s

Annual Report 2016

PHILSUCOR 1

MISSION : To actively assist the sugarcane industry through the formulation and implementation of innovative and diversified assistance programs to its stakeholders, for the continuing sustainability and enhancement of sugarcane production, including the production of co-products and by- products of sugarcane.

VISION : By 2018, Philsucor shall be an indispensable partner of the sugarcane

industry, supporting the country’s efforts for inclusive growth and poverty reduction, particularly in the rural areas of sugar producing provinces through the formulation and implementation of innovative and diversified assistance programs to its stakeholders, for the continuing sustainability and enhancement of s u g a r c a n e production, including the production of its co-products and by-products.

CORE VALUES: Love of Country

Transparency

Professionalism

PHILSUCOR 2

PAGE CONTENTS

4 Message of the Chairperson of the Board

5 Message of the President of Philsucor

7 Organizational Structure

8 Profile of the Board of Directors

11 Officers of Philsucor

12 Background of Philsucor

13 Highlights of Accomplishment

14 Client Satisfaction Survey

15 Frontline Services

17 Corporate Governance

27 PHILSUCOR In Action

36 Annual Audit Report for the Year Ended December 31, 2016

TABLE OF CONTENTS

PHILSUCOR 3

List of Tables and Figures

Page Table No. Content

13 1 Highlights of Accomplishments for the Year 2016

18 2 2016 Performance Agreement Negotiation

19 3 2016 Performance Scorecard Result

23 4 Attendance of Credit Committee Meetings

24 5 Attendance of Finance and Audit Committee

Meetings

25 6 PHILSUCOR Board Attendance for the Year 2016

37 7 Financial Highlights of PHILSUCOR for the year

2016

Page Figure No. Content

7 1 Organizational Structure of PHILSUCOR

14 2 Percentage of clients’ perception of the Overall

Service Delivery of Philsucor.

20 3 2015 PHILSUCOR Strategy Map

21 4 2016 PHILSUCOR Strategy Map

PHILSUCOR 4

MESSAGE OF THE CHAIRPERSON OF THE BOARD

Office of the Chairperson

of the Board

and

SRA Administrator

(2010-2016)

MESSAGE

“Overcoming Global Competitiveness for the Sugarcane Industry”

Globalization has changed the landscape of the sugarcane industry in the recent

years. And as our industry continues to evolve and adapt, its stakeholders are

fortunate to have the Philippine Sugar Corporation (PHILSUCOR) as its financial

partner that is truly committed t provide support and assistance.

The time has come for PHILSUCOR to maximize its capabilities by being more

proactive in helping the industry. It is a steep climb to provide financial assistance

with a clear return on investment as bottom line. But always remember, if the

objectives are clear, solutions shall appear.

The sugarcane industry is in need of resources to modernize, mechanize and

achieve precision farming, It is an opportune time for s at now and leave a more

lasting and fruitful legacy. Together we can hurdle this transition of overcoming the

global competitiveness.

Lastly, I would like to extend my heartfelt appreciation and gratitude to the

PHILSUCOR Board of Directors, Officers and Staffs for all their hard work and

efforts in delivering honest and meaningful service to our stakeholder for the last

six (6) years. To my Board Members, I am proud to say that you exemplified public

service with compassion and integrity!

Let us continue to invest for our progressive tomorrow.

Thank you and Mabuhay PHILSUCOR!

MA. REGINA BAUTISTA-MARTIN

Chairperson of the Board/SRA Administrator

PHILSUCOR 5

MESSAGE OF THE PRESIDENT OF PHILSUCOR

Office of the President

and

Vice-Chairman of the

Philsucor Board

MESSAGE

Following the path of the previous year, which was our breakthrough year, we

continued our financial assistance to various cooperatives all over the country.

Management improve the organizational changes, new employees were hired,

systems were improved, interests were adjusted and facilities were upgraded to

the best interest of our borrowers.

Philsucor will continue to be in the forefront of existing production targets of the

industry

RENATO B. SALVATIERRA

President

PHILSUCOR 6

PHILSUCOR

PHILSUCOR 7

Figure No. 1 – Organizational Structure of PHILSUCOR

ORGANIZATIONAL STRUCTURE

PHILSUCOR 8

*MARIA REGINA BAUSTISTA-MARTIN

-Filipino, born in 1961, 55 years old, Ms. Martin served as Administrator of Sugar Regulatory

Administration and Chairperson of the Board of Directors of Philippine Sugar Corporation

from 2010 prior to the appointment of Atty. Paner. Prior to her stint in SRA, she held key

positions in various civic and industry organizations like the Asociacion de Hacienderos Silay-

Saravia (AHSSI), BJB Agro-Industrial Company, Sugar Industry Foundation, Inc., SIMAG and

Kabuhi Foundations of Silay City, Negros Occidental. She graduated from the University of

Santo Tomas with a degree in Physical Therapy in 1982 and her post graduate studies in

Program Development Management from Asian Institute of Management in 1987.

