MASS-SPECC Annual Report 2012

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ASS-SPECCC O O P E R A T I V E D E V E L O P M E N T C E N T E RMASS-SPECCM

C O O P E R A T I V E D E V E L O P M E N T C E N T E R

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Table of Contents

Message from the Chairperson .................................................................... 2

Message from ACCU ..................................................................................... 3

Message from CDA ....................................................................................... 4

Message from PBSP ...................................................................................... 5

Message from DSWD ................................................................................... 6

Message from MinDA ................................................................................... 7

Message from COOP NATCCO Party-list .................................................... 8

About the Theme .......................................................................................... 9

Our Performance ........................................................................................ 10

Networking, Membership & Marketing ................................................ 11

Central Fund .....................................................................................12-13

Information and Communication Technology (ICT) ......................14-16

Consultancy ...........................................................................................17

Institute of Cooperative Studies (ICS) ................................................. 18

Hostel and Properties ............................................................................19

Gender Equality ....................................................................................20

Coop Youth Parliament (CYP)...............................................................21

Environment ......................................................................................... 22

New Members ............................................................................................. 23

Highlights of the BOD Resolutions .......................................................24-25

Audit Committee Report ............................................................................ 26

Statement of Management’s Responsibility to Financial Statements ....... 27

Report of the Independent Auditors .................................................... 28-70

Awardees ................................................................................................ 71-78

2012-2013 MASS-SPECC Officers ........................................................ 79-80

2013 Action Plans and Targets ................................................................... 81

2013 Budget ................................................................................................82

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The recognition and the manifestation by no less than the United Nations General Assembly by declaring 2012 as the International Year of the Cooperative has caught attention and awareness by the players in community development and financial institutions on the importance of the cooperative sector as a stalwart in building a beneficial environment for nation building. This recognition has brought a great responsibility of the cooperative sector to be worthy of the recognition and to work hard for coming up with the expectation.

MASS-SPECC Cooperative Development Center, and the more than 300 primary affiliates being at the forefront of the cooperative sector in Mindanao has taken on that challenge. Through the years, MASS-SPECC has continuously evolved and be involved in various undertakings and innovations that brought about changes in the movement.

This years’ theme of MASS-SPECC General Assembly “Growing Co-ops into One Strong Movement: How Can We Contribute to Inclusive Growth” is a clear call to all its affiliates to unite and work in the same direction to prove our worthiness as an emerging sector in sustainable development. This is a call to all to work as a team, to grow as one, crossing cultural identities and to be self-less with a mission. As a federation we are duty bound to inform, educate and capacitate our member-cooperative for them to be sustainable, pursuing products and services, maximizing all resources to reap substantial returns. Being in one sector with clear identities has helped us through the years facing all adversities and changes. As we move forward, MASS-SPECC will be the driving force of all cooperatives in Mindanao, uniting cooperatives amidst the differences, leading the way and a leader of innovations. We have been known to pioneer services, and capacitate the cooperatives to provide better services a trade mark that each one of us has to keep. We could not just be complacent where we are now because change occurs every microsecond. We have to work together and collaborate if we want to be recognized in the global market. This will be our significant contribution that could not be set aside but to be valued and fostered.

To the Board of Directors, the countless ways that you continue to inspire not only to the management but the members as well through your constant support and ensuring that every programs and services would be beneficial to the vast majority of the members plays an important role in the transformation of MASS-SPECC. To the Management Team you have shown how you put the endeavours of the federation a priority thus putting MASS-SPECC to where it is now. Be encouraged of the many faceless people that you have touch with through your effort, continue to uphold the mission and vision to reach out throughout Mindanao despite the challenges and the adversities.

I would like to extend my gratitude to our members and partners who support and cooperate with MASS-SPECC through the years that contributes to the change in the landscape of the cooperative sector.

Remember always, united we can do more!

Thank you and God bless! Mabuhay ang Kooperatiba!

Gadwin E. Handumon Chairperson

Message from the Chairperson

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Best Wishes and Greetings from ACCU!

On behalf of the Association of Asian Confederation of Credit Unions, it is my great honor to send our congratulatory message to MASS - SPECC Cooperative Development Center on its 44th Coop Leaders’ Forum and 39th General Meeting on April 20-21, 2013.

We are impressed that members of MASS-SPECC Cooperative Development has tremendously reaped benefits through the education and tailored – fit services such as information and communication technologies - now used by more than 100 cooperatives.

MASS – SPECC is one of the oldest federations in the Philippines. It has contributed to the growth of cooperatives. However, we have much more things to do. The forum is an opportunity for the leaders of cooperatives to examine why we do not rank number one in the market though we altogether reached 1 billion people in the world.

We have been discussing solidarity, unity, and cooperation in all platforms offered to us. I believe this is the time to act. We would request MASS-SPECC to support our initiative in Asia to promote the federated system to our network. It does not mean that cooperatives will lose their autonomy, but as one movement, we need to agree on basic standards in governance, services, financial performance, operating procedures and market distinction. Today, we are seen as individual cooperative rather than as a movement. As our discussion is ongoing on the federated system, MASS-SPECC’s input would be very much welcomed. As Supporter member of ACCU, we are very grateful of your commitment not only to help your members but as well as to help credit unions in Asia. Once again, I wish to congratulate all the leaders, management and members of MASS-SPECC on this very special occasion.

Sincerely yours,

Ranjith Hettiarachchi Chief Executive Officer

ASSOCIATION OF ASIANCONFEDERATION OFCREDITUNIONS

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My warmest felicitations to MASS-SPECC Cooperative Development Center (MASS-SPECC) the Officers, Staff, all members and stakeholders on its 44th Coop Leaders’ Forum and 39th MASS-SPECC General Assembly on April 20-21, 2013.

For almost half-a-century, MASS-SPECC has undeniably been part and instrumental to the socioeconomic growth and development of more than 300 primary cooperatives in Mindanao, educating, training, enabling, instilling profound commitment, awareness and social concern while nurturing each coop and creating a cycle of transformative impact on the live of individual members.

With the recognition given by the United Nation to the importance of the cooperatives worldwide, great many things are expected to come out from this sector. Your theme: “Growing Co-ops into One Strong Movement: How Can We Contribute to Inclusive Growth” is very much responsive to that great expectancy. But still I urge the dynamic MASS-SPEC leaders to continue to innovate your linkages, products and services to international quality standards; steadfastly adhere to the noble mission, vision and core values of the coop; exemplify the highest form of integrity, commitment and good governance. Encourage your own family members to join and embrace cooperativism as a way of life. Thus, more Filipinos will be empowered and will benefit from the cathartic influence of the cooperatives.

The CDA was able to forge Memorandum of Agreement with different National Government Agencies as well as the Local Government Units which aim to strengthen the grass roots of our cooperatives. We formed strong ties with the unions, federations and other institutions with cooperative development pursuits in implementing and achieving the flagship program of this agency. I am happy to announce that the CDA has achieved the ISO 2008:9001 certification which calibrates the kind of services this agency renders to the cooperative sector, pursuing a grand dream of guiding all coops in the country to attain the same Quality Management System certification in not so distant future.

These endeavors were painstakingly undertaken by our agency with just one target in mind… to be the best agency in service of the cooperatives nationwide. We therefore request cooperative leaders to regularly visit our website: www.cda.gov.ph for valuable information on Memorandum Circular issuances and policy directions being implemented by our agency so that we can gear our synchronized actions towards the same direction… to the path of progression and excellence.

I congratulate the entire workforce, the pillar behind the success, development and stability of MASS-SPECC. May it continually grow and prosper together with all the members, their families, and the community.

Mabuhay ang MASS-SPECC Cooperative Development Center! Mabuhay ang Kilusang Kooperatiba sa Pilipinas!

Emmanuel M. Santiaguel, Ph. D. Chairperson

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To the Women and Men of MASS-SPECC,

My warmest greetings on the occasion of your 44th Coop Leaders’ Forum and 39th MASS-SPECC General Assembly with the theme “Growing Co-ops into One Strong Movement: How Can We Contribute to Inclusive Growth?”

It is an honor to be a part of this momentous activity in your 40th year of existence as a forerunner of the cooperative movement in Mindanao,which has united more than 300 primary cooperatives not just in Mindanao but also all over the country.

The adage “in unity there is strength” cannot find more resonance than in the cooperative.It has long been acknowledged that the cooperative is an effective mechanism in eradicating poverty in agricultural and other informal sectors.The unity of and among cooperatives already cements this fortification. A strong financial cooperation among cooperatives likewise redounds to a strong and stable economy for the nation.

PBSP is proud to have partnered with MASS-SPECC as a conduit of loan funds to its members for the last three years. As PBSP moves towards engaging the business sector towards inclusive business efforts, we foresee the partnership to make greater inroads in economic development in Mindanao, particularly in areas where poverty is at its worst.

Likewise, we in the MVP Group are one with you in this quest towards economic growth, in this task of nation building. As a group of companies that has made substantial and significant investments in this country, we share with you the hope that the lives of each and every Filipino shall significantly improve, and that the unification of cooperatives, as well as the partnership between the cooperative movement and business sector, shall help see this through.

Here’s wishing you all the best in your current and future endeavors.

Thank you and best regards,

Manuel V. Pangilinan

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I would like to extend my heartfelt congratulations to you, the officers and members of the MASS-SPECC Cooperative Development Center for holding your 44th Coop Leader’s Forum and 39th General Assembly with the theme “Growing Co-ops into Strong Movement: How Can We Contribute to Inclusive Growth.”

Your theme for this year’s convention is timely and appropriate especially that achieving inclusive growth continues to be a goal of the Aquino government. It is high time to emphasize that true development is for the people and by the people.

We, at the DSWD, recognize the vital role of cooperatives in the attainment of sustainable development. Cooperatives are always at work at the grassroots level providing livelihood and income opportunities as well as increasing productivity of the poor, marginalized, and disadvantaged groups.

I commend your group for undertaking various livelihood projects, capability building activities, and environmental protection programs all aimed towards promoting inclusive growth.

While we still have much to accomplish in terms of improving the socio-economic conditions of the poor, with the help of groups such as yours, we can empower them to lead meaningful and productive lives.

Through this convention, it is my hope that you will be able to come up with new directions and approaches that will highlight and strengthen the role of cooperatives in nation building.

Again, I wish you a successful gathering and I look forward to continue working with your group in empowering our countrymen.

Corazon Juliano-Soliman Secretary

DEPARTMENT OF SOCIALWELFARE ANDDEVELOPMENT

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My warmest greetings to the Board of Directors and members and of the Mindanao Alliance of Self-help Societies-Southern Philippines Educational Cooperative Center (MASS-SPECC), as you hold your 44th Coop Leaders’ Forum and 39th General Assembly.

Throughout the years, MASS-SPECC has taken the lead in fostering and strengthening financial cooperation among its members by steering towards lasting and sustainable financial stability of the cooperative sector. From its humble beginnings, this alliance has successfully evolved into becoming the country’s largest regional cooperative federation.

Your federation’s solidarity also demonstrates a commitment to meet the changing needs of your members, by continually attaining the goal of becoming into one formidable force that exemplifies a cooperative’s core philosophy, principles, and values.

By significantly expanding access to financial services, and for facilitating the development and implementation of government policies and legislations that support the rural and urban economic development through the delivery of coop’s services, it has significantly helped brought low-income community-members into mainstream financial system.

Clearly, MASS-SPECC’s contribution to providing Mindanawons sustainable income and dependable jobs truly support President Aquino’s thrust of achieving inclusive growth and equitable progress in Mindanao.

Your standards of cooperation, which place premium importance in equity, solidarity, selfhelp, and mutual responsibility, are truly commendable. The move to scale-up MASSSPECC’s corporate social responsibility to include the care and protection of our environment is more than admirable, which supports long-term goals to protect the environment and wisely utilize our natural resources as foundations for the peace and development roadmap of Mindanao.

Hence, the Mindanao Development Authority (MinDA) is encouraged by your support to the Mindanao Nurturing Our Waters (MindaNOW) program. Towards this end, may this alliance continue with its efforts in harnessing and uniting more than 300 primary cooperatives in Mindanao in line with an overarching goal of strengthening the cooperative movement in our country.

Mabuhay!

Sec. Luwalhati R. Antonino Chair

MINDANAODEVELOPMENTAUTHORITY

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From the Coop-NATCCO Party-list family, we extend our sincerest greetings to the MASS-SPECC Cooperative Development Center (MASS-SPECC) as you hold your 44th Coop Leaders’ Forum and 39th General Assembly.

Your theme “Growing Co-ops into One Strong Movement: How Can We Contribute to Inclusive Growth” raises the bar in our cooperative development work. Indeed, we need to bank on building a strong cooperative movement if we mean longterm development for our people.

So what can be done to ensure inclusive and sustainable growth? To fulfill this objective, the International Cooperative Alliance laid out five key strategies such as: 1) Elevate participation within membership and governance to a new level. 2) Position cooperatives as builders of sustainability. 3) Build the cooperative message and secure the cooperative identity. 4) Ensure supportive legal frameworks for cooperative growth. 5) Secure reliable cooperative capital while guaranteeing member control.

As a federation of cooperatives in Mindanao and the largest federation in the country, your role is pivotal to the growth and development of your more than 300 member cooperatives and of the region. We know that MASS-SPECC has consistently worked hard to meet the changing needs of cooperatives and has been at the forefront of building viable and people-based cooperatives. So we trust that you will come up with bigger plans and sound strategies that would further unite and assist the primary coops in the conduct of their respective enterprise. It is important that we take advantage of several windows for growth.

The Coop-NATCCO Partylist, the voice and ally of our cooperatives in Congress, remains enthusiastic that our proposed legislations and policy reforms supportive of the thrust of the government towards economic prosperity, people empowerment and social development will always be given utmost consideration by our fellow legislators and the executive branch led by the President of the Republic. We too are exhausting all means in building the cooperative identity.

I believe our collective efforts and determined spirit will see us through towards achieving our common vision.

Congratulations and more power!

Hon. Cresente C. Paez Representative, Coop-NATCCO Party-list

HOUSE OF REPRESENTATIVES

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The Philippine’s gross domestic product grew by 6.6% in 2012, beating market expectations and government’s own goal of 5-6%. This has put our country on the

world spotlight, with most economic analysis pointing to strong performance of the economy in the coming years. This is good news to us Filipinos after so many years of our country being labelled as the “sick man of Asia.” There is just one major downside and it is that this growth still favours the elite and the urban centers. According to former Economic Planning Minister Cielito Habito, the 40 richest families in the country account for up to 76% of our gross domestic product. This is why the majority of the population, especially the poor, do not feel the benefits of this growth. It is also hardly felt in the rural areas where agriculture, which is the source of employment of roughly 40% of Filipino workers, remains underdeveloped. For a developing economy like the Philippines, economic growth that benefits only a few and is skewed towards the urban centers cannot be inclusive. And when economic growth is not inclusive, it cannot be sustainable. The “economy that excluded the many” was precisely what the pioneers of the co-operative movement sought to change; they proved that co-operatives was the best way by which people with limited means can secure their economic future and contribute to the growth of the national economy at the same time. As successful co-operative movements around the world later proved, co-operatives could help ensure that the benefits of economic growth are spread to as many people as possible. Co-operatives have also proven that they can contribute effectively to the development of the rural economy and ultimately to the advancement of the nation as a whole. This is the case in Japan and other developed countries where successful agricultural co-operatives have become major contributors to economic output. So it is a fact that co-operatives can contribute towards making economic growth inclusive. As the experience in many countries has shown, co-operatives achieved this by operating efficiently at the community level, by moving up the value chain, and by becoming major economic players in the industry they operate in. In other words, by establishing strong market presence especially in the productive sectors of the economy. Moreover, it is important to note that they achieved this, not by individual co-operatives acting alone in the marketplace, but by working together as a group

and creating support structures at all levels – from the local to the regional up to the national level. It is in this light that the theme of this general assembly should be viewed. Are we up to this challenge? Co-operatives right now are pre-occupied with individual growth and efforts at higher level collaboration are still predicated on individual interests rather than the collective advantage of the whole. Can we grow out of this inertia? Can we take the path of consolidation towards new forms or higher levels of cooperation? As a sector, can we move from services to production, and accentuate our contribution to agriculture and rural development? Can we ensure that all members, particularly those belonging to the lower income sectors, really benefit from the growth of our own enterprises and of the economy as a whole? These are some of the big questions put before co-operative leaders as we dwell on this theme and as we participate in the national discourse on mainstream social issues.

“Growing Co-operatives into One Strong Movement: How Can We Contribute to Inclusive Growth?”

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OURPERFORMANCE

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Networking, Membership and Marketing

Building a network and membership base conducive to collaboration is a prime foundation for weaving together a strong cooperative movement.

A total of 10 Ownership Meetings (OM) conducted throughout the 5 regions in Mindanao

The reduction of cooperatives and number of participants in the 2nd round of OM was mainly due to the decision to limit invitation to MASS-SPECC members only.

Highlight of the 2012 OMs was the organization of a regional platform for members’ broader participation in the form of the Regional Steering Committees (RSCs), which is the base of the regional representative to the MASS-SPECC BOD. The RSC is composed of 2 representatives per province/chartered city, Youth Regional Representative, Regional Gender Representative and is headed by the Regional Representative of MASS-SPECC BOD. Also, the OMs for 2012 are already free of registration for at least two representatives of member cooperatives giving equal opportunity for all members to participate and engage with their Federation.

As of this report, RSC has been organized in all regions in Mindanao and is in the process of strengthening its functions.

Building a network and membership base conducive to collaboration is a prime foundation for weaving together our strong cooperative movement. A total of 10 Ownership Meetings (OM) conducted throughout the 5 regions in Mindanao

Region

1st Round of OMs (Feb-March 2012)

2nd Round of OMs (Sept-October 2012)

Number of Co-ops

Number of Participants

Number of Co-ops


9 34 60 29 58 10 26 56 24 52 11 29 67 30 63 12 36 76 29 68 CARAGA 35 66 16 40 ZAMBASUTA 15 20 TOTAL 160 325 143 301

The reduction of cooperatives and number of participants in the 2nd round of OM was mainly due to the decision to focus invitation to MASS-SPECC members only. Highlight of the 2012 OMs was the organization of a regional platform for members’ broader participation and base of the regional representative to the MASS SPECC BOD which is the Regional Steering Committees (RSCs). The RSC is composed of 2 representatives per province/chartered city, Youth Regional Representative, Regional Gender Representative and is headed by the Regional Representative of MASS SPECC BOD. Also, the OMs for 2012 are already free of registration for at least two representatives of member cooperatives giving equal opportunity for all members to participate and engage with their Federation. As of this report, RSC has been organized in all regions in Mindanao and is in the process of strengthening its functions. Membership Recruitment

Region Number of Co-op Recruits 9 3

10 4 11 5 12 4

CARAGA 5


Building a network and membership base conducive to collaboration is a prime foundation for weaving together our strong cooperative movement. A total of 10 Ownership Meetings (OM) conducted throughout the 5 regions in Mindanao

Region

1st Round of OMs (Feb-March 2012)

2nd Round of OMs (Sept-October 2012)

Number of Co-ops


Number of Co-ops


9 34 60 29 58 10 26 56 24 52 11 29 67 30 63 12 36 76 29 68 CARAGA 35 66 16 40 ZAMBASUTA 15 20 TOTAL 160 325 143 301

The reduction of cooperatives and number of participants in the 2nd round of OM was mainly due to the decision to focus invitation to MASS-SPECC members only. Highlight of the 2012 OMs was the organization of a regional platform for members’ broader participation and base of the regional representative to the MASS SPECC BOD which is the Regional Steering Committees (RSCs). The RSC is composed of 2 representatives per province/chartered city, Youth Regional Representative, Regional Gender Representative and is headed by the Regional Representative of MASS SPECC BOD. Also, the OMs for 2012 are already free of registration for at least two representatives of member cooperatives giving equal opportunity for all members to participate and engage with their Federation. As of this report, RSC has been organized in all regions in Mindanao and is in the process of strengthening its functions. Membership Recruitment

Region Number of Co-op Recruits 9 3

10 4 11 5 12 4

CARAGA 5


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LOANSThe increase in borrowings of the primary cooperatives in response to the demand for financing of the microenterprises as well as consumer spending brought about the highest level of loan releases of P472M gaining an increase of 16% over the previous years’ loan releases of P407.5M. 86% of the year’s loan release target was accomplished resulting in a net surplus of P43M against target of P31M.

The loans of primary cooperatives in 2012 were primarily intended for the working capital needs of savings and credit coops followed by various capital expenditures, infra projects and equipment procurement or upgrading, including manpower service capital support of both Agri and non-Agri cooperatives.

In 2012, the Federation’s commitment and support to the Agri co-op members continued to make an impact with a substantial loan to various Agrarian Reform and other Farmer co-ops in Mindanao amounting to P22M, bringing to a total of P66M financing support to the Agri-sector under the Yaman Ng Lupa Financing Program. Prior to 2011, financial assistance to the agri co-ops was extended either as Credit line or Term loan.

Another loan facility started a year back that aims to provide greater financial access to micro-entrepreneurs as well as SMEs made an initial take-off in 2012 with total loans granted of P5M.

With a boost in the nation’s economy, the co-operative network has followed in step. Increase in spending and a bright outlook in the financial sector brought a higher demand for financing services. Though there were challenges that affected a few regions brought about by scams, they were isolated and temporary. Over-all in 2012, the Central Fund, continued to be relevant as a support facility made by the members and for the members of the co-op network.

facility intends to provide a deepening of the support of the primary coops’ to its growing member entrepreneurs by providing continued financial services equal to that offered by other financial providers.

SHARE CAPITAL Members’ contribution gained an increase of 25% from the previous year’s value of Php 122 M to Php 153 M share capital in 2012.

