr. Ongpin graduated cum laude in Business Administration from the Ateneo de Manila University, is a Certified Public Accountant, and has an MBA from the Harvard Business School. Mr. Craig E. Ehrlich has been a Director of the Company since July 2003 and was elected as Vice Chairman in May 2006. He has been a Director of PhilWeb Corporation since May 2002. He is the former, long-time chairman of the GSM Association (GSMA), the global trade association representing more than 700 2nd and 3rd generation network operators and over 180 manufacturers and suppliers, serving more than 3.5 billion customers across 218 countries and territories. He is a board member of the International Telecommunications Union (ITU), Hutchison Telecommunication Group, Bharti Airtel (India’s largest company by market capitalization), chairman of Kbro, Taiwan’s largest cable TV company, and founding chairman of Novare Technologies Ltd., a Hong Kong software development company. He was former group managing director of Sunday Communications Limited, a Hong Kong mobile operator. Mr. Ehrlich, a Hong Kong resident since 1987, holds a BA degree from the University of California Los Angeles, a master’s degree from Occidental College, and a postgraduate fellowship with the Coro Foundation. Mr. Eric O. Recto was elected Director and President of the Company in March 2005. He is also the chairman of the Philippine Bank of Communications (PBC), vice chairman and director of Alphaland Corporation, Alphaland Balesin Island Club, Inc., The City Club at Alphaland Makati Place, Inc., Alphaland Marina Club, Inc., Atok-Big Wedge Co., Inc., Philweb Corporation, and Petron Corporation, president and director of ISM Communications Corporation, a director of San Miguel Corporation and Manila Electric Company (MER), and a member of the Board of Supervisors of Acentic GmbH. Prior to joining the Company, Mr. Recto served as Undersecretary of Finance of the Republic of the Philippines from 2002 to 2005, in charge of handling both the International Finance Group and the Privatization Office. Before his stint with the government, he was chief finance officer of Alaska Milk Corporation and Belle Corporation. Mr. Recto has a degree in Industrial Engineering from the University of the Philippines as well as an MBA from the Johnson School, Cornell University.

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Mr. Mario J. Locsin was elected Independent Director of the Company in November 2007 and Director and Executive Vice President in October 2008. He is also Vice Chairman and a Director of the Philippine Bank of Communications, President of Inpilcom, Inc., and a Director of PhilWeb Corporation and Atok-Big Wedge Co., Inc. He is also an Independent Director of Alphaland Corporation, Alphaland Balesin Island Club, Inc., The City Club at Alphaland Makati Place, Inc. and Alphaland Marina Club, Inc. In the past, he served as the President and COO of Eastern Telecommunications Philippines, Inc. and Atok-Big Wedge Co., Inc., a Director of Belle Corporation, APC Group, Southwest Resources, Philippine Long Distance Telephone Co., and Pilipino Telephone Co., as well as a Director, Executive Vice President and COO of Philippine Airlines. Mr. Locsin is also a consultant of Acentic Asia Ltd. He holds a Master’s degree in Business Administration from the University of San Francisco (1980), and a degree in Lia-Honors Math from De La Salle University (1973). Mr. Mario A. Oreta was elected a Director of the Company in May 2007. He is currently the President and a Director of Alphaland Corporation, Alphaland Development, Inc., Alphaland Balesin Island Resort Corporation, Alphaland Makati Place, Inc., Alphaland Makati Tower, Inc., The City Club at Alphaland Makati Place, Inc., Alphaland Balesin Island Club, Inc., Alphaland Marina Corporation, Alphaland Marina Club, Inc., Aklan Boracay Properties, Inc., and Alphaland Property Management Corporation, the Vice Chairman and a Director of Alphaland Heavy Equipment Corporation and Alphaland Reclamation Corporation, and Chief Operating Officer of Jet Eagle International Limited, Inc. He is Chairman of Major Holdings, Inc., Major Properties, Inc., and Major Homes, Inc. He is also a Director of PhilWeb Corporation and Atok-Big Wedge Co., Inc. He is the Founder and Managing Partner of Tanjuatco Oreta and Factoran Law Offices. Mr. Rafael B. Ortigas was elected Vice President and director of the Company in April 2002. He is a Director of PhilWeb Corporation, Executive Vice President of Sagitro, Inc. and Itogon-Suyoc Resources, Inc., Vice President of Leafar Commercial Corporation, Chairman, President and Director of Rising Sons of 3K, Inc., Chairman and Director of CK3K, Inc. and GSC-3KCK, Inc., and Director of Vinmer Realty, Inc., Concrete Aggregates Corporation, Director and Treasurer of Creative Trade Center Services, Inc. and Delegate General Partner of Ortigas and Company, Ltd. Mr. Ignacio R. Ortigas has been a Director of the Company since 1993 and was elected Vice President in April 2002. He is President of Sagitro, Inc. and a General Partner of Ortigas & Co., Ltd.

Mr. Gregorio Ma. Araneta III was elected a Director of the Company in July 2003. He has been Chairman of Gregorio Araneta Incorporated, Carmel Development Corporation, Gregorio Araneta Management Corporation, and Gamma Holdings Corporation and the Vice Chairman and CEO of Araneta Properties, Inc. since 2003. Mr. Walter W. Brown was elected a Director of the Company in May 2007. He is presently the Chairman of A Brown Company, Inc., Palm Thermal Consolidated Holdings Corporation, International Cleanvironment Systems, Inc., North Kitanglad Agricultural Company, Inc., PhiGold and A Brown Energy & Resources Dev’t. Inc., President of Monte Oro Resources and Energy Inc., a Director and President of Atok-Big Wedge Co., Inc., and Director of Forum Energy plc, and PBJ Corporation. He was also the Chairman and Chief Executive Officer of Philex Mining Corporation from

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January 2004 to December 2009. He received two undergraduate degrees: B.S. Physical Science (1959) and B.S. Geology (1960), both from the University of the Philippines, and post graduate degrees from Stanford University: M.S. Economic Geology (1963), and Ph.D. in Geology, and Major in Geochemistry (1965). He was a candidate in Master of Business Economics (1980) from the University of Asia & the Pacific (formerly Center for Research & Communications). He is currently the Chairman and Director of Family Farm School (PPAI), Chairman and President of StudiumTheologiae Foundation, Vice Chairman of the Board of Trustees of Xavier University, and Member of the Chamber of Mines of the Philippines Inc., and the Geological Society of the Philippines. Mr. Dennis O. Valdes was elected a Director of the Company in May 2007. He is currently the President and a Director of PhilWeb Corporation, a Director of Alphaland Corporation and Atok-Big Wedge Co., Inc.. His previous work experience includes 10 years with the Inquirer Group of Companies, as a Director of the newspaper, and also expanding their Internet, printing, and ink-making operations. Prior to that, he spent six years with The NutraSweet Company developing its businesses in Asia. He is a Certified Public Accountant, graduated magna cum laude in Business Administration and Accountancy from the University of the Philippines and has an MBA from the Kellogg School of Management, Northwestern University. Mr. Alberto M. Montilla was formerly President and Chairman of the Company from 1995 to 2001. He has been a Director since 1993. Mr. Montilla is currently a Vice President and Secretary of Sagitro, Inc.

Mr. Pablo L. Lobregat was elected a Director of the Company in November 2007. He was a Director of Eastern Telecommunications Philippines, Inc. from 2000 to 2008. He is currently the President of Crystal Sugar Co., Inc, Aerocom Investors & Managers, Inc. and Philippine Sugar Research Institute Foundation, Inc. He received a degree in Business Management from Instituto Catolico de Artes Empresariales in Madrid, Spain. Mr. Roberto V. San Jose was elected a Director of the Company in 2011. He was the Corporate Secretary of the Company from February 2002 to May 2011. He is also the Corporate Secretary of Alsons Consolidated Resources, Inc., Anglo-Philippine Holdings Corporation, Energy Development Corporation, Premiere Entertainment Productions, Inc. and Solid Group, Inc. He is a Director and/or Officer of various companies which are clients of Castillo Laman Tan Pantaleon and San Jose Law Offices where he is name partner and special counsel. He is a member of the Philippine Bar. Mr. Jose Ernesto C. Villaluna, Jr. was elected a Director of the Company in 1993. He is also a Director of Philex Mining Corporation and President of Valle Verde Country Club. Mr. Villaluna was formerly Vice Chairman and President of the Company, President and COO of Philex Mining Corporation, Executive Vice President of Apex Mining and Surigao Consolidated Mining Company, Vice President (Gold Sector) and Director of the Chamber of Mines of the Philippines. Mr. Victor C. Macalincag was elected a Director of the Company in 2012. He is also an Independent Director of Crown Equities, Inc. and a Director of Semirara Mining Corporation, Republic Glass Holdings Corp., SEM Calcaca Power Power Corporation

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and Finman Rural Bank. He was the President of Trade & Investment Development Corporation of the Philippines which is presently known as PHILEXIM (formerly PhilGuarantee) from 1991 until his resignation in 2001. He was the Deputy Minister of Finance from 1981 to 1986 and Undersecretary of Finance from 1986 to 1991. He also held the position of National Treasurer from 1981 to 1988. Mr. Macalincag is a Certified Public Accountant. He has a Bachelor of Arts in Business Administration from the University of the East. He also earned a Master of Arts in Economics from the same university. He finished a fellowship program conducted by the Economic Development Institute of the World Bank, Washington D.C. U.S.A. in 1971. Mr. Rodolfo Ma. A. Ponferrada was elected Corporate Secretary of the Company in May 2011 and served as its assistant corporate secretary from May 2007 to May 2011. He is also currently a Director and Corporate Secretary of Alphaland Corporation. He is also the Corporate Secretary and a Corporate Information Officer of Alphaland Corporation, Atok- Big Wedge Co., Inc., Philweb Corporation and the Philippine Bank of Communications, Corporate Secretary of The City Club at Alphaland Makati Place, Inc., Alphaland Balesin Island Club, Inc., and Alphaland Marina Club, Inc., Assistant Corporate Secretary of Eastern Telcommunications Philippines, Inc. and a Member (representing the private sector) of the Board of Directors of the Social Housing Finance Corporation. He graduated from the University of the Philippines (Bachelor of Laws cum laude, 2001) and the Ateneo de Manila University (BS Management [Honors Program] magna cum laude; 1997). Mr. Ponferrada is a member of the Philippine Bar. Ms. Jovita D.S. Larrazabal was elected as the Assistant Corporate Secretary of the Company in May 2011. She also serves as one of the Company's legal counsel. Currently, she is also the Assistant Corporate Secretary of Alphaland Corporation, Atok-Big Wedge Co., Inc. the Philippine Bank of Communications, The City Club at Alphaland Makati Place, Inc., Alphaland Balesin Island Club, Inc. and Alphaland Marina Club, Inc. Prior to joining the group, she was an associate of Sycip Salazar Hernandez & Gatmaitan and Martinez Vergara Gonzalez & Serrano. She is a member of the Philippine Bar. Ms. Larrazabal holds a Juris Doctor degree from the Ateneo De Manila University-College of Law and a Bachelor of Arts degree major in Management Economics from the College of Arts and Sciences of the same university. Mr. Zaldy M. Prieto was elected as Chief Finance Officer and Treasurer of the Company in November 2008. He is also CFO of PhilWeb Corporation. Mr. Prieto is a certified public accountant and certified financial consultant. His previous work experiences include being a senior tax consultant of SGV & Co. in 1998, assistant vice president for finance in Ford Motor Company in 2007 and plant controller and assistant finance director of James Hardie Philippines in 2008. He is a member of the Philippine Institute of Certified Public Accountants and Institute of Financial Consultants. All the foregoing directors will be nominated for re-election to the Board of Directors at the meeting. No director has resigned or declined to stand for re-election to the Board of Directors since the date of the last annual stockholders’ meeting because of a disagreement with the Company on any matter relating to the Company’s operations, policies, or practices. As of the date of this Annual Report, the Company has two (2) incumber independent directors, Messrs. Jose Ernesto C. Villaluna, Jr. and Victor C. Macalincag.

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Directorships in Other Reporting Companies

Mr. Roberto V. Ongpin also serves as chairman of Alphaland Corporation, Philweb Corporation, Atok-Big Wedge Co. Inc., The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc. and a director of Petron Corporation, San Miguel Corporation, PAL Holdings, Inc. and Ginebra San Miguel, Inc. Mr. Eric O. Recto is also the chairman of Philippine Bank of Communications, the president of Alphaland Corporation as well as vice chairman of Philweb Corporation, Atok-Big Wedge Co. Inc., Petron Corporation, The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc. He is also a director of Manila Electric Company and San Miguel Corporation. Mr. Mario A. Oreta is president of Alphaland Corporation, The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc., a director of Philweb Corporation and Atok-Big Wedge Co. Inc. Mr. Mario J. Locsin is vice chairman of Philippine Bank of Communications, a director of Philweb Corporation, as well as director of Alphaland Corporation, The City Club at Alphaland Makati Place, Inc., Alphaland Balesin Island Club, Inc. and Atok-Big Wedge Co., Inc. Dr. Walter W. Brown is also the chairman of A Brown Company, Inc., president of Atok-Big Wedge Co., Inc. and a director of ISM Communications Corporation and Philippine Realty & Housing Corporation.

Mr. Macalincag is a director of Semirara Mining Corporation and Crown Equities, Inc.

Shares of PhilWeb Corporation (WEB), Alphaland Corporation (ALPHA), Atok-Big Wedge Co., Inc. (AB), Philippine Bank of Communications (PBC and PBCP), Petron Corporation (PCOR and PPREF), Philex Mining Corporation (PX), Manila Electric Company (MER), PAL Holdings,Inc. (PAL), San Miguel Corporation (SMC), Ginebra San Miguel, Inc. (GSMI), Philippine Realty & Housing Corporation (RLT), A Brown Company, Inc. (BRN), Semirara Mining Corporation (SCC), and Crown Equities, Inc. (CEI) are all listed in the PSE. Shares of The City Club at Alphaland Makati Place, Inc. and Alphaland Balesin Island Club, Inc. are covered by Registration Statements filed with the SEC.

Significant Employee Except for the foregoing, there are no other significant employees of the Company.

Family Relationships Mr. Alberto M. Montilla is the brother-in-law of Atty. Ignacio Ortigas. Mr. Rafael B. Ortigas is a nephew of Messrs. Ortigas and Montilla. Messrs. Eric O. Recto and Dennis O. Valdes are nephews of Mr. Roberto V. Ongpin.

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Other than the foregoing, none of the directors and officers is related to each other by consanguinity or affinity.

Involvement in Certain Legal Proceedings Mr. Ongpin, the Chairman of the Board of Directors of the Company, and Ms. Manalo, one of the Corporate Information Officers of the Company, are involved in the following legal proceedings:

1. Roberto V. Ongpin vs. Nestor A. Espenilla, Jr., OMB Case No. IC-OC-13-0044,

pending before the Office of the Ombudsman, which is a criminal complaint for violation of Section 3 (e) of R.A. No. 3019;

2. Roberto V. Ongpin vs. Vicente S. Aquino, OMB Case No. IC-OC-13-0044, pending before the Office of the Ombudsman, which is a criminal complaint for violation of Section 3 (e) of R.A. No. 3019 and perjury under Article 183 of the Revised Penal Code;

3. Atty. Zenaida Ongkiko-Acorda, as attorney in fact of Atty. Mario E. Ongkiko and in behalf of Philex Mining Corporation vs. Roberto V. Ongpin, et al., SEC Case No. 11-166, pending before the Regional Trial Court of Pasig City, Branch 158, which involves a purported derivative suit filed on behalf of Philex Mining Corporation (Philex) in order to recover the “short-swing profits” which were allegedly realized from supposed transactions involving Philex shares. This case is in the discovery stage. A related Petition for Review on Certiorari is also pending before the Supreme Court in G.R. No. 204166, entitled Roberto V. Ongpin, et al. vs. Acorda, et al,;

4. Development Bank of the Philippines vs. Reynaldo G. David, et al., OMB Case No. C-C-11-0492-H, which is a criminal complaint for violations of R.A. No. 3019, and banking laws, rules and regulations, pending with the Office of the Ombudsman, in connection with transactions with the Development Bank of the Philippines also involving Philex shares. In an Order dated 26 November 2012 and approved on 8 January 2013, the Office of the Ombudsman denied all motions for reconsideration of its 24 September 2012 Review Resolution;

5. People vs. Reynaldo G. David, et al., S.B.-13-CRM-0105 and S.B.-13-CRIM-0106, pending before the Third Division of the Sandiganbayan in connection with two loans obtained by Deltaventure Resources, Inc. from the Development Bank of the Philippines. The Informations in both cases, respectively, for violations of Section 3 (e) of R.A. No. 3019 were filed on 10 January 2013; and

6. In Re: Ex-Parte Petition for the Issuance of Freeze Order Against the Bank Accounts of Roberto V. Ongpin, et al., CA-G.R. AMLC No. 00066 pending before the Fifth Division of the Court of Appeals, which is a petition filed by the Anti-Money Laundering Council for the freezing of the bank accounts of some 30 persons all in connection with two loans granted by DBP to DVRI in 2009.

Other than the foregoing, no director or senior corporate officer of the Issuer during the past five (5) years has been subject to:

(a) Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

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(b) Any conviction by final judgment, including the nature of the offense, in a criminal proceeding, domestic or foreign, excluding traffic violations and other minor offenses;

(c) 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; or

(d) Being found by a domestic or foreign court of competent jurisdiction (in a civil action), the Securities and Exchange 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.

Item 10. Executive Compensation

For the fiscal years ended 31 December 2010, 2011 and 2012, the Company did not pay its directors. For the fiscal year ending 31 December 2013, the Company does not intend to pay its directors. There are no standard arrangements with the company’s directors other than those that have already been disclosed. There are no other arrangements with the company’s directors other than those that have already been disclosed.

Annual Compensation

(a) (b) (c) (d) (e) Name and Principal Position Year Salary Bonus Other Annual Comp.

1. Roberto V. Ongpin21 N/A N/A N/A N/A Chairman

(elected in July 2001) 2. Craig E. Ehrlich1 N/A N/A N/A N/A

Vice Chairman (elected in July 2003) (elected Vice Chairman in May 2006)

3. Eric O. Recto1 N/A N/A N/A N/A

President (elected in March 2005)

4. Mario J. Locsin1 N/A N/A N/A N/A

1 All the above mentioned executives do not receive salaries from the Company.

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Executive Vice President (elected in October 2008)

5. Zaldy M. Prieto1 N/A N/A N/A N/A CFO & Treasurer (elected in November 2008)

(a) (b) (c) (d) (e)

Name and Principal Position Year Salary Bonus Other Annual Comp.