*RENATO B. SALVATIERRA

- Filipino, born in 1940, 76 years old, Mr. Salvatierra is the President & Vice Chairman of

Philsucor since 2011. He has been with the company for over 20 years and became Vice

President in 1989 until his retirement in 2005. He was then hired as a Consultant for Operations

up to his appointment as member of the Board on 20 December 2010. Prior to joining Philsucor,

he worked for Philippine National Bank from 1965 to 1974 and headed the Domestic Sugar

Department of the Philippine Exchange Company until 1978. He graduated from the University

of the East with a degree in Business Administration major in Accounting in 1962 and passed

the CPA Licensure Exam in 1964.

*ROBERTO G. ABELLO

- Filipino, 73 years old, born in 1943, a Banker, he was appointed as a member of the Board

since 20 December 2010 and serves as the Chairman of Credit Committee. He is the

President/Gen. Manager of Rural Bank of Ilog and a Board of Trustee of Dungannon Bank. He

is affiliated with Binalbagan-Isabela Planters Association, Metro-Bacolod Chamber of

Commerce, and Negros Women’s for Tomorrow Foundation and Sacred Heart Seminary

Foundation. Mr. Abello acquired his Bachelor of Science degree in Agriculture from University

of the Philippines-Los Baños in 1965 and his post graduate studies in Agriculture from

California Polytechnic College in 1966.

*AUGUSTO B. ARANETA, JR.

- Filipino, 69 years old, born in 1947, a Lawyer by profession, he was appointed as one of the

Directors of Philsucor since 20 December 2010 and is the Chairman of the Remedial

Committee. Concurrently, he is the President of Barotac-Dumangas Anilao Planters

Association Inc. and sits as the Corporate Secretary of the National Federation of Sugarcane

Planters Inc. He was formerly the Vice-Chairman of the Board of Trustees of the Philippine

Sugar Research Institute. Atty. Araneta earned his Bachelor of Arts degree from the University

of the Philippines-Diliman in 1968 and his Bachelor of Laws degree from San Beda College in

1973. He passed the Bar Exam the following year.

BOARD OF DIRECTORS

PHILSUCOR 9

*RAYMOND T. GOMEZ

- Filipino, 68 years old, born in 1948, an Accountant by profession, Mr. Gomez was appointed

as one of the Directors of Philsucor on 15 January 2013 and is the Chairman of the Finance

Committee. He started his career as an Auditor at Sycip, Gorres, Velayo & Co. He then assumed

various positions connected with the Sugar Industry, including serving as the President of

Calinog-Lambuano Multi-Planters Association and a Trustee of the Philippine Sugar Research

Institute and Panay Federation of Sugarcane Farmers. He graduated Cum Laude with a

Bachelor of Science in Commerce major in accounting degree from the University of St. La Salle

(formerly La Salle College-Bacolod) in 1968 and passed the CPA Licensure Exam in 1969. He

has completed all units for his Masters in Management from University of the Philippines-

Visayas.

*JOSEPH CONRAD F. LEDESMA

- Filipino, born in 1976, 40 years old, he was appointed as a member of the Board on 20

December 2010. He previously worked as a Process Engineer at Amkor Technology and has

been a part-time faculty at the University of St. La Salle-College of Engineering until 2005. He

is the General Manager of Tinihaban Agricultural Corp. and a member of the Board of Directors

of various associations including Sugar Industry Foundation, Silay-Saravia Railways

Cooperative, AHSSI Planters Multi-Purpose Cooperative and the SIMAG Foundation. A

consistent honor student, he earned his degree in Bachelor of Science in Manufacturing

Engineering and Management from De La Salle University in 1998 and his MBA from University

of St. La Salle Bacolod in 2005.

*ANDREW O. REGALADO

- Filipino, born in 1947, 69 years old, he joined Philsucor as a member of the Board on 20

December 2010. Prior to Philsucor, he served as a Board Member of various organizations such

as the Carlos Hilado Memorial College, Bacolod Eco & Business Council, and Bacolod Negros

Occidental Federation Info Tech. He was also a Trustee of the Habitat for Humanity Philippines

Foundation Inc. until 1997 and has been an executive of various local private companies. Mr.

Regalado graduated from La Salle College-Bacolod with a Bachelor of Science in Commerce

major in Business Management degree in 1969.

*JOSEPH EDGAR M. SARROSA

- Filipino, born in 1965, 51 years old, was appointed Board of Director of Philsucor on 20

December 2010. Concurrently, he serves as the Chairman of Organic Producers in the Island of

Negros and Executive Vice President of the Sagay Aqua Ventures Corp and of Salvacion Agri-

industrial Corp. He is also affiliated with United Sugar Producers Federation of the Philippines,

Rural Sugar Planters Association Inc., and Farmers Multi-Purpose Cooperative. Mr. Sarrosa

graduated from the University of St. La Salle (formerly La Salle College-Bacolod) in 1986 and

completed a Business Management Program at the Asian Institute of Management in 1987.

