COVER SHEET

Transcription

COVER SHEET

COVER SHEET
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(Company's Full Name)
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( Business address: No. Street City / Town / Province )
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ORTRUD T. YAO
373-30-38
Contact Person
Company Telephone Number
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Q 1st Qtr 2013
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Dept. Requiring this Doc.
Total amount of borrowings
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complished by SEC Personnel concerned
File Number
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Document I.D.
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STAMPS
Foreign
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CALAPAN VENTURES, INC.
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES
REGULATION CODE AND SRC RULE 17(b)(2) THEREUNDER
1.
For the quarterly period ended: March 31, 2013
2.
SEC Identification No. CS200901269
3.
BIR Tax Identification No. 007-236-853-000
4.
Exact name of registrant as specified in its charter :
5.
Province, Country or other jurisdiction of incorporation or organization:
PHILIPPINES
6.
Industry Classification Code : _________ (SEC Use Only)
7.
Address of principal office and Postal Code:
4th Floor 20 Lansbergh Place, Tomas Morato Ave. cor. Scout Castor St.,
1103 Quezon City
8.
Registrant’s telephone no. and area code: (632) 373-3038
9.
Former name, address, and fiscal year, if changed since last report:
Not applicable
10.
Securities registered pursuant to Sections 4 & 8 of the RSA:
Title of Each Class
Common Stock, P 1 par value
No. of Shares of Common Stock
Outstanding &/or Amount of
Outstanding
162,161,000 shares
Debt
11.
Are any or all of these securities listed on the Philippine Stock Exchange?
Yes [x]
No [ ]
12.
Indicate by check mark whether the registrant:
(a) has filed all reports required to be filed by Section 17 of the Securities
Regulation Code and Sections 26 and 141 of the Corporation Code of the
Philippines during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports):
Yes [x]
No [ ]
(b) has been subject to such filing requirements for the past 90 days:
Yes [x]
No [ ]
TABLE OF CONTENTS
FINANCIAL INFORMATION
Section 1
Page No.
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income and Expenses
Consolidated Statements of Changes in
Shareholder’s Equity
Consolidated Statements of Cash Flows
2
3
4
5
Section 2
Notes to Financial Statements
6
Section 3
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
24
Section 4
Aging of Accounts Receivable
30
Section 5
Summary of Adoption of Philippine Financial Reporting Standards
31
Section 6
Schedule of Retained Earnings Available for Dividends
36
CALAPAN VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Philippine Pesos)
March 31,
2013
(Unaudited)
December 31,
2012
(Audited)
ASSETS
Current Assets
Cash and cash equivalents
Receivables – net
Due from related parties
Other current assets
Total Current Assets
84,795,575
20,620,234
8,876,427
4,014,446
118,306,683
86,413,856
22,258,607
9,485,592
3,248,306
121,406,361
Noncurrent Assets
Available-for-sale investments
Investment property
Property and equipment – net
Deferred tax assets (Note 5)
Other noncurrent assets – net
Total Noncurrent Assets
1,371,776
80,357,000
314,783,103
2,397,385
11,939,346
410,848,610
1,371,776
80,357,000
316,738,180
2,397,385
11,937,346
412,801,687
529,155,293
534,208,048
88,632,008
11,137,360
99,769,368
101,410,645
7,934,834
109,345,479
78,134,152
2,566,750
11,866,221
7,651,215
100,218,338
80,137,592
2,566,750
11,866,221
7,600,215
102,170,778
162,161,000
58,073,612
9,444,169
370,522
98,133,661
328,182,964
162,161,000
58,073,612
9,444,169
370,522
91,688,123
321,737,426
984,623
954,365
529,155,293
534,208,048
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses
Income tax payable
Total Current Liabilities
Noncurrent Liabilities
Loan payable (Note 4)
Retirement benefit obligation
Deferred tax liability (Note 5)
Customers' deposits
Total Noncurrent Liabilities
Equity
Attributable to Equity Holders of Parent Company
Share capital – 1 par value
Authorized – 200,000,000 shares
Subscribed and issued – 120,000,000 shares
Additional paid-in capital
Revaluation surplus in property and equipment
Gain on available-for-sale investments
Accumulated profit
Minority Interest
See accompanying Notes to Consolidated Financial Statements.
2
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Quarters Ended September 30
2010
2009
REVENUES
Water services
Sales of goods
Quarter Ended March 31
2013
2012
(5,423,131)
(7,861,692)
(46,239,893)
16,210,162
33,599,186
34,552,386
5,012,644
39,565,030
32,274,291
4,696,104
36,970,395
COST OF SALES AND SERVICES
(26,659,291)
14,157,204
16,688,217
15,162,824
GROSS PROFIT
(19,580,602)
19,441,982
22,876,814
21,807,570
(7,393,997)
9,011,079
11,946,235
11,309,375
(12,186,605)
10,430,903
10,930,579
10,498,195
(2,031,028)
(1,148,196)
(1,094,819)
(12,738,094)
8,399,875
9,782,383
9,403,376
(3,344,578)
2,752,156
3,306,586
2,926,490
9,393,517)
5,647,719
6,475,796
6,476,886
(18,973,987)
(8,716,038)
5,647,046
673
6,445,538
30,258
6,450,229
26,656
27,690,025)
5,647,719
6,475,796
6,476,886
0.0201
0.0397
0.0398
OPERATING EXPENSES
PROFIT FROM OPERATIONS
OTHER INCOME (CHARGES) - NET
(551,489)
PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE – Net (Note 5)
Current
TOTAL COMPREHENSIVE INCOME
(
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Equity holders of the parent
Minority interest
(
EARNINGS PER SHARE (Note 6)
(
0.0674)
3
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE UNAUDITED THREE MONTHS ENDED MARCH 31
Attributable to Equity Holders of Parent Company
Revaluation
Gain on
surplus in
available
property and
for-sale
Accumulated
equipment
investments
profit
Balance at December 31, 2011
9,438,247
256,068
Profit for the period
Total
Minority
interest
89,885,673
319,814,600
822,323
6,450,229
6,450,229
26,656
Balance at March 31, 2012
9,438,247
256,068
96,335,902
326,264,829
848,979
Balance at December 31, 2012
9,444,169
370,522
91,688,123
321,737,426
954,365
6,445,538
6,445,538
30,258
98,133,661
328,182,964
984,623
Profit for the period
Balance at March 31, 2013
9,444,169
370,522
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE UNAUDITED THREE MONTHS ENDED MARCH 31
2013
2012
6,445,538
6,450,229
4,054,943
3,306,586
13,807,067
3,595,171
2,926,490
12,971,891
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax and minority interest
Adjustments for:
Depreciation and amortization
Provision for income tax
Operating profit before working capital changes
Increase in:
Receivables
Other current assets
Increase (decrease) in:
Accounts payable and accrued expenses
Customers' deposits
Cash generated from operations
Income tax paid
Net cash provided by operating activities
1,638,373
(766,140)
(2,705,746)
(37,216)
(12,778,637)
51,000
1,951,663
(104,061)
1,847,602
(1,608,621)
60,100
8,680,407
(208,630)
8,471,777
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to:
Due from related parties
Property and equipment
Minority interest
Decrease (increase) in other noncurrent assets
Net cash used in investing activities
609,165
(2,099,867)
30,258
(2,000)
(1,462,443)
(1,373,997)
(2,737,401)
26,656
2,250,000
(1,834,741)
CASH FLOWS FROM FINANCING ACTIVITIES
Additional loan loan payments
(2,003,440)
(1,335,627)
NET INCREASE IN CASH
(1,618,281)
5,301,409
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD
86,413,856
86,413,856
CASH AND CASH EQUIVALENTS AT END OF PERIOD
84,795,575
91,715,265
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Calapan Ventures, Inc. (“CVI” or “the Parent Company” formerly Calapan Equity Ventures Inc.)
and subsidiaries, collectively referred to as “the Group”, were incorporated in the Philippines and
were registered with the Securities and Exchange Commission (SEC) on January 30, 2009.
The consolidated financial statements include the accounts of the Parent Company and the
following subsidiaries:
Name of Subsidiary
Calapan Waterworks Corporation (CWC)
Metro Agoo Waterworks Inc. (MAWI)
Parent Company’s ownership through CWC
Tabuk Water Corp. (Tabuk Water)*
Dates of Incorporation
May 23, 1991
Percentage of
Ownership
99.61
September 17, 2012
August 14, 2006
84.55
100.00
* preoperating stage
The Parent Company was incorporated primarily to engage in, operate, conduct and maintain the
business of trading, processing, assembling, manufacturing, and/or fabricating and exporting,
importing, buying, acquiring, holding, or otherwise disposing of and dealing in goods, wares,
supplies, materials, articles, merchandise, commodities, equipment, hardware, appliances,
minerals, metals, timber, lumber and real and personal properties of every kind, class and
description, whether natural or artificial which may become articles of commerce.
On July 8, 2009, Jolliville Holdings Corporation (JOH), CVI’s Parent Company, passed a
resolution declaring 32% property dividends corresponding to 90,080,000 shares of the Parent
Company. The declaration was approved by JOH’s stockholders during the annual stockholders’
meeting on August 18, 2009. On January 28, 2010, the SEC approved the notice of property
dividend declaration of JOH amounting to P
= 90,080,000 payable to JOH’s stockholders of record
as of December 15, 2009. Subsequently on December 22, 2009, a stockholder of JOH executed
a deed of assignment of shares of stocks of the Parent Company equivalent to 40 million shares in
favor of certain subsidiaries of JOH.
On December 16, 2009, Elgeete Holdings, Inc. assigned its 100% ownership in Kristal Water to
the Parent Company amounting to P
= 250,000 equal to 250,000 shares.
Also in
December 16, 2009, CWC and Ormina Realty and Development Corporation (ORDC) assigned
their 67% and 33% ownership, respectively, in Tabuk Water to the Parent Company amounting to
P
= 6.7 million and P
= 3.3 million, respectively.
The principal activities of the subsidiaries are as follows:
Name of subsidiary
CWC
Tabuk Water*
Principal activity
Operates, manages and maintains the general business of development
and utilization of water resources to harness, produce and supply water
for domestic, municipal, agricultural, industrial, commercial or
recreational purposes.
Will engage in the operation, management and maintenance of
development and utilization of water resources. Also, will acquire, own,
lease, construct, install, equip, operate, manage and maintain plants.
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MAWI*
Will engage in the operation, management and maintenance of
development and utilization of water resources. Also, will acquire, own,
lease, construct, install, equip, operate, manage and maintain plants.
* preoperating stage
On October 23, 2002, the 12th Congress of the Republic of the Philippines enacted
Republic Act No. 9185 whereby CWC was granted a franchise to construct, install, operate, and
maintain for commercial purposes and in the public interest, a water supply and sewerage system
for the purpose of distributing water for sale and for sanitation in the City of Calapan, province of
Oriental Mindoro. The franchise is for a period of 25 years from the date of enactment. The act
took effect on February 9, 2003.
CWC was also granted a certificate of public convenience by the National Water Resources Board
on December 18, 2002 and will expire on January 16, 2028.
The registered address of the Parent Company is at 4
Tomas Morato, Quezon City.
th
Floor 20 Lansbergh Place Bldg., 170
2. Summary of Significant Accounting and Financial Reporting Policies
Basis of Preparation of Financial Statements
The accompanying consolidated financial statements have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS) including interpretations issued by Financial
Reporting Standards Council (FRSC).
The accompanying consolidated financial statements have been prepared on the historical cost
basis except for revaluation for certain property.
Reporting Currency
The financial statements are presented in Philippine pesos, which is the Group’s functional and
presentation currency under PFRS.
Basis of Consolidation
The consolidated financial statements include the accounts of the Parent Company and
subsidiaries. Subsidiaries are consolidated from the date on which control is transferred to the
Parent Company and cease to be consolidated from the date on which control is transferred out of
the Parent Company. The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of comprehensive income from the effective date of
acquisition or up to the effective date of disposal, as appropriate. All significant intercompany
accounts, transactions, and income, expenses and losses are eliminated upon consolidation.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with those used by other members of the Group.
Minority interests in the net assets of consolidated subsidiaries are identified separately from the
Group’s equity therein. Minority interests consist of the amount of those interests at the date of
the original business combination and the minority’s share of changes in equity since the date of
the combination. Losses applicable to the minority in excess of the minority’s interest in the
subsidiary’s equity are allocated against the interest of the Parent Company except to the extent
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that the minority has a binding obligation and is able to make an additional investment to cover
losses.
Disposals of equity investments to minority interests result in gains and losses for the Group are
recorded in the consolidated statement of comprehensive income. Purchase of equity shares
from minority interests results in goodwill, being the difference between any consideration paid
and the relevant share acquired in the fair value of the net assets of the subsidiary.
Changes in Accounting Policies
The Group adopted the amendment to PFRS, which became effective on or before
January 1, 2010 as follow:

Revised PFRS 3, Business Combinations and PAS 27, Consolidated and Separate Financial
Statements. The revised PFRS 3 introduces a number of changes in the accounting for
business combinations that will impact the amount of goodwill recognized, the reported
results in the period that an acquisition occurs, and future reported results. The revised
PAS 27 requires that a change in the ownership interest of a subsidiary (without loss of
control) is accounted for as an equity transaction. Therefore, such transactions will no
longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the
amended standard changes the accounting for losses incurred by the subsidiary as well as
the loss of control of a subsidiary. Other consequential amendments were made to PAS
7, Statement of Cash Flows, PAS 12, Income Taxes, PAS 21, The Effects of Changes
in Foreign Exchange Rates, PAS 28, Investment in Associates and PAS 31, Interests in
Joint Ventures. The changes introduced by the revised PFRS 3 must be applied
prospectively, while changes introduced by the revised PAS 27 must be applied
retrospectively with a few exceptions. The changes by PFRS 3 and PAS 27 will affect future
acquisitions or loss of control and transactions with minority interests.
However, the Group did not intend to take advantage of this possibility.
Also, the following revised PFRS, amended PAS and interpretations issued by IFRIC became
effective in 2010 but are not relevant to the Group:

Amendment to PFRS 2, Share-based Payment: Group Cash-settled Share-based Payment
Transactions. This Amendment clarifies the scope and the accounting for group cash-settled
share-based payment transactions. This Amendment will have no impact on the consolidated
financial position or performance of the Group, as the Group is not involved in any similar
transaction.

Amendment to PAS 39, Financial Instruments: Recognition and Measurement – Eligible
Hedged Items. This Amendment addresses only the designation of a one-sided risk in a
hedged item, and the designation of inflation as a hedged risk or portion in particular
situations. The amendment clarifies that an entity is permitted to designate a portion of the
fair value changes or cash flow variability of a financial instrument as a hedged item. The
Group has not entered into transactions involving hedges and as such the amendment is
unlikely to impact the financial position or performance of the Group.

Philippine Interpretation IFRIC 17, Distributions of Non-Cash Assets to Owners. This
Philippine Interpretation covers accounting for two types of non-reciprocal distributions of
assets by an entity to its owners acting in their capacity as owners. The two types of
distribution are:
8
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a.
distributions of non-cash assets (e.g., items of property, plant and equipment,
businesses as defined in PFRS 3, ownership interests in another entity or disposal
groups as defined in PFRS 5); and
b.
distributions that give owners a choice of receiving either non-cash assets or a cash
alternative.
This Philippine Interpretation addresses only the accounting by an entity that makes a
non-cash asset distribution. It does not address the accounting by shareholders who receive
such a distribution.

Philippine Interpretation IFRIC 18, Transfers of Assets from Customers. This Philippine
Interpretation covers accounting for transfers of items of property, plant and equipment by
entities that receive such transfers from their customers. Agreements within the scope of
this Interpretation are agreements in which an entity receives from a customer an item of
property, plant and equipment that the entity must then use either to connect the customer
to a network or to provide the customer with ongoing access to a supply of goods or
services, or to do both. This Philippine Interpretation also applies to agreements in which
an entity receives cash from a customer when that amount of cash must be used only to
construct or acquire an item of property, plant and equipment and the entity must then use
the item of property, plant and equipment either to connect the customer to a network or to
provide the customer with ongoing access to a supply of goods or services, or to do both.
Improvements to Existing Standards
On April 2009, IASB issued amendments to certain standards, primarily with a view to removing
inconsistencies and clarifying wordings. There are separate transitional provisions for each
standard.