Aggregate Compensation of the CEO & Most Highly-Paid Executive

2010 0 0 0

2011 0 0 0 2012 0 0 0

(a) (b) (c) (d) (e) Name and Principal Position Year Salary Bonus Other Annual Comp.

All Officers and Directors as a Group Unnamed

2009 0 0 0

2010 0 0 0 2011 0 0 0

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

No executive officer has an employment contract with the Company.

There have been no terminations of employment and neither have there been any change-in-control arrangements with the present management.

Item 11. Security Ownership of Certain Record Beneficial Owners and Management 1) Security Ownership of Certain Record and Beneficial Owners

As of March 31, 2013, ISM Communications Corporation knows of no one who beneficially owns more than 5% of its common stock except as set forth in the table below:

Title of Class

Name and Address of Record Owner and

Relationship with the Company

Name of Beneficial Owner and Relationship

with Record Owner

Citizenship Amount and Nature of

Record/Beneficial Ownership

(indicate “r” or “b”)

Percent of Class

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Common PhilWeb Corporation3 20th Floor, Alphaland Southgate Tower, 2258 Chino Roces Avenue corner EDSA, Makati City (Stockholder)

PhilWeb Corporation is a publicly-listed

corporation (See footnote 1)

Filipino 388,453,859 (b) 77,144,542 (r)

20.27%

4.03%

Common Boerstar Corporation4 6766 Ayala Avenue, Legaspi Village, Makati City (Stockholder)

Messrs. Roberto V. Ongpin and Eric O.

Recto (See footnote 2)

Filipino 105,474,116 (r)

5.51%

Common EMDCD Ltd. (EMDCD)5 M&C Corporate Services Ltd., PO Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands (Stockholder)

Ashmore Investment Management Limited

(see footnote 3)

British 196,618,486 (r)

10.26%

Common Asset Holder PCC No. 2 Ltd. Re: Ashmore Asian Recovery Fund (ARF) 6 New Street, Peter Port, Guernsey(Stockholder)

Ashmore Investment Management Limited

(see footnote 4)

British 556,226,748 (r)

29.03%

Security Ownership of Management

As of March 31, 2013, the security ownership of the members of the Board of Directors and that of management are as follows:

Title of Class Name of Director/Officer Citizenship Number of Shares and

Nature of Beneficial Ownership

Percent of Class

Common Roberto V. Ongpin (Chairman of the Board/Director)

Filipino 1,520 (direct) 89,652,999 (indirect)

4.68%

Common Craig E. Ehrlich (Vice Chairman/Director)

American 21,382,600 (direct)

1.12%

Common Eric O. Recto (President/Director)

Filipino 50 (direct) 15,821,117 (indirect)

0.83%

Common Mario J. Locsin (Executive Vice President/Director)

Filipino 100 (direct) 0.00%

Common Rafael B. Ortigas (Vice President/Director)

Filipino 9,508,064 (direct)

0.50%

Common Ignacio R. Ortigas (Vice President/Director)

Filipino 20,565,354 (direct) 14,006,524 (indirect)

1.80%

Common Alberto M. Montilla Filipino 27,974,120 (direct) 1.72%

29

(Director) 5,065,674 (indirect)

Common Gregorio Ma. Araneta III (Director)

Filipino 2 (direct) 82,164,016 (indirect)

4.29%

Common Jose Ernesto C. Villaluna, Jr. (Independent Director)

Filipino 7,581,732(direct) 0.40%

Common Reynaldo G. David (Independent Director)

Filipino 1,000(direct) 0.00%

Common Pablo L. Lobregat (Director)


Common Walter W. Brown (Director)


Common Mario A. Oreta (Director)

Filipino 100 (direct) 0.00.%

Common Dennis O. Valdes (Director)

Filipino 4,200 (direct) 0.00%

Common Roberto V. San Jose (Director)


Common Rodolfo Ma. A. Ponferrada (Corporate Secretary)


Common Jovita D.S. Larrazabal (Assistant Corporate Secretary)


Common Zaldy M. Prieto (Chief Finance Officer/Treasurer)

Filipino 0 (direct ) 0.00%

Aggregate Ownership of Directors and Officers as a Group 293,729,522 15.33%

There are no voting trust agreements or any other similar agreement that may result in a change in control of the Company of which the Company has any knowledge.

Item 12. Certain Relationships and Related Transactions

There has been no transaction outside of the ordinary course of business during the last two years, nor is any transaction presently proposed, to which the Company was or is to be a party in which any director or executive officer of the Company, or owner of more than 10% of the Company’s voting securities or any member of the immediate family of any of the foregoing persons, had or is to have a direct or indirect material interest. In the ordinary and regular course of business, the Company had or may have had transactions with other companies in which some of the foregoing persons may have an interest. No person, natural or juridical, owns more than 50% of the Company’s voting securities.

30

Part IV – EXHIBITS AND SCHEDULES Item 13. Exhibit and Reports on SEC Form 17-C

a. Exhibit

None

b. Reports on SEC Form 17-C

Date of Report Contents of Report

November 23, 2012 ISM disclosed that the Audit Committee will be conducting an annual assessment of its performance and effectiveness based on the guidelines provided in SEC Memorandum Circular No. 4, Series of 2012.

SIGNATURES

Pursuant to the requirements of Section 17 of the Code and Section '141 of the CorporationCode, this report is signed on behalf of the issuer by the undersigned, thereunto dulyauthorized, in the City of Makati on April [? , 2013

ERIC O. RECTOPresident

\

' - ( ' , " t

ZALDY M. PRIETOCFO and Treasurer

SUBSCRIBED ANDaffiants exhibiting to me their

RODOLFOCorporate

SWORN to before me thisPassoort No.. as follows:

PONFERRADA

2013

ROBEBT

ld"y

Name t .D. Date & Placed lssued

Roberto V. Ongpin Passoort No. E85768825 27 Jun 2012 / DFA Manila

Eric O. Recto Passport No. EB408454916Nov2011 / DFA Manila

Zaldy M. Prieto Passoort No. XX2103801 24Seot 2008 / DFA Manila

Rodolfo Ma. A. Ponferrada Passport No. EB3482290 25 Aug 2011 / DFA Manila

Doc No. VrJPage No. 7!Book No. ttfSeries of 2ffi.

CI IRI5T!AN GRANT Y, TOMAsr Nobry Pubi ia fo ' Mni<ai i C; ty

9rr ' i laaf A:ahnl : ic S' t r ihgate tcwer: : : : f ; a i i l !c l i i : . . . : f ' , i : . , . . :ncr aDSA, MakDt i Ci tv, : F i . rc i r l t : , .1- - " , ! ,1: r : ! j i i i31 .Je.embtr 2013

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COVER SHEET8 0 8

S.E.C. Registration Number

r l s l M l l c l o M I M I UN I I I C A I T r l o N l s I l c o R l P l o l R l A l r l I l o l N

(Company's Full Name)

T l h l e P n t h o u S n t"l l

II a l n l d

S l o l u t l n l e l a l t l e l l T l o l w l er 2 l 2 l 5 l 8 l l c l h l L l n l o

R l o S A n e o I n r E l d s l a

M a l k A t l i c l i t y

(Business Address No. Street Company / Torvn / Province)

I zaldy M. priero IContact Person

33 8-5 599

Company TelePl.rone Number

l-,T; [I]l r l " l I " r i l

Month f)ntt

Dept. Requiring this Doc.

n F S

FORM TYPE

Secondary License Type, lf Applicable

m mMonth DaY

Annual Meeting

Foreign

Total

Total No. of Stookholders

To be

File Numbet

Doc,ument I.D

I s r a M P S

L - - - -

Remarks : Pls. use black

Domesttc

br SEC Personnel conce

Cashiet

- /a?-t iau

Amended Articles Nurnber/Section

Amount of Borrowin

ink for scanning Purposes.

ISM COMMLNICATIONS CORPORATION

FINANCIAL STATEMENTSDecember 31.2012 and 2011

(€)

COMMUNICAT'ONSt-:=

STATEMENT OF MA.NAGEMENT'S RESPONSIBILITYFOR FINANCIAL STATEMENTS

The management of ISM Communication corporation is responsible for the preparation

and fair piesentation of the financial statements forthe years ended December 31'2012

and 201i,rrin accordance with the prescribed financial reporting framework indicated

therein. This responsibility includes designing and implementing internal controls

relevant to the preparation and fair presentation of financial statements that are free from

material misstatement, whether due to fraud or error, selecting and applying appropriate

accounting policies, and making accounting estimates that are reasonable in the

circumstances.

The Board of Directors reviews and approves the financial statements and submits the

same to the stockholders.

KPMG - Manabat sanagustin & co., the independent auditors, appointed bv ih9stockholders has examineJ th. finun.ial statements of the company in accordance with

ehiiippin. Standards on euOirirrg, and in its report to the stockholders, has expressed its

opinion on the fairness of presentation upon completion of such examination'

ERIC O. RECTOPresident

/ '--7> /l--droY M.F-RIEro

SVP & Chief Finance Officer a1rl

o' ulv

- ) r - inc luding the addi t ional components at tached there in

The penthouse, Alphaland southgate Tower,2258 chino Roces Avenue corner Edsa, Makat i c i ty , Phi l ippines 1232 l re l . No' : (632) 886'6000 / Fax: 886-600'1 / www' ismcomm con

COMMUN'CAT'ONSc(,RPoRAT'g-N

G.

sUBSCRTBED AND SwoRN to before me this -driv"l S[=?,i ' 2013?013 in

- - , affiant exhibited to me the following TIN/SSS No'

TIN No. 130725714TIN No. i08730891SSS No. 33-2810118-7

i r i i i l . l : j : i t e &i. i :- I t , ! i : ' ! ' . :

i i i l i ; ; :7 ? r , l r l i ' { ' ' i v1 : :xa ! l i r i v

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j , : l < . i t 9 A , t v l a k a t i C i t v

, : r r - ; j 3 j $ece$ i l le r 2013

' . . " , : . S : i 0 2

: - r ; i . ;0 i i / t la ! i3 t i' : ' i a . r : f t l 3

, . l r r . l . : i i , r ' ; , : r_ " lq . rn

(€)

I5

Roberto V. OngPinEric O. RectoZaldy M. Prieto

Doc. No. J4 ;Page No. -l%.;Book No. 1! ;Series of20fi-

The penthouse, Arpharand southgate Tower, 2258 chino Roces Avenue corner Edsa, Makat i c i ty , Phi l ippines 1232 | Tel No : (632) 886-6000 / Fax: 886-6001 / www' ismcomm-co

REPORT OF INDEPENDENT AUDI

The Board of Directors and StockholdersISM Communications CorporationThe Penthouse, Alphaland Southgate Tower2258 Chino Roces Avenue corller EDSAMakatiCiq, {fR

Report on the Financial Statements

We have audited the accompanying financial statements of ISM Communications Corporat(the "Company"), which comprise the statements of financialposition as at December 31,2012and 2011, and the statements of 'comprehensive income, statements of changes in equit l 'andstatements of cash flows for the years then ended, and notes, comprising a summary/ of significantaccounting policies and other explanatory infonnation.

Management's Responsibility far the Financial Statements

Management is responsible for the preparation and fair presentation of these financial staternentsin accordance with Philippine Financial Reporling Standards, and for such internal control asmanagement determines is necessary to enable the preparation of financial statements that arefl'ee fi'om material misstatement, whether due to fraud or eror.

Aud it ors' Re sp on s i b i I itlt

Our responsibilify is to express an opinion on tirese financial statements based on our audits.We conducted our audits in accordance with Philippine Standards on Auditing. Those standardsrequire that rve comply with ethical requirements and plan and perform the audit to obtainreasonable assllrance about whether the financial statements are free from material misstatement.

An audit involves perfonning procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors'judgment, inclLrding the assessment of the risks of material misstatement of the financialstaternents, whether due to fraud or error. In making those risk assesstnents, the attditors considerinternal control relevant to the entity's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in the circumstances. but notfor the purpose of expressing an opinion on the effectiveness of tlre entity's internal control. An

audit also inclLrdes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates rnade by management, as well as evaluating the overallpresentation of the financial statements.

We believe thal the audit evidence we have obtained is sufficient and appropriate to provide a

bas is fo r our aud i t op i t r io r t .

Manabat Sanagust in & Co., CPAs

The KPMG Center, 9/F6787 Ayala Avenue

Makat i Ci ty 1226, Me:Jo Mani la, Phi l ippines

Branches: Bacolod . Cebu l lo i lo Subic

Telephone +63 (2) 885 7000Fax +63 (2) 894 1985In terne t www.kpmg.com.phE-Mai l man i [email protected]

P R C - 8 O A R e g r s l r a t r o n N o 0 0 0 3 G r o u p A v a l d u n l r l D e c e m b e I 3 l , 2 0 1 3

S E C A c c r e d r r a l o n N o 0 0 0 4 F R 3 , G r o u p A , v a l r d u n l l N o v e m b e f 2 2 , 2 0 1 4

lC Accredrlatron No F'0040'B Gro!p A. va rd unl l Seplember 1 1. 2014

B S P A c c r e d i l e c G r o o p A v a l l d u n l r D e c e m b e r I 7 . 2 0 T 4

Manabat Sanagusin & Co., CPAs, e Phlhpprnepannershrp and e mernber i rrnr ol the KPMG nelwork oi

rndepenoent m€mber lLlms al l l ralecj wlth KPMG Inlernat lona

C o o p e r a l r v e i K P M G i n t e r n a l o n a l " ) . a S w i s s e r t , t y

F\.ME

Opinion

In orrr opinion, the financial statements present fairly, in all material respects, the financralposit ion of the Company as at December 31,2012 and 2011, and i ts f inancial performance and i tscash flows for the years then ended in accordance with Philippine Financial Reporting Standards.

Report on the Supplementary Information Required Under Revenue Regulations (RR)No. 15-2010 and RR No. 19-2011 of the Bureau of Internal Revenue

Our audits were conducted for the purpose of fonning an opinion on the basic financialstatements taken as a whole. The supplementary information in Note 20 to the basic financialstatements is presented for purposes of fil ing with the Bureau of Internal Revenue and is not arequired parl of the basic financial statements. Such inforrnation has been subjected to theauditing procedures applied in our audits of the basic financialstaternents. In our opinion, theinformation is fairly stated in all material respects in relation to the basic financial statementstaken as a whole.

& CO., CPAS

ARTHUR Z. MACHACONPaftnerCPA License No. 0090279SEC Accreditat ion No. 1 i 89-A, Group A, val id unti l February 1 5, 2015Tax Identification No. 164-607-040BIR Accreditation No. 08-00 1 981 -29-2011Issued November 3,2011; val id unt i l November 2,2014

PTR No. 3669515MCIssued January 2,2013 at Makati City

February 11,2013Makati City, It,Ietro Manila

APR t220tr, t

ABAT SANAGUSTIN

Manabat Sanagust in & Co., CPAs Telephone +63 {2) 885 7000

The KPlr4G Center, 9/F Fax +63 {2) 894 1 985

6787 Ayala Avenue Internet www.kpmg.com.pn

Makat i Ci ty 1226, Mevo Mani la, Phi [ppines E-Mai l mani [email protected]

Branches: Bacolod . Cebu l lo i lo Subic

REPORT OF INDEPBNDENT AUDITORSTO ACCOMPAI{Y FINANCIAL STATEMBNTS FOR FILING WITH THE

SBCURITIBS AND EXCHANGB COMMISSION

The Board of Directors and StockholdersISM Communications CorporationThe Penthouse, Alphaland Southgate Tower2258 Chino Roces Avenue corner EDSAMakati City

We have audited the accompanying financial statetnents of ISM Communications Corporation as

at and fbr the year ended December 31,2012, on which we have rendered our repofi thereon

dated February 11,2013.

ln compliance with Securities Regulation Code Rule 68, As Amended, we are stating that the said

entity has three thousand three hundred seventy (3,370) stockholders owning one hundred (1 00)

or more shares each,

MANAIIAT SANAGUSTIN & CO., CPAs

ARTIIUR Z. MACHACONPat1nerCPA License No. 0090279SEC Accreditat ion No. 1189-A, Group A, val id unti l February 15,2015Tax ldentification No. 164-607-044BIR Accreditation No. 08-00 1 987 -29-201 1Issued November 3,2A11; va l id unt i lNovember 2,2014

PTR No, 366t ,5 I5MCIssued January 2,2013 at Makati City

FebrL ra ry 11 ,2013Makati Clity, lletro Mairila

M a n a b a l S a n a g u s l r n & C o . , C P A S ' a P h r l r P p r n e P R C B O A R e g r s t r a l o n N o 0 0 0 3 ' G t o u p A v a i r d u n l l D e c e m b e r 3 T 2 0 1 3

p a d n e r s h r p a n d a m e m b e r f r r m o 1 t i e i i t H ' f O n " * o ' l o 1 S ^ E C A c c r e d i t a l r o n N o 0 0 0 4 - F R - 3 G r o u p A ' v a i r d u n l l N o v e m b e f 2 2 ' 2 0 1 4

rndependenl rember Lf ms "t t

, rr"o *, t ' r i ; ; ; ; ; ; ; ; ; ; i ; ' lc.A(I6drt l ron No' F-0040-R Group A valrd !n1r1 september I l ' 2or 4

c o o D e l a t l v e l " K P M G l n l e r n a l o n a _ ' " i * t t " " i n

- - - - B S P A c c r e d l € c G r o u p A v a i r c l n l l D e c e m b e r i T ' 2 0 1 4

ISM COMMUNICATIONS CORPORATIONSTATEMENTS OF FINANCIAL POSITION

December 31

Note 2012 20t7

ASSETS

Current AssetsCash and cash equivaientsReceivables - netOther current assets

5A

7

P553,706,725 P628,949,7517,432,715,709 97 6,356,905

4,786,905 4,563,119

Total Current Assets 1,991,2A9 339 1,609,869,77 5

Noncurrent AssetsLong- term receivableslnvestments in associates and shares of stockProperly and equipment - netOther noncurrent assets

b

89

r0

2,957,324,7685,731,761

1,101 ,177 ,6922,633,154,391

8, '165,91538,936,479

Total Noncurrent Assets 2,963,056,529 3,788,634,477

P 4,954,265,868 P5,398,504,252

LIABTLITIES AND EQLI ITl'

Current LiabilitiesAccounts payable and accrued expenses t I

l2P35.572.204 P120,946,323

Notes payable

Total Current Liabilities

430.405.290 1,048,660,220

465,977,494 1,169,606,543

EquifyCapital stockAdditionai paid-in capitalStock options outstandingRetained eamings

t l l

I 4

1,826,368,658455,329,483

2,206,713,080

1,826,368,65 8445,434,191

9,894,6921 AA '7 T ) 41 5L t t I I

, J - - ) | ' '

(122,847)Treasury stoc.k I22,847

4,488,288,37 4 4,228J97,7 09Total Equify

P4,954,265,868 P5,398,504,252

See Notes to the Financial Slatemenls An I t zstil/ d g r \ 5 u 1 3 - " * \

REi{,jiff^s","-*#j-om4B y/E ST ta -- \ i#- ' r----*{*1- 4,-..