DELINQUENCY RATE

Maintaining a risk-based lending policy and pursuing proper remedial management, delinquency was at a manageable rate of 5.26% Portfolio-at-Risk 1-day.

Credit Line49%

Term Loan33%

Bridge Finance

3%

Back to Back3%

ATM Liquidity

5%

Yaman ng Lupa

5%SSN1%

Coop-Sale1%

2012 Loans Released per Product

LOANS RELEASED IN 2012

LOANS RELEASED

LOAN STATUS

NO. OF ACCOUNTS

or AVAILMENTS

CREDIT LINE 231,065,000 CURRENT 30

TERM LOAN 157,010,059 CURRENT 35

BRIDGE FINANCE

15,000,000 CURRENT 4

BACK TO BACK

12,600,000 CURRENT 4

ATM LIQUIDITY

25,400,000 CURRENT 5

YAMAN NG LUPA

22,187,750 CURRENT 7

SUPORTA SA NEGOSYO

5,000,000 CURRENT 1

COOP-SALE 4,370,000 CURRENT 2

TOTAL 472,632,809

Central Fund

0

100

200

300

400

500

600

2011

2012

500 550

407.5472

Loan Releases (2011-2012)

86%

Loan Releases Per Product

Loan Releases (2011-2012)

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This facility intends to provide a deepening of support of the primary coops’ to growing member entrepreneurs by providing continued financial services equal to that offered by other financial providers.

facility intends to provide a deepening of the support of the primary coops’ to its growing member entrepreneurs by providing continued financial services equal to that offered by other financial providers.

SHARE CAPITAL Members’ contribution gained an increase of 25% from the previous year’s value of Php 122 M to Php 153 M share capital in 2012.

DELINQUENCY RATE

Maintaining a risk-based lending policy and pursuing proper remedial management, delinquency was at a manageable rate of 5.26% Portfolio-at-Risk 1-day.

Credit Line49%

Term Loan33%

Bridge Finance

3%

Back to Back3%

ATM Liquidity

5%

Yaman ng Lupa

5%SSN1%

Coop-Sale1%

2012 Loans Released per Product

LOANS RELEASED IN 2012

LOANS RELEASED

LOAN STATUS

NO. OF ACCOUNTS

or AVAILMENTS

CREDIT LINE 231,065,000 CURRENT 30

TERM LOAN 157,010,059 CURRENT 35

BRIDGE FINANCE

15,000,000 CURRENT 4

BACK TO BACK

12,600,000 CURRENT 4

ATM LIQUIDITY

25,400,000 CURRENT 5

YAMAN NG LUPA

22,187,750 CURRENT 7

SUPORTA SA NEGOSYO

5,000,000 CURRENT 1

COOP-SALE 4,370,000 CURRENT 2

TOTAL 472,632,809

DELINQUENCY RATEMaintaining a risk-based lending policy and pursuing proper remedial management, delinquency was at a manageable rate of 5.26% Portfolio-at-Risk 1-day.

LOAN PROVISIONMaintaining compliance to 100% loan loss provision for delinquent loans over 365 days and 35% loan loss provision for delinquent accounts less than 365 days in following International Prudential Standards with accounting standards is a priority to the Federation. Provision for the year amounted to P3,125,000.00, a total allowance of P26,016,521.

DEPOSIT LIABILITIESDeposit generation remained high as more co-ops opted to place their funds showing greater confidence in the stability of the Federation and at the same time boosting their support to the network of cooperatives. Time Deposits increased by 39% from Php 302M in 2011 to P419M in 2012.

SHARE CAPITALMembers’ contribution amounted to P153M share capital in 2012, an increased of 25% of the previous years total of P122M.

MASS-SPECC believes in not only giving financial support but also in ensuring that livelihoods and businesses are not only sustainable but also environmentally safe and productive. Thus, one of the priority activities of the Yaman Ng Lupa Financing program is Organic Agriculture. To keep up with technology and current best practices, two representatives from management and board of directors enrolled in technical training in Natural Farming technology and an educational trip to agri-cooperatives in Batangas was conducted by the MANCOM. Discussions for partnership with link-agencies in developing value-chain program for the co-ops are on-going. Two organic agriculture projects both in crop and livestock production have been financed with an initial availment of P3M.

Loan Released 2012

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IBM CSC Team Visits MASS-SPECC

The IBM Corporate Service Corps, a team of IT experts from various countries conducted its Customer Social Responsibility program last September 10-October 10, 2012. Its mission was to assist MASS-SPECC in its various ICT initiatives, for short and long term development of the organization.

They reviewed MASS-SPECC’s ICT initiatives and the team affirmed that we are on the right track with standardization, transparency and compliance. The team further recommended that MASS-SPECC should consider the web-based scalable banking solution to address the expanding needs of member cooperatives.

Information & Communication Technology (ICT)

The IBM team was composed of Mr. Anindo K. Ghosh, an Application Architect from India, Mr. Chandrasekaran Mahadevan, IBM India Country Business Manager, Mr. Edinar Aquino, Technical Team Leader from Brazil and Ms. Maya De Grazia, Customer Fulfilment Manager from Spain.

141 Coops424 Sites216 MBWIN208 MBDOS

26 Coops40 Terminals71,144 Cards

Installations

ATM Deployment

ATM Transactions reached 1M mark.

A total of 1,104,226 Acquirer, Issuer and On-Us transactions

were recorded with 71,144 PinoyCoop ATM cards being used

by cooperative members.

Information and Communications Technology (ICT) is widely understood to be the enabling technology of the 21st century. It has evolved and continues to transform all aspects of our lives including the way our co-operatives operate. Its impact both directly and indirectly continues to grow in size and importance. To appreciate the magnitude and breadth of its achievements, imagine spending a day without MSRTE or PinoyCoop ATM. This would be a day without system generated Financial Statements, passbooks, ledgers, vouchers and ATM transactions.

In 2012, MASS-SPECC ICT Unit continued its mission to transform the cooperative movement in the Philippines through innovation. Despite the technological challenges that MASS-SPECC and its cooperatives had to face, this year turned out to be another winning year for the federation.

MSRTE is the most widely used software among cooperatives in the Philippines.

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Megalink Performance

Our ATM sites, based on Megalink’s Performance Report, are among the fastest in terms of acquirer transactions. Our off-site ATM located in ICTUS Surallah was ranked as the 4th among Megalink’s 3,051 sites in the Philippines. This proves that more and more people are utilizing our ATMs for their banking needs.

Upgrading MBWIN to MSRTE Core

The system dubbed as ‘MSRTE Core’ is an upgraded version of MBWin. This system can be accessed through the web and is capable for access in low bandwidth. Its advantage is that it is running in an open-source platform and has a centralized database.

With MSRTE Core, inter-branch and co-op to co-op (C2C) services would be available for the members. This means that it is possible for a member of one co-operative to deposit to her savings account or pay her loan in another cooperative.

With MSRTE Core, we will be assured of uniformity among the cooperatives. Standard products for savings and loans will be implemented among the co-operative members. The system will also be compliant with government regulations in particular with Bangko Sentral ng Pilipinas and the Cooperative Development Authority. The piloting of the system is scheduled for the 2nd quarter of 2013.

ATM Center Forum

Continuous education is vital for the operation of our ATM sites. That is why MASS-SPECC conducted two ATM Center Forums last April 7-8 and December 7-8, 2012. Various topics were discussed with the Managers, Recon and IT staff. This includes ATM Security Principles and Guidelines, Megalink Learning Circle, Monitoring and Customer Service Support as well long holiday preparations. Among its plans for 2013 is the conduct of regional ATM Forums and invite participants from other cooperatives that still do not have their own PinoyCoop ATM.

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Mobile Banking Nowadays, most of the people have their own cellphones. Through Mobile Banking, your mobile phone can be your own handy personal banker. You can perform ATM services anytime, anywhere at the click of your fingertips. You can do balance inquiry, transfer funds and even pay your bills even if you’re still in bed or stuck in traffic.

Internet Banking No time to go to your ATM to do your transactions? Why not enrol your PinoyCoop ATM card with MIBS or Megalink Internet Banking System. This facility allows the cooperative’s cardholders to make on-line transactions with their ATM accounts such as Balance Inquiry, Funds Transfer and Bills Payment. You can also use your card to purchase from on-line accredited merchants. You can enrol your PinoyCoop ATM account through this site: https://mibs.megalink.com.ph/iBank/index.html.

Withdrawals and Balance InquiryNow you can do your basic banking transactions such as withdrawals and balance inquiry through your PinoyCoop ATM cards. Our machines will allow a maximum of five withdrawals a day with a minimum of P 200.00 and a maximum of P10,000.00 per withdrawal at a minimum charge.

PinoyCoop POS FacilityYour PinoyCoop ATM card is your personal Debit Card. When doing shopping, there is no need to carry large sums of cash. Simply present your ATM card to the cashier and key in your Personal Identification Number (PIN) on the terminal and you’re done. Best of all, it’s free – no fees or surcharges to pay.

Debit Bills PaymentThrough your PinoyCoop ATM card, paying your bills makes it fast and easy. No need for you to line-up and commute to your payment centers and wait in long lines just to pay your bills. By following the steps below, you can pay all your bills - insurance and pre-need premiums, telecommunications, utilities, credit cards, internet and cable service providers, loan amortizations, even tuition fees, etc. You can even send donations to charitable institutions like Bantay Bata and Oplan Smile through this facility.

The Power of PinoyCoop ATM Card

ATMs

POS

Funds TransferBurdened with sending and receiving money from someone? Why not just transfer funds from your PinoyCoop ATM account to any Megalink connected banks. Through Fund Transfer, there is no need for you to go to a Megalink bank and deposit your money to someone’s ATM account. At a click of the mouse or the mobile phone, your funds will be transferred at a very minimal rate. This service is available 24 hours a day, 7 days a week.

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MASS-SPECC Consultancy UnitA year ago when the 5-Year Strategic Plan of MASS-SPECC was formulated, FICS was reconfigured as separate from ICS, the former focusing on co-op management consultancy services while the latter on co-op training programs, just like how it was in 2006. FICS dealt with the change by first and foremost fixing its name to simply just “MASS-SPECC Consultancy Unit” (MCU), reflecting the unit’s primary direction of work.

The name speaks for itself and it goes with it the over seven (7) years of combined experience in providing quality, cost-effective, time-efficient and professional yet personalized services to co-operatives in a wide range of sectors. Over the years, it has been recognized that cooperatives partnering with MCU realized better growth rate and return in assets, increased productivity and have reduced delinquency rate.

COOPS SERVEDIn 2012, the Consultancy unit served a total of 51 cooperatives. Of the 51 co-ops served, 21 of these are located in Region 10; 11 in Region 11; 7 in Region 12; 6 in Region 9; 5 in CARAGA; and 1 in ARMM.

MANUALS DEVELOPED & INSTALLEDBefore the end of 2012, two co-ops completed the development and installation of manuals on Internal Control and Human Resource (MSU-IIT MPC and Tagum Cooperative). Four more co-ops are in the process of installing their manuals.

Installation of Internal Control Manual at MSU-IIT MPC

5th Annual Chairperson’s and CEO’s Summit at NSCC Plaza, Caoayan,

Vigan Ilocos Sur last Sept. 22-25, 2012

DID - NATCCO - MASS-SPECC Consultancy Teams Meeting at Marco Hotel, CDO last March 12-16, 2012

COOP MENTORMCU is helping build relationship among cooperatives in Mindanao through collaborative work. As of 2012, Panabo MPC, NICO & BUGEMCO committed to serve as co-op mentors or on-call advisors and extend advisory support to growing co-ops.

PARTNERSHIP WITH CONSULTING PROFESSIONALS & INSTITUTIONSEarly 2012, MCU started partnership with Atty. Juanita Rodriguez-Gueco as HR external consultant in order to provide the new consultancy service of Human Resource Management. In June 2012, MCU joined NATCCO and Developpemet International Desjardins (DID) project in forming the NATCCO—MASS-SPECC Consultancy collaboration.

COOP BRANDINGThe ACCESS (A-1 Competitive Choice for Excellence in Service & Soundness) Branding is a diagnostic tool that will help provide relevant insight to build an organization-wide brand strategy. Fifteen (15) of the Consultancy partner co-ops are continuously trained in preparation for ACCESS Branding.

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Institute of Co-operative Studies (ICS)ICS is a center of learning for cooperators and aims to become the prime source of co-operative knowledge in the country. Its mission is to “deliver quality learning programs and grow cooperators who are committed to building the movement and the nation.” Cooperators are individuals who are not just involved in co-operatives but are committed to living its ideals and in promoting the cause of the co-operative movement as a whole. Cooperators also see the value of the co-operative enterprise in the transformation of the lives of its members & the lives of people in the community.

The conduct of these trainings was made possible by the active involvement of ICS’s 16 cluster partners and 49 MASS-SPECC Accredited Trainer-Facilitators in the following regions:

Fulfilling its commitment to support its pool of trainer-facilitators, ICS held its first Coop Educators’ Conference on November 24-26, 2012 at RMPC Resort, in the Island Garden City of Samal, Davao del Norte.

To increase its reach and respond to the growing demand for training while ensuring quality and affordability, ICS started an eLearning program for co-operatives. It developed an online platform with Etalon, an IT company in Manila, as technology partner. Co-operative courses will be delivered in video format through this platform, starting with the courses required by RA 9520 for co-operative officers. These courses are available in English and Cebuano (with later versions planned for Tagalog and other dialects). The courses can be accessed through www.virtucademy.com.

REGION CLUSTER PARTNER AND AREAS COVEREDREGION 9 (1 Cluster Partner) - LANAO-ZAMBOANGA-MIS.OCC. COOP NETWORK (LZMCN)

REGION 10 (3 Cluster Partners) - MAMBAJAO CREDIT COOPERATIVE (CAMIGUIN) - BUGEMCO (BUKIDNON) - MSU-IIT (ILIGAN & MARAWI)

REGION 11 (1Cluster Partner) - PROVINCIAL COOP UNION (DAVAO DEL SUR)

REGION 12 (6 Cluster Partners) - NOTRE DAME MPC (S. COTABATO) - MALAPATAN MPC (SARANGANI & GEN. SANTOS CITY) - KIMECO (SARANGANI PROVINCE) - KCCDC MPC (2ND CONGRESSIONAL DIS. OF COTABATO) - GMA MPC (DISTRICT 1, COTABATO) - CDSMC (PROVINCE OF COTABATO)

CARAGA REGION (5 Cluster Partners) - BAUG CARP BENEFICIARIES MPC (BUTUAN & AGUSAN NORTE) - AMPAYON MPC (BUTUAN & AGUSAN NORTE) - SAFRAGEMC (AGUSAN DEL SUR) - BCGEMCO (SURIGAO DEL SUR) - SOEMCO (SURIGAO NORTE & DINAGAT ISLAND)

DEVELOPING C O-OPERATORS

DEVELOPING C O-OPERATORS (FOR LEADER S)

12

367

DEVELOPING C O-OPERATORS (FOR STAFF)

8

391

PRE-MEMBERSHIP PROGRAM (NEW APPROACH)

2

87

LEADER SHIP AND VALUES RE-ORIEN TATION COURSE

13

340

BASIC CO OPERATIVE COURSE

23 946

COOPERATIVE MANAGEM ENT AND GOVERNANC E COURSE

18 641

COOPERATIVE STANDARD S COURSE

2 25

FINANCIAL MANAGEM ENT COURSE

7 233

COURSES REQU IRED BY RA9520 AND OTHER COURSES

COURSE NO. OF TRAININGS

NO. OF PARTICIPANTS

POLICY DEVELOPM ENT COURSE

17

576

STRATEG IC PLANNING COURSE

15 322

CONFLICT MANAGEM ENT COURSE

4 101

CUSTOM ER SERVIC E 1 32

HUMAN RESOURC E (JOB ANALYSIS)

1

20

123 Trainings Conducted

4,054 Participants

Trainings conducted from January to December 2012

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Hostel and Properties2012 marks the 20th season of the hostel in the history of MASS-SPECC. Today, MASS-SPECC hostel stands as one of the tallest cooperative buildings in the country, a monument to the leadership of MASS-SPECC cooperators not only in Mindanao but in the entire country. It serves as one-stop center for cooperatives. It serves as a venue for cooperators who come together to discuss issues affecting cooperatives and their membership.

Despite the conversion of the fourth floor rooms into office spaces in the middle of the year, its over-all net surplus from the combined earnings of the two hostels in Cagayan de Oro and Davao City increased to P200,288, an improvement of 51% over last year’s P132,180.

What boosted such growth were the increase in occupancy rate by 48.70%; increase in function room usage by 85%; the seventy-two (72) catering events served; and the remarkable increase of the restaurant and catering net surplus by 415% or P413,420 compared to P99,494 in 2011.

204,038.00

(99,000.00)

132,180.00

200,287.00

(150,000.00)

(100,000.00)

(50,000.00)

-

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

20092 20103 2011 2012

Net Income (loss) over the years

Hostel staff are trained to practice professionalism with friendly and casual attitude towards all its guests. They are actually encouraged to socialize with guests and make them feel at home – interact in common areas, share experiences and most importantly, have fun. This is the difference that is so noticeable in MASS-SPECC hostels. In 2012, a member of the management team attended the Hotel Management course in Manila and two of the staff finished culinary courses.

Hostel Amenities

The six-storey CDO hostel has a total of 20

rooms while Davao City hostel has 3. It

has rooms of all sizes, WIFI enabled, TV in all

its single deluxe and business dormitory rooms, a spacious

lounge on the 3rd floor, conference rooms that can accommodate 30

to 100 persons, and the restaurant and catering

services with wide choices of reasonably

priced menu.

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A C o r n e r s t o n e o f D e v e l o p m e n t

MASS-SPECC recognizes the importance of gender equality in the development process as an essential factor in strengthening the impact and sustainability of the cooperative movement. It resonates the idea that there can hardly be a road to real gender equality unless that road is leading to increased well-being for both men and women. Thus, it continuously promotes gender equality in its operations and among its membership.

RESOLUTION

That the search for “Most Outstanding Primary Cooperative Gender Equality Program Implementor” must be categorized in terms of asset size based on CDA categorization of cooperatives, so that other cooperatives can participate.

That the Gender Program of the primary cooperatives may be funded from the 10% allocation of the local CETF, if not enough, Cooperative Development Fund may be used.

The MASS-SPECC affiliate coops should have Gender Equality Program starting with the board and officers of the primary co-ops. To ensure the implementation of the program, the following must be present: 1. Creation of the GE Committee 2. Appointment of Gender Focal Person & Alternate 3. Allocation of CETF for GE Activities

UPDATES

On-going implementation

On-going dissemination to all MASS-SPECC affiliates

Already implemented at MASS-SPECC levelOn-going dissemination to all MASS-SPECC affiliates

MS. NORMA R. PEREYRAS, member of MASS-SPECC’s Board of Directors representing the women sector, was awarded as the Most Outstanding Cooperative Leader in the Philippines during the 2012 Gawad Parangal of the Cooperative Development Authority (CDA) in the 11th Cooperative Summit in Cagayan de Oro City. This recognition is a manifestation of her untiring efforts in the advancement of the cooperative movement as well as empowerment of women in the cooperative sector.

MASS-SPECC’s advancement of gender equality is manifested in the 2012 General Assembly’s adoption of the resolution passed during the Gender Congress

Congratulations to Ms. Norma R. Pereyras who garnered the Most Outstanding Cooperative Leader in the Philippines.

Gender Equality

For MASS-SPECC the motive of gender equality is beyond just being a goal. It is the basics of commitment to humanitarian rights, meeting challenges, reducing poverty and promoting sustainability. It is an indispensable tool for progress, a cornerstone of development.

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1. To develop a generic youth program that will be adopted by the primary cooperatives.

Co-op Youth Parliament (CYP) Building a Movement of Young Co-operator Leaders

Great leaders form visions not only through their own vantage point, but also through the perspective of those who will soon succeed them as leaders, today’s Youth.

2012 Congress Resolution Approved by the General Assembly and Updates

is a youth membership development program which aims to increase youth engagement in cooperative affairs

and enhance their appreciation of the co-op philosophy, values and principles. Movement of Young Co-operators (MY COOP) strategically appeals to the youth’s personal choice and individuality (MY) and collective effort and belongingness (Co-op Movement). It aims to attract more young members and lead them to value and choose the co-operative advantage. The program also aims to instill loyalty and active engagement of coop members at an early age. Implementation approaches include visually youthful logo and materials complemented by a full-package offering of the Cooperative Youth Leadership Academy. (CYLA)

2. To encourage primary cooperatives to send delegates during the Cooperative Youth Leadership Academy

MASS-SPECC has taken a more active stance in building and ensuring sustainability of the cooperative movement through the CYP’s Youth Leadership Formation Course in collaboration with the Institute of Cooperative Studies (ICS).

The CYP - Youth Leadership Course is envisioned to be

the center for experience-based training and formation of young cooperator leaders in Mindanao and throughout the country.

In the year 2012, the youth leaders from various member co-ops completed modules 1 and 2 out of the 3 modules. A total of 17 co-op youth leaders from 8 cooperatives participated in the activities.

3. CYP to coordinate with the Local Government Unit in the creation of Local Youth Development Council.

CYP Chairperson and Board Representative Mr. Vernon Salig represented CYP in the Asian Confederation of Credit Unions (ACCU) Forum in Manila last September 3-8, 2012.

Module 1: March 29-31, 2012 with 19 youth participants

Dare to Lead. Dare to be different. Its ALL ABOUT YOUth.

Module 2: June 10-12, 2012 with 17 youth participants

The engagement with the Local Government Units will be undertaken in the 2nd quarter of 2013.

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Acknowledging how climate change has brought another dimension to sustainable development and how vulnerable the cooperatives are. MASS-SPECC continues to put its best foot forward in protecting Mother Earth.