PHILSUCOR 10

*FREDDIE W. ZAYCO

- Filipino, born in 1944, 72 years old, Mr. Zayco was appointed Board Member on 20 December

2010. He was a former Provincial Board Member of Negros Occidental and General Manager

of Vizcaya Management Corporation. He is affiliated with the Association of Negros Agro

Producers, Inc., United Sugar Producers Federation of the Philippines, Inc. and Lions Club.

He earned his degree in Business Administration from Adamson University.

•ATTY. ANTONIO C. LOPEZ, JR.

- Filipino, born in 1958, 59 years old, he was appointed as member of the board of Philsucor

on 01 December 2016. Currently, he serves as a senior partner of Lopez Law Office in Tacloban

City. Atty. Lopez earned his Bachelor of Laws degree from the Leyte Colleges in 1984 and

admitted to the bar in 1986.

* Holdover directors • Newly appointed member of the Board

PHILSUCOR 11

OFFICERS & PERSONNEL

JULIE L. ESTANTE

- Filipino, born in 1962, she was appointed Department Manager II in 2014.

She’s been with Philsucor since 1984 and has held various positions including

being the Office-in-Charge in 2005 and Acting Department Manager II from

2010 until her recent appointment. She earned her Bachelor of Science major

in Accounting degree from University of San Agustin in 1983 and her MBA from

International Academy of Management and Economics in 2002.

THELMA R. BUGAYONG

- Filipino, born in 1953, she joined Philsucor in 1984 and holds the position of

Accountant V since 1992. She earned her undergraduate degree from

Philippine School of Business Administration in 1975 and passed the CPA

Licensure Exam in 1977.

*CELSA G. ANDALIZA

- Filipino, born in 1955, she joined Philsucor in 1984 and holds the position of

Supervising Budget Specialist since 1992. She earned her undergraduate

degree of Bachelor of Science in Commerce Major in Accounting from

Polytechnic University of the Philippines.

PRECIOSO P. PREPOTENTE

- Filipino, born in 1953, he joined Philsucor in 1984, and hold the position of

Supply Assistant I since 1992. He earned 40 units of BSBA degree from the

University of the East.

ANNABELLE M. LUSTERIO

- Filipino, born in 1970, she joined Philsucor in 2012, and holds the position of

Administrative Assistant II. She earned her degree in Business Administration

in Philippine Christian University and passed the CPA Licensure Exam in 1994.

* Already retired as of December 31, 2016

PHILSUCOR 12

BACKGROUND OF PHILSUCOR

Established on 14 November 1983 by virtue of Presidential Decree No. 1890.

Its creation was brought about by the need to support the sugar industry at that time, it being one of

the biggest and most reliable sources of foreign exchange earnings of the country.

During that time, many of the obligations of the sugar mills, refineries and other sugar facilities

acquired after the war at heavy financing cost to rehabilitate the damage sugar industry remain unpaid

and in arrears; it created an onerous burden, not only to their owners, but to the local financing

institutions as well.

Philsucor was thus, created, specially charged and empowered to design and implement a program for

sugar mills, refineries and other sugar facilities.

In keeping with the developments in the sugar industry, both locally and internationally, and in light of the

challenges posed by the substantial reduction of tariff on importation of sugar in the country in 2015 under

the ASEAN Free Trade Agreement and the change of administration of the Philippine Government following

the result of the May 2016 National Election, Philsucor has regularly revisited its mission and vision

statements.

Philsucor’s mission used to be the following: “To provide vital assistance to increase productivity and growth

in the sugar industry, and consequently, help alleviate the country’s economy”; and its vision, the following:

“To be a key player in ensuring the viability, stability and growth of the country’s sugar industry”.

Now, the mission and vision statements of Philsucor have been enhanced (see page 2).

The Philsucor Board revised its mission and vision statements as immediate response to the advent of ASEAN

Economic Community Integration in 2015 and the change of the administration of the Philippine

Government.

CREATION

MISSION AND VISION

PHILSUCOR 13

Table No. 01 – Highlights of Accomplishment for the Year 2016

Client Date of Loan Release Total Amount Purpose

Macaessa Multi-Purpose Cooperative

(MACAESSA MPC) Mar. 11 Aug. 5 12,624,240 Farm mechanization

First Farmers Holding Corporation

(FFHC) Mar. 14 Mar. 21 70,000,000

Purchase of farm

materials and supplies

Kamahari Agri-based Multi-Purpose Cooperative

(KABMPC) Apr. 15 Jun. 7 2,176,900 Purchase of farm Inputs

Association of Sugar Planters of Central Luzon

(ASUCAL) Apr. 26 30,000,000 Purchase of farm inputs

Nefrospa Multi-Purpose Cooperative

(Nefrospa MPC) May 30 3,000,000

Help farmer-members

purchase fertilizer,

cultivation and

rehabilitation of

sugarcane farm

Ormoc Sugar Planters Association, Inc.