PFRS 2, Scope of PFRS 2 and Revised PFRS 3, clarifies that the contribution of a business
on formation of a joint venture and combinations under common control are not within the scope
of PFRS 2 even though they are out of scope of PFRS 3.

PFRS 5, Disclosures of Noncurrent Assets Classified as Held for Sale or Discontinued
Operations, clarifies that the disclosures required in respect of non-current assets and
disposal groups classified as held for sale or discontinued operations are only those set out in
PFRS 5. The disclosure requirements of other PFRS only apply if specifically required for such
non-current assets or discontinued operations.

PFRS 8, Disclosure of Information About Segment Assets, clarifies that segment assets and
liabilities need only be reported when those assets and liabilities are included in measures that
are used by the chief operating decision maker.

PAS 1, Current/Noncurrent Classification of Convertible Instruments, clarifies that the terms of
a liability that could result, at anytime, in its settlement by the issuance of equity instruments at
the option of the counterparty do not affect its classification.

PAS 7, Classification of Expenditures on Unrecognised Assets, explicitly states that only
expenditure that results in a recognized asset can be classified as a cash flow from investing
activities.
9
-5
PAS 17, Classification of Leases of Land and Buildings, removes the specific guidance on
classifying land as a lease. Prior to the amendment, leases of land were classified as
operating leases. The amendment now requires that leases of land are classified as either
“finance” or “operating” in accordance with the general principles of PAS 17. The amendments
will be applied retrospectively.

PAS 18, Determining Whether an Entity is Acting as a Principal or as an Agent, adds
guidance (which accompanies the standard) to determine whether an entity is acting as a
principal or as an agent. The features to consider are whether the entity: (a) has primary
responsibility for providing the goods or service; (b) has inventory risk; (c) has discretion in
establishing prices; and (d) bears the credit risk.

PAS 36, Unit of Accounting for Goodwill Impairment Test, clarifies that the largest unit permitted
for allocating goodwill, acquired in a business combination, is the operating segment as defined
in PFRS 8 before aggregation for reporting purposes.

PAS 38, Additional Consequential Amendments Arising from Revised PFRS 3
– Measuring the fair value of an intangible asset acquired in a business combination,
clarifies that if an intangible asset acquired in a business combination is identifiable only with
another intangible asset, the acquirer may recognize the group of intangible assets as a
single asset provided the individual assets have similar useful lives; also clarifies that the
valuation techniques presented for determining the fair value of intangible assets acquired in a
business combination that are not traded in active markets are only examples and are not
restrictive on the methods that can be used.

PAS 39, Treating Loan Prepayment Penalties as Closely Related Embedded Derivatives
– Scope exemption for business combination contracts - Cash flow hedge accounting,
clarifies the following:
a. that a prepayment option is considered closely related to the host contract when the
exercise price of a prepayment option reimburses the lender up to the approximate present
value of lost interest for the remaining term of the host contract.
b. that the scope exemption for contracts between an acquirer and a vendor in a business
combination to buy or sell an acquiree at a future date applies only to binding forward
contracts, and not derivative contracts where further actions by either party are still to be
taken.
c.

that gains or losses on cash flow hedges of a forecast transaction that subsequently
results in the recognition of a financial instrument or on cash flow hedges of recognized
financial instruments should be reclassified in the period that the hedged forecast cash
flows affect profit or loss.
IFRIC 9, Scope of Philippine Interpretation IFRIC 9 and Revised PFRS 3, clarifies that it does
not apply to possible reassessment at the date of acquisition, to embedded derivatives in contracts
acquired in a business combination between entities or businesses under common control or the
formation of joint venture.
10
-6
IFRIC 16, Amendment to the Restriction on the Entity that Can Hold Hedging Instruments,
states that, in a hedge of a net investment in a foreign operation, qualifying hedging
instruments may be held by any entity or entities within the group, including the foreign
operation itself, as long as the designation, documentation and effectiveness requirements
of PAS 39 that relate to a net investment hedge are satisfied.
Future Changes in Accounting Policies
The Group did not early adopt the following standards and Philippine Interpretations that have
been approved but are not yet effective:
Effective in 2012
 Philippine Interpretation IFRIC-15, Agreements for the Construction of Real Estate
Effective in 2013
 PFRS 9 Financial Instruments
The Group is currently assessing the relevance and impact of the above standards, amendment to
standards and interpretations. The revised disclosures on the financial statements required by the
above standards and interpretations will be included in the Group’s financial statements when
these are adopted.
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments 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
value.
Receivables
Trade and other receivables are carried at original invoice amount less any allowance for
impairment in value.
Financial Assets and Liabilities
Financial assets and financial liabilities are recognized initially at fair value. Transaction costs are
included in the initial measurement of all financial assets and liabilities, except for financial
instruments measured at fair value through profit and loss. Fair value is determined by preference
to the transaction price or other market prices. If such market prices are not reliably determinable,
the fair value of the consideration is estimated as the sum of all future cash payments or receipts,
discounted using the prevailing market rates of interest for a similar instrument with similar
maturities.
The Group recognizes a financial asset or liability in the statement of financial position when it
becomes a party to the contractual provisions of the instrument. A financial liability (or a part of a
financial liability) is derecognized when the obligation is extinguished. In the case of a regular
purchase or sale of financial assets, recognition and derecognition, as applicable, is done using
settlement date accounting.
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Financial assets are classified into the following categories: financial assets at fair value through
profit or loss (FVPL), loans and receivables, held-to-maturity investments, and available-for-sale
investments as appropriate. Financial liabilities are classified into the following categories:
financial liabilities at FVPL and other financial liabilities. The Group determines the classification
at initial recognition and, where allowance is appropriate, re-evaluates this designation at every
reporting date. As of September 30, 2012, the Group has financial assets and liabilities under
loans and receivables, available-for-sale financial assets and other financial liabilities.

Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
and are not quoted in an active market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the receivables. Such assets are
carried at cost or amortized cost in the statement of financial position. Amortization is
determined using the effective interest method. Loans and receivables are included in current
assets if maturity is within 12 months from the end of financial reporting period. Otherwise,
these are classified as noncurrent assets.
This category includes cash and cash equivalents, receivables, due from related parties and
special bank deposits.

Available-for-sale investments
Available-for-sale (AFS) investments are those non-derivative financial assets that are
designated as available-for-sale or are not classified in any of the preceding categories. After
initial recognition, AFS financial assets are measured at fair value with gains or losses being
recognized as separate component of stockholders’ equity until the investment is
derecognized or until the investment is determined to be impaired at which time the
cumulative gain or loss previously reported in equity is included in the statement of
comprehensive income.
The fair value of investments that are actively traded in organized financial market is
determined by reference to quoted market bid prices at the close of business at the end of
each financial reporting period. For investments where there is no active market, fair value is
determined using valuation techniques. Such techniques include recent arm’s length market
transaction; reference to the current market value of another instrument which is substantially
the same; discounted cash flows analysis and option pricing models.
This category includes investment in mutual fund managed by an insurance company.