The synchronized event proves that the collective effort of cooperatives can make a big difference. It is also a concrete way of showing how cooperatives love the Earth as much as they love their members!

Environment

Sitio Quidulun, Malasag, Cagayan de Oro

Dubbed as “Coops Love Green Earth, Nurture Trees, Save Earth” is an advocacy-and-action oriented program aims to help ensure environment sustainability thru tree-nurturing activities. This is anchored on the National Greening Program (NGP) of the DENR thru the Mindanao Development Authority’s (MinDa) Nurturing our Waters program. The campaign aims to grow at least 6,000 trees covering 12 hectares all over Mindanao in the next three years.

Sitio Tibal-og, Marilog, Davao

SitioTabon, Brgy. Aclan, Nasipit,Agusan del Norte

Ecopark, Bayog, Zamboanga del Sur

12 hectares planted with 6,000 trees

participated by 29 cooperatives

Sitio Manirub, BrgyPamantingan,Esperanza, Sultan Kudarat

PLANT, GROW, & NURTURE TREES TO SAVE THE EARTH

The first ever large-scale Mindanao-wide simultaneous tree growing event across all five (5) regions in Mindanao was conducted on December 10, 2012.

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1. Ipil Market Vendors Multi-Purpose Cooperative (IMAVEMCO) Public Market Don Andres, Ipil, Zamboanga Sibugay2. Government Employees Multi-Purpose Cooperative (GEMPC) Deleverio Building, V. Sagun St., Gatas District, Pagadian City3. Bulanit Farmers Multi-Purpose Cooperative (BUFAMCO) Purok Bagong Silang, Bulanit, Labangan, Zamboanga del Sur

4. First Agrarian Reform Credit Cooperative (FARCCO) Laruk, Kisolon, Sumilao, Bukidnon5. Paceman Multi-Purpose Cooperative (PACEMAN MPC) 204 ICS Bldg., Tiano-Montalvan Sts., Cagayan de Oro City6. Mauswagon Community Multi-Purpose Cooperative (MACOMPCO) Zone 4, Mauswagon, Laguindingan, Misamis Oriental7. Palalan CARP Farmers Multi-Purpose Cooperative (PCFMPC) Upper Palalan, Brgy. Lumbia, Cagayan de Oro City8. Aloranon Multi-Purpose Cooperative (AMPC) Dalisay, Aloran, Misamis Occidental9. Initao National Comprehensive High School Teachers and Employees Cooperative (INCHSTECO) INCHS Campus, Poblacion Initao, Misamis Oriental10. Servus Savings and Credit Cooperative (SSCC) PB Poblacion, Initao, Misamis Oriental

11. Manuel Guianga and Sirib Growers and Employees Multi-Purpose Cooperative (MAGSIGE MPC) Sumifru P1, Manuel Guianga, Tugbok, Davao City12. Davao United Builders Cooperative (DUBC) Mantex Arcade, Magallanes St., Davao City13. Allied Trade Resources Multi-Purpose Cooperative (ALLTRADE) Unit 105, Mitra Bldg., San Pedro St., Davao City14. Bansalan Coconut Farmers and Workers Multi-Purpose Cooperative (BCMC) ZOFEMCO Bldg., De Los Cientos St., Pob. 2, Bansalan, Davao del Sur15. Davao Oriental Police Provincial Office Credit Cooperative (DOPPCC) Dahican, Mati City, Davao Oriental

16. Malungon Employees Multi-Purpose Cooperative (MEMPCO) Municipal Hall, Malungon, Sarangani Province17. Alabel Local Government Employees Multi-Purpose Cooperative (ALGEMPCO) Orchid St., Sta. Cruz Poblacion Alabel Sarangani Province18. Kilusang Bayan Multi-Purpose Cooperative (KBMPC) CFCST Compound Doroluman, Arakan, Cotabato19. Sto. Niño Teachers and Farmers Multi-Purpose Cooperative (SNTFMPC) SNCES Compound, Sto. Niño, South Cotabato20. Aleosan Credit Cooperative (ACCO) Terminal Blgd., Upper San Mateo, Aleosan, North Cotabato21. Household Cooperative Society (HCS) New Cebu, President Roxas, Cotabato

22. Mahayahay Credit Cooperative (MACRECO) Purok 4 Mahayahay, San Jose, Dinagat Islands23. Silver Lining Credit Cooperative (SLCC) 2/F Onghoc Bldg., Pangkalambuan Office, Butuan City24. Bacuag Employees Multi-Purpose Cooperative (BEMCO) Quezon St., Poblacion, Bacuag, Surigao del Norte25. Kamayu Producers Cooperative (KAPCO) Purok-5, Bigaan, Hinatuan, Surigao del Sur26. Malimuno Municipal Employees Multi-Purpose Cooperative (MAMEMPUCO) Malimuno Governing Center, Malimuno, Surigao del Norte

REGI

ON 9

REGI

ON 1

0RE

GION

11

REGI

ON 1

2CA

RAGA

2012 New Members

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MEMBERSHIP • Acceptance of the 26 new members of MASS-SPECC and withdrawal of 1 coop from membership. • Approval of the free General Assembly registration fee of one (1) voting delegate for all MIGS member

cooperatives. • Approval of the Regional Steering Committee (RSC) funding from the 10% of CETF collection from the regions.

STRENGTHENING THE CENTRAL FUND OPERATIONS • Renewal of the P 75M rediscounting line with BPI Globe Banko, Inc. • Renewal of the P 75M Rediscounting line with Land Bank of the Philippines (LBP) • Renewal of the P 50M CORRBANK Line with Land Bank of the Philippines(LBP) • Renewal of the P 150M rediscounting line with Development Bank of the Philippines (DBP) • Renewal of the P 37.5M credit line with Foundation for a Sustainable Society, Inc. (FSSI) • Increase of Land Bank of the Philippines (LBP) credit line from P 75M to P 150M • Access of credit line facility from Small Business Corporation (SBC). • Confirmation of the P 76.5M loan drawndown from Land Bank of the Philippines • Approval of P 2M equity-investment in the Rural Bank of Plaridel, Inc. acquired by Paglaum Multi-Purpose Cooperative.

SUSTAINING THE HOSTEL OPERATIONS • Renewal of the Department of Tourism (DOT) accreditation • Registration of Mindanao Cooperative Hostel (MCH) with the Cooperative Development Authority (CDA)

as subsidiary of MASS-SPECC.

AMENDMENTS • Approval of the proposed amendments to the Amended By-Laws for General Assembly consideration • Approval of the proposed amendments to the 2005 Election Code for General Assembly consideration

CREATION OF NEW COMMITTEES • Appointment of Oro Integrated Cooperative, MSU-IIT Multi-Purpose Cooperative and Tagum Cooperative

as members of the Investment Committee. • Appointment of Mambajao Credit Cooperative, Toril Community Cooperative and AIM Cooperative as

members of the Mediation-Conciliation Committee • Appointment of Bukidnon Government Employees MPC, Sta. Catalina MPC, and Panabo MPC as members

of the Hostel Committee • Appointment of Sta. Ana Multi-Purpose Cooperative as Credit Committee member

BOARD AND COMMITTEE REPORTS • Acceptance and approval of the Chairperson and BOD reports • Acceptance and approval of the Audit Committee Reports • Acceptance and approval of the Credit Committee Reports • Acceptance and approval of the Election Committee Reports • Acceptance and approval of the Mediation and Conciliation Committee Reports • Acceptance and approval of the Investment Committee Reports • Acceptance and approval of the Unification Committee Reports • Acceptance and approval of the Hostel Committee Reports

HIGHLIGHTS OF THE 2012-2013 BOD RESOLUTIONS

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AFFILIATIONS, LINKAGES AND PARTNERSHIPS • Approval of the Partnership Agreement with Mindanao Development Authority (MinDA) for the

MindaNOW: Nurturing Our Waters Program. The program is an integrated set of development interventions anchored on sustainable development framework that aims to integrate, harmonize and rationalize plans, programs, policies, mechanisms and processes, as well as adopts the river basin and watershed as the key platforms for planning.

• Approval of the Memorandum of Understanding with University of the Philippines – Open University (UPOU) which will explore academic cooperation in the following areas: a) Joint academic activities, including research and training; b) Faculty and staff exchange program; c) Student exchange program; d) Consultancy and other technical services; and e) Resource and information sharing.

• Approval P 1M investment to Philippine Cooperative Center (PCC) for equity infusion to Credit Information Corporation (CIC). Credit Information Corporation or CIC is the structure/stock corporation created and mandated by law whose primary purpose shall be to receive and consolidate basic credit data, to act as a central registry or central repository of credit information, and to provide access to reliable, standardized information on credit history and financial condition of borrowers.

• Approval of the P 75,000 support to Philippine Cooperative Center (PCC) as major cooperative sponsor of the 11th National Cooperative Summit.

• Approval of the Memorandum of Agreement with Ayala Foundation to participate in the two-year project on “Strengthening the Capacity of Civil Society Organizations (CSOs) in the Philippines”.

• Granting P 110,000 support to Federation of Peoples’ Sustainable Development Cooperative (FPSDC) of co-op housing to cooperative members affected by Sendong

• Contributing P 1M support to COOP-NATCCO PARTYLIST for the forthcoming election campaign. • Approval of the endorsement of Mr. Benjamin Togonon as Cooperative Development Authority

(CDA) administrator for Mindanao. • Approval of membership with Microfinance Council of the Philippines, Inc. (MCPI). MCPI is the

national network of microfinance institution working towards sustainable, innovative and client-responsive solutions to poverty in the country.

CARING FOR HUMAN RESOURCES • Approval of the revised Salary Scale and Job Grade • Approval of the policy on IPAD acquisition for the officers and Managers • Approval of the MASS-SPECC Employees Retirement Plan • Approval of the P 20,000 cash gift for officers and P 25,000 for the staff • Approval of release of the 2012 Productivity Incentive Bonus (PIB) to officers and staff • Approval of the Code of Ethics for employees to be implemented two (2) months after proper dissemination. • Approval of the proposed Code of Ethics for officers

OPERATIONS • Approval of management and treasurer’s reports during regular BOD meetings • Approval of the P800,000 provision for Disaster Risk Reduction and Management (DRRM) fund. • Approval of the P800,000 provision for General Assembly expense as subsidy for members in good standing

in 2013 General Assembly. • Approval for release of the 2012 Audited Financial Statement • Approval of the proposed allocation of the 2012 net surplus • Approval of the revised Policy on Operations such as PCL/RF, advances, communication and travel cost.

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Dear Valued Cooperators:

Warm greetings to our Esteemed Members!

Envisioned to be the most dependable and trusted Cooperative Federation in Mindanao, MASS-SPECC continued to live up to the members’ expectations as the most successful, solid and strong federation with its 39 years of meaningful existence to the community it served.

Hence, it is the Audit Committee’s aim to be attuned to the Federations strategic plans and directions. Further to our oversight role and to exercise the mandate given to us, it is indeed important to be vigilant in the exercise of our function with the fiduciary duty to monitor the Federation’s operational and other business activities that can have significant impact on MASS-SPECC’soperation for the calendar year under review.

While the Board of Directors, Management and all other committees play an important role to effectively and efficiently exercise its function to attain the goal, it is the Audit Committee’s responsibility though, to monitor the Federation’s operational activities and business affairs whether they are aligned to the federation’s ethical standards and compliance with laws and regulations.

Thus’ it is the audit committee’s challenge and commitment to contribute to the continued growth and governance strength of MASS-SPECC and introduce recommendations for its improvement to strengthen internal control and governance.

Hence the following are the summary of our Audit activities: • Conducted an inspection and validation of various financial transactions and made some recommendations to the

management and Board to further strengthen its internal control. • Have discussed with both the internal and external auditors regarding their audit findings and recommendations.

The committee likewise confirms the financial highlights, financial position and cash flow of MASS-SPECC for the year ended December 31, 2012 as reported by our external auditor, SGV and Co.

RECOMMENDATIONS: 1. ON AUDIT FIELD WORK The Committee recommends that audit field work dates should not be set/ specified by management. Only the frequency of

audit should be specified of which the specific dates shall be agreed upon by the audit committee members themselves, to allow independence and maintain the element of surprise.

2. ON GOVERNANCE AUDIT a) The Committee recommends that majority of the Board of Directors that should compose the Federation shall come

from the Board of Directors of the member Primary Cooperative. This is to strengthen governance and to give more time for our CEOs/GMs to concentrate on Management Operation of their respective Primaries.

b) Compliance to Election Committee requirements for elective positions. The Committee recommends to involvethe Audit Committee in the verification of requirements for member Cooperative and its representatives who will seek for an elective position.

3. COMPLIANCE with CDA Memorandum Circular No.2012-05 series of 2012. The Committee recommends that the Management should fully comply with this CDA Memorandum Circular no.2012-05

series of 2012 on Rules Implementing the Truth in Lending Act.4. ON INTERNAL AUDITORS The Committee recommends to management to make a study on whether to hire internal auditor staff composed of three

(3) persons on contractual basis for a prescribed period of time rather than outsource them. The committee observed that outsourced internal auditors cannot do their internal control duties on a day to day basis due to their limited visits. Another reason is for these hired internal auditors to monitor frequently the compliance of previous exceptions and for disbursements to be checked by them before implementation or payment. These hired internal auditors shall be reporting directly to the Board and the Audit Committee.

5. The Committee recommends hiring of SGV AND COMPANY to be our external auditor for the calendar year 2013.

We wish, therefore, to express appreciation and thanks to all primary Cooperative members and all individuals, who in one way or the other, have made the year 2012 very challenging yet fulfilling for MASS-SPECC.

Happy 39th Annual General Assembly and GOD bless us all!

MIRIAM R. BALOYO, CPA DELFIN L. CUEVAS SONIA T. CHUA, CPA Chairperson Vice Chairperson Secretary

Audit Committee Report

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STATEMENT OF MANAGEMENT‘S RESPONSIBILITY FOR FINANCIAL STATEMENT

The Management of MASS-SPECC COOPERATIVE DEVELOPMENT CENTER is responsible for all information and representation contained in the financial statement for the years ended December 31, 2012 and 2011. The financial statements have been prepared in conformity with Philippines Financial Reporting Standards and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration of materiality.

In this regard, management maintains system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized.

The Board of Directors reviews the financial statement before such statement are approved and submitted to the members of the cooperative.

SyCip Gorres Velayo & Co. (SGV& Co.), the independent auditors appointed by the Board of Directors, has examined the financial statements of the Cooperative for the year ended December 31, 2012 and 2011 in accordance with Philippines Standards on Auditing and has expressed their opinion on the fairness of presentation upon completion of such examination, in this report to the Members and Board of Directors.

MR. GADWIN E. HANDUMON, MS-ICED Chairperson of the Board

MS. BERNADETTE O. TOLEDO, CPA MS. MIRIAM R. BALOYO, CPA Chief Executive Officer Chairperson, Audit Committee

MS. ALETA A. GICOLE Treasurer

Tiano-Pacana Streets9000 Cagayan de Oro City, Philippines(08822) 725762 / 726516 / 728145Telefax No. (088) 856-2339

Dinavill Road, Anahaw VillageMa-a, Davao CityTelefax No. (082) 244-1096

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MASS-SPECC COOPERATIVE DEVELOPMENT CENTER STATEMENTS OF FINANCIAL POSITION December 31 2012 2011

ASSETS

Current Assets Cash and cash equivalents (Note 6) P=195,395,474 P=165,876,518 Financial assets at fair value through profit or loss (Note 7) 30,949,981 1,428,952 Loans and other receivables – net (Note 9) 169,586,580 225,521,439 Other current assets (Note 13) 2,983,558 1,140,104 Total Current Assets 398,915,593 393,967,013

Noncurrent Assets Investment in non-marketable equity securities – net (Note 10) 7,963,807 8,748,059 Loans and other receivables – net (Note 9) 359,581,491 277,079,873 Available-for-sale securities (Note 8) 60,824,871 33,587,777 Property and equipment – net (Note 11) 42,194,321 47,816,870 Investment property (Note 12) 1,043,092 1,043,092 Other noncurrent assets (Note 13) 9,789,378 6,722,699 Total Noncurrent Assets 481,396,960 374,998,370

TOTAL ASSETS P=880,312,553 P=768,965,383

LIABILITIES AND MEMBERS’ EQUITY

Current Liabilities Short-term interest-bearing loans and borrowings (Note 14) P=132,244,321 P=201,197,214 Accounts payable and accrued expenses (Notes 15) 25,803,654 17,978,118 Short-term members’ deposits (Note 16) 81,775,786 122,588,985 Interest on share capital and patronage refund payable 17,733,140 16,480,894 Total Current Liabilities 257,556,901 358,245,211

Noncurrent Liabilities Long-term interest-bearing loans and borrowings (Note 14) 18,583,986 24,436,567 Long-term members’ deposits (Note 16) 371,630,585 191,261,790 Retirement benefit obligation (Note 22) 8,418,510 7,267,651 Other noncurrent liabilities (Note 17) 21,719,290 24,323,407 Total Noncurrent Liabilities 420,352,371 247,289,415 Total Liabilities 677,909,272 605,534,626

Members’ Equity (Note 18) 202,403,281 163,430,757

TOTAL LIABILITIES AND MEMBERS’ EQUITY P=880,312,553 P=768,965,383 See accompanying Notes to Financial Statements.

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MASS-SPECC COOPERATIVE DEVELOPMENT CENTER STATEMENTS OF COMPREHENSIVE INCOME AND DISTRIBUTION OF NET SURPLUS Years Ended December 31 2012 2011

REVENUES Interest income on loans and receivables P=68,018,908 P=57,162,039 Consulting and service fees (Note 19) 39,397,536 40,886,410 Donation (Note 11) 2,204,775 8,771,350 Hostel fees – net (Note 20) 7,942,440 8,765,086 Interest from bank deposits and investments 11,613,339 6,741,955 Education and training 5,635,655 4,373,396 Other income 2,502,654 3,981,955 137,315,307 130,682,191

COSTS AND EXPENSES Interest on members’ deposits 31,682,628 23,059,298 Impairment losses (Notes 2 and 9) 3,000,000 17,896,681 Employee benefits (Note 22) 21,358,853 17,609,188 Depreciation and amortization (Notes 2 and 11) 13,258,892 10,804,673 Interest on Borrowed funds (Note 2) 14,793,613 10,578,314 Other operating expenses (Note 21) 25,918,589 25,328,554 110,012,575 105,276,708

NET SURPLUS BEFORE TAX 27,302,732 25,405,483

INCOME TAX (Note 24) 20,977 50,261

NET SURPLUS 27,281,755 25,355,222

OTHER COMPREHENSIVE INCOME 3,053,457 1,043,019 TOTAL COMPREHENSIVE INCOME P=30,335,212 P=26,398,241

DISTRIBUTION OF NET SURPLUS (Note 18) General reserve fund P=5,456,351 P=5,071,044 Cooperative development fund 1,909,723 1,774,866 Education and training fund 1,364,088 1,267,761 Community development fund 818,453 760,657 Interest on share capital and patronage refund 17,733,140 16,480,894 P=27,281,755 P=25,355,222 See accompanying Notes to Financial Statements.

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MASS-SPECC COOPERATIVE DEVELOPMENT CENTER STATEMENTS OF CHANGES IN MEMBERS’ EQUITY Years Ended December 31 2012 2011

SHARE CAPITAL (Note 18) Common:

Balance at beginning of year P=116,674,849 P=91,146,000 Additional members’ contributions 30,400,133 25,528,849

Balance at the end of year 147,074,982 116,674,849 Preferred 5,425,000 5,425,000 Total share capital 152,499,982 122,099,849

REVALUATION RESERVES Balance at beginning of year 8,724,224 7,681,205 Fair value gains on available-for-sale securities 3,053,457 1,043,019 Balance at end of year 11,777,681 8,724,224

STATUTORY FUNDS General reserve fund:

Balance at beginning of year 22,076,934 13,604,854 Allocation from net savings 5,456,351 5,071,044 Adjustments (1,805,523) 3,401,036 Balance at end of year 25,727,762 22,076,934

Cooperative education and training: Balance at beginning of year 1,017,274 935,946 Allocation from net savings 1,364,088 1,267,761 Transfer to liability (677,430) (633,881) Disbursement (999,841) (552,552) Balance at end of year 704,091 1,017,274

Cooperative development fund: Balance at beginning of year 8,751,819 9,061,592 Allocation from net savings 1,909,723 1,774,866 Adjustments (741,097) (2,084,639) Balance at end of year 9,920,445 8,751,819

Community development fund: Balance at beginning of year 760,657 541,097 Allocation from net savings 818,453 760,657 Adjustments 194,210 (541,097) Balance at end of year 1,773,320 760,657

Interest on share capital and patronage refund

Balance at beginning of year – – Allocation from net savings 17,733,140 16,480,894 Transfer to interest on share capital and patronage refund payable (17,733,140) (16,480,894) Balance at end of year – –

Total Statutory Funds 38,125,618 32,606,684

TOTAL MEMBERS’ EQUITY P= 202,403,281 P=163,430,757 See accompanying Notes to Financial Statements.