(OSPA) Jun. 27 20,000,000

Purchase of farm

equipment

Lucban Multi-Purpose Cooperative

(Lucban MPC) Jul. 12 1,500,000 Block farm program

Northern Negros Planters Association, Inc.

(NNPAI) Sep. 15 Nov. 10 8,400,000

Purchase of farm

equipment

TOTAL 147,701,140

HIGHLIGHTS OF ACCOMPLISHMENT

PHILSUCOR 14

CLIENT SATISFACTION SURVEY

The Q and P Solution provided the report of Client Satisfaction Survey that was conducted for

and behalf of the Philippine Sugar Corporation (PHILSUCOR) for the year 2016

The Client Satisfaction Survey was administered and sent to the following clients of

PHILSUCOR:

1. NEFROSPA Multi-Purpose Cooperative

2. KAMAHARI Agri-Based Multi0Purpose Cooperative

3. LUCBAN Multi-Purpose Cooperative

4. ASUCAL - Association of Sugar Planters of Central Luzon, Inc.

5. MACAESSA Multi-Purpose Cooperative

6. First Farmers Holding Corporation

7. OSPA - Ormoc Sugar Planters Association

8. Ormoc Kanangga Mill District Development Council Foundation, Inc.

Within the eight (8) clients, there were a total of 18 respondents to the survey, representing

100 percent of the target respondents.

Figure No. 2 – Percentage of clients perception of the Overall Service Delivery of Philsucor.

This indicates the clients respondents’ actual perception on the PHILSUCOR Services. In the

2016 survey, 72% of the respondents see the services as Very Satisfactory, 22% Delightful, and

6% say that it is Satisfactory.

In the 2015 survey results, 53% of the respondents said that the services are “Very

Satisfactory” at 53%, with 41% finding the services as Satisfactory. 6% find the services as “

Delightful”.

PHILSUCOR 15

SERVICES

FRONT-LINE SERVICES

Assistance extended to sugar

mills/refineries for the rehabilitation, and/or

improvement of sugar mills.

Lending/Financing for requirements related

to sugar production to support the sugar

industry.

Sugarcane Farm Equipment/

Mechanization/Manufacturing and Crop

Loan.

ELIGIBLE BORROWERS

Sugar Mills

Planter/s Cooperative, Associations,

Confederations

Individual engaged in sugar related

businesses

LOAN TERMS

SHORT TERM - 1 YEAR

MID-TERM - 3 YEARS

LONG-TERM - 5 YEARS

LOAN PROCESSING TIME

Within 20 working days from submission of initial

documents to approval of the loan (excluding

delayed response form client)

REQUIREMENTS

Pre-Evaluation Requirements

1. Audited Financial Statement for the last 3 years

2. Sugar Production Historical Data for the last 3

years (if applicable)

3. Articles of Incorporation/Cooperation

General Requirements:

1. Loan Application Letter

2. Post-dated check of the applicant

3. Payment to Documentary Stamp

4. Chattel Mortgage

5. Projected Cash Flow and Operating Budget

6. Appraisal Report of the Property

7. Latest Mayor’s Permit/Business Permit of the

Borrower

8. List of Officers and Beneficiaries

9. Farm details supported by relevant documents

10. Secretary’s Certificate

-authorizing the loan transaction on the

part of applicant

-designating authorized signatories

-the appointment papers of client’s

representative/s to execute Continuing

Surety Agreement

Additional Requirements

FOR PURCHASE OF FERTILIZER

1. License to purchase fertilizer

2. Trust Receipt (for fertilizer)

3. Marginal Deposit (for importation)

4. Comprehensive Insurance Coverage

FOR FARM EQUIPMENT/MECHANIZATION

1. Chattel mortgage on equipment/machinery

2. Purchase Order

FOR INDIVIDUAL

1. BIR Certificate of Registration

2. Certification from Association/Cooperative

3. Collaterals: Real Estate, Equipment should be

less than 5 years (picture of collaterals)

4. Marital Consent

Individual—Additional Requirements

Manufacturing

DTI or SEC Registration

Business Permit

Individual Crop Loan

Hectarage - at least 30 hectares

Optional Requirements

1. Secretary’s Certificate re: the appointment papers

of Philsucor Board of Directors and two

Comptrollers

2. Consolidated Sugar Quedan under the name of the

borrower.

3. (1)Affidavit from the Chairman/President that the

members has assigned their respective sugar and

molasses in favor of the cooperative duly

executed deed of assignment; (2) that the original

copies of the deed of assignment are it eh position

of the cooperative.

4. Crop Insurance/Credit Guarantee

PHILSUCOR 16

1. Written intent to borrow addressed to Philsucor Chairman/President.

2. Acknowledge receipt of the letter and management will initially request the applicant

to submit the Pre-evaluation Requirements.