Other Financial Liabilities
Other financial liabilities pertain to liabilities that are not held for trading or not designated as at
FVPL upon inception of the liability. A financial liability at FVPL is acquired principally for the
purpose of repurchasing in the near term or upon initial recognition, it is designated by
management as at fair value through profit or loss.
Other financial liabilities are initially recorded at fair value less directly attributable transaction
costs. After initial recognition, other financial liabilities are subsequently measured at
amortized cost using effective interest method. These include liabilities arising from
operations and borrowings.
This category includes accounts payable and accrued expenses, due to related parties, loan
payable and customers’ deposits.
12
-8-
Impairment of Financial Assets
The Group assesses at each end of financial reporting period whether a financial asset or group of
financial assets is impaired.
Assets carried at amortized cost
If there is objective evidence that an impairment loss on loans and receivables carried at
amortized cost has been incurred, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount
of the asset shall be reduced either directly or through use of an allowance account. The amount
of the loss shall be recognized in the Group’s consolidated statement of comprehensive income.
The Group first assesses whether objective evidence of impairment exists individually for financial
assets that are individually significant, and individually or collectively for financial assets that are
not individually significant. If it is determined that no objective evidence of impairment exists for
an individually assessed financial asset, whether significant or not, the asset is included in a group
of financial assets with similar credit risk characteristics and that group of financial asset is
collectively assessed for impairment. Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decrease can be related objectively
to an event occurring after the impairment was recognized, the previously recognized impairment
loss is reversed. Any subsequent reversal of an impairment loss is recognized in the consolidated
statement of comprehensive income to the extent that the carrying value of the asset does not
exceed its amortized cost at the reversal date.
Assets carried at cost
If there is objective evidence that an impairment loss has been incurred in an unquoted equity
instrument that is not carried at fair value because its fair value cannot be reliably measured, or on
a derivative asset that is linked to and must be settled by delivery of such an unquoted equity
instrument, the amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the current market rate
of return for a similar financial asset.
Available-for-Sale investments. If an available-for-sale asset is impaired, an amount comprising
the difference between its cost (net of any principal payment and amortization) and its current fair
value, less any impairment loss previously recognized in profit or loss, is transferred from equity
to the statements of income. Reversals in respect of equity instruments classified as available-forsale are not recognized in profit. Reversals of impairment losses on debt instruments are
reversed through profit or loss; if the increase in fair value of the instrument can be objectively
related to an event occurring after the impairment loss was recognized in profit or loss.
13
-9-
Derecognition of Financial Assets and Liabilities
Financial assets
A financial asset is derecognized when (1) the rights to receive cash flows from the financial
instruments expire, (2) the Group retains the right to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a third party under a “passthrough” arrangement, or (3) the Group has transferred its rights to receive cash flows from the
asset and either has transferred substantially all the risks and rewards of the asset, or has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset or has entered into
a pass-through arrangement and has neither transferred nor retained substantially all the risks and
rewards of an asset nor transferred control of the assets, the asset is recognized to the extent of
the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of the original carrying amount of
the asset and the maximum amount of consideration that the Group could be required to repay.
Financial Liabilities
A financial liability is derecognized when the obligation under the liability is discharged, cancelled
or expired. Where the existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of
a new liability, and the difference in the respective carrying amounts is recognized in consolidated
statement of comprehensive income.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated statement of financial position if, and only if, there is a currently enforceable legal
right to offset the recognized amounts and there is an intention to settle on a net basis, or to
realize the asset and settle the liability simultaneously. This is not generally the case with master
netting agreements, and the related assets and liabilities are presented gross in the consolidated
statement of financial position.
Investment Property
Investment property, which is property held to earn rentals and/or for capital appreciation, is
carried at fair value at end of financial reporting period. Gains or losses arising from changes in
the fair value of investment property are included in profit or loss for the period in which they arise.
A company-occupied property classified under property and equipment account becomes an
investment property when it ends company-occupation. Decrease in the carrying amount is
recognized in statement of comprehensive income. However, to the extent that an amount is
included in its revaluation surplus, the decrease is charged against that revaluation surplus.
Increase in carrying amount is recognized in statement of comprehensive income to the extent
that the increase reverses a previous impairment loss for such property. The amount recognized
in statement of comprehensive income does not exceed the amount needed to restore the
carrying amount that would have been determined (net of depreciation) had no impairment loss
been recognized. Any remaining part of the increase is credited directly to equity in revaluation
surplus. Revaluation surplus included in equity maybe transferred to accumulated profits. The
transfer from revaluation surplus to accumulated profits is not made through profit or loss.
14
- 10 -
Investment property is derecognized on disposal, or when the investment property is permanently
withdrawn from use and no future economic benefit is expected from its disposal. Any gains or
losses on the retirement or disposal of an investment property are recognized in the statement of
comprehensive income in the year of retirement or disposal.
Where there is clear evidence that the fair value of an investment property is not reliably
determinable on a continuing basis, the cost model under PAS 16 “Property, Plant and
Equipment”, shall be used.
The Company’s investment property consists of parcels of land located in Calapan, Oriental
Mindoro.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation, amortization and any
allowance for impairment in value except for land. Land is carried at appraised values as
determined by an independent firm of appraisers on December 22, 2009. The appraisal increment
resulting from the revaluation was credited to “Revaluation surplus in land” shown under “Equity”
section in the consolidated statement of financial position and consolidated statement of changes
in equity.
Initial cost of property and equipment comprises its construction cost or purchase price and any
directly attributable cost of bringing the assets to its working condition and location for its intended
use. Expenses incurred and paid after the property and equipment have been put into operation,
such as repairs and maintenance and overhaul costs, are normally charged to income when the
costs are incurred. In situation where it can be clearly demonstrated that the expenditures have
resulted in an increase in the future economic benefits expected to be obtained from the use of an
item of property and equipment beyond its originally assessed standard of performance, the
expenditures are capitalized as an additional cost of property and equipment.
Depreciation and amortization commence once the assets are available for use and is computed
using the straight-line method over the following estimated useful lives:
Years
20
5 – 50
5
5
5
Land improvements
Water utilities and distribution system
Office furniture and equipment
Service vehicles
Staffhouse, warehouse and office
The useful life and depreciation and amortization methods are reviewed periodically to ensure that
the method and period of depreciation and amortization are consistent with the expected pattern
of economic benefits from items of property and equipment.
Construction in progress and equipment for installation, included in the property and equipment,
are stated at cost. These include cost of construction, equipments and other direct costs.
Construction in progress and equipment for installation are not depreciated until such time as the
relevant assets are completed or installed and put into operational use.
When assets are retired or otherwise disposed of, the cost and related accumulated depreciation
and amortization are eliminated from the accounts, and any gain or loss resulting from their
disposal is credited or charged to current operations.
15
- 11 -
Goodwill
Goodwill arising from the acquisition of a subsidiary or a jointly controlled entity represents the
excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity recognized at
the date of acquisition. Goodwill is initially recognized as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment
annually or more frequently, if events of changes in circumstances indicate that the carrying value
may be impaired. An impairment loss recognized for goodwill is not reversed in a subsequent
period. Negative goodwill, which is the excess of net fair value of subsidiaries’ identifiable assets,
liabilities and contingent liabilities over the cost of business combination, is immediately
recognized as income.
On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
Impairment of Non-financial Assets
The carrying values of long-lived assets are reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable. If any such indication
exists and where the carrying values exceed the estimated recoverable amounts, the assets or
cash-generating units are written down to their recoverable amounts. The recoverable amount of
the asset is the greater of net selling price and value in use. The net selling price is the amount
obtainable from the sale of an asset in an arm’s length transaction less cost to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessment of the time value of money and the risks
specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the smallest cash-generating unit to which the asset
belongs. Impairment losses are recognized in the statement of comprehensive income in the
period in which it arises unless the asset is carried at a revalued amount in which case the
impairment is charged to the revaluation surplus of the said asset.
A previously recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the recoverable amount of an asset, however, not to an amount
higher than the carrying amount that would have been determined (net of any depreciation and
amortization) had no impairment loss been recognized for the asset in prior years.
A reversal of an impairment loss is credited to current operations.
Related Party Transactions
Transactions between related parties are based on terms similar to those offered to non-related
parties. Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making financial and
operating decisions and the parties are subject to common control or common significant
influence. Related parties may be individuals or corporate entities.
16
- 12 -
Revenue and Cost Recognition
Revenue is recognized when it is probable that the economic benefit associated with the
transactions will flow to the Group and the amount can be reliably measured. The following
specific recognition criteria must also be met before revenue is recognized:
 Water revenues are recognized when the related water services are rendered.
 Sales are recognized upon delivery of goods sold, and the transfer of risks and rewards to the
customer has been completed.
 Interest income is recognized on a time proportion basis that reflects the effective yield on the
asset.
 Other income is recorded when the related income/service is earned.
Cost and expenses are recognized upon receipt of goods, utilization of the service or at the date
they are incurred. Except for borrowing costs attributable to qualifying assets, all finance costs are
reported on an accrual basis.
Leases
Leases are classified as finance leases whenever the term of the lease transfer substantially all
the risks and rewards of ownership to the lessee. All other leases are classified as operating
leases.
Retirement Benefit Costs
The Group’s retirement cost is actuarially determined using the projected unit credit method. This
method reflects service rendered by employees up to the date of valuation and incorporates
assumptions concerning employees’ projected salaries. Actuarial valuations are conducted with
sufficient regularity with option to accelerate when significant changes to underlying assumptions
occur. Retirement expense includes current service cost, interest cost and amortization of
unrecognized past service cost and recognition of actuarial gains or losses.
The current service cost is a level annual amount or a fixed percentage of salary which, when
invested at the rate of interest assumed in the actuarial valuation, is sufficient to provide the
required retirement benefit at the employee’s retirement.
Past service cost is the present value of the excess of the projected retirement benefits over the
amount expected to be provided by future contributions based on the service cost. Past service
cost is recognized immediately to the extent that the benefits are already vested, and otherwise is
amortized on a straight-line basis over the average period until the benefits become vested.
Actuarial gains and losses that exceed 10% of the greater of the present value of the Group’s
defined benefit obligation and the fair value of plan assets are amortized over the expected
average remaining working lives of the participating employees.
The retirement benefit obligation recognized in the statement of financial position represents the
present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and
losses and unrecognized past service cost, and as reduced by the fair value of plan assets, if any.
Any assets resulting from this calculation is limited to unrecognized actuarial losses and past
service costs, plus the present value of available refunds and reductions in future contributions to
the plan.
17
- 13 -
Borrowing Costs
Borrowing costs incurred during the construction period on loans and advances used to finance
construction and property development are capitalized as part of construction and development
costs included under “Property and Equipment” account in the statement of financial position.
Capitalization of borrowing costs commences when the activities to prepare the asset are in
progress and expenditures and borrowing costs are being incurred. Capitalization of borrowing
costs ceases when substantially all the activities necessary to prepare the asset for its intended
use are complete. If the carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recorded. Capitalized borrowing cost is based on applicable weighted average
borrowing rate.
All other borrowing costs are charged to operation in the period in which they are incurred.
Rental expenses under operating leases are charged to profit or loss on a straight-line basis over
the term of the lease.
The Group determines whether an arrangement is, or contains a lease based on the substance of
the arrangement. It makes an assessment of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset.
Income Taxes
Income taxes represent the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable income for the year. Taxable income differs from
income as reported in the statement of comprehensive income because it excludes items of
income or expenses that are taxable or deductible in other years and it further excludes items that
are never taxable or deductible. The Group’s liability for current income tax is calculated using tax
rates that have been enacted or substantively enacted at the end of financial reporting period.
Deferred tax is provided, using the liability method, on all temporary differences at the end of
financial reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes and carryforward benefits of net operating loss carryover
(NOLCO) and minimum corporate income tax (MCIT). Deferred tax assets are recognized for all
deductible temporary differences to the extent that it is probable that taxable profit will be available
against which the deductible temporary difference can be utilized. Deferred tax liabilities are
recognized for all taxable temporary differences. Deferred tax assets and liabilities are measured
using the tax rate that is expected to apply to the period when the asset is realized or the liability is
settled.
The carrying amount of deferred tax assets is reviewed at each end of financial reporting period
and reduced to the extent that it is not probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax assets to be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to off-set
current tax assets against current tax liabilities.
Income tax relating to items recognized directly in equity is recognized in equity and in other
comprehensive income in the consolidated statement of comprehensive income.
18
- 14 -
Provisions
Provisions are recognized only when the following conditions are met: a) there exists a present
obligation (legal or constructive) as a result of past event; b) it is probable (i.e. more likely than
not) that an outflow of resources embodying economic benefits will be required to settle the
obligation; and, c) reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at each end of financial reporting period and adjusted to reflect the
current best estimate.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. They are
disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.
A contingent asset is not recognized in the consolidated financial statements but disclosed when
an inflow of economic benefit is probable.
Events after the End of Financial Reporting Period
Post year-end events that provide additional information about the Group’s position at the end of
financial reporting period (adjusting events) are reflected in the Group’s financial statements. Post
year-end events that are not-adjusting events are disclosed in the notes to financial statements
when material.
Earnings per Share (EPS)
EPS is determined by dividing net income for the year by the weighted average number of shares
outstanding during the year including fully paid but unissued shares as of the end of the year,
adjusted for any subsequent stock dividends declared.
Management’s Use of Judgments and Estimates
The preparation of the Group’s financial statements in accordance with PFRS requires
management to make judgments, estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. The judgments, estimates and assumptions
used in the accompanying financial statements are based upon management’s evaluation of
relevant facts and circumstances as of the date of the financial statements. Actual results could
differ from such estimates. The effect of any changes in estimates will be recorded in the Group’s
financial statements when determinable.
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations which have the most significant effect on the
amounts recognized in the consolidated financial statements:

Distinction between Investment Property and Owner-Occupied Property
The Group determines whether a property qualifies as investment property. In making its
judgments, the Group considers whether the property generates cash flows largely
independent of the other assets held by an entity. Owner-occupied properties generate cash
flows that are attributable not only to the property but also other assets used in the supply
process.
19
- 15 -
Some properties are held to earn rentals or for capital appreciation and other properties are
held for use in rendering of services or for administrative purposes. If the portion cannot be
sold separately, the property is accounted for as an investment property only if an insignificant
portion is held for use in the production or supply of goods and services or for administrative
purposes. Judgment is applied in determining whether ancillary services are so significant
that a property does not qualify as investment property. The Group considers each property
separately in making its judgment.
Estimates
The key assumptions concerning the future and other sources of estimation uncertainty at the end
of financial reporting period that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below:

Estimation of Impairment on Receivables
The Group maintains allowances for impairment losses on receivables at a level considered
adequate to provide for potential uncollectible receivables. The level of this allowance is
evaluated by the management on the basis of factors that affect the collectibility of the
accounts.
The factors include, but are not limited to, the length of relationship with the customer, the
customer’s payment behavior and known market factors. The Group reviews the age and
status of receivables, and identifies accounts that are to be provided with allowances on a
continuous basis.
The Group provides full allowance for receivables that it deems
uncollectible. The amount and timing of recorded expenses for any period would differ if the
Group made different judgments or utilized different estimates. An increase in the allowance
for impairment losses on receivables would increase recorded operating expenses and
decrease current assets.

Estimation of Useful Lives of Property and Equipment
Useful lives of property and equipment are estimated based on the period over which these
assets are expected to be available for use. Such estimation is based on a collective
assessment of industry practice, internal technical evaluation and experience with similar
assets. The estimated useful life of each asset is reviewed periodically and updated if
expectations differ from previous estimates due to physical wear and tear, technical or
commercial obsolescence and legal or other limits on the use of the asset. It is possible,
however, that future results of operations could be materially affected by changes in the
amounts and timing of recorded expenses brought about by changes in the factors mentioned
above. Any reduction in the estimated useful lives of property and equipment would increase
the Group’s recorded operating expenses and decrease on the related asset accounts.

Judgment on classification of Financial Assets and Liabilities
The Group classifies a financial instrument, or its component parts, on initial recognition as a
financial asset, a financial liability or an equity instrument in accordance with the substance of
the contractual arrangement and the definitions of a financial asset, a financial liability or an
equity instrument. The substance of a financial instrument, rather than its legal form, governs
its classification in the Group’s statement of financial position.
The Parent Company determines the classification at initial recognition and reevaluates this
designation at every reporting date.
20
- 16 -
PFRS requires that certain financial assets and liabilities be carried at fair value, which
requires the use of extensive accounting estimates and judgments.
While significant components of fair value measurement are determined using verifiable
objective evidence (i.e. interest rates, volatility rates), the timing and amount of changes in fair
value would differ with the valuation methodology used. Any change in the fair value of these
financial assets and liabilities would directly affect income and equity

Estimation of Impairment on Non-Financial Assets
Impairment review is performed when certain impairment indicators are present. Such
indicators would include significant changes in asset usage, significant decline in market value
and obsolescence or physical damage on an asset. If such indicators are present and where
the carrying amount of the asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. Determining the net recoverable
value of assets requires the estimation of cash flows expected to be generated from the
continued use and ultimate disposition of such assets. While it is believed that the
assumptions used in the estimation of fair values reflected in the financial statements are
appropriate and reasonable, significant changes in these assumptions may materially affect
the assessment of recoverable values and any resulting impairment loss could have a material
adverse impact on the results of operations.
Determining whether goodwill is impaired requires an estimation of the value in use of the
cash-generating units to which goodwill has been allocated. The value in use calculation
requires the management to estimate the future cash flows expected to arise from the cashgenerating unit and a suitable discount rate in order to calculate present value.