MASS-SPECC COOPERATIVE DEVELOPMENT CENTER STATEMENTS OF CASH FLOWS Years Ended December 31 2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES Net surplus P=27,302,732 P=25,405,483 Adjustments for:

Depreciation and amortization - net of amortization of donation reserves 13,258,892 9,634,292

Unrealized fair value gains on financial assets at fair value through profit or loss (2,373,251) (181,889)

Interest expense on available-for-sale debt securities 355,198 55,005 Operating income before working capital adjustments 38,543,571 34,912,891 Decrease (increase) in loans and other receivables

Loans and other receivables (26,566,759) (114,501,590) Other current assets (1,843,454) 1,352,727 Other noncurrent assets (3,146,155) (4,049,137)

Increase (decrease) Members’ deposits 139,555,596 70,512,985 Accounts payable and accrued expenses 7,825,536 4,439,568 Retirement benefit obligation 1,150,859 965,515 Other noncurrent liabilities (2,604,117) (3,363,248)

Net cash from (used in) operating activities 152,915,077 (9,730,289)

CASH FLOWS FROM INVESTING ACTIVITIES Increase in investment in non-marketable equity securities 784,252 (353,242) Acquisition of:

Available-for-sale securities (24,538,835) (32,599,763) Property and equipment (7,556,867) (5,262,415) Financial assets at fair value through profit or loss (27,147,778) (1,247,063)

Net cash used in investing activities (58,459,228) (39,462,483)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds of interest-bearing loans and borrowings 115,519,321 204,458,000 Repayment of interest-bearing loans and borrowings (190,324,795) (135,081,841) Proceeds from issuance of share capital 30,400,133 13,805,084 Increase in statutory fund (20,531,552) 456,499 Net cash from (used) in financing activities (64,936,893) 83,637,742

NET INCREASE IN CASH AND CASH EQUIVALENTS 29,518,956 34,444,970

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 165,876,518 131,431,548

CASH AND CASH EQUIVALENTS AT END OF YEAR P=195,395,474 P=165,876,518

See accompanying Notes to Financial Statements.

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MASS-SPECC COOPERATIVE DEVELOPMENT CENTER STATEMENTS OF CASH FLOWS Years Ended December 31 2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES Net surplus P=27,302,732 P=25,405,483 Adjustments for:

Depreciation and amortization - net of amortization of donation reserves 13,258,892 9,634,292

Unrealized fair value gains on financial assets at fair value through profit or loss (2,373,251) (181,889)

Interest expense on available-for-sale debt securities 355,198 55,005 Operating income before working capital adjustments 38,543,571 34,912,891 Decrease (increase) in loans and other receivables

Loans and other receivables (26,566,759) (114,501,590) Other current assets (1,843,454) 1,352,727 Other noncurrent assets (3,146,155) (4,049,137)

Increase (decrease) Members’ deposits 139,555,596 70,512,985 Accounts payable and accrued expenses 7,825,536 4,439,568 Retirement benefit obligation 1,150,859 965,515 Other noncurrent liabilities (2,604,117) (3,363,248)

Net cash from (used in) operating activities 152,915,077 (9,730,289)

CASH FLOWS FROM INVESTING ACTIVITIES Increase in investment in non-marketable equity securities 784,252 (353,242) Acquisition of:

Available-for-sale securities (24,538,835) (32,599,763) Property and equipment (7,556,867) (5,262,415) Financial assets at fair value through profit or loss (27,147,778) (1,247,063)

Net cash used in investing activities (58,459,228) (39,462,483)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds of interest-bearing loans and borrowings 115,519,321 204,458,000 Repayment of interest-bearing loans and borrowings (190,324,795) (135,081,841) Proceeds from issuance of share capital 30,400,133 13,805,084 Increase in statutory fund (20,531,552) 456,499 Net cash from (used) in financing activities (64,936,893) 83,637,742

NET INCREASE IN CASH AND CASH EQUIVALENTS 29,518,956 34,444,970

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 165,876,518 131,431,548

CASH AND CASH EQUIVALENTS AT END OF YEAR P=195,395,474 P=165,876,518

See accompanying Notes to Financial Statements.

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MASS-SPECC COOPERATIVE DEVELOPMENT CENTER NOTES TO FINANCIAL STATEMENTS 1. Cooperative Information

MASS-SPECC Cooperative Development Center (the Cooperative) is a federation of cooperatives organized on September 9, 1971 and duly registered with the Cooperative Development Authority (CDA) pursuant to Republic Act (R.A.) No. 6938 on December 27, 1990. Pursuant to R.A. No. 9520 “Philippine Cooperative Code of 2008”, the Cooperative was re-registered with the CDA on September 25, 2009. As contained in its amended Articles of Cooperation, the Cooperative is presently engaged in providing loans, receiving deposits and providing other financial services to member-cooperatives. It also serves as a training and resource center, databank, program coordinator and service bureau of its member-cooperatives. In accordance with R.A. No. 9520, otherwise known as “the Cooperative Code of the Philippines”, the Cooperative is exempted from the payment of all national (including income tax), city, provincial, municipal or barangay taxes of whatever name and nature, including exemption from custom duties, advance sales of compensating taxes on its importation of machinery, equipment and spare parts which are not available locally as certified by the Department of Trade and Industry. It enjoys tax exemptions from government taxes or fees imposed under internal revenue laws provided it does not transact with non-members or the general public. The Cooperative, if transacting business with non-members or the general public, may be exempted from tax if its accumulated reserves and undivided net surplus does not exceed P=10 million, or up to 10 years from the date of registration if its accumulated reserves already exceeds P=10 million. It has obtained a tax exemption certificate from the Bureau of Internal Revenue (BIR) in 2011. The Cooperative’s registered office address is Tiano-Yacapin Streets, Cagayan de Oro City. The financial statements of the Company were authorized for issue by the Board of Directors (BOD) on February 27, 2013. Amendment of the Cooperative Code of the Philippines On February 17, 2009, the President of the Philippines signed into law R.A. No. 9520, otherwise known as the Philippine Cooperative Code of 2008 (the Code), amending the Cooperative Code of the Philippines. On February 5, 2010, the Department of Finance issued the Joint Rules and Regulations implementing Articles 60, 61 and 144 of the Code in relation to R.A. No. 8424 or the National Internal Revenue Code, as amended (the Joint Rules and Regulations). Likewise, on February 11, 2010, the Bureau of Internal Revenue issued Revenue Memorandum Circular No. 12-2010 circularizing the full text of the Joint Rules and Regulations. The Cooperative has re-registered with the CDA, as required under the Code, and has complied with the requirements and procedures of the Joint Rules and Regulations.

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2. Summary of Significant Accounting Policies The significant accounting policies that have been used in the preparation of these financial statements are summarized below and in the succeeding pages. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of Financial Statements Preparation and Presentation The financial statements of the Cooperative have been prepared on the historical cost basis, except for certain available-for-sale (AFS) investments which have been measured at fair value. The financial statements of the Cooperative are presented in Philippine peso, the Cooperative’s functional and presentation currency, and all values are rounded to the nearest peso, except when otherwise indicated.

Statement of Compliance The financial statements have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). Changes in Accounting Policies and Disclosures The accounting policies adopted are consistent with those of the previous financial year except for the following amended Philippine Financial Reporting Standards (PFRSs), which were adopted as of January 1, 2012. Unless otherwise indicated, the adoption of these changes did not significantly affect the financial statements of the Cooperative. Amendments to PFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets

(Amendments). The amendments require additional disclosures about financial assets that have been transferred but not derecognized to enhance the understanding of the relationship between those assets that have not been derecognized and their associated liabilities. In addition, the amendments require disclosures about continuing involvement in derecognized assets to enable users of financial statements to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets. The Cooperative does not usually enter into this type of arrangement; hence, the amendments did not have a significant impact to the Cooperative’s financial position or performance.

PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets (Amendments). This

amendment to PAS 12 clarifies the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that the carrying amount of investment property measured using the fair value model in PAS 40, Investment Property, will be recovered through sale and, accordingly, requires that any related deferred tax should be measured on a ‘sale’ basis. The presumption is rebutted if the investment property is depreciable and it is held within a business model whose objective is to consume substantially all of the economic benefits in the investment property over time (‘use’ basis), rather than through sale. Furthermore, the amendment introduces the requirement that deferred tax on non-depreciable assets measured using the revaluation model in PAS 16, Property, Plant and Equipment, always be measured on a sale basis of the asset. The amendments are effective for periods beginning on or after January 1, 2012.

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Standards Issued but Not Yet Effective Standards issued but not yet effective up to the date of issuance of the Cooperative’s financial statements are listed below. This listing of standards and interpretations issued are those that the Cooperative reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Cooperative intends to adopt these standards when they become effective. Except as otherwise indicated, the Cooperative does not expect the adoption of these new and amended PFRS, PAS and Philippine Interpretations to have significant impact on its financial statements. Effective in 2013 PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial

Liabilities. These amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). These amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are set off in accordance with PAS 32. These disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with PAS 32. The amendments require entities to disclose, in a tabular format unless another format is more appropriate, the following minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period:

a. The gross amounts of those recognized financial assets and recognized financial liabilities;

b. The amounts that are set off in accordance with the criteria in PAS 32 when determining

the net amounts presented in the statement of financial position;

c. The net amounts presented in the statement of financial position;

d. The amounts subject to an enforceable master netting arrangement or similar agreement that are not otherwise included in (b) above, including: Amounts related to recognized financial instruments that do not meet some or all of

the offsetting criteria in PAS 32; and Amounts related to financial collateral (including cash collateral); and

e. The net amount after deducting the amounts in (d) from the amounts in (c) above. The amendments to PFRS 7 are to be retrospectively applied and are effective for annual periods beginning on or after January 1, 2013.

PFRS 11, Joint Arrangements. PFRS 11 replaces PAS 31, Interests in Joint Ventures and SIC-13, Jointly-controlled Entities - Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The standard becomes effective for annual periods beginning on or after January 1, 2013.

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PFRS 12, Disclosure of Interests with Other Entities. PFRS 12 includes all of the disclosures that were previously in PAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in PAS 31 and PAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. The standard becomes effective for annual periods beginning on or after January 1, 2013.

PFRS 13, Fair Value Measurement. PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements. PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted. This standard should be applied prospectively as of the beginning of the annual period in which it is initially applied. Its disclosure requirements need not be applied in comparative information provided for periods before initial application of PFRS 13. The standard becomes effective for annual periods beginning on or after January 1, 2013.

PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive

Income or OCI (Amendments). The amendments to PAS 1 change the grouping of items presented in OCI. Items that can be reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon derecognition or settlement) will be presented separately from items that will never be recycled. The amendment became effective for annual periods beginning on or after July 1, 2012. The Cooperative anticipates that the amendment will not affect the presentation of items in other comprehensive income, since all of the Cooperative’s other comprehensive income, which includes revaluation reserve on property and equipment, and unrealized fair value gains and losses on AFS financial assets, can be recycled to profit or loss when specified conditions are met.

PAS 19, Employee Benefits (Revised). Amendments to PAS 19 range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The revised standard also requires new disclosures such as, among others, a sensitivity analysis for each significant actuarial assumption, information on asset-liability matching strategies, duration of the defined benefit obligation, and disaggregation of plan assets by nature and risk. The amendments become effective for annual periods beginning on or after January 1, 2013. Once effective, the Cooperative has to apply the amendments retroactively to the earliest period presented. Currently, the Cooperative is using the corridor approach and its unrecognized actuarial gains as of December 31, 2012 amounted to P=2.1 million, which will be retrospectively recognized as gains in other comprehensive income in 2013.

PAS 28, Investments in Associates and Joint Ventures (as revised in 2011). As a consequence of the new PFRS 11 and PFRS 12, PAS 28, Investment in Associates, has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The amendment becomes effective for annual periods beginning on or after January 1, 2013.

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Effective in 2014 PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial

Liabilities (Amendments). The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments affect presentation only and have no impact on the Cooperative’s financial position or performance. The amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014.

Effective in 2015 PFRS 9, Financial Instruments. PFRS 9, as issued, reflects the first phase on the replacement

of PAS 39 and applies to the classification and measurement of financial assets and liabilities as defined in PAS 39, Financial Instruments: Recognition and Measurement. Work on impairment of financial instruments and hedge accounting is still ongoing, with a view to replacing PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is not invoked, be subsequently measured at amortized cost if it is held within a business model that has the objective to hold the assets to collect the contractual cash flows and its contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding. All other debt instruments are subsequently measured at fair value through profit or loss. All equity financial assets are measured at fair value either through other comprehensive income (OCI) or profit or loss. Equity financial assets held for trading must be measured at fair value through profit or loss. For FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. All other PAS 39 classification and measurement requirements for financial liabilities have been carried forward into PFRS 9, including the embedded derivative separation rules and the criteria for using the FVO. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the Cooperative’s financial assets, but will potentially have no impact on the classification and measurement of financial liabilities.

PFRS 9 is effective for annual periods beginning on or after January 1, 2015.

Annual Improvements to PFRSs (2009-2011 cycle) The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessary amendments to PFRSs. The amendments are effective for annual periods beginning on or after January 1, 2013 and are applied retrospectively. Earlier application is permitted. Unless otherwise specified, the Cooperative does not expect the adoption of these amendments to have significant impact on its financial statements. PAS 1, Presentation of Financial Statements - Clarification of the requirements for

comparative information. The amendments clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional comparative period does not need to contain a complete set of financial statements. On the other hand, supporting notes for the third balance sheet (mandatory when there is a retrospective application of an accounting

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policy, or retrospective restatement or reclassification of items in the financial statements) are not required.

PAS 16, Property, Plant and Equipment - Classification of servicing equipment. The

amendment clarifies that spare parts, stand-by equipment and servicing equipment should be recognized as property, plant and equipment when they meet the definition of property, plant and equipment and should be recognized as inventory if otherwise.

Financial Assets Financial assets are recognized when the Cooperative becomes a party to the contractual terms of the financial instrument. Financial assets other than those designated and effective as hedging instruments are classified into the following categories: financial assets at fair value through profit or loss (FVPL), loans and receivables, held-to maturity investments and AFS financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired. Regular purchases and sales of financial assets are recognized on their trade date. All financial assets that are not classified as at fair value through profit or loss are initially recognized at fair value plus any directly attributable transaction costs. Financial assets carried at fair value through profit or loss are initially recorded at fair value and transaction costs related to it are recognized in profit or loss.

The categories of financial instruments relevant to the Cooperative are more fully described below. Financial Assets at FVPL. This category includes financial assets that are either classified as held for trading or that meets certain conditions and are designated by the entity to be carried at fair value through profit or loss upon initial recognition. All derivatives fall into this category, except for those designated and effective as hedging instruments. Assets in this category are classified as current if they are either held for trading or are expected to be realized within 12 months from the end of the reporting period. Financial assets at FVPL are measured at fair value, and changes therein are recognized in profit or loss. Financial assets (except derivatives and financial instruments originally designated as financial assets at fair value through profit or loss) may be reclassified out of fair value through profit or loss category if they are no longer held for the purpose of being sold or repurchased in the near term. Loans and Other Receivables. Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Cooperative provides money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current asserts, except for maturities greater than 12 months after the end of the reporting period which are classified as non-current assets. Loans and receivables are subsequently measured at amortized cost using the effective interest method, less any impairment loss, if any. Any change in their value is recognized in profit or loss. Impairment loss is provided when there is objective evidence that the Cooperative will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets’ carrying amount and the present value of estimated cash flows.

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The Cooperative’s financial assets categorized as loans and receivables are presented as cash and cash equivalents, loans and other receivables, and as part of other non-current assets (with respect to certain cash bond, provisional deposits and refundable deposits) in the statement of financial position. Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. Available for sale Financial Assets. This include non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. They are included in non-current assets in the statement of financial position unless management intends to dispose of the investment within 12 months from the end of the reporting period. This includes listed entity securities, corporate bonds, government bonds that are subsequently measured at fair value, and investments in shares of stock of other cooperatives and organizations that are not quoted in active market and their fair value cannot be readily measured. Accordingly, these unquoted financial assets are carried at cost, less impairment losses and presented as “Investment in non-marketable equity securities” in the statement of financial position. Gains and losses from changes in fair value are recognized in other comprehensive income, net of any income tax effects, and are reported as part of the revaluation reserve account in members’ equity. When the financial asset is disposed of or is determined to be impaired, the cumulative fair value gains or losses recognized in other comprehensive income is reclassified from equity to profit or loss and is presented as reclassification adjustment within other comprehensive income. Reversal of impairment losses are recognized in other comprehensive income, except for financial assets that are debt securities which are recognized in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognized.

For investments that are actively traded in organized financial markets, fair value is determined by reference to exchange-quoted market bid prices at the close of business on the reporting period. For investments where there is no quoted market price, fair value is determined by reference to the current market value of another instrument which is substantially the same or is calculated based on the expected cash flows of the underlying net asset base of the investment. Non-compounding interest, dividend income and other cash flows resulting from holding financial assets are recognized in profit or loss when earned, regardless of how the related carrying amount of financial assets is measured. The financial assets are derecognized when the rights to receive cash flows from the financial instruments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.

Property and Equipment Land is measured at fair value. As no finite useful life for land can be determined, related carrying amount are not depreciated. All other property and equipment are stated at cost less accumulated depreciation and any impairment in value. The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to working condition for its intended use. Expenditures for additions, major improvements and renewals are capitalized; expenditures for repairs and maintenance are charged to expense as incurred.

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Following initial recognition at cost, land is carried at a revalued amount which is the fair value at the date of the revaluation, as determined by independent appraisers. Revalued amounts are fair market values determined in appraisals by external professional valuers unless market-based factors indicate immediate impairment risk. Fair value is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date. Any revaluation surplus is recognized in other comprehensive income and credited to the revaluation reserves account in the statement of changes in members’ equity. Any revaluation deficit directly offsetting a previous surplus in the same asset is charged to other comprehensive income to the extent of any revaluation surplus in members’ equity relating to this asset and the remaining deficit, if any, is recognized in profit or loss.

Upon disposal of revalued assets, amounts included in revaluation reserves relating to them are transferred to general reserve fund account under members’ equity. Revaluations are performed every two years unless circumstances require annual revaluations. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets as follows:

Furniture, fixtures and equipment 2-8 years Building and improvements 5-25 years Transportation equipment 8 years Kitchen, dinnerware and others 2-5 years

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

The residual values and estimated useful lives of property and equipment are reviewed, and adjusted if appropriate, at each reporting date. An item of property and equipment, including the related accumulated depreciation and impairment losses, is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the year the item is derecognized. Investment Property Investment property pertains to parcels of land acquired by the Cooperative in settlement of loans from defaulting borrowers through foreclosure or dacion in payment, and is property held either to earn rental or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the supply of services or for administrative purpose. These properties are initially recognized at cost, which includes acquisition price plus directly attributable cost incurred such as legal fees, transfer taxes and other transaction costs. Subsequent to initial recognition, the investment property is stated at cost less any impairment losses, if any. The Cooperative adopted the cost model in measuring the asset, hence, it is carried at cost less any impairment in value. The carrying value of the asset if reviewed for impairment when changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset is written down to its recoverable amount and impairment losses are recognized in the statement of income and distribution of net surplus.

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The investment property is derecognized upon disposal or when permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of the asset is recognized in the statement of income and distribution of net surplus in the year of retirement or disposal.

Financial Liabilities Financial liabilities of the Cooperative, which include interest-bearing loans and borrowings, accounts payable and accrued expenses, short and long-term members’ deposits, interest on share capital and patronage refund payable and other funds (presented as “Others” under the Other noncurrent liabilities account), are recognized when the Cooperative becomes a party to the contractual terms of the instrument which are measured at amortized cost using the effective interest method. All interest related charges are recognized as an expense in profit or loss under the caption “Interest on share capital and patronage refund” in the statement of income and distribution of net surplus. Interest-bearing loans and borrowings and members’ deposits are raised for support of short and long-term funding of operations. They are recognized at proceeds received, net of direct issue costs. Finance charges are charged to profit or loss on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that these are not settled in the period in which they arise.

Accounts payable and accrued expenses, interest on share capital and patronage refund payable and other funds are initially recognized at fair value and subsequently measured at amortized cost, using effective interest method for maturities beyond one year, less settlement payments.

Interest on share capital and patronage refund (or dividend payable) for distributions to members is recognized as financial liability upon declaration by the BOD subject to the concurrence of the general assembly.

Financial liabilities are classified as current liabilities if payment is due to be settled within one year or less after the end of the reporting period, or the Cooperative does not have an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. Otherwise, these are presented as non-current liabilities. Financial liabilities are derecognized from the statement of financial position only when the obligations are extinguished either through discharge, cancellation or expiration. Provisions and Contingencies Provisions are recognized when present obligations will probably lead to an outflow of economic resources and they can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the end of the reporting period, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. When time value of money is material, long-term provisions are discounted to their present values using a pretax rate that reflects market assessments and the risks specific to the obligation. The increase in the provisions are reviewed at

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the end of each reporting period and adjusted to reflect the current best estimate. Provisions due to passage of time are recognized as expense. In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognized in the financial statements. Similarly, possible inflows of economic benefits to the Cooperative that do not yet meet the recognition criteria of an asset are considered contingent assets, hence, are not recognized in the financial statements. On the other hand, any reimbursement that the Cooperative can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset not exceeding the amount of the related provision. Revenue and Expense Recognition Revenue comprises revenue from the sale of goods and rendering of services measured by reference to the fair value of consideration received or receivable by the Cooperative for goods sold and services rendered, excluding trade discounts. Revenue is recognized to the extent that the revenue can be reliably measured; it is probable that the economic benefits will flow to the Cooperative; and the costs incurred or to be incurred can be measured reliably. In addition, the following specific recognition criteria must also be met before revenue is recognized: Interest income on loans and receivables and investments. This is recognized as the interest

accrues taking into account the effective yield on the asset.

Interest income on bank deposits. This is recognized as the interest accrues.

Consulting and service fees, and education and training. Revenue is recognized when the service has already been provided.

Sale of goods. Revenue is recognized when the risks and rewards of ownership of the goods have passed to the buyer, i.e. generally when the customer has acknowledged delivery of goods.

Donation. This is recognized as income over the period necessary to match the related costs which they are intended to compensate, on a systematic basis.

Cost and expenses are recognized in profit or loss upon utilization of goods or services or at the date they are incurred. All finance costs are reported in profit or loss on an accrual basis.

Leases The Cooperative accounts for its leases as follows: Cooperative as Lessee. Leases which do not transfer to the Cooperative substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.