3. Subject application letter and documentary requirements will be endorsed to Credit

Committee, composed of five (5) Board Members of Philsucor for preliminary

evaluation.

4. Credit Committee meets with the Loan Applicant and discuss the request.

5. Credit Committee visits the area of the Loan Applicant for ocular inspection (if

applicable)

6. Credit Committee will submit their report/recommendation to the Philsucor Board for

approval.

7. The Board will evaluate the application and will either deny or approve it outright or

require further information or substantiation.

8. Management will inform the applicant of the Board's action and accordingly, if further

substantiation is required, they should comply with such further requirements.

9. If approved, Management will inform the applicant about it, but subject to the latter's

compliance with all legal requirements.

10. If the applicant is amenable to the requirements they have to signify in writing their

conformity to Philsucor.

11. Philsucor legal consultant will prepare the loan documents; thereafter, the same are

sent to the applicant.

12. Management ensures that all the documents submitted are complete and in order.

13. Execution of loan agreement and other related documents.

Check Release

STEPS AND PROCEDURES

PHILSUCOR 17

Market condition and volatility not only in the sugar industry, but also in the finance and banking industry posed significant challenges to Philsucor the past year/s. To a certain extent, there seemed to be sufficient and independent sources of funding on the part of the key players in the industry. Moreover, interest rates are low, so the finance and banking institutions have been aggressive in offering attractive terms and conditions for their borrowers needing loan assistance. The market has thus, been very competitive and Philsucor has had to face, and continue to face to date, the lack of borrowers for its available funds.

Philsucor thus, reviewed several times during the meetings of the Board of Directors in 2015 and 2016, its loan policies, terms and conditions, adjusted them to the changing needs of times, including but not limited to the interest rates for the different types of loans, and other relevant factors.

The Board of Directors of Philsucor has been actively reaching out to potential borrowers and presenting the services it can offer. They are also aggressively identifying the relevant sectors in the sugarcane industry who need assistance the most, with the end objective of increasing and improving efficiency and production.

On October 28, 2015, Philsucor signed a Memorandum of Agreement (MOA) with the Sugar Regulatory Administration (“SRA”) to support the Block Farm Program that the latter is spearheading. The Block Farm Program of the SRA is the undertaking for the consolidation of the management of small sugarcane farms of less than five (5) hectares, which includes farms of agrarian reform beneficiaries, into bigger but contiguous unit/s of at least thirty (30) hectares each, for purposes of improving farm productivity while individual ownership is preserved. The consolidated farms are envisioned to be agribusiness centers through professionalized farm management and mechanized farming with provision for financial a n d technical s u p p o r t services, among others, from government agencies, banking and financial institutions and private sectors.

Philsucor has allotted at least P300 Million of its available funds for lending to give priority for the needed support of the Block Farm Program. The MOA is effective for the period of 5 crop years. Thus, for the 2016 Performance Agreement Negotiation (PAN) of Philsucor with GCG, signed last November 10, 2015, it already reflects this new program that Philsucor is targeting. (see table no. 2)

CORPORATE GOVERNANCE

PHILSUCOR 18

Table No. 2 – 2016 Performance Agreement Negotiation

COMPONENT BASELINE TARGET

Objective / Measure Formula Wt. Rating System Data

Provider 2013 2014 2015 2016

SOC

IAL

IMP

AC

T

SO 1 Expand & Diversity Credit Assistance to Sugarcane Planters’ Cooperative/Federations/Associations, Sugar Mills/Refineries and Block Farms

SM 1

Number of Beneficiaries assisted: a. Block Farms / Individuals /

Unaffiliated No. of Entities with Approved Loans

20% Actual / Target x

Weight

SRA, Administrative

Division

NA NA 2 65

b. Coops/Federations/ Associations, Sugar Mills/ Refineries 20% 6 6 5 7

Sub-total 40%

FIN

AN

CIA

L

SO 2 Financial Stewardship

SM 2 Credit Financing Utilization Rate (Total Amount Released / Credit Financing

Budget) x 100 10%

Actual / Target x Weight

Accounting Division

76% (184.7M/ 243M)

78% (199M/255) 75%

(277.5M/370M) 80%

(326M/ 407)

SM 3 Net Income (Before Tax) Revenue – Expenses 5% 29M 17M 5.5M 2.686M

SM 4 Arrears Collected (Past Due Accounts) Actual Amount Collected vs. Total Amount

Receivables 5% 8.51M 13.37M 12M 15M

Sub-total 20%

INTE

RN

AL

PR

OC

ESS SO 3 Improve Delivery of Service

SM 5 Percentage of Loans granted within 20 days

Loans Processed within 20 Working Days / Total No. of Loans Granted

15% BOD and

Management 100% 100% 90% 92%

SM 6 Customer Satisfaction Index % of Customer Satisfaction 7% All or Nothing Third Party