Estimation of Retirement and Other Benefits
The determination of the Group’s obligation and cost for pension and other retirement benefits
is dependent on management’s selection of certain assumptions used by actuaries in
calculating such amounts.
The assumptions for pension costs and other retirement benefits are described in Note 14,
and include among others, discount and salary increase rates. Actual results that differ from
the assumptions are accumulated and amortized over future periods and therefore, generally
affect the Group’s recognized expense and recorded obligation in such future periods. While
management believes that the assumptions are reasonable and appropriate, significant
differences in actual experience or significant changes in management assumptions may
materially affect the Group’s pension and other retirement obligations.
The Group also estimates other employee benefits obligation and expense, including the cost
of paid leaves based on historical leave availment of employees, subject to the Group’s policy.
These estimates may vary depending on the future changes in salaries and actual
experiences during the year.

Deferred Income Tax Assets
The carrying amount of deferred tax assets is reviewed at each end of financial reporting
period and reduced to the extent that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax assets to be utilized. Management expects
future operations will generate sufficient taxable profit that will allow all or part of the deferred
income tax assets to be utilized.
21
- 17 
Financial Assets and Liabilities
PFRS requires that certain financial assets and liabilities be carried at fair value, which
requires the use of extensive accounting estimates and judgments. While significant
components of fair value measurement are determined using verifiable objective evidence (i.e.
interest rates, volatility rates), the timing and amount of changes in fair value would differ with
the valuation methodology used. Any change in the fair value of these financial assets and
liabilities would directly affect income and equity.
3. Loan Payable
This account pertains to long-term loans availed from the Development Bank of the Philippines for
the rehabilitation, expansion and improvements of the waterworks system of CWWC for P
= 137
million payable in fifteen (15) years on a monthly basis. Interest is fixed at 10.5% per annum,
reviewable and subject to adjustment annually thereafter but not to exceed 15% per annum. For
2007 and beyond, the Company was able to negotiate the interest rate at 9%.
CWWC executed a deed of assignment relative to the loan, in favor of the bank of (a) a portion of
CWWC’s Reserve Fund (via Savings or Other Investment Account) equivalent to two monthly
interest amortization during the grace period, to increase to two monthly principal and interest
amortization after the grace period onwards. The Reserve Fund shall be mainted for CWWC’s
expenses for maintenance, operation and emergency fund; and (b) billed water/receivables until
the amount of the loan is fully paid.
Also, CWWC mortgaged its real estate and other equipment all situated in Calapan, Oriental
Mindoro in favor of the bank.
4. Related Party Transactions
The Group has the following transactions with related parties:
a. Non-interest bearing cash advances with affiliates for investing and working capital purposes.
Also, the Group availed non-interest bearing cash advances from its major stockholder and
affiliate for the acquisition of operating machinery and equipment.
b. Management and consultancy agreement with an affiliate renewable annually upon such
terms and conditions as may be mutually agreed upon by both parties.
c.
Lease of office space from an affiliate for a period of one year, renewable upon mutual
agreement of both parties.
5. Income Taxes
The provision for income tax differs from the amount computed by applying the statutory income
tax rate to income before income tax due mainly to interest income already subjected to final tax at
a lower rate.
The deferred tax assets represent the tax consequences of NOLCO, accrued retirement
expenses, and allowances for impairment losses and parts obsolescence.
22
- 18 -
The deferred tax liability pertains to tax consequences of capitalized borrowing costs and
appraisal increase in land under property and equipment.
6. Earnings Per Share (EPS)
Computation of EPS is as follows:
Net income
Divided by weighted average number of common shares
2013
P
= 6,445,538
162,161,000
P
= 0.0397
2012
P
= 6,450,229
162,161,000
P
= 0.0398
7. Other Matters
On May 18, 2012, the Company’s Board of Directors approved an additional equity investment of
P
= 100 million in CWC to finance the latter’s zoning and expansion program. This will be taken from
the recent initial public offering.
On July 4, 2012, the Company completed the sale of its shares in Kristal Water. A total of
249,995 shares were sold for P
= 1 per share. As a result of the sale, Kristal Water ceases to be a
subsidiary. The decision to sell was reached in order for the Company to focus on its core water
utility business.
There are no material events subsequent to the end of the interim period that has not been
reflected in the financial statements. Neither are there any material contingencies and any other
events or transactions that are material to an understanding of the current interim period aside
from those already included in our report.
23
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Financial Position (Balance Sheet)
Total assets decreased by 0.95% or about P
= 5.1 million to P
= 529,155,293 as of 31 March 2013. The
decrease can be attributed to settlement of amounts due to suppliers and contractor as may be seen
from the decrease in the cash and cash equivalents and accounts payable and accrued expenses
accounts by 1.87% and 12.60%, respectively. Cash and cash equivalents decreased to P
= 84,795,575
and accounts payable and accrued expenses decreased to P
= 88,632,008 as of the end of the period.
The improved collection efficiency caused receivables to decrease by 7.36% or P
= 1,638,373 from
P
= 22,258,607 as of year-end to the present P
= 20,620,234.
The increases and decreases in the net receivable from related parties is dependent upon the liquidity
and financial status of the concerned parties at any given point in time. None of the parties involved is
in financial distress and there is no reason to believe that any accounts may be impaired in the
immediate or near future. Also, these accounts have no definite call dates and do not bear interest.
The purpose of these advances is for operating and investing activities.
Other current assets increased by 23.59% to P
= 4,014,446. The increase of P
= 766,140 pertains mainly
to unapplied creditable withholding taxes of CVI.
The property and equipment account decreased from the additional depreciation from the acquisition
of a new office building acquired by CWWC worth around P
= 57.36 million located in Barangay
Bayanan, Calapan City. CWWC has already moved its offices to this new building in the last quarter
of 2012.
Available-for-sale investments, investment property and deferred tax assets were unchanged from
their balances as of December 31, 2011.
Accounts payable and accrued expenses decreased by 12.60% from P
= 101.41 million as of
December 31, 2012 to P
= 88.63 million as of March 31, 2013, a total of P
= 12.8 million. Much of this
could be attributed to CWWC’s settlement of amounts due to its contractor for its development
projects.
The income tax liability as of December 31, 2012 was due for payment on April 15, 2013. The income
tax liability as of March 31, 2013 consists of the unpaid tax liability of 2012 and accrual for first quarter
2013 results. This explains why income tax payable increased by 40.36% or P
= 3,202,526. Another
major contributor to the increase is the improved results of operations.
The retirement benefit obligation and deferred tax liability were unchanged from year-end. The loan
payable of P
= 82,776,810 pertains to Calapan Water’s loan with DBP mentioned earlier. The grace
period on principal payments on the loan expired in 2009. The decrease in this account by 2.50% or
P
= 2,003,440 pertains to principal payments for the period.
Minority interest pertains to Calapan Water. This represents the share of its minority shareholders in
the net assets of said subsidiary. The change in this account represents the share of minority
shareholders in the results of operations for this period.
Results of Operations
Water service revenues have been steadily increasing and this may be attributed to additional billed
volume from the increase in the number of subscribers which stood at 12,873 at period-end as against
24
12,370 last year. Revenues grew by P
= 2,278,095 or 7.06% from P
= 32,274,291 to P
= 34,552,386 for the
quarter.
Sales of goods of P
= 5.0 million for the period pertain to the trading activity of CVI. It started operation
only last December 2009 and the increase as against the same year-to-date figure is P
= 316,541
(6.74%). The increase was due to the effort of the company in expanding its product lines resulting to
an increase in orders from its clients.
Cost of sales and services have been increasing due to higher depreciation (due to office building
acquired end of last year) and power costs (due to additional booster stations put up to augment water
pressure) of CWWC. This increased by 10.06% (P
= 1,525,393) for this period as conscious efforts were
done to keep costs at relatively the same levels. Further, the increase in sales from the trading activity
also affected this account. Most of the same factors affecting year-to-date figures also apply.
Operating expenses have increased due to higher salaries and taxes this period as against the same
period last year. This account increased by 5.63% (P
= 636,860).
Net other charges increased by 4.88% or P
= 53,377 for the period. The increase is attributed to interest
charges on CWWC’s loan with DBP charged to expense this quarter. The interest on CWWC’s loan
was capitalized as part of property and equipment in prior years. The increase or decrease in the
interest income earned is dependent upon the duration of the higher-yielding placements and not
necessarily on the balance as of the end of the period.
The current provision for income tax increased by 12.99% to P
= 3,306,586 as a result of higher profits
before income tax.
Minority interest represents minority stockholders’ share in the net income or loss of Calapan Water.
The fluctuation in this account is tied-in to the operating results of Calapan Water and to the
Company’s overall ownership in the former.
Liquidity and Solvency
The Company’s cash balance decreased from end-2012 of P
= 86.4 million to P
= 84.8 million as at 31
March 2013. A significant portion of the cash balance came from the proceeds of CVI’s IPO last 2011.
The IPO proceeds are intended for CWWC’s expansion and zoning works. Meanwhile, the decrease
for this period was a result of payment of obligations mentioned earlier.
The Company seeks to manage its liquidity profile to be able to finance its capital expenditures and
serve its maturing obligations. The objective is to maintain a balance between continuity of funding
and flexibility through valuation of projected and actual cash flow information. The Company manages
liquidity by maintaining adequate reserves through advances from related parties and loan facilities
with local banks.
The IPO proceeds improved our current ratio considerably. Nonetheless, the Company is not in
danger of insolvency as it could readily draw funds from related parties and banks. Further, its strong
relations with suppliers and creditors enable the Company to negotiate and stretch credit terms. It
may also be worth mentioning that payment terms of accounts with related parties have no definite call
dates. The retirement benefit obligation and deferred tax liabilities may also be regarded as provisions
and are not due immediately.
Dividends
In the Board of Directors’ meeting held on June 13, 2012 a resolution was passed declaring cash
dividends of P
= 0.20 per share. Record date for determination of stockholders entitled to the cash
dividends was the close of business on June 29, 2012. July 25, 2012 was set as the payment date.
25
Issuances, Repurchases, and Repayments of Debt and Equity Securities
None
Events that will trigger Direct or Contingent Financial Obligation that is Material to the
Company, including any Default or Acceleration of an Obligation
None
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
None
Known Trends, Demands, Commitments, Events or Uncertainties that will have a Material
Impact on Liquidity or that are reasonably expected to have a Material Favorable or
Unfavorable Impact on Net Sales/Revenues/Income from Continuing Operations
None
Cause for any Material Change from period to period which shall include Vertical and
Horizontal Analyses of any Material Item
This is already incorporated in the discussion under “Results of Operations” and “Financial Position”.
Seasonal Aspects that has a Material Effect on the Financial Statements
None
Material Commitments for Capital Expenditures, General Purpose of such Commitments,
Expected Sources of Funds for such Expenditures
Calapan Water has completed its rehabilitation, expansion and improvement plan of its waterworks
system in Calapan City, Oriental Mindoro. The purpose of the plan is to bolster water pressure,
improve water quality, and to increase production so as to accommodate more subscribers.
A contractor was awarded the project for the total contract price of about P
= 168 million. The P
= 137
million-loan facilities from DBP are earmarked for the contract and the differential between the total
contract price and the loan facility will be sourced from internally generated sources.
Calapan Water has various projects lined up as detailed in the following table. Fifty Two Million and
Five Hundred Thousand Pesos (P
= 52,500,000.00) will be used for expansion of storage facilities,
particularly for the construction of one (1) overhead reservoir and the installation of transmission and
distribution lines from the reservoir to the water system. Ninety Two Million Eight Hundred and Fifty
Thousand Pesos (P
= 92,850,000.00) will be used for zoning works to be undertaken in twenty six (26)
barangays, such as installation of district meters and isolation valves. Also included in zoning works is
the cost of massive meter replacement that will be implemented in order to reduce non revenue water
to its target level of twenty percent (20%).
Cost
(In P
= Millions)
Timeline
Zoning Works
92.85
Q3 of 2013 to Q2 of 2014
Expansion
52.50
Q3 to Q4 of 2013
Grand Total
145.35
26
The stated amounts include the estimated cost of transmission and distribution pipes, district meters
and isolation valves, and water meters; however, as of the date of this report no specific supplier has
been identified from whom these assets will be bought.
The proceeds of the recent initial public offering of CVI will be used to finance the above projects.
Priority shall be given to zoning works and the development of expansion facilities, in that order. As
the proceeds is below the project cost, the balance shall be funded through internally generated funds.
Any Significant Elements of Income or Loss that did not arise from Continuing Operations
None
Financial Risk Disclosure
Please refer to page 6 of the Notes to Consolidated Financial Statements for the description,
classification and measurements applied for financial instruments of the Group.
The Group’s principal financial instruments comprise of cash, receivables, short-term bank deposits,
available-for-sale investments, bank loans, trade payables and due to related parties. The main
purpose of the Group’s financial instruments is to fund the Group’s operations and to acquire and
improve property and equipment. The main risks arising from the use of financial instruments are
liquidity risk, interest rate risk and credit risk.
The main objectives of the Group’s financial risk management areas are as follows:



To identify and monitor such risks on an ongoing basis;
To minimize and mitigate such risks; and
To provide a degree of certainty about costs.
The Group’s Board reviews and agrees with policies for managing each of these risks. These are
summarized below:
Liquidity risk
The Group seeks to manage its liquid funds through cash planning on a weekly basis. The Group
uses historical figures and experiences and forecasts from its collections and disbursements. The
Group’s objective is to maintain a balance between continuity of funding and flexibility through
valuation of projected and actual cash flow information.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s longterm borrowings. The Group’s policy is to minimize interest rate cash flow risk exposures. Long-term
borrowings are therefore usually at agreed interest rates. Also, the Group manages its exposure to
interest rate risk by closely monitoring bank interest rates with various banks and maximizing
borrowing period based on market volatility of interest rates.
Credit risk
This risk refers to the risk that a customer/debtor will default on its contractual obligations resulting in
financial loss to the Group. The Group controls this risk through monitoring procedures and regular
coordination with the customers. In addition, receivable balances are monitored on an ongoing basis
with the result that the Group’s exposure to bad debts is not significant. The Group also controls this
risk by cutting its services and refusal to reconnect until the customer’s account is cleared or paid.
The Group’s credit risk is primarily attributable to its trade receivables. An allowance for impairment is
made where there is an identified loss event which, based on previous experience, is evidence of a
reduction in the recoverability of the cash flows.
27
Given the Group’s diverse customer base, it is not exposed to large concentration of credit risk.
Currency risk is the risk that a business' operations or an investment's value will be affected by
changes in exchange rates. If Philippine pesos, the Group’s functional currency, has to be converted
into another currency to buy or sell goods and services, or to make certain investments, a gain or loss
may arise when these are converted back into pesos. This risk has been assessed to be insignificant
given that all the Group’s transactions are made in pesos. The Group has no investments in foreign
securities.
Market risk is the risk of losses arising from changes in market prices. This usually affects an entire
class of assets or liabilities. The value of investments may decline over a given period of time simply
because of economic changes or other events that impact large portions of the market. Management
has assessed this risk to be insignificant since the Group’s financial instruments are not openly traded
in the open market (stock exchange, foreign exchange, commodity market, etc.) nor does it engage in
exotic financial instruments such as derivatives, spot or forward contracts and the like. The fair values
of the Group’s financial instruments did not change between this period and the preceding period thus
no gain or loss was recognized.
28
Key Performance Indicators
2013
2012
Profitability
Return on total assets (ROA)
=
- measures how well assets
have been employed by
{ni + [interest exp x (1 - tax rate)]}
average total assets
7,353,033
0.0138
531,681,671
7,245,578
0.0142
510,030,688
management
Return on equity (ROE)
=
- when compared to the ROA,
net income
1,253,196
0.0038
6,450,229
0.0199
average stockholders' equity
325,929,689
323,875,366
=
water revenues
average no. of water subscribers
34,552,386
12,841
2,691
32,274,291
11,717
2,754
=
total liabilities
total assets
199,987,706
529,155,293
0.3779
186,072,177
513,185,987
0.3626
=
total liabilities
stockholders' equity
199,987,706
329,167,587
0.6076
186,072,177
327,113,808
0.5688
=
market value per share
book value per share
measures the extent to which
financial leverage is working
for or against shareholders
Water revenue per subscriber
- measures how well service
and facilities improvements
have influenced consumer's
usage
Financial leverage
Debt ratio
- measures the share of
company's liabilities to total
assets
Liabilities to equity
- measures the amount of
assets being provided by
creditors for each peso of
assets being provided by
the stockholders
Market valuation
Market to book ratio
- relates the Company's stock
price to its book value per
share
29
4.50
2.02
2.22
2.34
2.01
1.16
Below is the aging analysis of receivables:
March 31, 2013
Current
31 to
60 days
61 to
90 days
More than
90 days
Total
Trade
Advances and
nontrade
=4,230,309
P
=4,309,337
P
=4,424,352
P
=6,288,567
P
=19,252,565
P
705,532
-
-
662,137
1,367,669
Total
=4,935,841
P
=4,309,337
P
=4,424,352
P
=6,950,704
P
=20,620,234
P
30
SUMMARY OF EFFECTIVE STANDARDS AND INTERPRETATIONS UNDER
PHILIPPINE FINANCIAL REPORTING STANDARDS
AS OF MARCH 31, 2013
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Framework for the Preparation and Presentation of Financial
Statements
Not
Not
Adopted Adopted Applicable