. / . n . . - - - . ' , V

ISM COMMUNICATIONS CORPORATIONSTATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 3l

Note 2012 2011

INCOME

OPBRATING COSTS AATD EXPENSES

P Dl -

LOSS FROM OPERATIONS

24.563.427 25,916,036

(24,563,421) (25.916,036)

OTHER TNCOMB (EXPENSES)Interest income (expense) - netForeign exchange loss - netGain on disposal of investment

uiw in net earnings in associates

(22,727,821)(1,025,581)

168,819( 1 , 3 0 6 , 1 8 8 )

266,991,087307.707 272.915.427

283.9s4.086 (1A ' . l 75 1 45J J r t 2 t J ) / ' e

INCOME BEFORT INCOME TAX 259.390.665 { r ? 1 0 0 l o q

NET INCOME/TOTAL C OMPREHENSNTEINCOME P2s9.390.665 P5 1 3 ,3 99, i 09

EARNINGS I}ER SHAREBasicDiiuted

I 7P0.1354

0.1354P0.26790.266r

See Notes to the Financial Statetnenls.

APR t 2 tfltt

ISM COMMUNICATIONS CORPORATIONSTATEMENTS OF CHANGES IN EQUITY

Years Ended December 31

Note 2012 2011

CAPITAL S'TOCKPar value - P1.00Authorized - 2.8 bill ion sharesIssued - 1,826,268,658Subscribed - 90,000,683 (net of subscriptions

receivable c, f P89,900,682

ADDITIONAL PAID-IN CAPITALBalance at beginningAdditionalpaid-in capital from expired stock

optiorl

Balance at end ofyear

P1,926,368,658 826,368,65 8

445,434,791 445,434,191

9,894,692

455,329,483 / A \ A 1 4 ' 7 q 1

STOCK OPTIONS OUTSTANDINGBaiance at beginning of year

t 49,894,692 a 9,94 6q)

Exoired stock options during the year ,894,6929,894,692Balance at end ofyear

R.ETAINED EARNINGSBalance at beginning of Year r,947,322,475

259.390.6651,433,923,306

5 13 ,399 ,1 09Net income fc,r the

Balance at end ofyear 2.206.713,080 1 0 L ' 7 7 ) 1 4 1 \L ) r I t

r J ' 1 ' ' t e

TRXASIIRY STOCK -

53.192 shares (122.84

P4,488,288,37 4 P4,228.891,1 09

See Notes to the Financial Slateneils

ISM COMMUNICATIONS CORPORATIONSTATEMENTS OF CASH FLOWS

Years Ended December 31

Note 20t2 2011

CASH FLOWS FROM OPERATINGACTIVITIES

Income before income taxAdjustments for:

Depreciation and amortizationGain on sale of investmentInterest expenseInterest income

P259 ,390 ,665 P513 ,399 ,109

98

1 /

3,1"44,248

53,670,211(30,942,390)

4,089,663(266,997,087)

88, 1 83,020(88 ,951 ,839 )

iw in net earnings of associates

Operating loss before working capital changes(lncrease) decrease in:

ReceivablesOther current assets

Decrease in:

01,707 2' t2 .915.427(22,444,754) (23,192,561)

651,418,888 (3r1,358,228)(273,786) 4,000,582

Accounts le and accrued expenses

Cash generated from (absorbed by) operations

lnterest received

85.374.119543,316,22930,942,390

128.}',/6.06(458,626,269)

88 ,951 ,839

lnterest pai

Net cash provided by (used in) operating activities

s3.670211 88,1 83,020)

520.648.408 (457,857 ,450)

CASH FLOWS FROM IN\iESTINGACTTWTIES

Acquisition of:Properly and equipmentlnvestments in associates and shares of stock

Proceeds from saie of investment

(110,094) (565,7 16)(16,462,889) (654,820,782)

- 3 0 i . 5 5 5 . 5 3 8

Decrease (increase) in other noncurrent assets 38,9 3 8 . 8 7 3 , 3 1 9

22,363,496 (392J04,279)Net cash proi,'ided by (used in) investing activities

CASH FLOWS FROM A FINANCINGACTIVITY

lncrease (decr:ease) in notes

Net cash provided by (used in) an investing

activity

54,930 41.306,872

(618,254,930) 41,306,872

NBT DECRITASE IN CASII AND CASHEQUIVALENTS

CASH AND CASII EQIJWALENTS ATBEGINNING OF }'EAR

CASH AND CASH EQUTVALENTS ATEND OF YEAR

(75,243,Azq (809,254,857)

628.949,751 438.204.608

See Notes to the Fmancial Statements

P553.706,725 P628,949,751

ISM COMMUNICATIONS CORPORATIONNOTES TO THE FINANCIAL STATEMENTS

1. Reporting Entify

ISM Communications Corporation ("ISMCC" or "Company") was, originally, a mining

company incorporated under the name "ltogon-Suyoc Mines, lnc."

During meetings held on June22 and July 25,2001, the Board of Directors (BOD) and

stockholders of ISMCC approved a Memorandum of Agreement (MOA) befween

ISMCC and PhilWeb Corporation (PhilWeb). Under the terms of the MOA, PhilWeb

shall manage the transformation of ISMCC from a mining company to a company

engaged in information technology, multimedia, telecommunications, and other simiiar

industries, including the identification of and negotiation with potential investors who

will ilfuse the necessary capital or assets for projects in such industries, Any project

identi{jed by PhilWeb shall be subject to the approval of the tsoard of Directors and

stockholders of ISMCC. As consideration for the services to be rendered by PhilWeb,

a1d in order to generate investor confidence in the new corporate direction of ISMCC,philWeb was granted the right to subscribe to 12,000,068,290 shares of the unissued

capital stock of ISMCC at par value, by making an initial payment of twenry five percent

(25%) on such subscriPtion.

To facilitate the transfonnation envisioned in the aforernentioned MOA, ISMCC:

a. Arnended its articles of incorporation and by-laws to enable it to undertake its new

prr:jects in a manner acceptable to the nelv investors;

b. Completeiy divested its mining operations, as well as ail mining-related assets and

liabilities io a third party such that, at the time of the commencement of the new

prr:jects andior the entry of the new investors, it would have substantialiy no assets

and no liabiiities; and

c. Allowed the new investors to have majority control of its voting shares of stock and

control the management of its operations'

on July 25,2007,the stockholders of ISMCC also approved the following:

a. The amendments to the Articles of lncorporation of ISMCC concerning:

i. The declassification of the capital stock (common "A" and common "8") into

just one class of common stock;

ii. Denial of pre-emptive riglits; and

iii Inclusion, among its secondary purposes' of the business of information

technology, telecommunications, multimedia, as well as other similar businesses.

b. T1e granting of authority to the BOD to sel1, alienate, and/or dispose of any or ali of

its assets to repay maturing loan obligations'

On April 10, 2002, the stockholders of ISMCC approved ainvohed, among others, the following;

a. Change in corporate narne from "Itogon-Suyoc

Communications Corporation," and

Restructuring Plan, which

Mines, Inc." to "ISM

b. Change in the primary purpose from a company engaged in the business of mining to

a company engaged in the business of telecommunications, multimedia and

in formation technologY.

The lsecurities and Exchange Commission (SEC) subsequentiy approved such

Restructuring Plan on June I ,2002'

Since October 1,2002, the activities of iSMCC have been entirely focused on building

the products and services of its new line of business.

On July 11, 2005, ISIvICC entered into a Memorandum of Agreement (MOA) with

Aerocrlm Investors & Managers, Inc. (Aerocom) where the latter agreed to transfer and

convey to ISMCC, 4,600,557 fully paid Class 'rA" common shares of Eastern

Teleci,mmunications Philippines inc. (ETPI) representing approximately 17.69% of the

issued and outstanding capital stock of ETPI, the oldest telecommunication company in

the Philippines. Fufiher discussion on this matter is included in Note 8 to the financial

statements.

On November 11, 2005. ISMCC entered into a Deed of Sale with Australian Gigahertz

Network lntemational Pty Ltd. (AGNI), wherein the iatter agreed to sell its entire interest

in the outstanding capital stock of its wholly-owned subsidiary, A.G.N' Philippines, lnc.

(AGNp), consisting bf tn. entire issued 100,000 fully paid common shares of AGNP

iaCXp-shares). In addition, ISMCC assumed the receivables of AGNI from AGNP

iaCX.p Loan). Further discussion on this matter is included in Note 8 to the financial

statements.

AGNP is a hoiding company with 40yo equity interest in ETPI'

On October 22, 200'7, ISMCC entered into a Share Purchase Agreement

(the ,,Agreement") with Smart Communications, lnc. ("Smart") where the latter agreed to

sell, transfer and convey to ISMCC, subject to the terms and conditions of the

Agreement, 2,548,000 fully paid Class "A" common shares of ETPI representing

ap"proximately 9.8% of the issued and outstanding capital stock of ETPI for P100 miilion.

As at the same date, ETPI became a subsidiary of ISMCC and its financial results

thereafter were consolidated in the Group's financial statements' Further discussion on

this matter is included in Note 8 to the financial statements'

By virtue of the acquisition of ETPI shares in 2007, ISMCC secured a majoriry

shareholding and control of ETPI (see Note 8).

on March 6, 2008, ISMCC entered into a Share Purchase Agreement with the

Government of the Republic of the Philippines through the "Privatization and

Management Offrce" for ihe acquisition of 2,652,000 Class "A" common shares of ETPI

for a sum of P104.1 million, representing 10.2% of the issued and outstanding capital

stock ,cf ETPI. This brought the total hoidings of ISMCC in ETPI to 77 '69 Yo of total

shares outstanding as at December 31,2009 '

- 2

On September 9,2010, the SEC approved the Company's application for the amendment

of its ,4.rticles of lncorporation to reflect the increase in par value of its common shares

from P0.01 per share to P 1 .00 per share.

On December 30, 2010, ISMCC sold its 100% equity interest in AGNP to Vega

Telecom, Inc., a domestic company. AGNP owns 400% of ETPi, hence the transaction led

to ISMCC losing its 40y'o equity interest in ETPI. Consequetttly, ISMCC's shareholdings

have been reduced to 37.10% from17.69% of the total outstanding shares of ETPI.

On October Z0,Z0ll. the remaining stock of 3'7.70% was sold to San Miguel Equities

Securify, Inc. (see Note 8).

On May 26, 2012, the Company has entered into an agreement with Acentic Ltd. to

absolutily assign, cede and transfer all its rights, title and interest in and to the Initial

Subscripiion -a tn" Additional Subscription (collectively referred to as "Total

Subscription") of RRE Ventures Corporation (RRE) shares. The assignee shall assume

the payment of subscription payable to RRE'

On Novernber 15,2012, iSMCC entered into an Investment Agreement rvith Wagas

Consujtants Limited (WCL) for the disposition of ISMCC's investment in Host Union in

favor crf WCL, in consideration for ISMCC's acquisition of 100o/o ownership of WCL'

ISMCC is a public company under Sectio n 11 .2 of the Securities Regulation Code and its

shares are liited in the ihilippine Stock Exchange (PSE). Its registered office address is

at The Penthouse, Alphaland Southgate Tower, 2258 Chino Roces Avenue corner EDSA,

MakatliCity.

As at December 31, 2012, ISMCC has no operations, other than that of a hoiding

comDany.

2, Basis of PreParation

Statement of CompiianceThe financiut ,tu[*nts have been prepared in compliance with Philippine Financial

Reporting Standards (PFRSs). PFRSs are based on lnternational Financial Reporting

Standards (IFRSs) issued by the lnternational Accounting Standards Board (IASB)'

pFRSs consist oi pFRSt, Fnltipp;ne Accounting Standards (PASs), and Philippine

Interpretations issued by the Financial Reporting Standards Council (FRSC)'

The accompanying financial statements were authorized for issue by the Board of

Directors on February 11,2013'

Basis of MeasurementThe fi'ancrat rtutg,Inrntt hal'e been prepared on the historical cost basis of accounting'

Functional and Presentation Currenc)r

The financial statements ur" pr"r"ni"d in Philippine peso, which is also the Company's

functional culrency. A1l frnancial information presented in Philippine peso has been

roundedoff tothenearestpesounlessotherwisestated.

Use of'Judgments and Estimates

Th. p*p"*t." "f

financial statements in conformiry rvith PFRS requires management to

make judgments, estimates and assumptions that affect the application of accounting

policieis and amounts reported in the financial statements.

- 3 -

The erstimates and associated assumptions used in the financial statements are based on

historical experience and various other factors that are believed to be reasonable under

the circumstances, the results of which form the basis of rnaking the judgments about

carrying values of assets and liabilities that are not readily apparent from other sources'

Actual results could differ from these estimates'

Judgrnents, estimates and underlying assumptions are reviewed on an ongoing basis'

Revisions to accounting estimates are reaognized in the period in which the estimate is

revise,C if the revision uff""tr only that period, or in the period of the revision and future

periods ifthe revision alfects both current and fufure periods'

The following presents the summary of these judgments and estirnates, which have the

most significant effect on the amounts recognized in the financial statements:

JzAsL]e4!l" th" p.*.ss of applying the Company's accounting policies, management has made the

following judgments, apart from those involving estimations, which have the most

significant effect on the amounts recognized in the financial statements'

Functional CurrencyBased on the economic substance of the underlying circumstances relevant to the

Compreny, the functional currency has been determined to be the Philippine peso' It is the

currenc)/ of the primary economic environment in which it operates.

LeasesThe Company entered into various lease agreements as lessee. The Cornpany determined

that the lessor retains all significant risks and rewards of ownership of these properttes

which are ieased out under an operating lease arrangement'

Es t im(ltes and AssumqlionsTh" l,ry

"*"mptions concerning the future and other key sources of estimation

uncefiainty at thi reporting date ttat may have a significant risk of causing a material

adjustmeni to the carrying amounts of assets and liabiiities within the next reportlng

period are discussed below:

Estimoting Useful Lives of Property and Equipment

The Comfany reviews annually the estimated useful lives of its property and equipment

based onihe-period over which the assets are expected to be available for use and are

updated if expectations differ from previous estimates dtte to physical wear and tear and

technical or commercial obsolescence. It is possible that fufure financial performance

could be materially affected by changes in the factors mentioned. A reduction in the

estimated useful lives of pioperfy and equipment would increase the recorded

depreciation expense and decrease noncurrent assets'

Accunrulated depreciation of properly and equipment amounted to P12'04 million and

pg.90 million as at December T,,2012 and2Ali, respectively. Properry and equipment,

net of'accumulated depreciation, amounted to P5.73 million and P8''7'l million as at

Decenrber 31,20L2 and2011, respectively (see Note 9)'

Share-based PaYmentsThe c)ompany measures the cost of equity-settled transactions with its selected offlcers

by reference to an option pricing moAil. The valuation model requires determining the

expecrted volatility, risk-free rate and dividend yield. The Company recognizes expenses

based on the estimated number of grants that will ultimately vest. Its average employee

turnover rate will be used to determlne the attrition rate in computing the benefit expense

and the estimated liabilitY'

- 4 -

There was no share-based compensation expense recognized in profit or loss for the years

ended December 31 ,2A12 and 201 1 .

Estimating Realizability of Deferred Tca AssetsThe Company reviews the carying amount of deferred tax assets at each reporting date

and reduces these to the extent that it is no ionger probable that sufficient taxable income

will be avaiiable to allow all or part of the deferred tax assets to be utilized. The

Comprany's assessment on the recognition of defened tax assets on deductible temporary

diffeie,nces and carry forward benefits of unused tax losses and unused tax credits are

based on the level and timing of forecasted taxable income of the subsequent reporting

periods. This forecast is based on the past resuits and future expectations on revenues and

L*p.nu", as well as future tax planning strategies. However, there is no assurance that the

Company will generate sufficient taxable income to allow all or palt of the deferred tax

assets to be utilized.

Estintating Allowance for Impairment Losses on Non-financial Assets

The Company assesses impairment on non-financial assets whenever events or changes

in circumitances indicate that the carrying amount of such asset may not be recoverable.

The faLctors that the Company considers important which could trigger an impairment

revieu' include the follorving:

' siftnificant underperformance relative to the expected historical or projected future

operating results;. significant changes in the manner of use of the acquired assets or the strategy for

overall business; and. significant negative industry or economic trends'

Impairment losses are recognized whenever the carrying amount of an asset exceeds its

recoverable amount. As at December 31, 2012 and 2011, there were no impairments on

the Ccmpany's non-financial assets.

P rov is i ons and C ont ingenc i es

The estimate of the lrobable costs for the resolution of possible claims has been

dsyel6rped in consultation with outside counsel handling the Company's defense in these

mafieri and is based on an anaiysis of potentialresuits. The Company is a parly to certain

lawsuits or claims arising from the ordinary course of the business' However, the

Comprlny,s management and legal counsel believe that the eventual liabilities under

these lawsuits or claims will not have a material effect on the Company's financial

position and performance. Accordingly, no provision for probable losses arising from

iegal contingencies was recogni zed in the financial statements at Decembet 37 ' 2072, and

201 1 (see Note 18).

3. Summa15' of Significant Accounting Policies

The accounting policies set out belor'v have

presented in these financial statements, except

explained below.

been applied consistently to all years

for the changes in accounting policies as

nd lntemre

f6" Co*puny has adopted the following amendments to standards and interpretations

starling January 1,2012 and accordingly, changed its accounting policies.