Survey NA NA

At Least Satisfactory

At Least Satisfactory

SM 7 Number of complaints resolved within prescribed number of days

No. of complaints resolved / Total complaints 0% NA Management NA NA NA Establish Baseline

Sub-total 22%

LEA

RN

ING

AN

D

GR

OW

TH

SO 4 Establish Organizational Effectiveness through Personnel Competency & Quality Management System

SM 8 ISO 9001:2015 Milestone 10% Management &

Consultant NA NA NA ISO Certified

SM 9 Implementation of SPMS % of employees achieving at least satisfactory 5% Employees Rating Administrative

Division NA NA NA Implementation of OPCR and IPCR

SM 10 Average percentage of required competencies met

Competencies Acquired / Required Competencies

3% Competency

Level Administrative

Division NA NA NA Establish Baseline

Sub-total 18%

TOTAL 100%

PHILSUCOR 19

Table No. 3 – 2016 Performance Scorecard Result

Objective / Measure Formula Baseline

2015 Results 2016 Targets

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Total

SOC

IAL

IMP

AC

T SO 1 Expand & Diversity Credit Assistance to Sugarcane Planters’ Cooperative/Federations/Associations, Sugar Mills/Refineries and Block Farms

SM 1

Number of Beneficiaries assisted: a. Block Farms / Individuals /

Unaffiliated No. of Entities with Approved Loans

3 65 0 1 1 0 2

b. Coops/Federations/ Associations, Sugar Mills/ Refineries 5 7 2 3 2 0 7

FIN

AN

CIA

L

SO 2 Financial Stewardship

SM 2 Credit Financing Utilization Rate (Total Amount Released / Credit Financing Budget) x

100

39.73% (118.54/370M)

80% 18.26% 13.56% 4.12% .035% 36.29%

SM 3 Net Income (Before Tax) Revenue – Expenses 6.92M 2.686M 1.665M 3.270M 2.629M 1.920M 9.474M

SM 4 Arrears Collected (Past Due Accounts) Actual Amount Collected

vs. Total Amount Receivables

22M 15M 4M 8M 2M 2M 16M

INTE

RN

AL

PR

OC

ESS SO 3 Improve Delivery of Service

SM 5 Percentage of Loans granted within 20 days

Loans Processed within 20 Working Days / Total No.

of Loans Granted 100% 92% 100% 100% 100% 0 100%

SM 6 Customer Satisfaction Index % of Customer

Satisfaction Very Satisfactory

At Least Satisfactory

N/A N/A N/A N/A Very Satisfactory

SM 7 Number of complaints resolved within prescribed number of days

No. of complaints resolved / Total

complaints N/A

Establish Baseline

Zero Complaints

Zero Complaints Zero Complaints Zero Complaints Zero Complaints

LEA

RN

ING

AN

D G

RO

WTH

SO 4 Establish Organizational Effectiveness through Personnel Competency & Quality Management System

SM 8 ISO 9001:2015 Milestone N/A ISO Certified N/A N/A

Awareness Session and

Training Course on Documentation of

ISO 9001:2015

Signed Version 1 of Quality Manual

QMS Trainings and Documentation

SM 9 Implementation of SPMS % of employees achieving

at least satisfactory N/A

Implementation of OPCR and

IPCR

Formulated and Approved

Formulated and Approved

OPCR and IPCR Approved and

Cascaded

OPCR and IPCR Approved and

Cascaded Implementation of OPCR and IPCR

SM 10 Average percentage of required competencies met

Competencies Acquired / Required Competencies

N/A Establish Baseline

Competencies Identified and

Approved Implemented

Position Competencies Approved and

Cascaded

Position and Competencies Approved and

Cascaded

83%

PHILSUCOR 20

The foregoing shows that Philsucor constantly monitors its corporate programs and strategies. This include, but is not limited to, review of business plans and processes, operating budgets, and other performance enhancement measures. It adopted this strategy map for 2015:

Figure No. 3 – 2015 PHILSUCOR Strategy Map

Good Corporate Governance

Financial Sustainability

Service Excellence

Expand Innovative Credit Financing

Assistance to Sugarcane Planter’s

Cooperatives/Association/Federations

and Sugar Mills/Refineries

Enhance Revenue

Fast-track processing of loans

Improve Organizational Effectiveness and

Personnel Competency

Soci

al Im

pac

t an

d

Stak

eh

old

ers

Fi

nan

cial

In

tern

al

Pro

cess

Lear

nin

g &

Gro

wth

PHILSUCOR 21

And for 2016, its strategy map has been adjusted to this:

Figure No. 4 – 2016 PHILSUCOR Strategy Map

Consequently, Philsucor had also re-aligned its budget, particularly on available funds for

lending, to ensure that the parties in the sugarcane industry who need help the most could

be assisted, as identified.