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Cooperative as Lessor. Leases wherein the Cooperative substantially transfers to the lessee all risks and benefits incidental to ownership of the lease item are classified as finance leases and are presented as receivable at an amount equal to the Cooperative’s net investment in the lease. Finance income is recognized based on the pattern reflecting a constant periodic rate of return on the Cooperative’s net investment outstanding in respect of the finance lease. Leases which do not transfer to the lessee substantially all the risks and benefits of the ownership of the asset are classified as operating leases. Lease income from the operating leases is recognized in profit or loss on a straight-line basis over the lease term. The Cooperative determines whether an arrangement is, or contains a lease based on the substance of the arrangement. It makes an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Impairment of Non-financial Assets The Cooperative’s property and equipment, investment in non-marketable equity securities, and investment property are subject to impairment testing. Individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. An impairment loss is recognized for the amount by which the asset or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value in use, based on an internal discounted cash flow evaluation. Impairment loss is charged pro-rata to the other assets in the cash generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist and the carrying amount of the asset is adjusted to the recoverable amount resulting in the reversal of the impairment loss.

Employee Benefits Pension benefits are provided to employees through a defined benefit plan, as well as a defined contribution plan. Post-employment Defined Benefit Plan. A defined benefit plan is a post-employment plan that defines an amount of postemployment benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligation for any benefits from this kind of pension plan remains with the Cooperative, even if plan assets for funding the defined benefit plan have been acquired. Plan assets may include assets specifically designated to a long-term benefit fund, as well as qualifying insurance policies. The Cooperative’s defined benefit pension plan covers all regular full-time employees. The pension plan is tax-qualified, noncontributory and administered by a trustee.

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The liability recognized in the statement of financial position for defined benefit pension plans is the present value of the defined benefit obligation (DBO) at the end of each reporting period less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs amortized over five years. The DBO is calculated annually by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. Actuarial gains and losses are not recognized as an expense unless the total unrecognized gain or loss exceeds 10% of the greater of the obligation and related plan assets. The amount exceeding this 10% corridor is charged or credited to profit or loss over the employees’ expected average remaining working lives. Actuarial gains and losses within the 10% corridor are disclosed separately. Past service costs are recognized immediately in profit or loss, unless the changes to the post-employment plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortized on a straight-line basis over the vesting period. Defined Benefit Contribution Plans. A defined contribution plan is a post-employment plan under which the cooperative pays fixed contributions into an independent entity. The Cooperative has no legal or constructive obligations to pay further contributions after payment of the fixed contribution. The contributions recognized in respect of defined contribution plans are expensed as they fall due. Liabilities and assets may be recognized if underpayment or prepayment has occurred and are included in current liabilities of current asset as they are normally of a short term nature. Bonus Plans. The Cooperative recognizes a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the Cooperative’s employees after certain adjustments. The Cooperative recognizes a provision where it is contractually obliged to pay the benefits, or where there is a past practice that has created a constructive obligation.

Members’ Equity Share capital is determined using the nominal value of shares that have been issued. Statutory funds include all current and prior period results, net of interest on share capital and patronage refunds, as reported in the statement of income and distribution of net surplus. Revaluation reserves comprise gains and losses due to the revaluation of property and equipment and certain financial assets. Donated capital pertains to the value of assets received from not-for-profit organizations.

Events After the Reporting Period Any post-year-end event that provides additional information about the Cooperative’s financial position at the end of the reporting period (adjusting event) is reflected in the financial statements. Post-year-end events that are not adjusting events, if any, are disclosed when material to the financial statements.

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3. Significant Accounting Judgments and Estimates The preparation of the financial statements in accordance with PFRS requires the Cooperative to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future events may occur which will cause the judgments, estimates and assumptions used in arriving at the estimates to change. The effects of any change in judgments, estimates and assumptions are reflected in the financial statements as they become reasonably determinable. Judgments, estimates and assumptions 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. Critical Management Judgments in Applying Accounting Policies In the process of applying the Cooperative’s accounting policies, management has made the judgments presented below, apart from those involving estimation, which have the most significant effect on the amounts recognized in the financial statements:

Impairment of AFS Financial Assets. The determination when an investment is other-than-temporarily impaired requires significant judgment. In making this judgment, the Cooperative evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost, and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flows. Based on the recent evaluation of information and circumstances affecting the Cooperative’s AFS financial assets, management concluded that the assets are not impaired as of December 31, 2012. Future changes in those information and circumstance might significantly affect the carrying amount of the assets. Distinction Between Investment Properties and Owner-managed Properties. The Cooperative determines whether a property qualifies as investment property. In making its judgment, the Cooperative 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 to other assets used in the production or supply process. Operating and Finance Leases. The Cooperative has entered into various lease agreements. Critical judgment was exercised by management to distinguish each lease agreement as either an operating or finance lease by looking at the transfer or retention of significant risk and rewards of ownership of the properties covered by the agreements. Failure to make the right judgment will revert in either overstatement or understatement of assets and liabilities. Provisions and Contingencies. Judgment is exercised by management to distinguish between provisions and contingencies. Policies on recognition and disclosure of provision and disclosure of contingencies are discussed in Note 2 and relevant disclosures are presented in Note 25. Determining Functional Currency Based on the economic substance of the underlying circumstances relevant to the Cooperative, the functional currency of the Cooperative is the Philippine Peso. The Philippine Peso is the currency of the primary economic environment in which the Cooperative operates. It is the currency that mainly influences the sale of service and the costs of providing the service and the currency in which receipts from operating activities are retained.

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Financial Assets not Quoted in an Active Market The Cooperative classifies financial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in the evaluation on whether a financial asset is quoted in an active market is the determination on whether quoted prices are readily and regularly available, and whether those prices represent actual and regularly occurring market transactions on an arm’s length basis. Key Sources of Estimation Uncertainty Presented below and in the succeeding page are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year: Allowance for Impairment of Loans and Other Receivables. Allowance is made for specific and groups of accounts, where objective evidence of impairment exists. The Cooperative evaluates these accounts based on available facts and circumstances, including, but not limited to, the length of the Cooperative’s relationship with the members, the members’ current credit status, average age of accounts, collection experience and historical loss experience. The carrying value of loans and other receivables and the analysis of allowance for impairment on such financial assets are shown in Note 9. The Cooperative recognized impairment loss of P=3.0 million in 2012 and P=10.3 million in 2011. Impairment Losses of AFS Investments The Cooperative assesses at each reporting period whether there is objective evidence that a financial asset or group of similar financial assets is impaired. If an AFS financial 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 the statement of comprehensive income, is transferred from fund balances to the statement of comprehensive income. Reversals of impairment losses on debt instruments are reversed through the statement of comprehensive income if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognized in the statement of comprehensive income. The carrying value of AFS investments amounted to P=60.8 million and P=33.6 million as of December 31, 2012 and 2011, respectively. No provision for impairment losses of AFS investments was recognized in 2012 and 2011 (See Note 8). Useful Lives of Property and Equipment. The Cooperative estimates the useful lives of property and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the assets. The carrying amounts of property and equipment are analyzed in Note 11. Based on management’s assessment as at December 31, 2012, there is no change in estimated useful lives of property and equipment during the year. Actual results, however, may vary due to changes in estimates brought about by changes in factors mentioned above.

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Fair Value of Land. The Cooperative’s land, classified as property and equipment, is carried at revalued amount at the end of the reporting period. In determining the fair value of the asset, the Cooperative engages the services of professional and independent appraisers. The fair value is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged between a knowledgeable willing buyer and seller in an arm’s length transaction as at the valuation date. Such amount is influenced by different factors including the location and specific characteristics of the property (e.g., size, features, and capacity), quantity of comparable properties available in the market, and economic condition and behavior of the buying parties. A significant change in these elements may affect prices and the value of the assets. The amounts of revaluation and fair value gains recognized are disclosed in Note 11. Impairment of Non-financial Assets. The Cooperative’s policy on estimating the impairment of non-financial assets is discussed in detail in Note 2. Though management believes 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 effect on the results of operations. There are no impairment losses provided for the Cooperative’s non-financial assets in 2012 while P=7.6 million was provided in 2011 (see Note 11). Post-employment Defined Benefit. The determination of the Cooperative’s obligation and cost of post-employment defined benefit is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 22 and include, among others, discount rates, expected return on plan assets and salary increase rate. Actual results that differ from the assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. The amounts of retirement benefit obligation and expense and analysis of the movements in the estimated present value of retirement benefit obligation are presented in Note 22.

4. Financial Risk Management Policies and Objectives The Cooperative is exposed to certain financial risks in relation to financial instruments. The Cooperative’s financial assets and liabilities by category are summarized in Note 5. The main types of risks are market risk, credit risk and liquidity risk. The management takes charge of the Cooperative’s overall risk management strategies which is focused on actively monitoring and securing the Cooperative’s short to medium-term cash flows by minimizing the exposure to financial markets. The Cooperative does not engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Cooperative is exposed to are described below and in the succeeding pages.

Market Risk Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, foreign currency exchanges rates, commodity prices, equity prices and other market changes. The Cooperative’s market risk originates from its holdings in its AFS investments.

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Interest Rate Sensitivity. The Cooperative’s policy is to minimize interest rate cash flow risk exposures on long term financing. At December 31, 2012, the Cooperative is exposed to changes in market interest rates through its cash and cash equivalents, which are subject to variable interest rates (see Note 6). All other financial assets and liabilities such as loans and other receivables, members’ deposits, and interest-bearing loans and borrowings have fixed interest rates. The following paragraph presents the sensitivity of the net result for the year and equity to a reasonably possible change in interest rate of +/- 3.25% and +/- 2.32% for cash and cash equivalents in 2012 and 2011, respectively. These changes are considered to be reasonably possible based on observation of current market conditions. The calculation is based on changes in the average market interest rates for the period, and the financial instruments held at the end of each reporting period that are sensitive to changes in interest rates. All other variables are held constant. If the interest rates were to increase, net surplus before tax for the year and equity as of December31, 2012 and 2011 would decrease by P=2.2 million and P=1.9 million, respectively, and if interest rates were to decrease, net surplus before tax for the year and equity as of December 31, 2012 and 2011 would increase by the same amount. Credit Risk Credit risk is the risk that a counter party will fail to discharge an obligation to the Cooperative. The Cooperative is exposed to credit risk from its operating and investing activities. The Cooperative’s maximum exposure to credit risk for the components of the statement of financial position as at December 31, 2012 and 2011 is the carrying amounts as shown below:

2012 2011 Loans and receivables

Cash and cash equivalents P=195,395,474 P=165,876,518 Loans and other receivables 529,168,071 502,601,312

724,563,545 668,477,830 Financial assets at FVPL 30,949,981 1,428,952 AFS securities (see Note 8) 60,824,871 33,587,777 P=816,338,397 P=703,494,559

The aging analysis of loans and receivables, financial assets at FVPL and AFS securities as of December 31, 2012 and 2011 are as follows:

2012

Total

Neither past due nor

impaired

Past due but not impaired Less than

30 days 30-60 days 61-90 days More

than 90 days Impaired Loans and other receivables P=564,838,640 P=532,091,085 P=629,084 P=416,667 P=390,332 P=666,667 P=30,644,805 Financial assets at FVPL 30,949,981 30,949,981 – – – – – AFS securities 60,824,871 60,824,871 – – – – – P=656,613,492 P=623,865,937 P=629,084 P=416,667 P=390,332 P=666,667 P=30,644,805

2011

Total

Neither past due nor

impaired

Past due but not impaired Less than

30 days 30-60 days 61-90 days More

than 90 days Impaired Loans and other receivables P=531,296,770 P=493,402,563 P=– P=– P=– P=9,524,894 P=28,369,313 Financial assets at FVPL 1,428,952 1,428,952 – – – – – AFS securities 33,587,777 33,587,777 – – – – – P=566,313,499 P=528,419,292 P=– P=– P=– P=9,524,894 P=28,369,313

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Cash. The credit risk for cash is considered negligible, since the counterparties are reputable banks with high quality eternal credit ratings. Cash in banks, which are insured by the Philippine Deposit Insurance Corporation up to maximum coverage of P0.5 million per depositor per banking institution, as provided for under RA No. 9302, Charter of Philippine Deposit Insurance Corporation, are still subject to credit risk. Loans and Other Receivables - Net. The Cooperative’s loans and receivables are actively monitored to avoid significant concentration of credit risk. The Cooperative continuously monitors defaults of borrowers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls. The Cooperative’s policy is to deal only with creditworthy counterparties. The Cooperative’s management considers that all of the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due (see Note 9). In respect of loans and receivables, the Cooperative is not exposed to any significant credit risk exposure to any single counterparty. There is, however, a concentration risk on loans receivable and accounts receivable because the counterparties are all cooperatives. Liquidity Risk Liquidity risk is the risk that the Cooperative will be unable to meet its payment obligations when they fall due under normal and stress circumstances. The Cooperative seeks to manage its liquidity profile to be able to service its maturing debts, and to finance operating and capital requirements. The Cooperative maintains a level of cash on hand and in banks to cover liquidity needs. As part of its liquidity risk management, the Cooperative regularly evaluates its projected and actual cash flow. The analyses of the maturity grouping of resources and liabilities items as of December 31, 2012 and 2011, are presented below.

2012

One year

and below Over one year

to five years Total Financial resources P=456,756,906 P=360,581,704 P=817,338,610 Financial liabilities (265,788,557) (391,320,283) (657,108,840) Positive gap P=190,968,349 (P=30,738,579) P=160,229,770

2011

One year


to five years Total Financial resources P=426,414,686 P=286,972,478 P=713,387,164 Financial liabilities (362,855,040) (228,336,725) (591,191,765) Positive gap P=63,559,646 P=58,635,753 P=122,195,399

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As of December 31, 2012, the Cooperative’s liabilities have contractual maturities which are presented below.

One year


to five years Accounts payable and accrued expenses P=25,803,654 P=– Members’ deposits 90,007,442 371,630,585 Interest-bearing loans and borrowings 132,244,321 19,689,698 Interest on share capital and patronage refund 17,733,140 – P=265,788,557 P=391,320,283

This compares to the maturity of the Cooperative’s financial liabilities as of December 31, 2011 as presented below.

One year


to five years Accounts payable and accrued expenses P=17,978,118 P=– Members’ deposits 125,959,901 191,261,790 Interest-bearing loans and borrowings 202,436,127 37,074,935 Interest on share capital and patronage refund 16,480,894 – P=362,855,040 P=228,336,725

Interest-bearing loans and borrowing as presented above is inclusive of interest. The above contractual maturities reflect the gross cash flows, which may differ with the carrying values of the liabilities at the reporting date.

5. Categories and Fair Values of Financial Assets and Liabilities

Comparison of Carrying Amounts and Fair Values The carrying amounts and fair values of the categories of financial assets and liabilities presented in the statements of financial position are shown below. Carrying Values Fair Values 2012 2011 2012 2011 Financial Assets Loans and receivables:

Cash and cash equivalents P=195,395,474 P=165,876,518 P=195,395,474 P=165,876,518 Loans and other receivables - net 529,168,071 502,601,312 529,168,071 502,601,312

Fair value through profit or loss 30,949,981 1,428,952 30,949,981 1,428,952 Available-for-sale securities:

Debt 46,175,134 22,610,975 46,175,134 22,610,975 Equity 14,649,737 10,976,802 14,649,737 10,976,802

Investment in non-marketable equity securities 7,963,807 6,248,059 7,963,807 6,248,059

P=824,302,204 P=709,742,618 P=824,302,204 P=709,742,618

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Carrying Values Fair Values 2012 2011 2012 2011 Financial Liabilities Financial liabilities at amortized costs:

Interest- bearing loans and borrowings P=150,828,307 P=225,663,781 P=150,828,307 P=225,663,781

Accounts payable and accrued expenses 25,803,654 17,978,118 25,803,654 17,978,118

Members’ deposits 453,406,371 313,850,775 453,406,371 313,850,775 Interest on share capital and

patronage refund 17,733,140 16,480,894 17,733,140 16,480,894 P=647,771,472 P=573,973,568 P=647,771,472 P=573,973,568 See Note 2 for a description of the accounting policies for each category of financial instrument. A description of the Cooperative’s risk management objectives and policies for financial instruments is provided in Note 4. Fair Value Hierarchy Financial assets and liabilities measured at fair value are categorized in accordance with fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair values of the financial assets and liabilities. The hierarchy has the following levels: Level 1: Fair values determined using observable market inputs that reflect quoted prices in

active markets for identical assets or liabilities.

Level 2: Fair values determined using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Fair values determined using inputs for asset or liability that are not based on observable market data.

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement. The breakdown of the Cooperative’s financial assets measured at fair value in the statements of financial position as of December 31, 2012 and 2011, which are all categorized under Level 1, is as follows:

2012 2011 Financial asset at fair value through profit or loss P=30,949,981 P=1,428,952 Available-for-sale securities 60,824,871 33,587,777 P=91,774,852 P=35,016,729

Certain investments classified as investment in non-marketable equity securities amounting to P=8.0 million in 2012 and P=6.2 million in 2011 (see Note 10) are stated at cost since they have no available market price references and their fair values cannot be determined using valuation techniques.

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6. Cash and Cash Equivalents This account consists of:

2012 2011 Cash in bank and on hand P=126,122,982 P=92,354,990 Short term placements 68,966,071 73,234,028 Revolving fund 306,421 287,500 P=195,395,474 P=165,876,518

Cash in banks generally earn interest at rates based on daily bank rates. Short-term placements are made for varying periods from 36 to 90 days and earn effective interest ranging from 1%-12% for 2012 and from 1.2%-12% for 2011.

7. Financial Assets at Fair Value Through Profit or Loss

This account primarily consists of investment in Unit Investment Trust Fund, which is designated as at FVPL on initial recognition, acquired by the Cooperative in 2012 and 2011. The reconciliation of the carrying amounts of financial assets at FVPL as of December 31, 2012 and 2011 is as follows:

2012 2011 Balance at beginning of year P=1,428,952 P=– Additions during the year 27,147,778 1,247,063 Fair value gains 2,373,251 181,889 Balance at end of year P=30,949,981 P=1,428,952

All amounts have been determined directly by reference to published prices quoted in an active market.

8. Available-for-Sale Securities

The carrying amounts of the AFS securities as of December 31, 2012 and 2011, which are all traded and quoted in an active market, are classified as follows:

2012 2011 Debt securities P=46,175,134 P=22,610,975 Equity securities 14,649,737 10,976,802 Balance at end of year P=60,824,871 P=33,587,777

Investment in AFS debt securities of the Cooperative at December 31, 2012 and 2011 earn interest at the following annual rates:

2012 2011 Peso bonds 1.0%-3.0% 1.0% - 1.4% Government securities 5.0%-12.0% 5.7% - 12.4%

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The reconciliation of the carrying amounts of the AFS securities in 2012 and 2011 follows:

2012 2011 Balance at beginning of year P=33,587,777 P=– Additions during the year 24,538,835 32,599,763 Fair value gains 3,053,457 1,043,019 Amortization of premium (355,198) (55,005) Balance at end of year P=60,824,871 P=33,587,777

The fair value gain of P=1.5 million and P=1.0 million in December 31, 2012 and 2011, respectively, is presented as other comprehensive income in the statement of comprehensive income. The fair value of AFS securities have been determined directly by reference to published prices in active markets. The Cooperative established investment management accounts and appointed reputable banks as investment managers.

9. Loans and Other Receivables

This account consists of:

2012 2011 Loan receivables:

Regular loan P=455,210,805 P=447,637,537 Catholic Organization for Relief and

Development Aid (CORDAid) 9,511,683 16,269,232 464,722,488 463,906,769

Allowance for impairment (29,016,521) (26,016,521) Unearned interest income (4,946,878) –

430,759,089 437,890,248 Other receivables:

Accounts receivable 83,561,442 58,948,627 Accrued interest receivable 11,919,261 – Receivable from officers and employees 3,025,860 1,877,673 Employee retirement loan 467,657 316,207 Long-term receivables 290,916 290,916 Finance lease receivable – 3,344,002 Others 772,130 2,612,576 100,037,266 67,390,001 Allowance for impairment (1,628,284) (2,352,792) Unearned interest income – (326,145)

98,408,982 64,711,064 P=529,168,071 P=502,601,312

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Loans and other receivables are further classified into the following:

2012 2011 Current P=169,586,580 P=225,521,439 Non-current 359,581,491 277,079,873 P=529,168,071 P=502,601,312

Regular loans pertain to loans provided to its members to finance their working capital requirements. These loans have a term ranging from three months to five years and earn interest at various rates up to a maximum rate of 13.0% per annum. In the event of default, these loans are offset against the member-borrowers’ contributions to the Cooperative. The CORDAid loan represents loan releases to ten new branches of existing member cooperatives in Zamboanga, CARAGA and Cotabato which were funded from the proceeds of the Cooperative’s loan availments from CORDAid (see Note 14). These funds can only be used for income generating activities through the micro-enterprises of the members of these branches. Accounts receivable pertains to various receivables from member-cooperatives for services rendered such as software and Automated Teller Machines (ATMs) installations, interest and penalties arising from restructured loans, project support fees, and ATM settlement activities. Finance lease receivable arise out of the sale of ATMs to member-cooperatives under a finance lease agreement. Receivable from officers and employees pertains to various cash advances made to cash generating units for the expenses incurred related to operations of the Cooperative and are subject to liquidation. Long outstanding receivables from officers and employees that are not liquidated within 3 days from the date of the cash advance are subject to payroll deduction. Long-term receivables pertains to the Cooperative’s receivable from Pangilinan, Molo and Company, former Audit Unit of the Cooperative that arose when it spun off from the Cooperative in July 2004. The Cooperative had collected a total of P=332,160 as part of the introductory payments stated in the Deed of Undertakings signed by both parties on January 11, 2005. Employee retirement loan represents long-term loan availments of regular employees secured with assignment of future retirement benefits. The loan bears interest of 14% diminishing per annum for both 2012 and 2011. The net carrying value of loans and other receivables is considered a reasonable approximation of fair value. All of the Cooperative’s loans and other receivables have been reviewed for indicators of impairment. A reconciliation of the allowance for impairment loss on loans and other receivables at beginning and end of 2012 and 2011 is shown below (see also Note 10).