PFRSs Practice Statement Management Commentary



Philippine Financial Reporting Standards






Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled Entity
or Associate



Amendments to PFRS 1: Additional Exemptions for
First-time Adopters



Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time
Adopters



Amendments to PFRS 1: Severe Hyperinflation and
Removal of Fixed Date for First-time Adopters










*
*


*










*
Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRS 1
(Revised)
First-time Adoption of Philippine Financial Reporting
Standards
Amendments to PFRS 1: Government Loans
PFRS 2
Share-based Payment
Amendments to PFRS 2: Vesting Conditions and
Cancellations
Amendments to PFRS 2: Group Cash-settled Sharebased Payment Transactions
PFRS 3
(Revised)
Business Combinations
PFRS 4
Insurance Contracts
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
PFRS 5
Non-current Assets Held for Sale and Discontinued
Operations

PFRS 6
Exploration for and Evaluation of Mineral Resources
PFRS 7
Financial Instruments: Disclosures


31


 
INTERPRETATIONS
Amendments to PAS 39 and PFRS 7: Reclassification
of Financial Assets
Not
Not


*
*
of Financial Assets - Effective Date and Transition





*
Amendments to PFRS 7: Disclosures – Offsetting
Financial Assets and Financial Liabilities



Amendments to PFRS 7: Mandatory Effective Date of
PFRS 9 and Transition Disclosures



PFRS 8
Operating Segments
PFRS 9
Financial Instruments































*
Amendments to PAS 1: Presentation of Items of
Other Comprehensive Income



PAS 2
Inventories
PAS 7
Statement of Cash Flows
PAS 8
Accounting Policies, Changes in Accounting Estimates
and Errors









PAS 10
Events after the Reporting Period
PAS 11
Construction Contracts
PAS 12
Income Taxes











*
Amendments to PFRS 7: Improving Disclosures
about Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of
Financial Assets
Amendments to PFRS 9: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
PFRS 10
Consolidated Financial Statements
PFRS 11
Joint Arrangements
PFRS 12
Disclosure of Interests in Other Entities
PFRS 13
Fair Value Measurement
Philippine Accounting Standards
PAS 1
(Revised)
Presentation of Financial Statements
Amendment to PAS 1: Capital Disclosures
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on
Liquidation
Amendment to PAS 12 - Deferred Tax: Recovery of
32

INTERPRETATIONS
Not
Not
Underlying Assets
PAS 16
Property, Plant and Equipment
PAS 17
Leases
PAS 18
Revenue
PAS 19
Employee Benefits
Amendments to PAS 19: Actuarial Gains and Losses,
Group Plans and Disclosures
PAS 19
(Amended)
Employee Benefits
PAS 20
Accounting for Government Grants and Disclosure of
Government Assistance
PAS 21
The Effects of Changes in Foreign Exchange Rates














*









*
*

PAS 23
(Revised)
Borrowing Costs



PAS 24
(Revised)
Related Party Disclosures



PAS 26
Accounting and Reporting by Retirement Benefit
Plans



PAS 27
Consolidated and Separate Financial Statements
PAS 27
(Amended)
Separate Financial Statements






PAS 28
Investments in Associates
PAS 28
(Amended)
Investments in Associates and Joint Ventures




*

PAS 29
Financial Reporting in Hyperinflationary Economies
PAS 31
Interests in Joint Ventures
PAS 32
Financial Instruments: Disclosure and Presentation









*

*


*
Amendments to PAS 32: Offsetting Financial Assets
and Financial Liabilities



Earnings per Share



Amendment: Net Investment in a Foreign Operation
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on
Liquidation
Amendment to PAS 32: Classification of Rights
Issues
PAS 33
33
INTERPRETATIONS
PAS 34
Interim Financial Reporting
PAS 36
Impairment of Assets
PAS 37
Provisions, Contingent Liabilities and Contingent
Assets
PAS 38
Intangible Assets
PAS 39
Financial Instruments: Recognition and Measurement
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial
Liabilities
Not
Not






*










*
*
Amendments to PAS 39: Cash Flow Hedge
Accounting of Forecast Intragroup Transactions




*
*
of Financial Assets


*
of Financial Assets – Effective Date and Transition


*
Amendments to Philippine Interpretation IFRIC–9
and PAS 39: Embedded Derivatives


*










*










Amendments to PAS 39: The Fair Value Option
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
Amendment to PAS 39: Eligible Hedged Items
PAS 40
Investment Property
PAS 41
Agriculture
Philippine Interpretations
IFRIC 1
Changes in Existing Decommissioning, Restoration
and Similar Liabilities
IFRIC 2
Members' Share in Co-operative Entities and Similar
Instruments
IFRIC 4
Determining Whether an Arrangement Contains a
Lease
IFRIC 5
Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds



IFRIC 6
Liabilities arising from Participating in a Specific
Market - Waste Electrical and Electronic Equipment



IFRIC 7
Applying the Restatement Approach under PAS 29
Financial Reporting in Hyperinflationary Economies



IFRIC 8
Scope of PFRS 2


*
34
INTERPRETATIONS
Not
Not




*
*










*
*
*
*

Amendments to Philippine Interpretations IFRIC-14,
Prepayments of a Minimum Funding Requirement


*
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
IFRIC 17
Distributions of Non-cash Assets to Owners
IFRIC 18
Transfers of Assets from Customers
IFRIC 19
Extinguishing Financial Liabilities with Equity
Instruments








*
*
*
*
IFRIC 20
Stripping Costs in the Production Phase of a Surface
Mine



SIC-7
Introduction of the Euro
SIC-10
Government Assistance - No Specific Relation to
Operating Activities






SIC-12
Consolidation - Special Purpose Entities








*




*
*
IFRIC 9
Reassessment of Embedded Derivatives
Amendments to Philippine Interpretation IFRIC–9
and PAS 39: Embedded Derivatives
IFRIC 10
Interim Financial Reporting and Impairment
IFRIC 11
PFRS 2- Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
Amendment to SIC - 12: Scope of SIC 12
SIC-13
Jointly Controlled Entities - Non-Monetary
Contributions by Venturers
SIC-15
Operating Leases - Incentives
SIC-25
Income Taxes - Changes in the Tax Status of an
Entity or its Shareholders
SIC-27
Evaluating the Substance of Transactions Involving
the Legal Form of a Lease


*
SIC-29
Service Concession Arrangements: Disclosures.
SIC-31
Revenue - Barter Transactions Involving Advertising
Services




*
*
SIC-32
Intangible Assets - Web Site Costs


*
35
(A Subsidiary of Jolliville Holdings Corporation)
SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
MARCH 31, 2013
Beginning Unappropriated Retained Earnings,
as adjusted
P
Less net loss during the period
15,267,520
(1,232,942)
TOTAL RETAINED EARNINGS, END
AVAILABLE FOR DIVIDEND DECLARATION
36
P
14,034,578
SIGNATURES
Pursuant to the requirements of the Securities Regulation Code, the issuer has
duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Issuer: CALAPAN VENTURES, INC.
Chief Executive Officer: JOLLY L. TING
Signature and Title:
Chief Executive Officer
Chief Financial Officer: ORTRUD T. YAO
Signature and Title:
Chief Financial Officer
Date: 14 MAY 2013
37

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