. Disclosures; Trans_fers of Financial Assets (Amendments to PFRS 7) requte

additional disclosures about transfers of financial assets. The amendments require

disclosure of information that enables users of financial statements to understand the

relationship befween transferred financial assets that are not derecognized in their

entirety und th" associated liabilities; and to evaluate the nature of, and risks

associated with, the entity's continuing involvement in derecognized financial assets.

The adoption of these amendments to PFRS 7 did not have a material effect on the

cc,nsolidated financial statements. Additional disclosures required by the

arnendments PFRS 7 were included in the consolidated financial statements, where

applicable.

. D,z-ferred Tax: Recovetl, of Underlying Assets (Amendments to PAS '12) introduces an

exception to the current measurement principles of deferred_tax assets and iiabilities

arising from investment property measured using the fair value model in accordance

w:itir iaS 40, Investment Property. The exception also applies to investment

properties acquired in a business combination accounted for in accordance u'ith

FITRS 3, Business Combinatiorzs provided the acquirer subsequently measure these

assets applying the fair value modei. The amendments integrated the guidance of

Philippine Intirpretation SIC-21 Income Taxes - Recovery of Revaltted Non-

D,zpiiciabte Assets into PAS 72, Income taxes, and as a resuit Philippine

Interpretation SiC-21 has been withdrawn'

. philippine lnterpretations Committee Question and Answer (PIC Q&A) No. 2011-02

1FRS' 3.2 - Common Control Business Combinations provides guidance on how

shouid business combinations involving entities under common control be accounted

for, given that these are outside the scope of PFRS 3, Business Combinations.

. plc e&A No. 2011-03 Accounting for Inter-company Loans provides guidance on

how shouid an interest free or below market rate loan befween group companies be

accounted for in the separate/stand-alone financial statements of the lender and the

b c l r r o w e r : ( i ) o n t h e i n i t i a l r e c o g n i t i o n o f t h e l o a n ; a n d ( i i ) d u r i n g t h e p e r i o d s t orepayment.

The a,Coption of the above revised standard, interpretation and amendments to standards

did nc,t huu" u material effect on the Company's financial statements.

New or Revised standards, Amendments to standards and Interpretations !'lot Yet

AdoPted . E- --,A nurnber of new standards, amendments to standards and interpretations are effective

for annual periods beginning after January 1. 2012, and have not been applied in

preparing these financll statements. Except as otherwise indicated. none of these is

expecteJto have a significant effect on the financial staternents' Those which may be

relevant to the Compu"ny ur. set out below. The Company does not plan to adopt these

standards earlY.

- 6 -

The Company will adopt the foliowing new or revised standards and amendments to

standards in the respective eft'ective dates:

To be .Adopted on January J, 2013

. Presentation of ltems of Other Comprehensive Income (Amendments to PAS 1) The

amendments:

. require that an entity present separately the items of other comprehensive income

that would be reclassified to profit or loss in the future if cerlain conditions are

met from those that would never be reclassified to profit or loss;

r do not change the existing option to present profit or ioss and other

comprehensive income in fwo statements; and. change the title of the statement of comprehensive income to the statement of

profii or loss and other comprehensive income. However, an entity is stil l

allowed to use other titles.

The amendrnents do not address which items are presented in other comprehensive

income or which items need to be reclassified. The requirements of other PFRSs

continue to apply in this regard. These amendments are effective for annual periods

be;ginning on or after July l, 2012 with earlier application permiued and are applied

retrospectivelY.

. Di,sclosures; Offsetting Financial Assets and Financial Liabilities (Amendments to

pI,RS 7). These amendments inciude minimum disclosure requirements related to

financial assets and financial liabilities that are:

r offset in the statement of financial position; or

. subject to enforceable master netting arrangements or similar agreements.

They include atabular reconciliation of gross and net amounts of financial assets and

financial liabilities, separateiy showing amounts offset and not offset in the statement

of financial position. These amendments wiil be effective for annual periods

beginning on or after January 1, 2013 and interim periods within those annual

periods and are to be appiied retrospectively'

. PFRS 10 Consolidated Financial Statements

PFRS 10 introduces a new approach to determining which investees should be

consolidated and provides a single model to be applied in the control analysis for all

investees.

An investor controls an investee when:

. it is exposed or has rights to variable returns from its involvement with that

investee;. it has the ability to affect those returns through its power over that investee; and

. there is a link between power and returns'

Control is re-assessed as facts and circumstances change'

pFRS 10 slrpersedes PAS 27 (2008) Consolidated and Separate Financial Slatentents

ancl philippine Interpretation SIC-12 Consolidation - Specictl Purpose Entities. This

st.ndard li effective for annual periods beginning on or after January 1, 2013 with

early adoption permitted.

pIrRS 12, Disc/osure of Interests in Other Entities. PFRS 12 contains the disclosure

rerquirements for entities that have interests in subsidiaries, joint arrangements

li.e.joint operations or joint ventures), associates and/or unconsolidated structured

entitles, aiming to provide information to enable users to evaluate the nature of, and

risrks associated with, an entity's interests in other entities; and the effects of those

interests on the entity's financial position, financial performance and cash flolvs'

Tlris standard is effective for annual periods beginning on or after January 1, 2013

with early adoption permitted.

pIrRS 13, Fair Value Measuremenf. PFRS 13 replaces the fair value measurement

guidance contained in individual PFRSs with a single source of fair value

ir,-oru.r*"nt guidance. It defines fair value, establishes a framework for measuring

fair value and sets out disclosure requirements for fair value measurements' It

explains how to measure fair value when it is required or permitted by other PFRSs'

It'does not introduce new requirements to measure assets or liabilities at fair value

nor does it eliminate the practicability exceptions to fair value measurements that

currently exist in certain standards'

PAS 19 Employee Benefits (Amended 201 1)

The amended PAS 19 includes the following requirements:

. actuarial gains and losses are recognized immediately in other comprehensive

income; this change will remove the corridor method and eliminate the ability for

entities to recognlze all changes in the defined benefit obligation and in plan

assets in profit or loss, which is cunently allowed under PAS 19; and

o expected return on plan assets recognized in profit or loss is calculated based on

the rate used to discount the defined benefit obligation'

This amendment is effective for annual periods beginning on or after January 1, 2013

and is applied retrospectively with early adoption permitted'

pr\S 27, Separate I',inancial statements (2011). PAS 27 (2011) supersedes PAS 27

(2003).'PAS 2'7 (2011) carries forward the existing accounting and disclosure

requirements for separate financial statemenl.s, rvith some minor clarifications'

Pr\S 28, Investments in Associates and Joint Ventures (2011). PAS 28 (2011)

,rp"rrrd., PAS 28 (2008). PAS 28 (2011) makes the following amendments:

lajefns 5 applies to an investment, or a portion of an investment, in an associate or

a joint ventuie that meets the criteria to be classified as held for sale; and' (b) on

cessation of significant influence or joint control, even if an investment in an

associate becomes an investment in a joint venture or vice vetsa, the entily does not

remeasure the retained interest.

Tlris standard is effective for annual periods beginning on or after January 1, 201'3

with eariy adoption Permiued.

8 -

Artnual Improvements to PFRSs 2009 - 2011 Cycte - various standards contain

amendments to five standards with consequentiai amendments to other standards and

interpretations. The amendments are effective for annual periods beginning on or

after January 1,2013. The following are the said improvements or amendments to

pIrRSs, none of which has a significant effect on the financial statements of the

Company:

. pAS I presentation of Financial Statements - Comparative lnformation beyond

Minimum Requirements. This is amended to clarifl tl iat only one comparative

period - whiclt is the preceding period - is required for a cornplete set of financial

statements. If an entity presents additional comparative information, then that

additional information nied not be in the form of a complete set of financial

statements. However, sLrch information should be accompanied by related notes

and sliould be in accordance with PFRSs'

For example, if an entity elects to present a third statement of comprehensive

income, then this additional statement should be accompanied by a1l related

notes, and all such additional infonnation should be in accordance l'vith PFRSs'

Howevet, the entiqv need not present:

o other primary statements for that additional comparative period, such as a

third statement of cash flows; or

o the notes related to tirese other primary statements'

. PAS 1 - Presentation of the opening statement of Financial Position and

Related Notes. This is amended to clarify that:

o the opening statement of financial position is required onl,v if:

- a change in accounting PolicY;- a retrosPective restatement; or- a reclassificationhas a material effect upon the information in that statement of financial

position;o Lxcept for the disclosures required under PAS 8, notes related to the opening

statement of financial position are no longer required; and

o the appropriate date ior the opening statement of financial position is the

begi*ing of the preceding p"iiod, rather than the beginning of the eariiest

.oi,'purutiu. p"doa p."sJni"d. This is regardless of whethe' an entil)"

p.o,rid". additional comparative inforrnation beyond the minirnum

comparative information requirements'

The amendrnent explains ti-rat the requirements for the presentation of notes

related to additional comparative infoimation and those reiated to the opening

statement of financial staternents are different, because the underiying objectives

are different.

C o n s e q u e n t i a l a m e n d m e n t s h a v e b e e n m a d e t o P F R S l a n d P A S 3 4 I n t e r i n tFinancial RePortittg

I PAS 16 Property, Plant ancl Equipment - classiftcation of Servicing Equipment'

This is arrended to clarify the accountrng of spare parts. stand-by equipment and

servicing equipment. The definition of 'propeft)' plant and eqrtipment' in

PAS 16 rs now considered in determining whether these items should be

accounted ibr under that standard. If tlrese items do notmeet the definition' then

titev are accounted for using PAS 2 Inventories'

o

. PAS 32 Financial Instruments Presentation - Income Tax Consequences of

Distributions. 'This

is amended to clarifu that PAS 12 Income Zaxes applies to

the accounting for ittcome taxes relating to:

o distributions to holders of an equity instrument; and

o transaction costs of an equity transaction.

This amendment removes a perceived inconsistency between PAS 32 andpAS 12. Before the ainendment, PAS 32 indicated that distribLrtions to holders of

an equity instrurnent are recognized directly in equity, net of any related income

tax. However, PAS 12 generally requires the tax consequences of dividends to be

recognized in profit or loss.

A simi lar consequent ial amendment has also been made to Phi l ippine

interpretation IFRIC 2 Members' Share in Co-operative Entities and Sirnilar

Instruments.

. pAS 34 Interint Financial Reporting - Segment Assets and Liabilities' This is

amended to align the disclosure requirements for segment assets and segment

liabilities i1 interim financial reports with those in PFRS 8 Operating Segments.pAS 34 now recluires the disclosure of a measure of total assets and liabilities for

a particular reportable segment. In addition, such disclosure is only required

when:

o the amount is regularly provided to the chief operating decision maker; and

o there has been a material change from tire amount disclosed in the iast annuai

financial statements for that reportable segment'

To beAdopted onJanuarY 1,2014

. Offsetting Financial Assets and Financial Liabitities (Amendments to PAS 32). These

amendments clarifY that:

. An entity currently has a legally enforceable right to set-off if that right is:

o not contingent on a future event; and

o enforceaUte Uotn in the normal course of business and in the event of default,

insolvency or bankruptcy ofthe entity and all counterparties.

. Gross settlement is equivalent to net settlement if and oniy if the gross seftiement

mechanism has features that:

o eliminate or result in insignificant credit and iiquidity risk; and

o process receivables and payables in a single settlement process or cycle.

These amendments are effective for annual periods beginning on or after January 1,

2014 and are to be applied retrospectively'

InLvestrnentEntities (Amendments to PFRS 10, PFRS 12, and PAS 27 (2011)). These

amendments provide consolidation exception for investment funds and require

qualiling investment entities to recognize their investments in controiied entities, as

well as investments in associates and joint ventures, in a single line item in the

statement of financial position, measured at fair value through profit or loss; the only

exception would be subsidiaries that are considered an extension of the investment

entity's investing activities. However, the parent of an investment entifv (that is not

itrseif an investment entify) is stil l required to consolidate all subsidiaries' This

consolidation exception is mandatory'

10

T'hese amendments apply to annual periods beginning on or after Janualy l',2014

with early adoption permitted,

To bet Adopted on Janttary 1, 201 5

. PFRS 9 Financial Instruments (2010), PFRS 9 Financial Instruments (2009)

PFRS 9 (2009) introduces new requirements for the classification and measurement

of f,rnancial assets. Under PFRS 9 (2009), financial assets are classified and measured

based on the business model in which they are held and the characteristics of their

c,f,ntractual cash flows. PFRS 9 (2010) introduces additions relating to financial

liabilities. The IASB currently has an active project to make limited amendments to

tlre classification and measurement requirements of PFRS 9 and add new

requirements to address the impairment of financial assets and hedge accounting.

PFRS 9 (2010 and 2009) are effective for annual periods beginning on or after

January 1,2015 with early adoption permitted'

The Company will assess the impact of the new or revised standards and amendments to

standards on the consolidated financial statements upon adoption on their respective

effective dates.

Financial InstrumentsAll financial instruments, whether financial assets or financial liabilities, are initially

measrred at fair value, except for financial assets and financial iiabilities valued at fair

value through profit or loss (FVPL) in which initial measurement includes transaction

costs. The Company classifies its financial assets into the foliowing categories: held-to-

maturity investments (IITM), available-for-sale (AFS) financial assets, fair value through

profit or loss (FVPL) financial assets, and loans and receivables. The Company classifies

its financial liabiiities as either FVPL financial liabilities or other financial liabilities. The

classification depends on tlie purpose for which the financial assets are acquired or the

financial liabilities are incurred, and whether the instruments are quoted in an active

market. Management determines the classification of its financial assets and hnancial

liabilities at initial recognition and, where allowed and appropriate, re-evaluates such

desigrration at every reporting date.

The Company has no AFS and FVPL financial assets and HTM investments as at

Decernber 31, 2012 and 201 l.

A financial instrument is recognized if the Company becomes a party to the contractual

provisions of the instrument. Financial assets are derecognized if the Company's

contracfual rights to the cash flows from the financial assets expire or if the Company

transfers the financial asset to another parly without retaining control or substantially all

risks and rewards of the asset. Regular way purchases and sales of financial assets are

accounted for at trade date, i.e., the date that the Company commits itself to purchase or

sell tpre asset. Financial liabiiities are derecognized if the Company's obligations

specified in the contract expire or are discharged or cancelled.

Financial instruments are offset when the Company has a legally enforceable right to

offset and intends to settle either on a net basis or to realize the asset and settle the

liabiiity simultaneously.

1 l

The measurement of financial instruments at initial recognition and subsequent to initial

recognition is described below:

Cashand Cash EquivalentsCash includes cash in banks and is stated at its face value. Cash equivalents are short-

tenn, highly liquid instruments that are readily convertible to known amounts of cash

with original maturities of three months or less from dates of acquisition and that are

subject to an insignificant risk of change in vaiue.

Loans and ReceivablesRecei.yables are stated at antortized cost less aliowance for impairment loss. Receivables

are re,;ognized initially at fair vaiue and subsequently measured at amoftized cost using

effective interest method, less allowance for impairment. The Company's receivable is

included in this categor)'.

AFS F'inancial Assetslnvestments in shares of stock are classified as AFS financial assets. These are carried at

cost due to unavailabiliry* of any market information.

Other Financ ial Liabilit iesThis r;ategory pertains to financial liabilities that are not held for trading or not

desigrated as at FVPL at the inception of the liabili ly, These include iiabilities arising

from operations or borron'ings. These are recognized initially at fair value and are

subsequently canied at amrrrtized cost, taking into account the impact of applying the

effective interest method of amortization (or accretion) for any related premium, discount

and anLy directly attributable transaction costs.

Included in this category are the Company's accounts payable and accrued expenses,

excepl. for government payables (see Note 11)'

Non-current Assets Held for SaleNon-current assets, or disposal group comprising assets and liabilities, that are expected

to be recoverable primarily through sale rather than through continuing use, are classified

as held for sale. Immediately before classification as held for sale, the assets, or

components of a disposal group, are re-measured in accordance with the Company's

accounting policies. Thereafter generally the assets, or disposal BrouP, are re-measured at

the lorver oith" .urrying amount and fair vaiue iess costs to sell. Any impairment loss on

a disp6sal group firsi is allocated to goodwill, and then to remaining assets, liabilities on

pro )a:ta bisis,-except that no loss is allocated to financial assets, which continue to be

measured in accordance with the Company's accounting policies, lmpairment losses on

initial classification as held for sale and subsequent gains and iosses on re-measurement

are recognized in profit or loss. Gains are not recognized in excess of any cumulattve

impairment loss,

When an asset no longer meets the criteria to be classified as held for sale, the Company

shall cease to classis, such as held for sale. Transfers from assets held for sale are

measured at the lower of its carrying amount before the asset was classified as held for

saie, adjusted for any depreciation that would have been recognized had the asset not

been classified as held for sale, and its recoverable amount at the date of the subsequent

decision not to sell.

1 aI L '

Proocrfv and EquipmentProperly and equipment, except for 1and, are carried at cost less accumulated depreciation

and irnpairment iosses, if any. Land is stated atcost less any impairment in value.

lnitiatly, an item of properly and equipment is measured at its cost, which comprises its

purchase price and any directly attributable costs in bringing the asset to the iocation and

tondition for its intended used. Subsequent costs that can be measured reliably are added

to the carrying amount of the asset when it is probable that future economic benefits

associated with the asset will flow to the Company. Purchased software that is integral to

the functionality of the related equipment is capitalized as part of that equipment' The

costs ofday-to-day servicing ofan asset arerecognized in profit or loss.

Depreciation is computed using the straight-line method over the estimated useful lives

of the related assets as follows:

Number of Years

Computer softwareLeasehold improvementsComputer equiPmentFumiture and fixturesOffice equipmentNefwork and data equiPment

l 055

Transportat ionequipment 3 -5

The usefu1 lives and depreciation and amortization method are reviewed at each reporting

date to ensure that they are consistent with the expected pattern of economic benefits

from those assets.

When an asset is retired, disposed of, or is permanently withdrawn from use and no

future economic benefits are expected from its disposal, the cost and the related

accumulated depreciation, amortization and impairment losses' if any' are removed from

the ac;counts and any resulting gain or loss from the retirement or disposal is recognized

in profit or loss.