PHILSUCOR STRATEGY MAP

Customer Satisfaction Rating

Expand Innovative Credit

Financing Assistance to

Sugarcane Planters’

Cooperatives/Associations/

Federations and Sugar

Mills/Refineries

Enhance Revenue Resolve Legal Issues

Fast-track Processing of Loans

Improve Organizational Effectiveness and Personnel Competency

Financial Sustainability Service Excellence

Soci

al Im

pac

t Fi

nan

cial

In

tern

al

Pro

cess

Lear

nin

g &

Gro

wth

PHILSUCOR 22

Based on its scorecard, Philsucor prides itself of achieving the rating of 97.65% for its recent

performance. Please refer to this link:

http://gcg.gov.ph/site/public_files/gcg1466673121.pdf

Philsucor has in place, among others, the following policies and rules, for guidance and implementation in Philsucor:

(i) The pertinent sections in the Philsucor Manual of Corporate Governance,

as recently amended. The Manual was adopted pursuant to Republic Act No. 10149, otherwise known as `GOCC Governance Act of 2011’, in relation with the GCG Memorandum Circular No. 2012-07, entitled `Code of Corporate Governance for GOCCs.

(ii) Note that the Manual includes, among others, governance policy on conflict

of interest cases, policy and relations with respect to internal and external stakeholders, etc., with penalties for non-compliances (see: ;

(iii) Policy and Principles in Relation with Stakeholders’ Concerns (see:

http://philsucor.gov.ph/aboutus/policy_prin_stakeholder.pdf );

(iv) Formal Charter of Expectation;

(v) Corporate Social Responsibility Statement (see: http://philsucor.gov.ph/aboutus/corp_socl_resp.pdf );

(vi) Safety and Health Policy (see: http://philsucor.gov.ph/aboutus/policy_safe_health.pdf );

(vii) The `No Gift Policy’ of Philsucor (see: http://philsucor.gov.ph/aboutus/nogiftpolicy.pdf ); and

(viii) Policy on Illegal and Unethical Behavior (see: http://philsucor.gov.ph/aboutus/policy_ill_unetthic.pdf )

(ix) Procedure for Filing Complaints on Illegal and Unethical Behavior/ Whistleblowing (see: http://philsucor.gov.ph/aboutus/complaint_procedure.pdf )

These are all available in the website of Philsucor.

Needless to state, the entire Philsucor team, from its directors, management and employees, are all bound thereby. They are duly informed in writing, and regularly reminded as well, that compliances therewith shall be strictly monitored, and complains received, if any, shall be acted upon swiftly. Evaluation on the implementation and monitoring on compliances is undertaken by the Corporate Governance Committee. In recent years, based on evaluation, there has been no incident of unethical and conduct

A. Performance Evaluation

B. Policies and Rules on Corporate Governance

PHILSUCOR 23

unbecoming of the directors, officers and employees of Philsucor that has been reported.

Pursuant to the Philsucor Manual on Corporate Governance, as recently amended, the various enhanced committees (with effectively dual functions) in Philsucor, and memberships thereon are as follows:

(i) Executive and Governance Committee which is composed of five (5) members, to

wit: Chairperson : Ma. Regina B. Martin Members : Renato B. Salvatierra

Roberto G. Abello Atty. Augusto B. Araneta, Jr. Raymond T. Gomez

The Committee is headed by the Chairman of the Board of Directors of Philsucor, and the members are the President of Philsucor and all the Committee Chairpersons of its existing committees.

This Committee meets as and when it may be necessary, in the exercise of its functions as executive committee.

In the exercise of its governance functions on the other hand, it is mandated to meet at least twice a year.

(ii) Credit and Risk Management Committee which is composed of five (5) Members, to wit:

Chairman : Roberto G. Abello Members : Joseph Conrad F. Ledesma Joseph Edgar M. Sarrosa Freddie W. Zayco Vacant

Table No. 4 – Attendance of Credit Committee Meetings

This Committee meets as and when it may be necessary, in the exercise of its functions as credit committee, particularly when there are loan applications for evaluation. In 2016, it met at least 9 times. In the exercise of its functions as risk management committee on the other hand, it

is mandated to meet at least twice a year, but in 2016, no meeting of risk

management committee was held.

Name of Committee Members

01

.05

.16

01

.19

.16

02

.23

.16

03

.22

.16

05

.04

.16

06

.14

.16

07

.13

.16

08

.15

.16

09

.15

.16

TOTA

L

ATT

END

AN

CE

PER

CEN

TAG

E

Roberto G. Abello P P P A P P P P P 8 88.8%

Joseph Conrad F. Ledesma P P P P P P P P P 9 100%

Joseph Edgar M. Sarrosa A A P P P A P P P 6 66.6%

Freddie W. Zayco P P P P P P P P P 9 100%

-Vacant- - - - - - - - - - - -

C. Committee Appointments and Performances

PHILSUCOR 24

iii) Finance and Audit Committee which is composed of five (5) members, to wit:

Chairman : Raymond T. Gomez Members : Atty. Augusto B. Araneta, Jr.