2012 2011

Balance at beginning of year P=28,369,313 P=18,073,600 Impairment loss during the year 3,000,000 10,295,713 Write-off during the year (724,508) – Balance at end of year P=30,644,805 P=28,369,313

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Certain past due loans and other receivables have been provided with allowance for impairment using Portfolio at risk (PAR) based on the rates prescribed by the CDA. Certain loan receivables are assigned to creditor banks of the Cooperative as collateral for its borrowings (see Note 14).

10. Investment in Non-Marketable Equity Securities


2012 2011 Coop Life Insurance & Mutual Benefit Services P=2,591,024 P=2,560,157 Federation of People’s Sustainable Development

Cooperative (FPSDC 2,377,482 2,140,008 National Confederation of Cooperatives (NATCCO) 520,812 520,812 Philippine Cooperative Center (PCC) 1,198,112 198,112 Others 2,049,087 1,601,680 8,736,517 7,020,769 Allowance for impairment (772,710) (772,710) P=7,963,807 P=6,248,059

The Cooperative carries its investment in shares of stock (unquoted equity securities) under the cost method. Under this method, dividends are recognized as income when received. When there is a significant and apparently permanent decline in value of the investment, as indicated by a series of operating losses of an investee or other factors, the carrying amount of the investment is written down to fair value.

11. Property and Equipment

The gross carrying amounts and accumulated depreciation and amortization at the beginning and end of 2012 and 2011 are shown below.

2012

Land

Furniture Fixtures and

Equipment Building and

Improvements Transportation

Equipment

Kitchenware, Dinnerware and Others Total

Cost P=9,982,100 P=52,700,737 P=35,061,332 P=2,647,185 P=692,034 P=101,083,388 Accumulated depreciation and

amortization – (28,659,818) (20,682,166) (1,254,081) (692,034) (51,288,099) Accumulated impairment loss – (7,600,968) – – – (7,600,968) Net carrying amount P=9,982,100 P=16,439,951 P=14,379,166 P=1,393,104 P=– P=42,194,321

2011

Land




Equipment

Kitchenware, Dinnerware and Others Total

Cost P=9,982,100 P=47,010,125 P=33,885,077 P=1,957,185 P=692,034 P=93,526,521 Accumulated depreciation and

amortization – (18,912,157) (17,488,698) (1,024,866) (682,962) (38,108,683) Accumulated impairment loss – (7,600,968) – – – (7,600,968) Net carrying amount P=9,982,100 P=20,497,000 P=16,396,379 P=932,319 P=9,072 P=47,816,870

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A reconciliation of the carrying amounts at the beginning and end of 2012 and 2011 of property and equipment is shown below.

2012

Land




Equipment

Kitchenware, Dinnerware and

Others Total Balance at January 1, 2012, net of

accumulated depreciation and amortization P=9,982,100 P=20,497,000 P=16,396,379 P=932,319 P=9,072 P=47,816,870

Additions – 5,690,612 1,176,255 690,000 – 7,556,867 Depreciation and amortization charges for

the year – (9,747,661) (3,193,468) (229,215) (9,072) (13,179,416) Balance at December 31, 2012, net of

accumulated depreciation and amortization P=9,982,100 P=16,439,951 P=14,379,166 P=1,393,104 P=– P=42,194,321

2011

Land




Equipment

Kitchenware, Dinnerware and

Others Total Balance at January 1, 2011, net of

accumulated depreciation and amortization P=9,982,100 P=29,142,390 P=16,991,237 P=1,083,135 P=47,892 P=57,246,754

Additions – 3,797,555 1,450,744 – 14,116 5,262,415 Impairment loss – (7,600,968) – – – (7,600,968) Depreciation and amortization charges for

the year – (4,841,977) (2,045,602) (150,816) (52,936) (7,091,331) Balance at December 31, 2011, net of

accumulated depreciation and amortization P=9,982,100 P=20,497,000 P=16,396,379 P=932,319 P=9,072 P=47,816,870

Land, which is recognized at its fair value amounting to P=10.0 million as of December 31, 2012 and 2011, was last revalued on October 31, 2009 by independent appraisers. The revaluation surplus is presented as part of the “Revaluation Reserve” account in the members’ equity section of the statements of financial position. Management believes that the fair value of the land did not materially change from the last date of its appraisal (see Note 3). If the land was carried using the cost model, the carrying amount of the asset is P=2.3 million as of December 31, 2012 and 2011. The depreciation expense related to ATM units which were donated in 2010 amounted to P=2.2 million and P=1.2 million in 2012 and 2011, respectively, and are presented as part of depreciation and amortization in the statements of comprehensive income and distribution of net surplus. In 2011, management determined that 6 of the ATM units are impaired with a net book value of P=3.1 million while the remaining 38 ATM units are partially impaired. The impairment loss for the 38 ATM units amounted to P=4.5 million. The total impairment loss of P=7.6 million is presented as part of the impairment losses in the 2011 statement of comprehensive income and distribution of net surplus. Accordingly, the Cooperative also recognized donation revenue of P=2.2 and P=8.8 million in 2012 and 2011, respectively.

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12. Investment Property Investment property pertains to parcels of land acquired by the Cooperative in settlement of loans through foreclosure or dation in payment. The gross carrying amounts at the beginning and end of 2012 and 2011 are shown below.

2012 2011

Balance at beginning of year P=1,043,092 P=1,038,092 Additions – 5,000 Balance at the end of year P=1,043,092 P=1,043,092

The fair market value of investment property acquired as of December 31, 2012 and 2011, based on the available appraisal values dated May 2007, amounted to P=1.9 million.

13. Other Assets


2012 2011 Current:

Inventory supplies P=2,098,418 P=914,054 Prepaid expenses 521,268 89,191 Unused supplies 916 – Others 112,528 136,859 2,733,130 1,140,104

Non-current: Miscellaneous asset 4,149,525 2,811,148 Cash bond 553,182 544,727 Refundable deposits 111,820 99,820 Other 4,974,851 3,267,004 9,789,378 6,722,699

P=12,522,508 P=7,862,803

The amortization expenses of the licenses and fees related to the Cooperative’s Microbanking and Megalink connectivity systems amounted to P=0.4 million and P=3.7 million as of December 31, 2012 and 2011, respectively, and are presented as part of depreciation and amortization in the statements of comprehensive income and distribution of net surplus.

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14. Interest-bearing Loans and Borrowings


2012 2011 Current:

Land Bank of the Philippines P=60,269,321 P=– BPI Globe Banko (BPI) 39,125,000 22,916,667

Philippine Business for Social Progress, Inc. (PBSP) 20,475,000 21,750,000 The Foundation for Sustainable Society, Inc. (FSSI) 12,375,000 29,902,778

Development Bank of the Philippines (DBP – 125,409,250 CORDAid – 779,984 Cooperative Development Authority – 438,535 132,244,321 201,197,214

Non-current: CORDAid 18,583,986 24,436,567

P=150,828,307 P=225,633,781

The Cooperative obtained various unsecured loans from Land Bank of the Philippines totaling P=60.3 million in 2012 which will mature on various dates in 2013. These loans bear interest of 7%. The loan from BPI Globe Banko represents an approved rediscounting loan of P=48.5 million which bears interest of 7.5% per annum payable one year from the date of availment. The proceeds from which were loaned to the members of the Cooperative. In November 2012, the Cooperative fully availed of the P=32.5 million worth of loan facility, which will mature on November 20, 2013. This is secured by deeds of assignment of loan receivables with the total value of P=40 million as of December 31, 2012. The Cooperative obtained a loan from PBSP amounting to P=18.0 million in 2012, which bears interest at 5% per annum. The outstanding loan amounting to P=20.5 million as of December 31, 2012 includes loan availed in 2011 amounting to 29.0 million which will be fully paid on July 2013. These interest-bearing loans have a term of two years with a repayment term of eight equal quarterly installments. This is secured by deeds of assignment of loan receivables with the total value of P=22.5 million as of December 31, 2012. In 2009, a loan agreement was entered into by the Cooperative and CORDAid. The unsecured loan in the amount of P=30.0 million, which is repayable in 5 years, was granted to the Cooperative in relation to its project “Triple 10 for Cooperative Enterprises in Mindanao”. The exclusive purpose of this loan, which bears a fixed interest rate of 10% per annum, is to provide funding for the build-up of the loan portfolio of ten new branches of existing cooperatives in the underserved areas of Zamboanga, CARAGA and Cotabato, coupled with capacity building programs for the cooperatives in these regions, primarily but not limited to those accessing the loan fund (see Note 9). As of December 31, 2012, the total loan proceeds released to the subject Mindanao cooperatives amounts to P=27.3 million.

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15. Accounts Payable and Accrued Expenses This account consists of:

2012 2011 Accounts payable P=7,663,120 P=7,904,978 Accrued expenses 5,148,961 4,869,741 Accrued interest payable 9,337,368 4,609,829 Others 3,654,205 593,570 P=25,803,654 P=17,978,118

The carrying amounts of these financial liabilities are reasonable approximation of their fair values.

16. Members’ Deposits


2012 2011 Time deposits P=419,473,542 P=302,287,185 ATM settlement deposits 31,219,088 11,304,959 Regular savings 2,713,741 258,631 453,406,371 313,850,775 Long-term members’ deposits (371,630,585) (191,261,790) Short-term members’ deposits P=81,775,786 P=122,588,985

ATM settlement deposits represent cash received from members as security bond upon subscriptions of the ATM facilities. The non-interest bearing deposits shall be returned to the depositor upon termination of the contract. The time deposits have interest rates ranging from 6% to 10% both in 2012 and 2011. The breakdown of time deposits as to their maturities follows:

2012 2011 Below one year P=47,842,956 P=111,025,395 One to two years 82,418,347 89,893,041 Over one year to two years 289,212,238 101,368,749 P=419,473,541 P=302,287,185

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17. Other Noncurrent Liabilities This account consists of:

2012 2011 Deferred donations and grants P=14,321,441 P=16,792,882 Members’ benefit and other fund payable 6,368,005 7,268,005 Others 1,029,844 262,520 P=21,719,290 P=24,323,407

Members’ benefit and other fund payable include the following: a) Cooperative stabilization fund which is set aside to guarantee that member cooperatives with difficulties are provided with technical and financial support. As of December 31, 2012, the management is of the position to defer further the provisions for the stabilization fund since the reserve is still enough to cover the needs of the current circumstances. b) General assembly subsidy fund which is set aside to subsidize members’ costs for the General Assembly. c) Disaster and recovery fund which is set aside to cover the costs that may be incurred by members in their disaster recovery response. Deferred donations and grants include donations of 44 units of used ATMs and 40 units of used personal computers made by Rabobank to the Cooperative in 2010. The 44 units of used ATMs were valued based on the fair market value of refurbished ATMs (see Note 11). As of December 31, 2010, the 44 units of used ATMs were valued at P22.0 million and recorded as part of the furniture, fixtures and equipment under the Property and Equipment account in the statements of financial position (see Note 11). In 2011, 6 units were fully impaired and the remaining 38 units were partially impaired resulting in the recognition of the related donation as donation revenue amounting to P=3.0 million and P=4.5 million, respectively, included as part of Donation in the statements of comprehensive income and distribution of net surplus (see also Note 11). Moreover, the depreciation expense on the donated ATM units amounting to P=2.2 million and P=1.2 million in 2012 and 2011, respectively, also resulted in the recognition of donation revenue of the same amount.

18. Members’ Equity

Share Capital The details of the common shares and preferred shares are presented below. Shares Amount 2012 2011 2012 2011 Common shares - P1,000 par value Authorized - 150,000 shares

Issued: Balance at beginning of year P=116,675 P=91,146 P=116,674,849 P=91,146,000 Issuances during the year 30,400 25,529 30,400,133 25,528,849

Balance at the end of year 147,075 116,675 147,074,982 116,674,849 Preferred shares P=1,000 par value 5,425 5,425 5,425,000 5,425,000 P=152,500 P=122,100 P=152,499,982 P=122,099,849

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Preferred shares are non-voting and shall enjoy preference over common shares in the dividend or asset distribution in the event of liquidation and shall receive higher interest than the common share. Statutory Funds The details of this account as of December 31, 2012 and 2011 follow:

2012 2011 General reserve fund P=25,727,762 P=22,076,934 Cooperative development fund 9,920,445 8,751,819 Community development fund 1,773,320 760,657 Cooperative education and training 704,091 1,017,274 P=38,125,618 P=32,606,684

Distribution of Net Surplus The Cooperative’s Articles of Cooperation and By-Laws, together with a BOD Resolution, explicitly provide that its net surplus at the end of the year shall be distributed in the following manner: At least 10% shall be set aside as General Reserve Fund. This general fund shall be used for

the stability of the Cooperative and to absorb net losses, if any, in its business operations.

At least 5% shall be set aside for Cooperative Education and Training Fund. One half of the fund shall provide for the training, development, and such other cooperative activities geared towards the growth of the cooperative movement; while the other half shall be credited to the cooperative education and training fund of any international and national federation, and other chosen organizations of which the Cooperative is a member, and is presented as cooperative education and training fund payable under the Accounts Payable and Accrued Expenses in the statement of financial position.

At most 10% shall be set aside for Cooperative Development Fund. This shall be used for

projects or activities that will benefit the community where the cooperative operates.

An optional fund, a land and building, community development, and any other necessary fund, the total of which shall not exceed 7%.

At least 3% of the net surplus shall be set aside for the community development fund which shall be used for projects or activities that will benefit the community where the Cooperative operates. The amendment in the statutory fund distribution for community development fund was approved during the 2010 general assembly.

The remaining net savings shall be made available to the members in the form of interest not to exceed the normal rate of return on investments and patronage refunds.

Capital Management Policies and Procedures The Cooperative’s capital management objectives are to ensure the Cooperative’s ability to continue as a going concern and to provide an adequate return to members by pricing products commensurately with the level of risk.

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The Cooperative sets the amount of capital in proportion to its overall financing structure, i.e., equity and financial liabilities. The Cooperative manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Cooperative may adjust the amount of dividends paid to members or increase allocation of net surplus to reserve funds.

2012 2011

Total liabilities P=677,909,272 P=605,534,626 Total member’s equity 202,403,281 163,430,757 Debt-to-equity ratio 3.35 3.70

19. Consulting and Service Fees


2012 2011 ATM/MASS-SPECC Standard Run-time Edition

installation P=25,180,784 P=31,650,114 Service fees 10,329,657 6,443,685 Training fees 3,887,095 2,791,853 Others – 758 P=39,397,536 P=40,886,410

20. Hostel Fees


2012 2011

Revenues: Lodge P=5,322,139 P=6,370,311 Meals 4,289,154 4,253,175 Fast food 2,170,502 1,994,372 Rent income 74,000 –

11,855,795 12,617,858

Direct costs: Costs of sales 1,225,394 2,232,459 Board and lodging 2,376,672 1,317,647 Laundry expenses 301,328 302,666 Incentives expense 9,961 –

3,913,355 3,852,772 P=7,942,440 P=8,765,086

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Preferred shares are non-voting and shall enjoy preference over common shares in the dividend or asset distribution in the event of liquidation and shall receive higher interest than the common share. Statutory Funds The details of this account as of December 31, 2012 and 2011 follow:

2012 2011 General reserve fund P=25,727,762 P=22,076,934 Cooperative development fund 9,920,445 8,751,819 Community development fund 1,773,320 760,657 Cooperative education and training 704,091 1,017,274 P=38,125,618 P=32,606,684

Distribution of Net Surplus The Cooperative’s Articles of Cooperation and By-Laws, together with a BOD Resolution, explicitly provide that its net surplus at the end of the year shall be distributed in the following manner: At least 10% shall be set aside as General Reserve Fund. This general fund shall be used for

the stability of the Cooperative and to absorb net losses, if any, in its business operations.

At least 5% shall be set aside for Cooperative Education and Training Fund. One half of the fund shall provide for the training, development, and such other cooperative activities geared towards the growth of the cooperative movement; while the other half shall be credited to the cooperative education and training fund of any international and national federation, and other chosen organizations of which the Cooperative is a member, and is presented as cooperative education and training fund payable under the Accounts Payable and Accrued Expenses in the statement of financial position.

At most 10% shall be set aside for Cooperative Development Fund. This shall be used for

projects or activities that will benefit the community where the cooperative operates.

An optional fund, a land and building, community development, and any other necessary fund, the total of which shall not exceed 7%.

At least 3% of the net surplus shall be set aside for the community development fund which shall be used for projects or activities that will benefit the community where the Cooperative operates. The amendment in the statutory fund distribution for community development fund was approved during the 2010 general assembly.

The remaining net savings shall be made available to the members in the form of interest not to exceed the normal rate of return on investments and patronage refunds.

Capital Management Policies and Procedures The Cooperative’s capital management objectives are to ensure the Cooperative’s ability to continue as a going concern and to provide an adequate return to members by pricing products commensurately with the level of risk.

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The Cooperative sets the amount of capital in proportion to its overall financing structure, i.e., equity and financial liabilities. The Cooperative manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Cooperative may adjust the amount of dividends paid to members or increase allocation of net surplus to reserve funds.

2012 2011

Total liabilities P=677,909,272 P=605,534,626 Total member’s equity 202,403,281 163,430,757 Debt-to-equity ratio 3.35 3.70

19. Consulting and Service Fees


2012 2011 ATM/MASS-SPECC Standard Run-time Edition

installation P=25,180,784 P=31,650,114 Service fees 10,329,657 6,443,685 Training fees 3,887,095 2,791,853 Others – 758 P=39,397,536 P=40,886,410

20. Hostel Fees


2012 2011

Revenues: Lodge P=5,322,139 P=6,370,311 Meals 4,289,154 4,253,175 Fast food 2,170,502 1,994,372 Rent income 74,000 –

11,855,795 12,617,858

Direct costs: Costs of sales 1,225,394 2,232,459 Board and lodging 2,376,672 1,317,647 Laundry expenses 301,328 302,666 Incentives expense 9,961 –

3,913,355 3,852,772 P=7,942,440 P=8,765,086

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21. Other Operating Expenses The account consists of:

2012 2011 Travel and transportation P=6,350,790 P=5,233,607 Meeting and conferences 3,707,066 2,605,021 Trainings and seminars 3,557,146 2,348,644 Power, light and water 2,861,291 2,187,769 Communication 1,379,402 1,473,613 Professional fee 1,013,372 2,660,328 Security services 989,491 713,731 Staff development 887,806 401,244 Taxes and licenses 829,102 386,852 Maintenance and repairs 349,757 391,124 Materials and supplies 341,534 406,819 Rental 321,537 141,571 Marketing and promotion 205,586 353,271 Collection and litigation 144,819 108,419 Insurance 106,245 134,909 License fees – 1,306,976 Borrowing charges – 1,105,243 Loss on decline in value of investment – 82,257 Miscellaneous 2,873,645 3,287,156 P= 25,918,589 P=25,328,554

22. Employee Benefits Salaries, Wages and Benefits Expense Expenses recognized for salaries, wages and benefits are presented below.

2012 2011 Short term employee benefit P=20,207,994 P=16,643,673 Post-employment defined benefit 1,150,859 965,515 P=21,358,853 P=17,609,188

Employee Retirement Benefit Obligations The Cooperative maintains a tax-qualified, noncontributory retirement plan that is being administered by a trustee covering all regular full-time employees. The amount of retirement benefit obligation recognized in the statement of financial position is determined as follows:

2012 2011 Present value of the obligation P=8,763,227 P=7,398,922 Fair value of plan assets 2,413,049 2,255,186 Deficiency of plan assets 6,350,178 5,143,736 Unrecognized actuarial gain 2,068,332 2,123,915 P=8,418,510 P=7,267,651

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The movements in the present value of the retirement benefit obligation recognized in the books are as follows:

2012 2011 Balance at the beginning of year P=7,398,922 P=4,661,994 Current service cost and interest cost 1,364,305 1,251,310 Actuarial loss – 1,485,618 Balance at the end of the year P=8,763,227 P=7,398,922

The movements in the fair value of plan assets are as follows:

2012 2011 Balance at the beginning of year P=2,255,186 P=2,218,697 Expected return on plan assets 157,863 155,309 Actuarial loss – (118,820) Balance at the end of the year P=2,413,049 P=2,255,186

Actual return on plan assets amounted to P=157,863 and P=36,489 as of December 31, 2012 and 2011, respectively. The amounts of retirement benefits recognized in profit or loss are shown below.

2012 2011 Current service costs P=898,913 P=845,717 Interest costs 465,392 405,593 Expected return on plan assets (157,863) (155,309) Net actuarial gain recognized during the year (55,583) (130,486) P=1,150,859 P=965,515

The movements in the retirement benefit obligation recognized in the books are as follows:

2012 2011 Balance at beginning of year P=7,267,651 P=6,302,136 Expense recognized 1,150,859 965,515 Balance at end of year 8,418,510 P=7,267,651

For determination of the retirement benefit obligation, the following actuarial assumptions were used:

2012 2011 Discount rates used 6.3% 6.3% Expected rate of return on plan assets 7.0% 7.0% Expected rate of salary increases 7.0% 7.0%

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21. Other Operating Expenses The account consists of:

2012 2011 Travel and transportation P=6,350,790 P=5,233,607 Meeting and conferences 3,707,066 2,605,021 Trainings and seminars 3,557,146 2,348,644 Power, light and water 2,861,291 2,187,769 Communication 1,379,402 1,473,613 Professional fee 1,013,372 2,660,328 Security services 989,491 713,731 Staff development 887,806 401,244 Taxes and licenses 829,102 386,852 Maintenance and repairs 349,757 391,124 Materials and supplies 341,534 406,819 Rental 321,537 141,571 Marketing and promotion 205,586 353,271 Collection and litigation 144,819 108,419 Insurance 106,245 134,909 License fees – 1,306,976 Borrowing charges – 1,105,243 Loss on decline in value of investment – 82,257 Miscellaneous 2,873,645 3,287,156 P= 25,918,589 P=25,328,554

22. Employee Benefits Salaries, Wages and Benefits Expense Expenses recognized for salaries, wages and benefits are presented below.