Construction in-progress, which represents cable systems under construction, and

equipment in transit are stated at cost. This includes cost of constructing the cable

systerns, acquisition cost of the related equipment and other direct costs. Construction

in-prc,gress and equipment in transit are not depreciated until such time that the relevant

assets are completed and put into operational use'

ImpairmentFinan:cial AsselsA financial asset not can"ied at fair value through profit or loss is assessed at each

reporl.ing date to determine whether there is objective evidence that it is impaired. A

financial asset is impaired if objective evidence indicates that a loss event has occurred

after the initial recognition of the asset, and that the loss event had a negative effect on

the estimated future cash flows of that asset that can be estimated reliably'

The Company considers evidence of impairment for receivables at a specific asset and

colleotive levels. All individually significant receivables are assessed for specific

impairment. All individualiy significanireceivables found not to be specifically impaired

are th"n collectively assessed for any imparment that has been incurred but not ,vet

identified. Receivables that are not individualiy significant are collectively assessed for

impairment by grouping together receivables with similar risk characteristics'

l 3 -

In assessing coiiective impairment, tlie Company uses historical trends of the probability

of default, timing of recoveries and the amount of loss incurred, adjusted for

management's judgment as to whether current economic and credit conditions are such

that the actual losses are likeiy to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is

calculated as the difference befween its carrying amount and the present value of the

estimated future cash flolvs discounted at the asset's original effective interest rate.

Losses are recognized in profit or loss and reflected in an allowance account against

receivables. lnterest on the irnpaired asset continues to be recognized through the

unwinding of the discount. When a subsequent event causes the amount of impairment

loss t6 decrease, the decrease in impairment loss is reversed through profit or loss' Any

subsecluentreversal of an impairment loss is recognized in profit or loss, to the extentthat

the carrying value of the asset does not exceed its amortized cost at the reversal date.

Non-ftnancial AssetsNon-fiinancial assets are reviewed for impairment whenever events or changes ln

circumstances indicate that the carrying amount of an asset may not be recoverable' If

any such indication exists and where the carrying amount of an asset exceeds its

recoverable amount, the asset or cash-generating unit is wriften down to its recoverable

amount. The estimated recoverable amount is the higher of an asset's fair value less

costs 10 sell and value in use. The fair value less costs to sell is the amount obtainable

from the sale of an asset in an arm's length transaction less the cost of disposal while

value in use is the present value of estimated future cash flows expected to arise from the

continuing use of an asset and from its disposal at the end of its useful life' ln assessing

value in use, the estimated future cash flows are discounted to their present value using a

pre-ta,x discount rate that reflects current market assessments of time value of money and

ihe risks specific to the asset. For an asset that does not generate largely independent

cash i'flows, the recoverable amount is determined for the cash-generating unit to which

the asset belongs. Impairment losses are recognized in profit or loss.

Recovery of impairment losses recognized in prior years is recorded when there is an

indication that the impairment losses recognized for the asset no longer exist or have

decreased. The recovery is recognized in profit or ioss' However, the increase in the

carrying amount of an asset due to a recovery of an impairment loss is recognized to the

extent that it does not exceed the carrying amount that would have been determined (net

of deF,reciation and amortization) had no impairment loss been recognized for that asset

in prior years.

Investments in Associatesfnu*rtr.nt, in associates are accounted for under the equity method' An associate is an

""trtv "".. which the company has significant influence and is neither a subsidiary nor

an interest in a joint venture.

under the equity method, investment in associate is carried in the statements of financial

position at cost plus post- acquisition changes in the net assets of the investee, less any

impairment in value. The Company's share in the investee's post acquisition profits or

losses is recognized in profit oi lott, and its share of post-acquisition movements in the

investee's equify resen'es. Unrealized losses are eliminated similarly but only to the

extent that there is evidence of impairment of the assets transferred. Dividends received

are tre:ated as a reduction of the carrying value of the investments'

t 4 -

Capital StockCapital Stock composed of common stock is classified as equiry. lncremental costs

direc1ly attributable to the issue of ordinary shares are recognized as a deduction from

equitlr, net of any tax efTects.

Treasury SharesOwn equity instruments which are reacquired are carried at cost and are deducted from

equilr. No gain or loss is recognized in profit or loss on the purchase, sale, issue or

cancellation of the Company's own equity instruments. When the shares are retired, the

capiteLl stock account is reduced by its par value and the excess of cost over par value

upon retirement is debited to additional paid-in capital to the extent of the specific or

uu"rug" additional paid-in capital when the shares were issued and to retained earnings

for the remaining balance.

Revenue and Expense RecognitionR.uoru. is recognized to the extent that it is probable that tire economic benefits will

flow to the Company and the revenue can be reliably measured'

Interest income from bank deposits is recognized on a time proportion basis that reflects

the eflfective yield on the asset and is presented net of final tax. Other income is

recognized when incurred,

Expenses are recorded wheu incurred.

Share-based Pa)'ment Transactions

ffr" C.*puny has a stock option plan for its directors, officers and other key employees,

whereby employees rendei ,r.vi..t for shares or rights over shares ("equity-settled

transaction";. fne rights granted under the plan are not assignable and non- transferable'

The cost of the equiry settled transaction is measured by reference to the fair value of the

stock option at thl date when they are granted. Fair value is determined using an option

pricing model as detailed in Note 14 to the financial statements.

The cost of equiqv-settled transactions is recognized' together with a corresponding

increzLse in equity, over the period in which the performance is fulfilled ("vesting

perio{"). No^shared-based compensation expense is recognized in profit or loss for

grants; that do not ultimately vest.

Income Taxesfn*"r.f* on the profit or loss for the year is composed of current and deferred tax'

lnconte tax is recognized in profit or loss except to the extent that it relates to a business

combination, or items recognized directly in equity or in other comprehensive income'

Current tax is the expected tax payable on the taxable income for the year' using tax rates

enacted or sttbstantivell' enacted at the reporting date'

Deferred tax 1s provided using the iiabiliry method. Deferred tax liabilities are

recognized for all taxable tempoiary differences. Deferred tax assets are recognized for

all dlductible temporary differences and the cany-forward tax benefits of the net

operating loss carryou.l. INOI-CO) and unused tax credits from excess minimum

corporate tncome rax (MCIT) over regular corporate income tax (RCIT) to the extent that

it is prrobable that fufure taxable income wili be available against which such assets can

be utj.lized. The carrying amounts of defen"ed tax assets are reviewed at each reporting

date and reduced to the Jxtent that it is no longer probable that the related tax benefit will

be realized.

- L J -

LCASCS

L"ur", wliere the lessor retai1rs sLrbstantially all the risk and benefits of ownership of the

asset are classified as operating leases. Operating lease payments are recognized as

expeuse in profit and loss on a straight-line basis over the lease term.

Foreign Cunency TransactionsT.""*.ti"* in ioreign currencies are recorded in Philippine peso based on the exchange

rates prevailing at the transaction dates. Foreign curency denominated monetary assets

and iiabilities are translated into Philippines peso using the prevailing exchange rate at

reporting date. Exchange gains or losses arising from translation of foreign culrency

denominated items at .uGt diff.r.nt from those at which they were previously recorded

are recif,gnized in profit or ioss.

Earninss Per Share (EPS)

The company presents basic and diluted earnings per share data for its ordinary shares.

Basic EpS is calculated by dividing the profit or loss attributable to ordinary share

holdersr of the Company by the weighted average number of ordinary shares outstanding

during the year, adjusted for own shares held. Diluted earnings per share is determined by

adjust"ing the profii or loss attributable to ordinary shareholders and the weighted average

numben' of ordinary shares outstanding, adjusted for own shares held, for effects of all

dilutive potential ordinary shates, which comprise convertible notes and share options

grantecl to employees, if anY.

Provisions and Contingencies

Provisions ur" r""ognited when an entity 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 willte required to settle the obligation and a reiiable estimate can be made of the

amounr of the obligation. If the effect of the time value of money is material, provisions

are del.ermined by discounting the expected future cash flows at a pre-tax rate that

reflects current market assessments of the time value of money and, where appropriate'

the risks specific to the liability. Where discounting is used, the increase in the provision

due to the passage of time is recognized as an interest expense.

Contingent liabilities are not recognized in the financial statements but are disclosed in

the noils to the financial statements unless the possibiliry of an outflow of resources

embod.ying economic benefits is remote. Contingent assets are not recognized in the

financial iatements but are disclosed in the notes to the financial statements u'hen an

inflow of economic benefits is probable.

Events After the Reporting Date

P*t y.ur-.nd events thatlrovide additional information about the Company's position at

the rlporting date (adjusiing events) are recognized in the financial statements' Post

year-er,,d evJnts that are noiadjusting events are disclosed in the notes to the financial

statements when material'

1 6 -

4. Financial Risk Management

The Company's financial instruments comprise of cash, receivables, advances, accounts

payable and- accrued expenses (excluding governtnent payables and advances to

suppliers). The main risks arising from the use of these financial instruments are credit

risk, liquidify risk, and foreign currency risk. This n-ote presents information about the

company's "*porur.

to each"of the above risks, the company's objectives' policies and

processes for measuring and managing risk, and the Company's management of capital'

The main purpose of the Company's dealings in financiai instruments is to fund its

operations and capital expenditures'

The B,OD has overali responsibility for the establishment and oversight of the company's

risk management framework. The BoD has established the Executive Committee, which

is resp,onsible for developing and monitoring the cornpany's risk rnanagement policies'

The committee identifies all issues affecting the operations of the Company and repofts

legulariy to the BOD on its activities'

The Ccmpany's risk management policies are established to identify and analyze the risks

faced by the company, to set appropriate risk limits and controls, and to monitor risks

and adherence to limits. Risk manag"*.nt policies and systems are reviewed regularly to

reflect changes in market condition! and the Company's activities' All risks faced by the

comprlny are incorporated in the annual op*ruiing budget' Mitigating strategies and

proceclures are also devised to address the riiks that inevitably occur so as not to affect

the Company', of.rutions and forecasted results. The Co*rpany, through its training and

managiement ,tandards and procedures, aims to develop a disciplined and constructive

control environment in lvhich ali employees understand their roles and obiigations'

The C)ffice of the chief Financial officer and Treasurer (cFo & Treasurer) performs

oversight over financial management functions, specifically in the areas of managing

credit, liquidity, foreign culrency and other risks of the company' The cFo.& Treasurer

d i rec t l y in te r faceswi th the in te rna laud i t func t ion ,wh ichunder takesrev iewsof r i skmanagement controls and procedures and ensures the integrity of internal control

activilies which affect the financial management system of the Company. The results of

procedures performed by the cFo & Treasurer are reported to the Executive committee'

The EiOD reviews and institutes policies for managing each of the risks and they are

summarized below'

Credit RiskCredil risk is the risk arising from the inabiliry of a debtor to make payments rvher]

receivables are due. Credit risk or the counterparties defaulting, is controlled by

application of credit approval, limits and monitoring procedures'

The company manages credit risk by implementing policies on providing credit terms to

customers unO upprouing credit limits. Ii also *onitors credit erposures and continualiy

assessies the credit worthiness of customers'

The rlompany transact only with recognized creditworthy third parties' It is the

comprany,s policy that all customers who wish to transact on credit terms are subject to

credit verification pro."drr"r. A regular/annual review and evaluation of accounts is

being executed to assess the credit standing of customers'

1',7 -

With respect to credit risk arising from the other financial assets of the Compauv, which

comp.rise cash and cash equivalents and other curreut assets, the Company's exposure to

credit risk arises from default of the counter parfy, with maximum exposure equal to the

carrying amount of these instruments.

The carrying amount of financial assets represents the maximum credit exposure. The

maxirnum exposure to credit risk as at December 3 i is as follows:

Note 2012 2011

Castr and cash equivalentsReceivables

P553,706,',l25 P628,949,1511,432,7t5,709 2,084,134,591

P1,986,422,434 P2,713,084,348

Beiow is the classificationimpair:ed:

of the Company's financialassets that are neither past-due nor

2012Standard

Grade

Cash and cash equivalentsReceivables

Hieh Grade

P553,7A6,725

Total

P P553,706,725t.432.715.709 1.432.715,109

P553JA6,725 PL,432,7L5,709 P1,986,422,,434

Standard

Cash and cash equivalentsReceivables

Hish Grade Grade

P628,949,751 D P628,949,' ,7 512.084,r34.597 2,084,734,59'7

P628,949,7 51 P2,084,134,597 P2,7 13,084,348

The credit qualities of financial assets were detennined as follows:

' Czrsh and cash equivalents - based on the nature of the credit standing or rating of

co'unterparfy.

o Receivables - high grade pertains to receivables that are secured or covered with

coliaterals; standard grade pertains to receivables that are unsecured but with good

paying habits.

The Company's policy is to enter into transactions with a diversity of creditworthy

parties; to mitigate any significant concentration of credit risk. There is no significant

concer-rtration & credit risk within the Company as at December 3I, 2012 and 2011.

Liquiality RiskLiiuictity risk is the risk that the Company will not be able to meet its financial

obligations as they fall due.

The C)ompany manages liquidity risk by rnaintaining a balance between continuity of

funding and ilexibili ly in operations. Treasury controls and procedures are in place to

.nrrrr,lhut sufficient cash is maintained to cover daily operational and working capital

requir,:ments.

1 8

Managernent closely monitors the company's future and contingent obligations and sets

up req'uired cash reserves as necessary in accordance with internal policies'

Financiai liabilities of the company at the reporting date consist of accounts payable and

accrued expenses which are ail shorl term in nature'

The foliowing are the contractual maturities of financial liabilities, including estimated

interest payments and excluding the impact of netting agreements:

CarryingAmounf or Less 6-12 Nlonths

As a t December l l .20 l l -1P9mContraituat 6 Nlonths

Cash Flow

Accounts PaYable and

accrued exPenses PJ',511 ,178 P35.517,778 P?'956'434 P24.669,912 P7,891'372

Notes payable 43 0 ,40 5 ,29 0 430.710,017 430,710,017

)As at December 3l '2011

Contractual 6 MonthsCarrytngAmount or Less 6-12 Months 1-2 Years

Cash Flow

Accounts PaYable and

accruLed exPensesNotes payable

P I 20 ,634,06 I P120,634,061 P40,469,663 P80, I 64 ,398

1.048.560.220L.048,660,220 | .048,660,220

Net foreignCurrencY

Assets ExchangeRate

Forei6yt CurrencY Risk

Foreign exchange risk is the risk that the value of a financial instrument will fluctuate

due to changes in foreign exchange rates'

TheCompany,SexposuretoforeigncurTen-cyexchangerater iskarisesfromtransact ionsdenominated in foreiji;;;;rt: The company Joes xot engage in any derivative

transaction to mitigatJit, "*porur.

to foreign "u.r.n"y

exchange rate risk.

T h e ( ] o m p a n y , s f o r e i g n c u r T e n c y d e n o m i n a t e d m o n e t a r y a s s e t s a n d l i a b i l i t i e s a tDecernber 31 are as follows:

PHPuivalentCurren t

Assets

CurrentLiabil it ies Liabi l i t ies

z012EU]{O

Net foreignCurrencY

Current cunent Assets Exchange - . lHt

cunency ; '^'*- L'ab'l t e (L ab'l r es) Rate Equ valent

4,003,512 7,931,588 (3,928,076) P54.5300 (P214,191'984)

2 0 1 1EURO 4, l 50,3 39 7,9 '74,620 (3,824'281) P56.8428 (P2t '7 .382'840)

Net foreign exchange loss recognized- in profit ot -lo-t"t - fot the years ended

December 3I,zL]zun"izol1 amounled to P1'03'mil l ion and P1'31 mil l ion respectively'

sensitiviQ Analysis nr-:ri--i-^ ^oon December 31,2012 and

A Sot'o strengthenlng of the Philippine peso against EU\o-1 a1,

2011 would have increased equity and, net o?ru*. by P7.50 miliion and P7'61 million,

respe,ctivelY.

- 1 9

A 5%, weakening of the Philippine peso against the above currencies as at

Decerrrber 31, 2012 and 201 1 would have had the equal but opposite effect, on the basis

that all other variables remain constant'

lnterest Rate SensitivityTh" *t.t*t *p p.ofil. of the Company's interest beari'g financial instruments mainly

f.,tuin, to borrowed short term loani from HSBC amounting to EllR 7'893 million as at

Decenrber 31, 201,2 and 2011 (see Note i2). The company re-prices its financial

instrunaents based on a 3-month LIBOR plus 215 bps'

Sensitivity AnalYsisA 1% increase in the variable interest rates, with all other variables held constant' would

have decreased income and equity by P3.01 million and P7 '34 million as at

December 3I,2012 and 2011, respectively' A 1% decrease in the variable interest rates

would have had equal but oppositl effect, on the basis that all other variables remained

constant.

The irrterest rate risk's sensitiYity analysis is based on interest rate variance that the

-o,,'puny considered to be reasonably possible at the end of the reporting date'

Fair VaiuesThe ca,rrying amounts of the financial assets and liabilities approximate fair values'

The C,cmpany's financialinstruments comprise of cash and cash equivalents' receivables'

and ar:counts payable and accrued expenses. Due to the short-term nature of these

financial instruments, their fair vaiues approximate the carrying amoullts as of the

reporting date.

Capital ManagementThe BOD's poiicy is to maintain a strong capital base so as to maintain investor' creditor

and market confidence and to sustain future development of the business'

The IIOD has overall responsibility for monitoring of capital in proportion to risk'

profiles for capital ratios are set in the light of changes in the Company's external

environment and the risks underlying the Company's business operations and industry

BOD Lrses debt-to-equity ratio to monitor and review, on a regular basis, the Company's

caoital. defined as total equity as shown in the statements of financial position'

- 2 0 -

As at December 31, the company's debt-to-equity ratios are as follows:

2012 2 0 1 l

Debts (a)Accounts payable and accrued expenses P35,572'204 P120'946':\23

Noles pay;bie 430'405'290 1'048'660':120

465.977,494 I,169,606,: i43

Equity (b)Capital stockAdditional Paid-in caPital

Stock options outstandingRetained earnings

1,826,368,658 1,826,368,(i58455.329.483 445,434,191

- 9.894.t i922,206,713,080 1,94J,322,' ,175

Treasury stock t22,8474,488,288,374

10.38',/'

122.!t47

4,228,897,1092 1 . 6 6 %

Debt-to-equifY ratio (a/b)

5. Cash and Cash Equivalents

This a,tcount at December 31 consists of:

2012 2411

cu.tl on h*J*a ln uunt , P60'706'725 P38'420'329F ^ ^ F ^ A A A

Shorri-term investments 493'000'000 590'529'422

P553,706,125 P628,949,'751

The Company defines capital as total equity, which includes capital stock, additional

p"ia-ir, ..pltai, stock options outstanding and retained earnings, net of treasury stock'

There were no changes in the company's approach to capital management durin65 the

year.

The company is not subject to externaliy imposed capital requirements'

Cash in banks earns annual interest at the prevailing bank deposit rates' Short-term

invest.ments are made io. uurying periods of up to three months depending on the

imme<liate cash requirements of the Company and earn interest at the prevailing short-

term irnvestment rates.

- 2 1

6. Receivables

This account at December 31 consists of:

Note 2012 201 1

Current:Receivables from:

San Miguel Equities SecurilY, Inc

Vega Telecom Inc.Notes receivabie

B PL,206,222,154 P98,444,462B - 640,000,000

215,202,645 224,436,166

Receivabie from affiliate 8 7,215,181

Interest receiv able 4,07 5 '7 29 73 '4'7 6 '27 7

1,432,715,109 9',7 6,356,905

1. t01 , '777 ,6921,101 , ' l '7 '7 ,692

Nonc'urrent:Receivables from:

San Miguel

Pl,432,715,709 P2,084,734,597

The Ccrmpany's notes receivable represents the Euro 3.9 million or equivalent of P215 '20

million andP224.44 million as at December 31, 2012 and 2011, respectively'

The Euro note bears an interest of 90-day Euro LIBoR plus 550 basis points (bps). The

outstanding balance was renewed and will mature on December 28,2013.

The re,;eivable frorn affiliate refers to the amount due from Acentic GmbH arising from

the disrposal of the Compan.v's investment in RRE amounting to P6'25 million and

advances of various .*p*r., amounting to P0.96 million. The amount due from the

disposal of investment was collected in eatly 2072'

As at December 31, 2012 and2011, the company has interest receivabie amounting to

p4.08 million and P13.48 million, respectively. This inciudes interest income eamed

from nroney market placements un]ouniittg to P0.75 million and P1'66 million in2012

and 201 1, respectivelY.

7. Other Current Assets

This account at December 31 consists of

2072 2011

lnput vaiue-added tax C/AT)Cash advance for liquidation

Prepaid expensesOthers

P4,394,512345,76941,224

p ? R q l 5 q iL J ) v ' ' r e ' '

1 7 5 I 6 q\ 4 4 ) 5

241.934

a a

P4.786.905 P4,563,119

8. Investme'nts in Associates and Shares of Stock

This ilccount at December 31 consist of:

z012PBCOM Acent ic Total

Percentage ownersh iP

Cost of investmentBalance at beginning ofYear

36.64% 32.50'A

P1.770,989,354 P660.419.903 P2,431,409,257

Additional tnvestment L L . I I L

1,793,702,243 660,419,903

712

2,454,122,146Balance at end ofyear

AccuLmulated equity in net earnings

(losrses)Balance at beginning ofYear

Equi,ly in net eamings (losses) for the201,109,288 (6,614,104) 194,495,184

Balance at end ofYear

354.70s,598 46,998,1I 30'/,107,488

555,814,886 (53,612,214) 502,202,672

2,349,517 ,129 606,807,689 2,956,324,818999.950

inves;tments in shares of stockP2,951 ,324,768

201 IPBCOM Acentlc Total

Percentage ownershiP

Cost of investmentBalance at beginning ofYearAdditional investment

3',7.'70%

P 1 , r 43 ,97 1 ,003

36.64% 32.50%

P - P660,419,903P 1,804,390,906| ,77 0,989,3s4

Disorosalr r { ? o 7 A q 7 i

1,770,989,3541,15 ,1 ,9 '7 6 ,973

660,419,903 2.417,403,287Balance at end ofYear ( I 4 ,005,970)1 7 ? n q R Q ? 5 4

Accumula ted equ i t l in ne t

earnings ( losses)

Balance at beginning ofYearN in net earnings for the 1 / n n < o ? n

(64,4r4.2i3) t { . 4 114 )11 \

) 1 1 q 1 5 4 ) 1201 ,109 ,288 5 7.800, 1 69

20t,109,288 (6,614,104) 208 ,50 1 ,1 54Balance at end ofYear 14,005,970

1,9'12,098,642 K { 1 R n 5 7 q q 2,625,904,441

lnve:;!ments in shares of stock 7 .249,950

P2,633,154,391

a) lnvestment in AGNP

On November 11,2005, ISMCC entered into a Deed of Sale with Austral ian

ciigahertzNefworklnternational Pty Ltd. (AGNI), wherein the latter agleed to sell its

enrire interest in the outstanding capital stock of its wholly-owned subsidiary, A'G'N'

Philippines, Inc. (AGl.iP), consisting of 100,000 fully paid common shares of AGI'{P

(.AGNP Shares). tn addition, ISMdC assumed the receivable of AGNI from AGNP

(.AGNP Loan).

IIGNP is a hoiding company wirh 40% ownership equity interest in ETPI, the oldest

existing telecommirnicatlon company in the Philippines (see Note 1).

I;n consideration of the foregoing transaction, ISMCC paid AGNI a total amount of

US$8.2 mi l l ion.

a 1

Significant terms and conditions covering the sale required an Escrow Agreement,

which was executed simultaneously with the Deed of Sa1e. Pursuant to the Escrow

Agreement, the Company opened an escrow account with a local bank in 2005 '

The Deed of Sale and Escrow Agreement were finalized in 2006. Upon release of

frinds under the escrow account to AGNI in March 2006, ISMCC received the

ceftificates for the 100,000 shares of stock of AGNP and acquired the rights attached

to the receivables from AGNP'

The above transaction was funded in full by private placements from prospective

irLvestors of ISMCC. The private placements were initially booked as "Advances

from Prospective lnvestment Partners" and converted to equify upon approval of the

irLcrease in authorized capitalstock of the company (see Note i4).

on December 30, 2010, ISMCC soid its 100% equity interest in AGNP to Vega

Telecom, Inc. (vTI), a domestic company. As previously mentioned, AGNP owns

tJo/o of ETpI, hence the transaction led to ISMCC losing its 400h indirect equity

irLterest in ETPI. Consequently, ISMCC's shareholdings of the total outstanding

shares of ETPI have been reduced to 37 .'70% from77 'lVo'

On Decemb er 21, 2072, receivables from VTi, resulting from the sale of equiry

iriterest in AGNP, have been collected in full'

b) Investment in ETPI

on July 11, 2005, isMCC entered into a Memorandum of Agreement with Aerocom

Investors & Managers, lnc. (Aerocom) where the latter agreed to transfer and convey

tcr ISMCC 4.600,t57 fully paid class "A" common shares of ETPI, representing

approximatety ti.AOW of-the issued and outstanding capital stock of ETPI (ETPI

,irur"r; in exchange for 6,816,'761,093 newly registered and listed shares of ISMCC

with a par value"of P0.0i per share (ISMCC shares), from out of the increase in

IS;MCC's authorized capitai stock from P300 million to Pl.2 bill ion. The ISMCC

shares issued constitute approximately 8% of the issued capital stock of -ISMCC'after the increase in the authorized capital stock to P1.2 bill ion and subsequent

issuance of new shares (see Note 14)'

O,n October ZZ, 200i, ISMCC entered into a Share Purchase Agreement ("the

Agreement") with smart communications, Inc. ("Smart") where the latter agreed to

se1-1, transf"r and convey to ISMCC, subject to the terms and conditions of the

Agreement, 2,548,000 fully paid class "A" common shares of ETPI, representing

aliproximately 9.8:t', of the issued and outstanding capital stock of ETPI, for P100

nLillion.

c,n March 6, 2008, ISMCC entered into a Share Purchase Agreement with the

G,overnment of the Republic of the Phiiippines through the Privatization and

Ivlanagement office (PMO) for the acquisition of 2,652,000 class "A" common

slrares of ETPI fbr a sum of P104.1 miilion, representing approximately 10'2Y^o of

issued and outstanding capital stock of ETPI. This brings the total holdings of the

Company in ETPI to-'71.i %, includingthe 40% interest.of AGNP to ETPI as at

Drecember 31,2009. The total holdings of the company in ETPI were reduced to

37j/% on l)ecernber 30, 2010 due to the sale of the Company of its 10091' equiry

interest in AGNP

a /1

on october 20, 2011, the remaining stock of 37j0% was sold to San Miguel

Equities security, rn.. 1S-VmSIt f"L.l iotal consideration of P1,507.78 million. cash

received amounted to i:0t.56 million, while outstanding current and non-current

balances as at December 31, 2011 amounted to P98'44 mi l l ion and Pf i07'78

*ittion, respectively. i"i^f guln on sale of investment amounted to P266,997 '08'l '

Tlre outstanding current receivable from SMESI as at December 3I,20li amounting

to I,9g.44 million was extended for another year thus.leaving a total outstanding

current receivable as at December 3 1, 2012 of P1 .206 million'

lnvestment in Philippine Bank of Communications (PBCOM)

i S v l C C a c q u i r e d 3 6 ' 6 4 % e q u i t y i n t e r e s t i n P B C O M i n 2 0 l l . T h e t r a n s f e r o fownership *u, upprould by the Bangko Sentrai ng Pilipinas (BSP) on December 23,

2 0 1 1 .

onApr i l72 ,20 l2 , theCompanyT ' " : ' .99add i t iona lP22, ,7 |mi l l ionrepresent ing i tsdeposit for future r";;";;id" tL gt^q,aa6 new voting shares atP2-1.88 per share of

PBCOM. The equity interest of the compuny r"*uin'=the same as the application for

the increase in tir" uuino.i zed capitalrto"t or PBCOM is still pending approval from

the SEC and the BSP'

lnvestments in Shares of Stock

OnJune l 'T ,Z0 l l , theCompany incorpora tedRREVenturesCorpora t ion(RRE)awh,cliy owned ,"Urlii".y *iif, total uutho, ized capital subscribed and paid minimum

cap,i161 of p6.?5miilion. As at Decemb"r 31, 2011, RRE has no operations' This has

not been consolidateJin zor 1 on the basis of immateriality (see Note 2)'

OnMay26,z[ l?, theCompanyttas.enteredintoanagreementu' i thAcent icLtd' toabsoiutely assign, ,.4" una tansfer a1 it, tjgnit, title aid interest in and to the lnitial

Subscription and the Additional suut"tiflion--(collectively referred to as "Totai

Subscription,,; of RG ,t,u..r. The assignei shail assume the payment of subscription

pa;rable to RRE.

ln2011, ISMCCacqu i red10%tequ i ty in te res t inA lphaForceSecur i tyAgency foratotal consideration of P1'00 million'

e) Inruestment Held for Saie

orrDecember22,200g,theCompany.enteredintoanagreementrelatingtothesaleand purchas" i" J;;;; zoto orit:t".t:;iles of Acent-ic GmbH with LBC Capital

i"tf iieC capitalj, Host Union and PhilWeb Corporation'

onJanuary l l ,z l lo , theCompanycompletedtheacquis i t ionon32.5%ofAcent icGmbH, a Germany based compr"y ;;;"d in. hotels-and other multi-dwelling

establishment thru Host union in ihe amountiquivalent to P660 miliion'

d)

The above investmentwas presented as"lnvestment held for sale" in the 2010

financial statements following the commitment of the Company's management on

June i6,2010, to a plan to sell the assets. Efforts to sell the investment have

commenced, and a .ale was expected by 201i. However, on November 14, 201 1' the

BOD approved to keep th; above investment and withdrew the previous

au|horization to seli due to economic slowdown in Europe' As a result' the

investment ceases to be classified as held for sale and equity method accounting has

been applied and the carrying amount of the investment previously classified as held

for sale was remeasured using the equity method of accounting' The difference

between the remeasured equiry urouni and the carrying amount of the investment

am,runted toP64.41million und i. included as reduciion in equity in net eamings of

associates in the consolidated statements of comprehensive income'

on Novemb er I5,2012,ISMCC entered into an lnvestment Agreement with wagas

consuitants Limited (wcl), a company organized-and existing under the laws of the

British Virgin trtunds, fo, iit" disposition Jf TSMCC't investment in Host Union in

favor of wcl-, in consideration for ISMCC's acquisition of 100% ownership of

WCL.

MaLnagement assessed that there is no indication of impairment on the investment' ln

ui.* [...o1 no impairment was recognized in the books'

The summarized financial information of investments in associates as at and for the years

;"J; lDecember 31 follows (amounts in thousands):

201 12012Acentic PBCOM AcenticPBCOM

Total assetsTotal liabilitiesTotal revenue

P45,952,38541,228,1803,146,672

968,083

P2,254,5381,660,4972,224,17t

P41,529,52163 8 ,045,391

1,22',/,823

P2,569,1811,832,6692,308,533

t77.84',7144.38 548,880Net income (loss

g. ProPertY rrnd EquiPment

The movements and balances of this account consist of:

Leaschold ComPuter Furni tured Fixtures

Networkand Dats T.ansport!tion

Cost:,:ly--l,0,, 'l?:lil ".itr\'.i?Z "li,ili "il:?ll 'l?,f?i Pr'e65'62s P3'62r'48r '''

iii,jii,AOOrr lonr i

Dispcats (17 '601) - - - : - - - - - : ' - - - - - - - - -

u r , 1 ,621,481 t '1 ,666,64g*.rro 10,303,700 63'7.3s0 e15'2]s 61'19? t'e65'625

41.911 3l'629 30'548 '

1,965,625 3,623,483 11,' l '76,74310,303,700 685,30? l '006'848

Accumulated dePreciat loo

Bnd amort izat ion:January 1,201 i

Depreclatron ano

amonialof,

D e c e m b c r 3 1 , 2 0 1 I

Deprecra.tion and

amonl

160,229 99,417

106,598 70 ,16E

600,608

o) ) , zu6

140207.828 3 . l 4 4 . 2 4 8

3.622,102 12,044,9825,800,124

Carrying value:

D e c e m b e r I 1 , 2 0 1 l

Pzog,2o9 P8,765,915P370,563P6,564,3 l6

D € c e m b e r 3 1 , 2 0 1 2

P?4.58 I

P4,50J,5?6

- 2 6 -

P3 1,798 P709,809

Pl,38l P5,13r'161

10. Other Noncurrent Assets

An escrow agreement was enterecl to by ISMCC together with the other buyers of

PBCOI4 on luty 21,201i with PBCOM as the fund agent' Escrow fund includes any

excess on the contribution, net of settlement of acquisition cost and related expenses' and

interest income eamed (see Note l1). Escrow fund amounted to P38'94 mi l l ion as at

December 3 1 ' 201 i .

T h e e s c r o w a g l e e m e n t w a s c e a s e d i n e a r l y J a n u a r y 2 0 1 2 . A l l t h e o b l i g a t i o n s a r i s i n gfrom the agreement were settled and the fund has been distributed to the other investors'

11. Accounts I'ayable and Accrued Expenses

This account at December 31 consists of:

Note 2012 201r

Payable to investment PartnersDue to non-affiliated comPanY

Accrued exPensesPayable to government agencles

I1I O

P24,669,9727,891,3112,956,135

54,4_26

P61 ,463,60846,82'7,85070,816,264

312,262

P35,572,204 Pt20,946,323

Duetonon.a f f ] l i a tedcompanyrepresentspayab le to_ t l l l dpar t ies .The2a l2numberinciude,s p38.60 million payabL to fellow investors in PBCom' This amount arose from

escrow fund transactions 'in

2011 and this was settled early in January 2012 (see

Note 1l)).

Accrued expenses include interest payable arising from notes payable amounting to

p2.08 mil l ion and P3.25 mil l ion in 2012 and 2011, respect ively, accruals for shared

expenses with Philweb such as office rentals and salaries and wages amounting to P0'88

rnlifion and P5.75 million in2012 and2011' respectively'

The e>rposure to foreign culrency and liquidiry risks related to accounts payable and

u."ru.,i expenses is disilosed in Note 4 to the financial statements.

12. Notes PaYable

In 20i,C, the Company bon'owed short-term loans from Hongkong and ShanghaiBanking

Corporation Limiied GfSgC) amounting to EUR16'19 million' The loan bears an interest

of 3 rnonth i.mOn'plus it5 bps' fhi, bo.,o*ing is secured by a money market

placement in HSBC amounting to Pi'007 biii ion' lnterest expense for the loan

recognized ln profit or loss for the years ended December 3I,2012 and 20i 1 amounted to

P53.7 million and P88.18 million, respectively' The total amount of EUR 8'295 million

was paid in October 2011, thus leaving an ouistanding balance of EUR 7'893 million or

equivalent to P430.40 mii l ion and p+f3'OO mil l ion as at December 31 '2012 and 2011'

resPectivelY.

- 2 1

on July 22,2011, additional Notes Payable to the Bank of commerce amounting to

Pl,688 million was made to support the funding of the acqursition of PBCOM' The

Company was able to settle a totaL amount of P 1,088 million in 201 1 and P600 million as

full selllement in October 2012. Total outstanding Notes Payabie in 2011 was therefore

P1.048 mi l l ion .