2012 2011 Short term employee benefit P=20,207,994 P=16,643,673 Post-employment defined benefit 1,150,859 965,515 P=21,358,853 P=17,609,188

Employee Retirement Benefit Obligations The Cooperative maintains a tax-qualified, noncontributory retirement plan that is being administered by a trustee covering all regular full-time employees. The amount of retirement benefit obligation recognized in the statement of financial position is determined as follows:

2012 2011 Present value of the obligation P=8,763,227 P=7,398,922 Fair value of plan assets 2,413,049 2,255,186 Deficiency of plan assets 6,350,178 5,143,736 Unrecognized actuarial gain 2,068,332 2,123,915 P=8,418,510 P=7,267,651

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The movements in the present value of the retirement benefit obligation recognized in the books are as follows:

2012 2011 Balance at the beginning of year P=7,398,922 P=4,661,994 Current service cost and interest cost 1,364,305 1,251,310 Actuarial loss – 1,485,618 Balance at the end of the year P=8,763,227 P=7,398,922

The movements in the fair value of plan assets are as follows:

2012 2011 Balance at the beginning of year P=2,255,186 P=2,218,697 Expected return on plan assets 157,863 155,309 Actuarial loss – (118,820) Balance at the end of the year P=2,413,049 P=2,255,186

Actual return on plan assets amounted to P=157,863 and P=36,489 as of December 31, 2012 and 2011, respectively. The amounts of retirement benefits recognized in profit or loss are shown below.

2012 2011 Current service costs P=898,913 P=845,717 Interest costs 465,392 405,593 Expected return on plan assets (157,863) (155,309) Net actuarial gain recognized during the year (55,583) (130,486) P=1,150,859 P=965,515

The movements in the retirement benefit obligation recognized in the books are as follows:

2012 2011 Balance at beginning of year P=7,267,651 P=6,302,136 Expense recognized 1,150,859 965,515 Balance at end of year 8,418,510 P=7,267,651

For determination of the retirement benefit obligation, the following actuarial assumptions were used:

2012 2011 Discount rates used 6.3% 6.3% Expected rate of return on plan assets 7.0% 7.0% Expected rate of salary increases 7.0% 7.0%

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Assumptions regarding future mortality and disability are based on the 2001 CSO table-generational and the disability study, respectively.

The overall expected long-term rate of return on assets is 7%. The expected long-term rate of return is based on the yield rate for a risk portfolio similar to that of the fund with consideration to the fund’s past performance.

23. Related Party Transactions Related party transactions are transfer of resources, services or obligations between the Company and its related parties, regardless whether a price is charged. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. These include: (a) individuals owning, directly or indirectly through one or more intermediaries, control or are controlled by, or under common control with the Cooperative; (b) associates; and, (c) individuals owning, directly or indirectly, an interest in the voting power of the Cooperative that gives them significant influence over the Cooperative and close members of the family of any such individual. In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely on the legal form. The Cooperative’s related parties include its directors, officers, employees, organizations under common control and key management as described below. None of the transactions incorporate special terms and conditions and no guarantee was given or received. Outstanding balances are usually settled in cash. Advances to Officers and Employees The Cooperative provides cash advances for liquidation to certain employees, officers and directors, the outstanding balance of which, amounting to P=2.9 million and P=1.2 million as of December 31, 2012 and 2011, respectively, is presented as part of Loans and Other Receivables (see Note 9). Key Management Compensations The compensation of the Cooperative’s key management personnel as of December 31, are as follows.

2012 2011 Short-term benefits P=4,525,371 P=2,762,262 Post-employment defined benefits 719,987 2,806,851 Balance at end of year P=5,245,358 P=5,569,113

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24. Taxes The Cooperative is exempt from taxes, including income tax, under the Philippine Cooperative Code of 2008, except for its transactions with non-members (see Note 1). The Cooperative’s tax expense as reported in profit or loss pertains to regular corporate income tax (RCIT) amounting to P=20,977 and P=50,260 for the years ended December 31, 2012 and 2011. A reconciliation of tax on pretax profit computed at the applicable statutory rates to tax expense reported in the statement of income for the period ended December 31, 2012 and 2011.

2012 2011 Tax on pretax profit at 30% P= 8,190,820 P=7,621,644 Tax effect:

Non-taxable income (40,676,125) (38,672,868) Non-deductible expense 32,506,282 31,101,484

Balance at end of year P=20,977 P=50,260 As provided in R.A. No. 8424 (the Act), the Company shall pay the MCIT or the RCIT, whichever is higher. MCIT is 2% of gross income as defined by the Act. Any excess of the MCIT over the RCIT shall be carried forward annually and credited against the RCIT for the next three succeeding taxable years. MCIT reported in 2012 amounted to P=23,084.

25. Commitments and Contingencies Donation Arrangement In 2010, Rabobank donated and transferred ownership of movable goods comprising of 44 units of used ATMs and 40 units of used personal computers to the Cooperative. As specified in the contract, the Cooperative shall not transfer ownership of the received goods to any third party or to lease or rent the goods to any third party within the period of five years from the date of receipt. As of December 31, 2012, the Cooperative has been compliant with the provisions of the contract. Others There are contingent liabilities such as litigations and claims that arise in the normal course of the Cooperative’s operations which are not reflected in the accompanying financial statements. As of December 31, 2012, the Cooperative’s management is of the opinion that losses, if any, from these claims will not have any material effect on the Cooperative’s financial statements.

26. Supplementary Information under Revenue Regulations (R.R.) No. 19-2011 On December 9, 2011, the Bureau of Internal Revenue (BIR) issued R.R. No. 19-2011 prescribing the new income tax forms to be used effective calendar year 2011. In the case of corporations using BIR Form 1702, the taxpayer is now required to include as part of its notes to the audited financial statements, which will be attached to the income tax return, schedules and information on taxable income and deductions taken.

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Assumptions regarding future mortality and disability are based on the 2001 CSO table-generational and the disability study, respectively.

The overall expected long-term rate of return on assets is 7%. The expected long-term rate of return is based on the yield rate for a risk portfolio similar to that of the fund with consideration to the fund’s past performance.

23. Related Party Transactions Related party transactions are transfer of resources, services or obligations between the Company and its related parties, regardless whether a price is charged. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. These include: (a) individuals owning, directly or indirectly through one or more intermediaries, control or are controlled by, or under common control with the Cooperative; (b) associates; and, (c) individuals owning, directly or indirectly, an interest in the voting power of the Cooperative that gives them significant influence over the Cooperative and close members of the family of any such individual. In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely on the legal form. The Cooperative’s related parties include its directors, officers, employees, organizations under common control and key management as described below. None of the transactions incorporate special terms and conditions and no guarantee was given or received. Outstanding balances are usually settled in cash. Advances to Officers and Employees The Cooperative provides cash advances for liquidation to certain employees, officers and directors, the outstanding balance of which, amounting to P=2.9 million and P=1.2 million as of December 31, 2012 and 2011, respectively, is presented as part of Loans and Other Receivables (see Note 9). Key Management Compensations The compensation of the Cooperative’s key management personnel as of December 31, are as follows.

2012 2011 Short-term benefits P=4,525,371 P=2,762,262 Post-employment defined benefits 719,987 2,806,851 Balance at end of year P=5,245,358 P=5,569,113

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24. Taxes The Cooperative is exempt from taxes, including income tax, under the Philippine Cooperative Code of 2008, except for its transactions with non-members (see Note 1). The Cooperative’s tax expense as reported in profit or loss pertains to regular corporate income tax (RCIT) amounting to P=20,977 and P=50,260 for the years ended December 31, 2012 and 2011. A reconciliation of tax on pretax profit computed at the applicable statutory rates to tax expense reported in the statement of income for the period ended December 31, 2012 and 2011.

2012 2011 Tax on pretax profit at 30% P= 8,190,820 P=7,621,644 Tax effect:

Non-taxable income (40,676,125) (38,672,868) Non-deductible expense 32,506,282 31,101,484

Balance at end of year P=20,977 P=50,260 As provided in R.A. No. 8424 (the Act), the Company shall pay the MCIT or the RCIT, whichever is higher. MCIT is 2% of gross income as defined by the Act. Any excess of the MCIT over the RCIT shall be carried forward annually and credited against the RCIT for the next three succeeding taxable years. MCIT reported in 2012 amounted to P=23,084.

25. Commitments and Contingencies Donation Arrangement In 2010, Rabobank donated and transferred ownership of movable goods comprising of 44 units of used ATMs and 40 units of used personal computers to the Cooperative. As specified in the contract, the Cooperative shall not transfer ownership of the received goods to any third party or to lease or rent the goods to any third party within the period of five years from the date of receipt. As of December 31, 2012, the Cooperative has been compliant with the provisions of the contract. Others There are contingent liabilities such as litigations and claims that arise in the normal course of the Cooperative’s operations which are not reflected in the accompanying financial statements. As of December 31, 2012, the Cooperative’s management is of the opinion that losses, if any, from these claims will not have any material effect on the Cooperative’s financial statements.

26. Supplementary Information under Revenue Regulations (R.R.) No. 19-2011 On December 9, 2011, the Bureau of Internal Revenue (BIR) issued R.R. No. 19-2011 prescribing the new income tax forms to be used effective calendar year 2011. In the case of corporations using BIR Form 1702, the taxpayer is now required to include as part of its notes to the audited financial statements, which will be attached to the income tax return, schedules and information on taxable income and deductions taken.

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The schedule and information of taxable income and deductions taken for 2012 are as follows:

Sales/Receipts/Fees

Exempt Regular Rate Sales of goods P=2,577,208 P=174,099 Rendering of services 128,302,443 1,554,128 P=130,879,651 P=1,728,227

Cost of Services

Exempt Regular Rate

Direct charges - salaries, wages and benefits P=16,840,590 P=348,625 Direct charges - outside services 265,627 45,662 Direct charges - others 47,103,085 179,748 P=64,209,302 P=574,035

Non-operating and Other Taxable Income

Exempt Regular Rate

Donation P=2,204,775 P=– Others 2,502,654 – P=4,707,429 P=– Itemized Deductions

Exempt Regular Rate

Depreciation P=13,150,291 P=108,601 Transportation and travel 6,303,998 46,792 Salaries and employee benefits 5,829,352 365,234 Communication, light and power 3,926,465 314,228 Meetings and conferences 3,704,947 2,118 Trainings and seminars 3,557,146 – Impairment loss 3,000,000 – Taxes and licenses 826,892 2,210 Professional fees 993,782 19,590 Janitorial and messengerial services 891,695 97,796 Staff development cost 879,225 8,580 Repairs and maintenance – labor 341,388 8,369 Office supplies 340,529 1,006 SSS,GSIS, Philhealth, HDMF and Other

Contribution 330,213

21,512 Rentals 321,537 – Advertising and promotions 204,057 1,528 Insurance 102,915 3,330 Miscellaneous 3,353,892 83,374 P=48,058,324 P=1,084,268

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27. Supplementary Information under R.R. No. 15-2010

In compliance with the requirements set forth by R.R. No. 15-2010, hereunder are the information on taxes, duties and license fees paid or accrued during the taxable year 2012.

Value Added Tax (VAT) In accordance with RA No. 9520, Cooperatives are exempt from the payment of all national taxes. In addition, pursuant to Section 109 of the 1997 Tax Code, as amended, Exempt Transactions, Cooperatives duly registered with the CDA are exempt from VAT. However, under Revenue Memorandum Order (RMO) 76-2010, Section 8 - taxability/Exemption of Duly Registered Cooperatives which transact Business with Members and Non-members, Cooperatives with accumulated reserves and undivided net savings of more than P=10.0 million shall be subject to value added tax on transactions with non-members. Relative to the foregoing, the Cooperative declared output VAT on its transactions with non-

members as follows:

Net Sales/

Receipts Output

VAT Taxable sales:

Meals and lodging P=1,592,415 P=191,090 Fastfood sale 178,388 21,406 P=1,770,803 P=212,496

The tax base are included as part of Hostel Fees – net in the 2012 statement of income and distribution of net surplus. The tax are based on the Cooperative’s gross receipts for the year, hence may not be the same as the amounts accrued in the 2012 statement of income and distribution of surplus.

Input VAT arising from various purchases related to transactions with members were directly

charged by the Cooperative as cost and expense pursuant to RA No. 9337 and as non-VAT registered taxpayer. However, related to the abovementioned RMO 76-2010, purchases related to transactions with non-members are subject to input VAT as summarized below:

Balance at January 1 P=– Current year’s domestic purchases/payments for:

Goods other than for resale or manufacture 63,308 Applied against output VAT (63,308) Balance at December 31 P=–

Importations and Related Taxes No importations were made during the year. Under the Code, cooperatives are exempted from the payment of all national taxes of whatever name and nature, including import taxes.

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Other Taxes and Licenses The details of taxes and licenses are as follows:

Business tax P=20,439 Annual registration fee 500 Community tax 500 Others 807,663

P=829,102

The amounts of taxes and licenses are included in Other Operating Expenses presented under Cost and Expenses in the statement of income and distribution of net surplus (see Note 21) Withholding Taxes The withholding taxes pertaining solely to compensation and benefit amounted to P=847,986 for the year ended December 31, 2012. Tax Assessments and Cases The Cooperative has no tax assessments and tax cases with the BIR. Further, the Cooperative has no pending tax cases outside the administration of the BIR.

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MINDANAO COOP LEADERSHIP AWARDGadwin E. Handumon

SPECIAL RECOGNITION - NATIONAL COOP LEADERSHIP AWARDNorma R. Pereyras

TOP 5 OUTSTANDING CO-OP TIME DEPOSITORSOro Integrated CooperativeMSU-IIT Multi-Purpose CooperativeTagum CooperativeSta. Ana Multi-Purpose CooperativePaglaum Multi-Purpose Cooperative

TOP 5 SHARE CAPITAL CONTRIBUTORSBukidnon Government Employees Multi-Purpose CooperativeLorenzo Tan Multi-Purpose CooperativeMaco Development CooperativePantukan Chess Club Multi-Purpose CooperativeICTUS Premier Cooperative

TOP 3 PERFORMING ATM SITESTagum CooperativeOro Integrated CooperativeSta. Catalina Credit Cooperative

BILLIONAIRE CO-OPS’ CIRCLE AWARDOro Integrated Cooperative AIM Cooperative

CENTURY CO-OPS’ CIRCLE AWARDMaranding Women Investors Multi-Purpose CooperativeLamitan Agrarian Reform Beneficiaries Cooperative Sto. Nino Teachers and Farmers Multi-Purpose CooperativeSindangan Farmers and Teachers Multi-Purpose CooperativeDigos Market Vendors Multi-Purpose Cooperative

PLAQUE OF RECOGNITIONTagum CooperativeOro Integrated CooperativePaglaum Multi-Purpose CooperativeBaug CARP Beneficiaries Multi-Purpose CooperativeSocorro Empowered People’s Cooperative

LONGEVITY AWARDEE FOR OFFICERSAtty. Rolando C. CasawayEdgar G. Amoronio

MAASDANGON AWARDEEJoel L. Egasan

FULL CETF REMITTANCEAmpayon Multi-Purpose CooperativeBuug Integrated CooperativeBukidnon Government Employees Multi-Purpose CooperativeBuklod Multi-Purpose CooperativeBAFAVENTRA Multi-Purpose CooperativeBanga North District Teachers Multi-Purpose Cooperative Bangan Agrarian Reform Community CooperativeCalvary Credit and Consumers CooperativeMindanao Columbian Knights Multi-Purpose CooperativeDENRACEAE Multi-Purpose CooperativeDavao Oriental Market Multi-Purpose CooperativeGlan Local Officials Employees Movement Multi-Purpose Cooperative Greater Midsayap Area Multi-Purpose CooperativeICTUS Premier CooperativeIligan Dealers Multi-Purpose CooperativeIligan Cement Multi-Purpose CooperativeJobnet Service CooperativeKapalong CooperativeKumalarang Employees Multi-Purpose Cooperative Lake Sebu Countryside Development Multi-Purpose CooperativeLorenzo Tan Multi-Purpose CooperativeMakilala Multi-Purpose CooperativeMalapatan Multi-Purpose CooperativeMambajao Credit CooperativeMEPE Development Multi-Purpose CooperativeMSU-IIT Multi-Purpose CooperativeNormicist Administrative Personnel Development CooperativeNotre Dame Multi-Purpose CooperativeOro Integrated CooperativeOro Savings and Sharing CooperativePACEMAN Multi-Purpose CooperativePaglaum Multi-Purpose CooperativePilar Multi-Purpose CooperativeSacred Heart Multi-Purpose CooperativeSCI Employees Multi-Purpose Cooperative Sominot Multi-Purpose CooperativeSRT Digos Cooperative of Davao del SurSRT Tacurong City Cooperative of Sultan KudaratSta. Catalina Multi-Purpose CooperativeSumbakil Multi-Purpose CooperativeTalacogon Agro-Industrial Multi-Purpose Development CooperativeTimbermines Multi-Purpose CooperativeZAMSURGEA Community Multi-Purpose CooperativeZillovia Womens Multi-Purpose Cooperative

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MICMA celebrates the untiring efforts of cooperatives in uplifting the lives of their members and seeks to rediscover inspiration by recognizing outstanding entrepreneurial performance of individual members.

MICMA Program aims to:•Highlightthesuccessstoriesof“microentrepreneurs”orco-opmemberswhoareengagedinmicroandsmallbusinessenterprises

•Highlightthecontributionofcooperativesinhelpingdevelopmicro-entrepreneurs• Inspire cooperators by showcasing true stories of “partnership between the co-op and itsmembers”inmicroenterprisedevelopment

Micro-entrepreneurs are categorized into:

NANLIMBASOGShowcasing micro-enterprises with total asset of not more than P300,000.00

andMAUSWAGON

Showcasing micro-enterprises with total asset of more than P300,000.00 but not exceeding 1 Million

What you need to know before joiningFor Participating Co-ops:•Co-opmustbea“MemberinGoodStanding”fortherecenttwoyearswithMASS-SPECC•Co-opswillidentifytheirnomineesandsubmitafurnishedentryformorthenomineeprofile(both personal& business). Only two (2) nominees are required perCo-op, one for eachcategory.

For Co-op Member Nominees:•Nomineesmust be outstanding bonafidemembers of cooperatives and have availed of thecooperativemicrofinanceservices.

•Nominees must be engaged in micro-entrepreneurial activities that are NOT harmful ordamagingtotheenvironment.

•Nomineesmusthavedemonstratedexceptionalmicro-entrepreneurandmembershipqualitiesin terms of loan repayment, savings practices, family income and enterprise growth, jobgenerationandover-allimpacttothelocalcommunity.

For more details and inquiries, please contact (6388) 856-2339 and look for Mr. Ermie Hilario.

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Alma LibranzaMember: Tagum Cooperative (TC)Enterprise: Food Production (native sweets & delicacies and various party foods), Home-décor Making and Reselling of non-perishable goods Address: Purok Sunshine II, Brgy. Visayan Village, Tagum City Husband: Virgelio Libranza (52 years old)Children: son (18 years old)

Mrs. Alma Libranza grew up without any entrepreneurial influence at home. Yet, it was in her home that she found the reason why she should go into business --- the poverty that her family experienced everyday.

“I started doing small business because our family is really poor. My mother was jobless and I was then a struggling student. I needed to work hard so I could meet my daily expenses in school,” recalls Alma. Even as a student she was already involved in business.

At an early age, she learned how to struggle through life and understood that she had to be enterprising to help their family survive. So she started by borrowing money from her older brother to buy batik clothes, pajamas & other apparels and sell these to her neighbors and friends. Such experience served as her first entrepreneurial training, causing her to mature well beyond her years. She soon realized that she could easily turn things into something profitable. It’s no wonder she ventured into several kinds of business offering a wide array of products from food to home-décor to accessories of all types.

“My craft is really with foods. I make peanut-roll, spaghetti, maja-blanca, bico, turon, leche flan and other made-to-order party foods,” says Alma in talking about the variety in her food business. “But I also design artificial flower decorations that I’ve been doing ever since high school. In fact, these décor designs were already sold in Manila and my cousin served as the sales agent at that time. There are also students who resell these items for profit as what happened in 2010 with Assumpta School’s bulk order. In addition, I also sell a collection of fashion jewelries and other accessories that I always carry with me so these are readily available to my target buyers,” Alma proudly says of her two other business lines.

She probably can’t remember a time when she wasn’t hooked on business. However, one of the challenges for Alma is finding services that can respond to her needs and requirements. Fortunately, Tagum Co-operative (TC) did not overlook a micro-entrepreneur like her but catered specifically to her need. The cooperative has a program called “Savings and Credit with Education”. Alma took the opportunity of learning to save and build up her share capital with TC as well as acquire and hone her skills through the trainings provided by the coop. Eventually, her excellent performance in savings and loans repayment as well as her “maja blanca” masterpiece, garnered the awards she so deserved. Not only is she a part of the outstanding SCEW group of TC, but she actually is the recipient of the “SCWE Most Outstanding Member” in the last

three consecutive years. Indeed, through the SCWE program, her hard work and passion turned into changes that will improved the financial situation of her family.“Today, my share capital is now worth P6,000.00, accumulated from the P300.00 retention every time I get a loan plus capital savings. I’ve been a SCWE member of Tagum Co-op for quite some time and I’m a recipient of its services & dividends and a holder of mortuary benefit,” says Alma with some pride.