13. Related PartY Transactions

In the normal course of business, the company has the following related parfy

transac:tions:

a. The company has an agreement with Philweb, a stockholder, where the latter

handles the administration function of the company. Total expenses which include

salaries of common personnel, rental, communicition and utiiity charged by PhilWeb

a r i o u n r s t o P l 0 . 5 2 m i l l i o n a n d P l 6 . l m i l l i o n i n 2 0 1 2 a n d 2 0 l l , r e s p e c t i v e l y(se,e Note 15).

b. The company avails of noninterest-bearing, unsecured cash advances from Philweb

to finance working capital requirements, Total cash advances amounted to P24'7

mil l ion and p61.5 mi l l ion in 2012 and 2011, respect ively. These advances are

pa'yable to PhilWeb on demand'

T h e C o m p a n y h a s n o k e y m a n a g e m e n t p e r s o n n e l f o r t h e y e a r s e n d e dDecenrber 3I, 2012 and 201 1. All the administrative functions of the company during

the transaction years were being handled by PhilWeb'

14. Equity

Authorized CaPital StockOn December 14,2006, the SEC approved

ISMCC from P300 mil l ion to P1'2 bi l l ion

value of P0.01 Per share.

the increase in the authorized capital stock of

divided into 120 bill ion shares with the par

['1srn the increase in authorized capital stock, ISMCC issued 43,127,603,300 shares at

P0.01 per share to various investment partners. Advances amounting to P431,2'16'033

received from these investment partneri in 2005 were applied as payment fo1 t!9 jssued

shares, The excess of the advances from investment partners amounting to US$155,313

is still included as advances to third parties under the "Payable to investment partners"

account in the statements of financial position (see Note 1 1)'

increase in ISMCC's authorized capital stock

into 180 bill ion shares with the par value ofOn Aurgust 6, 2008, the SEC approved the

from P1.2 bi l l ion to P1.8 bi i l ion divided

P0.01 per share.

upon the approval of the SEC, ISMCC appiied the deposit for future stock subscription

receivr:d in 2001 amounting to P441 .g miflion to the issuance of a 16,127 ,'73J ,226 shares

recogrrizing additional paii in capital of .P26'7.9 million with the difference charged to

ooerations as "Other income" in profit or loss'

2 8 -

on May 28,2009,the SEC approved the additional increase in authorized capital stock of

ISMCC from P1.8 bi l l ion to 'pz.s bi l l ion divided into 280 bi l l ion shares with the par

value of P0.01 per share. With the increase in the authorized capital stock' the

corresponding stock rights offered last January 14,2009 have been converted to capital

stock.

orr Septemb er 9,2070, the SEC approved the Company's application for the amendment

of its r\rticles of lncorporation to ieflect the increase in par value of its common shares

from P0.01 per share to P1.00 per share. As a result of the increase in the par value' the

following changes in the capital stock of the Company were effected:

No fra,:tionalshares were issued to the stockholders of the Company in the convers.ion of

the number of shares. The Company acquired the resulting fractional shares as additional

treasury shares.

Stock (Jptions

on Mrarch 20,2003 and october 7,2003, the Stock option committee of ISMCC

approved the award of options to subscribe to atotal of 1.5 bill ion common shares' at a

sirit. pri.. of P0.01 p"r ,hare, to selected offtcers of ISMCC referred to as the ISM

Stock bption Plan (Plan). On October 21,2008, under SEC-CFD Resolution No' 213'

s. 200[i, ihe request for exemption from registration of issuance of 3 billion common

shares for the ISM Stock Option Plan was granted'

The Plan provides that one third of the total number of shares granted to the participant

shall vest upon the effectivily date of the grant. Another one third of the shares shall vest

one year after the effectiviq; date of the grant, and the remaining one third of the shares

shali vest two years after the effectivity date of the grant'

The fair value of stock option is estimated using an option pricing method which

consid,ored annual stock volatility, risk-free interest rate, expected life of option and

exercis;e price.

The 111,883,333 number of stock options at P1.00 weighted average exercise price that

was granted in 2008, has expired on October 21,2012. All of the stock options were

vested and none has been exercised until the expiration date.

Before the increasein par value

After the increasein par value

Number of authorized shares 280 bi l l ion shares 2.8 b i l l i on shares

Number of shares issued(inc:lusive of treasury shares)

I 82.626.865,800 shares 1.826.268,658 shares

Number of shares subscribedNumber of treasury shares

9,000,068,290 share 90,000,683 sharel

5,i 1 5,990 shares 53,192 shares

Number of shares outstanding 191,626,93 4,090 shares 1,916,269,341 shares

- ? 9 -

15. Operating Costs and ExPenses

This acilount for the years ended December 31 consists ol

Note 2012 201 1

AdmirristrativeProfessionai feesRepresentation and entertainment

DepreciationTransportation and travel

Taxes and licensesInsuranceUtilitiesPrinting and office suPPliesRepairs and maintenanceRentals

I3 P10,515,0274,270,9663,184,3813,144,2481,197,618

645,672410,216320,556248,018

62,85544,731

P16,134,441633,081

4,089,6631,829,458

ql 1 ' , ]??

| 544 549

225,088

4 1 7 ' 7 4 4

519,L2'/ 159.31'7Miscellaneous

P24,563,421 P25,976,036

16. Income Taxes

There a.re no cunent tax expense for the years ended December 3I,2012 and 2011 '

Administrative expenses pertain to the Company's share . in the common operatlng

expenses of Philweb wnicn include salaries ana e*ployee benefits, representation and

entertainment, rental an,J communication expenses charged by PhilWeb to ISMCC

(see Note 13).

The resonciliation of theincome tax exPense as

follows:

income tax expense computed at statutory income t&x rate and the

Jo*n in profit or loss for the years ended December 3l is as

2012 201 I

lncome before income tax P25939A,665 P513 ,399 ,109

Inconie taxTax effects of:

Exp,ilsd NOLCONontaxable incomeNondeductible exPenseExprired MCIT

Nondeductible interest expense:

Change in unrecognized deferred tax assets

(92,,312246) (161,913,1 54)

P77,811,200

L1,156,473

P154,019,'133

2 ,5 1 8 .1 56

955,316

3,829,1201,836,854

zgo,6lg11,00'1,79020,832,948

irr.,r,ti. ,uu]""i"Jio nnur tu* fq'zaz'ztD (ze'0gs'sszlP -P

3 0

The CompanY haswere rer:ognized:

the following temporary differences in which no deferred tax assets

2 0 i I2012

P301.099,20 8 P27 4,695,',l35NOLC]OForeign exchange loss 1'025'581 l '306'188

P302,124,189 P27 6,001,923

Deferred tax assets have not been recognized in respect of the items above as

management believes that it is not probabl"e that the company can utllize the benefits

therefrom.

The company has NOLCO which are available for offsefting against fufure taxable

income as follows:

Years lncuned Amount Used'Expired Balance Expiry Date

2009 py Jgg,ZZq (P3'/'188'224) P- - ^ December 31'2012

^n 1n 1<^ <)1 )a ) 154,527,242 December 31 ,2013

;;i; '#,rr;ii, 82,21?'?92 P"":-P:2i':2:2

63 -591.691 December 3 1, 20152012 63,591,697

p338,287,450 (P37,1 88,224) P301,099,208

17. Earnings Per Share

The calculation of earningsper share at December 31 is as follows:

2012 2011

P259.390,665 P5 i 3 ,399 ,109Net income (a

Issued shares at beginning of year 1.916,369,341 1,916,369,341

Effect of own shares held

Weighted aveftge number of shares at

December 31 (b)

53,192 (53,r92)

1,916,316,1_491,9r6 ,316,14912,883,333

Dilutive shares arisrng from stock optiom

Adjusted weighted avera.ge number of common| ,929,199,482

shares for diluted eamtn share (c 1.9L6,316,149P0.1354 PA.2679

Earnings per share (a/b)P0.1354 P0.2661

Diluted earnings Per share (a/c)

The average market value of the

dilutive ef,fect of share options was

which the options were outstanding

Company's shares for

based on quoted marketpurposes of calculating theprices for the Period during

- 31

18. Other Mal.ter

The Cornpany is a party to other litigations rvhich are stil l pending with the pertinent

courts and tribunals. attnough the uliimate outcome of these litigations cannot yet be

determined at this time, management is of the opinion that liabilities arising from the

future resolution of such litigations, if any, will not be material and, therefore, would not

require provisions in the accounts at December 3 1, 201'2 and 2011 '

19. Segment Information

As mentioned in Note 1 to the financial statements, ISMCC was transformed from a

mining company to a company engaged in information technology, multimedia,

telecommunicatilns, and othei simiiar industries' However, ISMCC has not commenced

operations of its new iine of business and has functioned mainly as a holding company'

,0. Srppl"*"nt".y fnf**ation Required by the Bureau of Internal Revenue (BIR)

In addition to the disclosures mandated under PFRS, and such other standards and/or

conventions as may be adopted, companies are required by the BIR to provide in the

notes to the financial statemlnts, certain supplementary information for the ta'xable year'

The amounts relating to such information may not necessarily be the same with those

amounl:s disclosed in the financial statements which were prepared in accordance with

PFRSs The following is the tax information required for the taxable year ended

December 31,2012:

I. Based on Revenue Regulations (RR) No' 19-2011

A. Non-Operating and Taxable Other Income

ExemptRegular/

Normal Rate

Equiry in net eamings of associates P307,707,488 P307,707,488

B. I temized Deduct ions

Regular/Normal Rate

lnterest expenses P40'906'47 5

Adminisfratrve expenses 10'515'027

Professional fees 4'27A'966

Depreciation 3'144'248

Transportation and fravel 1'79'7'618

Ut i l i t ies 320'556

Taxes and licenses 645'612

lnsurance 410'216

Printing and office supplies 248'018

Repairi and maintenance 62'855

Kenlats {J '731

Miscellaneous expense 1'825'315

P63.59r.697

' t a

II. Barsed on RR No. 15-2010

A. Value Added Tax (VAT)

1. Input VATBeginning of the YearCurrent year's domestic purchases:

a. Goods other than for resale or

manufacture

P3,891,591

96,950

b. Services lodged under other

accounts 405'971

Balance at the end of the year P4'39:il2-

B. DocumentarY StamP Tax

P93,750On shares of stocks

C. Withholding Taxes

P6',70,609Credirable withholding taxes

D. All Other Taxes (Local and National)

Other taxes paid during the year recognized under

"Tsxes antl licensis" account under Cost of Sales &

Operating ExPenses

License and Permit fees P645,672

As at December 3 1, 2072, the Company has

received tax assessment notices from the BIR'no pending tax court cases nor nas

-33 -

RBPORT OF INDEPENDENT AUDITORS ON SUPPLBMETARY INFORMATION

The Boarcl of Directors and Stockholders

ISM Cornlnurt icat ions Corporat iol tThe Penthousre, Alphaland Southgate Tower

2258 Chino tioces Avenue corner EDSA

MakatiCitY

we have audiited, in accordance with Philippine Standards on Auditing, the financial statements

of ISM comrnunications corporation (the "colnpany") as at and for the years ended

Decenrber 31,2012 and 2011, and have issued olrr repoft thereon dated February 11 '2013'

our audits were made for the pllrpose of forrning an opinion on the basic financial statemerlts of

the Cornpany taken as a whole. 'ihe supplementary information inclLrded in the following

acconipanying additional components is the responsibilify of the Colnpan)"s lnallagement'

' Map of the Conglomerate. Reconciliation of Retained Earnings Available for Dividend Declaration' Scherlule of Philippine Financial Reporling Standards' Supplernentary Schedules of Annex 68-E

This supplementary information is presented for purposes of cornplying "vith

the Securities

Regutaiion C,rde Rule 68, As Amended. and is not a required part of the basic financial

staiements. Such inforrnation has been subjected to the auditing procedures applied in the audits

of the basic financialstatements and, in our opinion. is fairly stated, in all material respects, in

relation to ther basic financial statements taken as a whole'

ARTHUR Z, MACHACONPafinerCPA License No. 0090279SEC Accredi lat ion No. 1 189-A. Group A, val id unt i l February 1 5. 201 5

Tax ldentification No. 164-601-040BIR Accreditat ion No. 08-001 987 -29-2011

Issued November 3.2011; val id unt i l November 2^ 2014

P T R N o . 3 6 6 ' ) 5 l 5 M CIssued Januerry 2,2013 at Makat i Ci6l

Februaly I l ,2A13Makati City, Metro Manila

Manaba t Sanagus t i n & Co , CPAs

The KPMG Center, 9/F

6787 Ayala Avenue

Makat i Ci ty 1226, Metro Mani la, Phi l tpprnes

Branches: Bacolod Cebu l lo i lo Subic

Telephone +63 (2) 885 7000Fax +63 (2) 894 1 985lnternel www.kPmg.com PhE-Mai l man i [email protected]

PBC BOA Regrstralron No. 0003 Group A, vaid untL Decomber 31 2013

SEC Accrednalon No. 0OO4'FB'3 G.oup A, vaLrd untr l November 22 201 4

lC Accredi latrof No F'0040-R, Group A, vahd untr Seplember I 1 2014

BSP Accredrtec Group A valrc untr l December 1 7 201 4

lvlanabal Sanagusln & Co. CPAS a Phl l lpprne

pannership and a momber Jrrm 01 the KPN,G neMork ol

rndepenoent remb€t f i lms ai i r l lated wl lh KPlvlG lnlelnal lona

C o o p e r a l v e I K P M G l n l s t n a l o n a i " ) a S w r s s e n t L t y

KF-W

RxPoRToFINDEPBNDENTAUDITORSoNSUPPLBMETARYINFORMATION

ARTHUR Z, MACI-IACONParltterCPA License No. 0090279

S E C A c c r e d i t a t i o n N o . ] 1 8 9 - A , G r o u p A . v a l i d u n t i l F e b r u a r y l 5 , 2 0 l 5Tax Iclentifi cration No. | 64-607 -040

BIR Accreditat ion No' 08-00 1987 -29-2011

Issued Novr :mber 3 , 2011;va l id un t i lNover r l :e r 2 '2014

PTR No. 366,9515MCIssrred January 2,2013 at Makati City

1 1 4 n 1 1

I ebruar) ' I t , lv | )

Makati CitY, Metro Manila

Manaba t Sanagus t i n & Co , CPAs

The KPMG Center, 9/F

6787 Ayala Avenue

Makat i Ci ty 1226, Metro Mani la, Phi l ipptnes

Branches: Bacolod Cebu l lo i lo Subic

Telephorre +63 (2) 885 7000

Fax +63 (2 ) 894 1985

internot www kPmg com PhE-Mai i man i la@kPmg com Ph

The Board of Directors and Stockholders

ISM Commuttications Corporation

The Penthouse, Alphaland Soutirgate Tower

2258 Chino R.oces Avenue corner EDSA

MakatiCitY

We have aucl i ted, in accordance with Phi l ippine Standards on Audit ing' t l te f i r rancial statements

of ISM Communications Corporation (the 'Cornpanl"') as _at and for the years ended -

December 31,2012and 2011, and have issued our reporl thereon dated FebrLrary 11 '2013'

OLrr auclits were t]lade forthe purpose of forlning an opinion on the basic financialslatements of

the Cornpany taken as a whole. ihe supplem.,',L,y information included i' the following

u""o*punying additional componentt it ine responsibility of the Compan.v's management'

' MaP of the Conglomerate. Reconciliation #Retuined Earnings Available for Divide'd Declaration

. s c h e r l u l e o f P h i l i p p i n e F i n a n c i a l R e p o r t i n g S t a n d a r d s' Supplementary Schedules of Annex 68-E

Th issupp lementaq/ tn fo rmat ion ispresented forpurposesofcomply ingwi th t l reSecur i t iesn.gutaiion Code Rule 68, As Amended, and is not arequired parl of the basic financial

statemeuts. Such infbrrnaiion has been subjected to the auditing procedures applied in the audits

of the basic f,inancialstatetnents and, in ouropinion, is fairly stated' in allmaterial respects' in

relation to thr: basic financial statements takeu as a whole'

Manabat Sanagustrn & Co ' CPA5 a Phl l rpprne

;; ; ; ; ; ; t .no' . ntu*n", i r rm oi the KPMG neuork oi

,nOeoenOent rembef i r tnis aiJl |ared wrlh KPIIC Inlernalonal

C o o p e t a l v e { " K P M G i n l e r n a t o n a " ) a S w ' s s e n i t y '

P R C ' B O A R o g r s t r a t r o n N o 0 0 0 3 G r o u p A ' v a l r d u n n l D e c e m b e r 3 l - 2 0 1 3 ,

i fJ i . -" t t ln i t t" r ' , " 0004 Ff l-3 Group A val id unt I November 2a-201 4-A

a."t"O*r"" No F'0040 8 Group A, vald unlr Seplember ] I 2014

B S P A c c r e d r t e d G I c u p A v a l r d ! n | D e c e m b e r 1 7 2 0 1 4

[)

at-x

o

-U

O -€ o: f

- i::

c b rN

lJ1

-f

3c=-a.o=a

-o-

f,

o

=.o-

E 3rD a); ^+ L !

E : ^\c

-O

= Tr D or -

T ^

O\O

ISN{ COM]\{UNI CATIONS CORPORAI-ION'f l re Penthouse, Alphaland Southgate T'olver

2258 Chino Roces At'ettue corller EDSA, N1[aliati Citi '

NATURT OF DI\'IDEN-D DECLARED

l - < Q , 1 9 0 . 6 6 5

I , 02 -5 ,58 l

(307 .707 ,488 )

r\N\[X A

P1.b75.590.31e

(4',7.291,2421

(172,84iJ

P1.618. I70 .1- l ( )

Unappropriated Retained Eamings' cts adjtrstecl to' '

at,criktble./br clit'iclcncl clistribtttiott' Jonuatl; I ' 20I2

Acld: Net income actuallv eartretl lrealized during the

pr:riod

Net inoonle dut' ing the perrod closed to Retained Earntngs

Add:Non-actual losses

Unrealized foreign excirauge loss - net (except

those attribulable to Cash and Cash Equivalents )

Less: Non-actual/unrealized tt'rcome net of tax

Equity iti net incotne of associateiioint \/e1lrure

Sub-tota1

Net incrime actuall l ' earned during the period

Less:Tleasut 1' shares

TOTAL RETAINED E-ARNINGS' December 37'2012

(17.291.2,42)

AVNLABLE FOR DI\'IDEND

Retained eamings ar.ailable fol dividends; Divjdends' rvhethelcash' ptopert)'oI stock: t l1lO'

declared out of ulrestricted ietarued eanings of t ire Colporation' Accordingly" a coll loralloll

cannot declare dirridends u4ren it has zero or negative retained eam:ir-igs otl1eru'tse kito''r'tl a-s

Retained Eamings a"nrir. e".,rr.t pr.rpor.._the"surplus profits or incorle 'rust be a bona fide

incorue founded upon actual earnulg's or prollts'

The actual earnlngs or profits urentioned above shall be the net iucot]le for the )'ear based on l lte

auciited 1.'arcral state'ents. ar1-lusted fol unlealized iterrs suclt as: share/ecluit\ in net itrcttme

of associate or joint .,entuie. unrealized foreign exchange,gain (except those attrib-utable to

casir ar1d casi'r equivalents). unl'ealized acruarial gains' farr value adjustlnent ot-gaius fi 'otlt

'rarked-to-rrarket 'aiuatjon, recognizecl cleferrecl tax asset. ac1-justrtlent due to de'iaiicrn 1t'ottl

PFRS/G;\AP. othet'unrealizecl gains ot' adjustments to the retained earnirl 'rs (suclt ls uLcle tioll

incorne, reverSal o1'tevaluattotl tt lcl 'etnent to lelatned eailrit lgs aud negalive goodr'ri l l otl

inveshnents in assoclale) and othel adjusttnents that the Cotlt l ission i.nar' pl 'escribe

PHI ' I ' " INE i INANCLAL REPORT NG STANDARDS AND INTERPRETATIONS

Ef fec t ive os o f Decembet 31 ,2012

, , No l

App l i cqb le

I F romework fo r ihe Preporo t ion ond Presento t ion o f F inonc io l

I SioiementsI CorrcePluol FronreworkI chorcclerisl lcs

p rnS, pro.ti. "

Sirrlement Mon o gemenl 99lryryry-pn i t ipp ine F inonc io l Repod ing S londords

Phose A: Ob iec l i ves or rd quo l i la i i ve

- - T - -

Frns r Firsi-i inre Adoption o1 Pi-ri l ippltre

- : , - - - r - -

jFinonciol RePorlrr lg

: lRevised) , Sior- 'dcrds' : - ; " . " " . i , P i n S r o ' o P A S 2 7 : C ? ' ' : ' : l

^irr c Sui lsidiory' joinl ly Cor-r irol led Enii ty or )

I nves l r r e l ' i | o Su i )S lo l o r v J J l r l v L u t r r u " r ' v

AssocloTe

Amendmenls io PFRS 1

l ime AdoPters

AdCii ionol Exempiiorls {or Ftrsl-

AtenOmtnf io PFRS l l ' imi leci Exempilon trom

C o,t',po,oti uu P F RS 7 Discl osYf t tql!114199!E!

Imendmenis lo PFRS l : Severe Hyper in f lo i ion ono

Rernovol o1 Flxed Doie {or Fi; 's l- i lme Adopiers.- I- i - + . 1 - -

Amendnre t r l s to PFRS 1 ' Governmenl Looru

Shcre-bosed PoVmenl

Imenoments tc PFRS 2 : Ves t ing Cond i l ions ond

Conce l lo l ions

,."menOmenlt to PFRS 2: Grovp Cosh-sett led Slrore-

I bo:;ed Poymenl Tronsocl lol is

Bus iness Comblno i ions

(Rev ised) , XP F R S 4 lnsuronce Cont roc ls

I ,An 'endmenls 1o PAS 39 onc ' PFRS4: F inor rc io l GuoronTee

I Conlrocis

9 F P q ( , Non-cunent Asse is He lc

Operotions

for Sole orrcl Disconi;nued

PFRS 6 r Expr lo ro i ion lo r ond Evo luc t icn o f Mlnerol Resources

P F R S 7 Firrr:ncioi lnsirun-rents: Disclcsures

Arnendmenis io PFRS 7 : Trons i t ion

Ar ,enc l ' nen1 , r o PA .5 30 Jno D 'R5 7 : ReC l l s s t r coT lo r o l

Fin,:rncicl Assets

,q.r ienO..nf s to PAS 39 onci PFRS 7: Reclcssif icoi iotr oi

I f ' nana io Asse ls - E f {ec i i ve Dofe ond Trcns l l lon -

p'. l -*nOln.nt, 1o PFRS 7 lmprovlng Disclosures oboir]

F l r ronc lo i Ins l runren ls

Amendrnen ls 1o PFRS / D is ' : l csL ' r res - T rons fers o i

F inonc io l AsseJs

un '6 ' r r d f i 1e ' r t , 16 DFR. - D i \ - l o5J r ' 5 - Of f set.t ing Finortctol

Assets ond Frnoncioj Llclbl l i i 'es --

I tnurnorr- l"nf s ic PFRS 7: f ' / ror rdolcr-r 'Ef iecl ive Dole cf

n L r ! o ^ n ^ l r n f s t , ) n - )

\ - l J \ - l e 5

f f < J y u l l u l r u r L J r r r u lX

P F R S 8

F i r o l l c i q l l r r s t r un ie t r l s

Arnendments to PFR5

PFRS 9 ono Trons i i io r r9 . Mcrndo ic ryDisclos' ' , tres

P F R S 9Ef f ec t iVe Do ie o l

pH[rpphl E FtNA t'rcr,q r nrponrl NG sTAN DA RDS AND INTERPRETATIoNS

Effective os of Dr:cemb er 31 ' 2012

lon . tz D ls , - losure o l in le res ts in Other Ent i j ies+ , - . - +

pFPc. 1? ro iJ \ O lJc M-OSLJre f i re l - l l

Phi l ipp ine Accor - rn t ing S londords

, pnS t ] Presen lo t lon o i F i r ronc io l S to temenis -(Rev ised) i ; *^ *n , a t ^S , f "o , * i D isc losures

a I " i l u l l r r

'Bnrendmenls lo PAS 32 ond PAS l : Pu i tob le F i t ronc to l

I lns i rumer r ls ond Ob l igo i ions Ar is ing on L iqu ido t ion

iL r r rendnren ls 1o PAS l : Presen lo i ion o f l jems o{ Ot l re r

^ - ^ ^ , ^ r i , r n p a l . , a ( r h n - ' c \ i n q c c l u t l i - o E l l i ' n o l e s XA C

- - O U i l l i l L . l - J r L l r s )A C : U U I l l r r r 9 r u l u r u J , v ' ' v i ' Y e v " I

n n ' _ l F r r n r q ' -

PAS Even ls o f ie r the Bo ionce Shee l Do ie rX

l

r A ) tl

r A J /j

] P A S 8

Comprehens ive Inconre

lnverriories

S lo lenren l o f Cosh F lows

PAS i Cons i ruc t ion Con l roc ls

D A A 1 ' income Toxes

Ar r rendmenr Tn rAJ

I Un,Jerlying Assetsl2 - Deierreci Tox: Recovery oi

P A S I 5 Proper ty , P lon t cnd Eou iPmenl

P A S 1 7

, P A S 1 8 Revenue

P A S 1 9 Fn- ployee Benefi ts

AmenCments to PAS l9 : Ac tuor io l Gc ins onc Losses

Group P lons ono D isc losures

Errrployee Benefi isPAS 'I

9

(Amended )

PAS 20 I Accoun i lng fo r Governrner r t Gron is on i D isc losure o f

Governmenl Asss lonce

P A S 2 1 tn . : t te : ts o i c ronges i r Eore ;g l - Lx :nonoe Rc les

Anrenomen ' f : Ne1 lnves tnren t in o Fore iSr ' Opero lon

PAS 23(Rev ised)

i ^ - . ^ . , , i ^ ^ - ^ c i cD U l r u v v r l r v e v J , J

I

PAS 24(Rev i sed )

Relcted Porly Disclosur-i?s

Ret i remen l Benef i i P lonsPA,S 26 Accoun l inq or rd Repor l lng bYCrCoUl ' lT lng Or l

paS-zz- tepcroie Finorrcicrl Sloiemerrls

I (Amended) ' , -_

PAS 28i lAmended)

P A S 3 I

l nves lmen ' is i r r Assoc io les ond lo in i ver r l t res

* ;--- Fir rrnclc Repcrl in g in Fiyperrnf iol ic>l! 'v!"" ' ]9a-t iY A J I A

l J I e re \15 j r l c i r r l Ve r rTUres

f i i ,on . io l l r rsTrumenis D isc losu fe c t rc Presen lc l to r :

Amerromel r l s i c PA 'S 32 or rd PAS l : Pr ' r i l cb le F j i rcnc jo l

I nri l r u rnents ond O'olr gcrl iorrs Arisi n g on 11.9111'" ' !--

D A ( ? ,

PI I IL IP f h IE T INAN CIAt REPORN NG STAN DA RDS A N D INTERPREIATIONS

Eff ecl ive os of Decembet 31 ' 2012

Adop ied , NolAdopied

NotApp l icab le

, ^ . a n n r a n r r r D e . - 3 , / ' l l O s : i { i . g i i 6 r 9 l R i q r 1 s 1 s S - e s, A n l e J l u l t c r r r r u ^ J

" - _ _ _ _ - - - .^ - . ̂ + - - - A

T- . . n , r ' , o , , t : 1 r PAS 32 o f i " r ' r i r g F tno r r o a ' s se l5 o ' d

r ; , , , , , - i . t ; O b i l i l i e ,

E 1 . , , ; - d . a c l ) t O e )

r A J J J L I " Y - J ) f O ' C

t rort --h,J; ;*" . , tm"P-1' ; --

, '

P A s 3 7 ] P r o v ] s j o n s , C o n 1 i r l g e n 1 L i o b i l i i i e s o r r d C o r r t i n q e r r 1 A s s e t ? - ! - - .'t^;- - u*;ibt" *;a ' X

- , I A L f \ t i r F m + J , _ /

^ ^ c r o r ' ' ^ ( 1 . \ . i ' 1 1 l ^ \ 1 r ' r : n e : ] 1 : : R - - O g l i ' i f t O r ' : ' v r r r ' r u ' r ' - "r A ) J 7

, ' -

- - . :

- ^ , , . . i + : ^ D ^ - . ^ ^ , 1 i i ! ^ n

[*.nOrn"nf s 1o PAS 3g lrorrsi i ion ond lni i io Recogrri l ion :] o f F incnc io l Asse ls ond f : incnc io l L iob i l i i i es i j

, Arrendnienls 1o PA'S 391 Cosh Flow Heclge Accounllng

PAS 36 , imPoirrrrenl of Asseis x

I of f 'orecosi Inlrogroup Tronsocl iotrs

i r rendments 1o PAS 39 The Fo i r Vo lue OPl ton

l, .rrendmenis to PAS 39 onc PFRS 4: Flnonciol Gucronlee

Conlrocts

,q,,rrendmerrls io PAS 39 ond PFRS T Reclossif icoi ion oJ

r F inonc io Assets

IAn'endmenls io PAS 39 ond PFRS 7: Reclossit icoi ion ol

i Fin,:nciol Asseis - Eff"tfyl?1?ol9 r'91:t'o'

p,.r lnOments 1o Phil ipprne lalerpretci ion IFRIC-9 ono

PAS 39: Embedded Der votfves

tmendmeni 1o PAS 3g E l ig io le Hedged l ie r tsX

PAS 40 i lnves iment Proper iy

P A s 4 l Agr icu l lu re

Phil ippine InterPrelot ions

l F R l c I Chonges irr [xist ingSimllor Liooi l i l les

Decommissiotr ing, Resloroi iorr onci

lFRlc 2 J'z,e,mbers'Shore in Co-opercl ive Entj l ies crrd Simitot

lns i rumen ls

I F R I C 4

t F R l c 5

De iermi r r ing Wl re ther on Ar rongement Cor r io l r r \ c

RiQlhls 1o inieresls orising iro:n Decommtsstontng'

Relslorot ion ond Envirorrmenlol Rehobil i tolror Funds

t F R l c 6 Itruit l t i t , or ising frorl ' r Pcrr l icipotirrg ln cr Specif ic Morkei

I \nrosie Eleclr icol ond Eleclronlc Equtpment

t F R l c 7 ,qp plylnir ihe R esiolemen l Appro-och'11"-' t j j , ln

fi iorrclo-l Reporting in hyperirrt iotionorY Econcmtes

t F R t C 8 a - , ^ ^ - ^ , P - l /J T I J i J I ' J

IFRIC 9 Reossessmenl oi Emlred'Je' j D:t"9l1tt

.q r , rendmenls i c Ph i l ipprne ln le rpre io l ion IFRIC-9 ond

D / ( ' r Q , r n n e d r e : r e t v o l ' v u s ,- . 4 ) J

lrtlerwt Fincnctai F:e|)o!:thg onc lmp'lirneni --

l F R l c 1 l PFRS 2- Grcup o t - l c Treosury Shore Tronsoc l ro rJ

12 Serv ice Concess io r r Ar r t rngemenls

l F R l c l 0

I F R I C'_;I I K I L I J Cuslonrer LoYoli l ' Prcgt cmtles

t F R l c l 4 Th: L in r i l on c Def inec Benef i l Asse l [4inin'rL-rnr Fun dtrlq

pHr fi ptl'l EjhIAGAL REPoRTI NG sTnru onnos A N D I NTERPRETATIoNS

Eff ective os of Dercemb er 31, 2012

R e L l J i l e m e n l s o n d l l t e t l n l e r o 1 ll n l e roc l l on

i l " "d t " . "1 t lo P i r i l i pp lne l r r le rp re lo i ions IFRIC- l4 '

] P re poyme n ls of o M irri n-r u m F]tri1S-R t9lrre m e n l

I F R I C l 6 . t - t o * ' o i o N e t I n r e s l n r e ' ] " ' o E o r - i q r O p c o l ' o n

+- ..-.:--

: ' r ^ ' ' 11 n ; ' t ' i n ' r t i nns o f No t ] - cc t sh A55e15 i o Owne rs ll f K l U l / , r ) r r r u u r r v r ' '

' IFRIC I I I l rons ie rs o f Asse ls J rom Cus i ' ln le rs

IFRIC 19 Ex l ingu ish ing F inonc io l L lob i l i l es * i1h Ec1t ! l " t l y - : ' "1

[ t * l c zo ls l r ipp i r rg Cos ls in l i re Produc l jon Phose o f o S 'u r loce

l\.41r e

SIC-7 : ln i rcduc i ion o f the Euro

X

X

/.

s l c - , l 0

-src-12 Consoi icol ion SpecioiPu5gt"Iry '*

Governmeni Ass ls lcnceI Operol ing Actlvl i ies

No SPec i f i c Re lc l lo r r io

I ,qmendmeni Jo SIC - l2 : Scope c f S IC l2

SIC- , l3 lo in t l yCon l ro l ledEr r i i t ies l " lon-Mor re lo ryCon i r ibu l tons

, Dy venTurerl

S IC- , l5 Cpero t ing Leoses - l r rcenT ives

SC-2, I ] In . " rnu Toxes - Recovetv o f Revo lued

As5e15

c r - - r 5 l ncome Toxes - Chonges tn

i l ts 5;horeholciers

> l w - / t Evcr luo t ing the Subs ionce o 'Tronscc l i cns lnvc i \ ' l ng lne

Non-DePreciobl€

, Leglol Form of o Lecse

Servlces

. t - a 4 - r ' r r r i n r a q s s e l s - W e r S i r e C o s i s) l L - J Z I ' r ' r ' V ' v ' ! J r v ' '

Service Concession ArronEemelits: Dlsclosures

Revenue - Borter Tronsoci ions l trvolving Adveri isi t- lg

I SNlI CON{N'ITINICATION S CORPORA'TION

INDEX TO I"INANCIAL ST-AI-EN{ENTS AND

S UPPLE}'IEN'TARY SCIIEDUI,trSDECEMBER 31, 2T}12

ANNEX 6T-i :

Not appl icable

Not apl thcable

Not applicable

Not appl icable

Not appiicable

Not appl icable

Not applicable

A

B

C

FINANCIAL ASSEl-S

AMOLNTS RITCIENABLE' FROM DIRECTO ItS'

oPPiCENS, EMPLOYEES. RELATED PARTIES AND

pnn'rCIpnr- STCCI(HOLDERS (OTHER THAN

RELATED PAR'fIES)

Ai\4OLli\'T OF RECEI'ABLE FROM RELATED PARIIES

rluhirh ur" Eiininatec dunng the Consolidation of Financial

Stalentents

INTANGIBLE ASSETS AND OTHER ASSETS

LONG TERM DEBT

INDEBTEDNESS TO RELATED PARTIES (LONG-TER'M

LOANS FROM RELATED CON4PANIES)

GUAX-{NTEES OF SECURITIES OF OTI-ItrR ISSUERS

CAPITAL STOC]K

D

E

F

G

H

a

v 7 alL, ' -J

: = e4 l - 7

' - t ) t

a > >

, z- 0a / \

x F7 a

=

zC)

(t =,'- O

= , 4

<

j

t ^i i : _ .

": l:r =' -

- f ? r ' ^

l r i . ;€ i . - - u' J , 7 -

l

1-{I J

l

Uo?'o=

a

- r 7 -

N 7

G.cC

= 7

q,

a - ,a-

I J

9-an5

l . J-l ic'xc.

A L t Z

o i : J= " " ' o

-

{ J

c.

-]:

V=

1f,

=@

=a

-

E

II

a-

?

I

-ca

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c o

T

:

iJ

t

.J

!3

:EF W

; r =

= / v

! i =l !

- r E

7 u )) z 7- A- vz a ' l ;- nl', ' 77. t - ;i - 7- : - ;

J < =! - - F E -i r - , -

J z 4 =r - r j - )- r i -t Y r -- - i

E Z -t v , F =. E LU ) - . ' r a

. . v . : A. )u l r , " - A- E ' J- aa w ftrr - ' - l - -

, r''

Z e , Fc c \j - ^

- r ' - zE,; i n

z :r y &a ;a -7 t= ' t

z-Vi

_ 6: a )

a ? >

a < a= \ _

= o= !

- ^- == J

, ; ;

t ) =

a -

z

€

co-iI_9

o

I J

:-I

= z

= a ,

; a ,

T

-Ii :!

€Ic

I

==c

--c+

I

!

€

+

]=

=i r-o

c

-I J

T

+

c

6

c Z

l J

!

I J

6€

z=

Z-

!

!

;

z= = =

a-

F = '

1 - ,

< c

z-

z 'z

Z z=Z

, z Z

; c

c ^

= z z=

= Z Z

!

!

!

!!

!L

-

c

a = '

t o

- * ;

=

i-

la

;,=

a

- a - a= = - == = - z. a ) - ,, - - ' A

= : ' = . '- = = 4

- = ' = tt - < =? 2 2 6

;

- i z c

= i -

- /^ r =, =3 , 1 E

Z - . =- ^ : a

E ? - =: u

= . L - l

=

€

NA7

!

6

-

pl

,

ISM COMMUNICATIONS CORPORATION ITOGON … Form 17-A 2012.pdf · ISM COMMUNICATIONS CORPORATION ......

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Transcript of ISM COMMUNICATIONS CORPORATION ITOGON … Form 17-A 2012.pdf · ISM COMMUNICATIONS CORPORATION ......