“From our business income, we’re able to pay for our electric bills, even buy on cash basis the things we need, something that I could hardly do before, and I bought a desktop computer as a gift to my son. Also, we can now afford to occasionally dine in restaurants like Penong’s.” Things are really different now and life is continuously improving since Alma’s family is now more capable of meeting their basic needs.

According to her, the SCWE program of Tagum Co-op is really of great benefit to her family especially when it comes to savings and building up her capital share. It has also helped her in developing the existing family business and she is sure the coop will continue to help her in pursuing new business ideas she might have in the future.

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Loida SantosMember: Digos Market Vendors MPC (DIMAVEMC)Enterprise: Meat VendingAddress: Lapu-lapu Extension, Zone 3, Digos CityHusband: Kenneth OvershineChildren: Two daughters

The success story of Loida is one that entailed personal sacrifices. Now at 53-years-old, Loida recounted her humble beginning as a daughter of a struggling family, even describing their condition as a “miserable” one.

At the tender age of 16, she gave up some important thing, like the hope for a college education because she saw herself obligated to help her parents. She said, “I started working young because my parents were poor. Among my siblings, I ended up finishing only in high school because I regularly took part in helping them with their work.”

Loida, who earlier helped her mother in their meat shop, ended up inheriting the business. She said, “I got married and my mother passed on their business to me. It was on those hard times that DIMAVEMC helped me get through it. My first loan was only P300.00 for additional capital and paid it for three months. I had added up sufficiently to my share capital and I was able to avail bigger amount of loans.”

“I started selling at 16 years old where I got acquainted with so many things like purchasing meat supplies, travelling, displaying meat, negotiating with people, gaining frequent customers and most of them still buy meat from me up to this day ” she said.

The edge of an early work experience however was not the only thing that helped her business grow, according to Loida. The help of DIMAVEMC was what fed the survival and success of her business. “I never loaned from others; only from DIMAVEMC because everything is there. They have loan products such as MCP, regular loan, DTI. You can avail a lot from their services and at the end of the year, you can also receive dividend!”

Loida is not just a successful business-woman, she is also a mother of two girls whom she educated well. One has already attained a degree in medicine. “Because of my business of selling meat, and with the big help of DIMAVEMC, I took part

of my loans as additional capital, while some of it, I used for my children’s education. As of my properties, I had built my own house, even gave away a house and lot for my daughter. I acquired a house at Lapu-lapu extension, and bought an 8-ha lot in Sigaboy. All of these, I have acquired with the help of DIMAVEMC.”V The success of Loida was not something she contained on her own. Her employee, Analyn Carpio, 31, started working for Loida at the age of 13. At present, Analyn has acquired two lot properties, built her own house, and fed her family well. Loida’s nephew also attested his gratitude on how Loida has helped him support his high school education and managed to build his own house.

The success of Loida is one of the many proofs we have as the power of self-help in transforming our own personal circumstances.

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Loreta MaligroMember: Maco Development Cooperative (MADECO)Enterprises: Retail Store, Public Utility Jeep (PUJ) and Computer GamesAddress: Purok Tagumpay, Binuangan, Maco, Compostella ValleyHusband: Gamaliel MaligroChildren: Two sons

Loreta, as an entrepreneur was unceasingly trying to purge their family out from being poor. “There was a time when we would divide by half a pack of small quick chow noodles in order for us to eat for a day. I will just mix the first half with vegetables, then the other half is allotted for our next meal,” Loreta said. She believes that it’s one thing to learn to be contented of what they have at the moment and it’s another thing to strive to go onwards for the better.

So, Loreta decided to venture into a retail store and a coin-operated gaming computer business to augment her husband’s meager income.

She had already started the retail store before becoming a MADECO member with P500.00 as seed capital. She’s left with no choice but to make their small hut (bahay kubo) made up of nipa roofs and walls as their business site. Then, the inventories slowly grew by P1,000.00 in few months. For almost ten years, the store scarcely survived with minimal stocks of merchandises. In 1999, a friend invited Loreta to attend an orientation with MADECO which eventually led her to become a co-op member.

“I planned to buy a multi-cab vehicle”, Loreta said. She started to learn building up her share capital. And after nearly three months, she availed of her first loan of P30,000.00 and paid it in 8 months. The loan proceed was deposited in the coop. She did the same way on the second loan. On the third loan, the loan proceeds and her deposits enabled her to purchase the vehicle.

Her desire for business growth and preservation of a good credit reputation with MADECO paved the way for the realization of their second family enterprise, the public utility jeep (PUJ). This business endeavor started with P100,000.00 for the jeep acquisition, including the franchise fee.

With the three different enterprises, it keeps the Maligro family happily busy. Today, the Maligros are said to be far better than the life they used to live. They have P4,000.00 weekly net

income from the retail store; P1,000.00 daily net earnings of the PUJ; and P3,000.00 monthly from the computer games business.

With these family enterprises and the MADECO assistance, they are more than able to meet their family daily expenditures, including their weekly loan repayments and purchases from MADECO consumer store. They have invested in other assets such as a parcel of land, motorcycles, house renovation, furniture and fixtures. And most importantly, they are able to send their children to school and provide them quality life and even plan of a good future.

Loreta has proven to all who knew her that she is more than what they perceive her to be – a mere housewife. She’s a housewife-entrepreneur! And with MADECO by her side, nothing can stop her from keeping on moving forward.

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Nelson MartinMember: Makilala Multi-purpose Cooperative (MAK-MPC)Enterprises: Dry goods, Barber shop, VulcanizingAddress: Rizal St., Poblacion, Makilala, South CotabatoWife: Arlene MartinChildren: 5 children

On September 17, 1990, Mr. M was employed at the National Telecommunications Office and was assigned in his hometown, Makilala. At that time, the manager of Makilala Multi-Purpose Cooperative (MAKMPC) encouraged him to become a member. At first, he declined to be a member, but in 1992, he joined the co-op.

“When I got married in 1994, I came to realize that if I only depended on my salary, we might encounter financial crisis in the future especially with the expenses of our growing family,” Mr. M said. That’s why in 1995, he decided to start a business with the help of MAKMPC. He availed of the loan services little by little until such time he became a “Class A” member for always paying on time. He always saw to it that he would never be delinquent.

Mr. M has several micro-enterprises. His first business was the “Martin Gift Center” which he started in 1995. With a starting capital of P 7, 417.00 from his one month salary as a government employee, it now ballooned to P260,000.00 worth of stocks.

“Before, I carry all the pails to sell them to the different barrios,” he recalled. “When I had more capital, I was able to buy a new tricycle. That’s how simple success was during that time.”

His second business, which is very popular in Makilala Public Market, is his “Mr. M Barber Shop” with three branches. With this, he was able to employ 11 small-time barbers. He only takes P 7.00 from the P 30.00 that the barbers charge their customers. Even with that, he still gains approximately P 1,400.00 a day.

Aside from the barbershop, he also has a beauty parlor. Before, he only had one beautician, but now he’s got two to whom he also gives benefits like bigger percentage in income, Christmas bonus, etc, the same benefits his barbers receive.

He has also opened two small businesses. He ventured to a rolling store which he calls his very own, “Mr. M Chicken Joy,”

that allows him to earn a net income of P 800.00 daily. With this, he is able to help his two nephews who are staying with him as working students.

He then opened a vulcanizing shop. But he said, “My vulcanizing shop business, it’s not yet gaining much income since it’s still new but I put some development on it little by little.”

By being an outstanding member of the co-operative and by being a diligent micro-entrepreneur, his success will surely continue. His wife and children have become members of MAK-MPC too.

“With the success of my businesses, I was able to buy my own stalls in the market. Now, I’m concentrating on buying land properties since they would cost more in the future than other items like cars,” he said.

MATIYAGA, MASIPAG, MATULUNGIN – indeed, these are only the few words that can describe “Mr. M” of Makilala MPC.

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Maricel GedaroMember: Maco Development Cooperative (MADECO)Enterprise: Retail Store, Construction Supply Trading and Hog RaisingAddress: Purok 1 Elizalde, Maco, Compostella ValleyHusband: Jesus Gedaro (31 years old)Children: Daughter (6 years old) and a son (4 years old)

With age comes wisdom but when it comes to entrepreneruship, sometimes young ambition can also breed success. This story of a young entrepreneur has been making waves having started business at the age of 23, a proof that being young or lacking in experience is not a hindrance to becoming an entrepreneur.

Before marrying her husband Jesus Gedaro, Maricel Mendoza got employed with SM Mall right after her graduation. Before long, she started juggling her loads of work while trying to be a young wife. “We started living in together. Though we have combined our wages, still it’s just enough to meet our expenses. We always end up without enough savings”, says Maricel talking of their struggle as young couple.

Unfortunately, things started to get worse when she got pregnant and was about to give birth to their first baby. They could have gone back to her parents but doing so would have meant that Maricel and her husband would both end up jobless. It was truly not an easy trial, yet while in the midst of all these she found her way to success by starting a small business and eventually meeting a support partner named Maco Development Cooperative.

“My husband and I started a small barbeque business. We borrowed capital from my mother with a promise to pay her 50% of our income. Gladly by July 2007, I became a member of MADECO”, Maricel said implying her relief of finding a co-op that can cater to their credit needs.

She and her husband were encouraged to undertake businesses with MADECO to help them in the development stages. Though their first retail store was initiated through her mother’s capital, MADECO was instrumental in its expansion and the creation of their second retail store and hog raising business. The procurement of merchandise and inventories, hog house construction, purchase of sows as well as delivery truck and land acquisition for their second store were all made possible with MADECO’s help.

As Maricel sought to improve their business, she succeeded in their goals until misfortune fell on their hog raising business --- a sow and a number of piglets vanished without a trace when typhoon Pablo passed by Elizalde. Maricel was left with nothing but the ruins of their first newly constructed hog house. This incident could have made her give up but instead she maintained a positive outlook that served as an example of resilience and grace in the face of adversity. On the other hand, MADECO did not fail to extend support by providing her P15,000.00 worth of loan for the reconstruction and rehabilitation of their hog raising business.

The Gedaro Family now owns and manages two retail stores with monthly income ranging from P10,000.00-P15,000.00 for each store, with four full-time hired workers; and runs a hog raising business with current inventory of 3 sows and 22 piglets, that provided them P40,000.00 net income on its previous cycle of operation.

“Such a huge difference now that we have these businesses. Before we can hardly buy even just a diaper for our baby and we were very much dependent on my parents. But now, we can afford to easily have whatever we need. At the same time, I can help my parents and look after my grandmother who’s now in her old age”, Maricel says with a big smile on her face.

Her real life story may be an exaggerated tale of success, but only because she and her husband together with MADECO worked so hard to make it successful – not every one may become as successful as she is, but she advises that it will never hurt to try and start small.

Now at age 29 with three flourishing enterprises, Maricel is rightfully thought of as a good example of a successful young entrepreneur who started small partnering with a co-operative.

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Insirah SultanMember: Maranding Women Investors Multi-purpose Cooperative” (MWIMPC)Enterprise: Merchandise Retailing & Wholesaling, Internet Café, Rotisserie Chicken & Refreshment StoreAddress: Maranding, Lala, Lanao del NorteHusband: Salic Datumandi SultanChildren: 1 daughter and 3 sons

As the owner-manager of their family businesses, Insirah Sultan is an exception to the male-dominated community and is beyond conventional in the Muslim culture. Her turning to entrepreneurship and developing partnership with MWIMPC to survive and thrive, paints a picture perfect of the great strides taken by women in a work previously out of their reach.

While still in high school, Insirah said she always felt a passion for business, having grown up with her very enterprising older brother. “He is really good in sales talk and deals with his customers so well. Convincing them to buy is no sweat for him”, Insirah shares of her businessman brother.

She always knew that she would own a business one day and do her own thing, that’s why she kept the insights she gained from her reselling business experience in high school. It wasn’t long before she got the chance to pursue the desires of her heart.

“When I got married, my husband was working with DAR. It was only a year after that we opened our first business of trading in Ozamis Market. That’s when I started putting into practice everything I learned from my older brother.”

But a businesswoman like Insirah is not immune to challenges. She recalled having to contend with that ill-timed demolition of Ozamis Market, leading to their relocation to Maranding. Since business is really in her blood, she continued her merchandise retailing and wholesaling business with P40,000.00 start-up capital. She again located her business in the market of Maranding. She found an excellent spot inside the market with enough space for expansion. The problem was she had no sufficient capital for the acquisition of additional merchandise inventories for the new store. She struggled with the thought that an excellent space like that was hard to give up but impractical to keep without anything in it. Gladly she found out about MWIMPC and realized that a partnership with the co-op is a great way to solve her problem. She got her first loan from MWIMPC and that started a beautiful business-credit relationship with the co-op which grew as her business progressed.

By November 18, 2009, Insirah franchised a rotisserie chicken business from her former landlady in Ozamis. “We met in one of my trips and that’s when she convinced me of this business. She assured me that it’s a good one” It was also during this time that a

close friend proposed another business to open a refreshment store near the Municipal Hall. For a keen business-woman like Insirah, she truly knows a promising business investment if she sees one. Having that refreshment store would surely provide an accessible and good business location for her rotisserie chicken. True enough, the start of her Rotisserie Chicken and Refreshment Store businesses was like hitting-two-birds-with-one-stone investment experience. And Insirah knows that it wouldn’t have been that easy without MWIMPC supporting her all the way.

New to her list of businesses is their internet café, with her cousin as the operation supervisor. She said that entrepreneurship has a particularly vital function in the lives of women like her by allowing them to own a business and care for their families and extending that care to other people. If you ask her what’s her secret in running a successful business and maintaining a good standing membership with her co-op, her answer is ---“It’s simple, use your loans wisely then pay your loans and make sure it’s NOT past due!”

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GADWIN E. HANDUMONChairperson

Representing Region XPaglaum Multi-Purpose Cooperative

VERNON S. SALIGYouth SectorIDEAL Multi-Purpose Cooperative

2012-2013 MASS-SPECC Officers

EDGAR G. AMORONIOVice-Chairperson

Representing Region XIISta. Catalina Multi-Purpose Cooperative

ALLING H. ARSAD Representing ARMM

MSU-SULU Employees Multi-Purpose Cooperative

B o a r d o f D i r e c t o r s

EDELITO C. SANGCORepresenting CARAGA Region

Socorro Empowered People’s Cooperative

MARIO A. BATERNARepresenting Region IX

Timbermines Multi-Purpose Cooperative

EFREN M. BRAVO Representing Region XI

Panabo Multi-Purpose Cooperative

NORMA R. PEREYRASWomen SectorTagum Cooperative

NORA A. CLARWomen SectorMSU-IIT Multi-Purpose Cooperative

MANSUETO V. DELA PEÑAElected at LargeOro Integrated Cooperative

DONATO A. ALMADORElected at LargeEl Grande Multi-Purpose Cooperative

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AUDIT COMMITTEEMiriam R. Baloyo - ChairpersonTagum CooperativeDelfin E. Cuevas - Vice-ChairpersonMediatrix Multi-Purpose CooperativeSonia L. Chua - SecretaryZillovia Women’s Multi-Purpose Cooperative

ELECTION COMMITTEE Atty. Rolando C. Casaway - ChairpersonTagum CooperativeJerry L. Cabonegro - Vice-ChairpersonMalapatan Multi-Purpose CooperativeChad P. Villamor - SecretaryAmpayon Multi-Purpose Cooperative

MARICELLE M. NUEVABOD Secretary

Lorenzo Tan Multi-Purpose Cooperative

ALETA A. GICOLETreasurer

Oro Integrated Cooperative

BERNADETTE O. TOLEDOEx-Officio

Chief Executive Officer

CREDIT COMMITTEEGadwin E. Handumon - Chairperson Paglaum Multi-Purpose CooperativeJose P. Castillo - Member Sta. Ana Multi-Purpose CooperativeBernadette O. Toledo - Member CEO, MASS-SPECC

INVESTMENT COMMITTEERaul M. Pregon - ChairpersonMSU-IIT Multi-Purpose CooperativeRodolfo B. Trinidad - SecretaryOro Integrated CooperativeRosalina S. Argent - MemberTagum Cooperative

MEDIATION AND CONCILIATION COMMITTEERomeo R. Busalla - ChairpersonToril Community CooperativeMarino O. Dal - SecretaryMambajao Credit CooperativeAndres B. Arsenal - MemberAIM Cooperative

2012-2013 MASS-SPECC OfficersC o m m i t t e e O f f i c e r s

Ke y O f f i c e r s

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2013 ACTION PLANS AND TARGETSSavings and Loans• P550M loan released to 107 qualified borrowers• <=5% on Portfolio at Risk (PAR)• 100% compliance to loan loss provision• P452.5M loan fund from funding institutions• P450M outstanding deposits reached • P230M cumulative share capital • At least 1 big bank partnered as wholesaler• Risk Management System Implemented

Investment• P50M total project investment size generated• 1-2 high-impact projects for member-coops’ communities, costing P30M-P50M each implemented

Information andCommunication Technology• 47 new and 15 migrated sites, MSRTE Installations• 10 MSRTE Core sites connected • 50 ATM Terminals • 50 POS Terminals• 30% increase of transaction volume on e-banking services• 1 Centralized Support System• Mobile banking implemented• On line branch connectivity implemented• 3 Module development on MIS & other apps implemented• Implementation of other ATM services

– Load Fulfillment– Internet Payment Gateway – Cross Border Services (CBS), an International Card

Acquiring (Master Card /VISA Card/JCB)– Remittance

Consultancy• 50 coops served• Partner co-ops’ operations improved• Co-op Managers’ Coaching and Mentoring program • 4 Manuals on the approaches and tools standardized• Quality Assurance System implemented• Staff development program• Partnerships with 4 consulting professionals and institutions

Networking and Marketing• 100 coops Member in Good Standing (MIGS) • At least 5 new members per region• 70% of the coops in the region attended the Bi-annual Ownership Meetings• 150 coops attended General Assembly• 6 Regional Steering Committee (RSC) meetings per region • P 10M CETF collected• Satellite offices set-up in the region• 1 Mindanao wide forum conducted • Mindanao Wide synchronized Social Services• Networking with GO’s and NGO’s• Marketing program and activities implemented• 1 Youth Program• 5 Regional Managers’ Club organized• Disaster Rist Reduction Management (DRRM) Program and fund establised

GovernanceConducted the following activities/events• 2 BOD and 2 Joint Officers meetings• 3 Executive Committee meetings • 2 Audit Committee activities• 2 Election Committee meetings• 2 Investment committee meetings• 1 Mediation and conciliation meeting• 3 meetings for Managers Club • 1 Chairperson’s and CEO’s Summit• 3 Coop Youth Parliament (CYP) meetings• 1 Youth Congress• 3 Gender Committee meetings• 1 Gender Congress

Research and Development• Established and maintained MASS-SPECC members’ data bank and archives• 3 Network products developed • 2 Network policies completed – Ethical Standards on Branching – Code of Ethics• Social Performance Management (SPM) approaches and tools developed• MASS-SPECC Officers and Employees Code of Ethics adopted• Bi-Annual “Koop Diaryo” published • 2013 Mindanao Coop Micro-Entreprenuer Award (MICMA) winners awarded and published

Admin and Support Group• Talent and Career Management Program implemented• Computerized HR system implemented• Fund management system improved• At least 30% increase in investible funds• Compliance to regulatory agencies• Accounting system and procedures enhanced• Comprehensive documentation and filing system• Maintenance, security & safety of properties improved• Procurement and disposal system implemented• Disaster Risk Reduction and Management (DRRM) developed

Institute of Cooperative Studies• 16 CDA courses delivered• 8 eLearning courses delivered• Management Development Course developed with UPOU• 20 active cluster partners • At least 5 facilitators per province• EDCOMs (primary coop) actively engaged

Hostel and Properties• Fully operating as subsidiary of MASS-SPECC• 60%-70% occupancy rate achieved • 30% of the catch-up capital expenditures acquired• Hostel staff attended trainings as requirement to professionalize hostel services• Above market rate Return on Assets (ROA) from Hostel operations achieved

Overall Financial Targets Total Assets of at least P 1.02B achieved Net Surplus of P30M realized Dividends and patronage refund above Market rate

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2013 BUDGETREVENUES Interest on loans extended 64,971,838 Consulting and service fees 14,465,907 Hostel fees (net) 9,524,274 Income from ATM operations 19,248,000 Education and training 12,813,300 Interest from bank deposits and investments 21,070,000 Miscellaneous 6,092,105

148,185,424 EXPENSES Personnel Cost Salaries and wages 13,896,099 Employees benefits 6,860,328 SSS/Philhealth contribution 1,607,089 CERP contribution 280,800 HDMF contribution 101,000

22,745,316 Interest expense on deposits 36,000,000 Depreciation and amortization 9,604,962 Interest on borrowed funds and other charges 14,115,534 Provision for doubtful accounts 3,300,000 Meetings and conferences 4,478,000 Trainings and seminars 2,000,800 Travel and transportation 6,972,822 Staff development 2,823,000 Light and power 2,297,878 Rental 1,330,000 Communication 1,917,428 Security and janitorial 1,003,280 Provision for retirement benefits 1,416,535 License fees 2,370,000 Professional fees 1,231,000 Taxes and licenses 1,550,000 Marketing expenses 658,925 Repair and maintenance 574,000 Materials and supplies 476,000 Insurance 136,000 Collection and litigation expense 130,000 Miscellaneous 1,053,944

118,185,424 NET SURPLUS 30,000,000

MASS-SPECC Annual Report 2012

Documents

Transcript of MASS-SPECC Annual Report 2012