Andrew O. Regalado Renato B. Salvatierra Atty. Antonio C. Lopez, Jr.

Table No. 5 – Attendance of Finance and Audit Committee Meetings

For its finance functions, it meets as and when it may be necessary, particularly when there are developments in the financial market that affects Philsucor’s existing and future transactions; when there is a need to adjust its policies; and for the Quarterly Report of Financial Statement of Philsucor. In 2016, it met once, with full membership attendance. To carry out its audit functions on the other hand, it is mandated to meet at least

four (4) times a year, to ensure that its audit functions are duly carried out.

(iv) Remedial and Nomination/Remuneration Committee which is composed of five (5) members, to wit:

Chairman : Atty. Augusto B. Araneta, Jr. Members : Renato B. Salvatierra

Joseph Edgar M. Sarrosa Freddie W. Zayco Vacant

In the exercise of its remedial functions, it meets as and when it may be necessary, particularly when Philsucor is confronted with problematic accounts, and there is a need to monitor and evaluate developments thereon, and adopt actions to protect the interests of Philsucor. In 2016, no meeting of the Remedial and Nomination Committee was held.

In the exercise of its nomination and remuneration committee functions on the

other hand, as mandated in the Manual, it must meet at least twice a year.

Name of Committee Members

04

.29

.16

05

.26

.16

07

-19.

16

TOTA

L A

TTEN

DA

NC

E

PER

CEN

TAG

E

Raymond T. Gomez P A P 8 88.8%

Atty. Augusto B. Araneta, Jr. P P P 9 100%

Andrew O. Regalado P P P 6 66.6%

Renato B. Salvatierra P P P 9 100%

Atty. Antonio C. Lopez, Jr. - - - - -

PHILSUCOR 25

Philsucor has a very active Board of Directors, or more accurately, pro - active directors. They are active participants in all board meetings, discussions and deliberations, not just within the Board, but also externally in dealing with Philsucor stakeholders. The Board of Directors meet at least once a month for their regular board

meeting, and as often as may be deemed necessary for their special board

meeting. They are however, only allowed under GCG Letter dated October

21, 2011, to hold the total maximum of twenty four (24) board meetings per

year.

Since the members of the Board of Directors of Philsucor are mostly based in

Bacolod and Iloilo, Philsucor has also adopted the policy where board papers

are emailed to each member of the Board of Directors at least three (3)

working days in advance of the board meeting; while the hard copies thereof

are distributed to them during actual meetings. In 2015, the members of the Board of Directors agreed as a policy, to schedule

their regular meeting every first Tuesday of the month; but in case that is not

possible, the consensus of everyone was to first seek to ensure they would be

available on any proposed r e-scheduled meetings. The summary of meetings and

attendance therein of the Board of Directors that year is as follows

Table No. 6 – PHILSUCOR Board Attendance for the Year 2016

As can be shown in the above matrix, the Board of Directors held their

meeting for the total of nineteen (19) times in 2016, i.e., with the total of twelve

(12) regular meetings and seven (7) special meetings. And on the average, at

PHILSUCOR BOARD MEETINGS FOR THE YEAR 2016

Name Regular Board

Meeting

Special Board

Meeting Total Percentage

Ma. Regina B. Martin 9 7 16

84.2%

Renato B. Salvatierra 12 5 17 89.4%

Roberto G. Abello 12 6 18 94.7%

Augusto B. Araneta, Jr. 11 7 18 94.7%

Raymond T. Gomez 12 7 19 100%

Joseph Conrad F. Ledesma 12 7 19 100%

Andrew O. Regalado 12 6 18 94.7%

Joseph Edgar M. Sarrosa 10 7 17 89.4%

Freddie W. Zayco 12 7 19 100%

Total Average 94.12%

D. Board of Director Meetings and Performances

PHILSUCOR 26

least ninety four and twelve (94.12%) percent of all the directors attended those

meetings.

During the Board meeting held on May 5, 2016 and August 17, 2016, the Board of

Directors met separately without the presence of the President. The present Corporate Secretary of Philsucor is a practicing corporate lawyer,

and thus, has the relevant legal training and company secretarial background.

The members of the Board of Directors of the Philsucor are all appointed by the

President of the Republic of the Philippines, consistent with its charter. They are

appointed for a term of one year each time, and with hold over capacity as sanctioned

by law, until they are either reappointed or their successors are appointed. The

incumbent members of the Board of Directors of Philsucor are all appointed by His

Excellency, President Benigno Simeon C. Aquino III.

Upon their appointments, the directors are provided with relevant

documents about Philsucor, including but not limited to its charter, briefer on its

structure and operations, financial conditions. One-on-one orientation by

the President of Philsucor with the new directors are also being undertaken.

Aside therefrom, all the incumbent members of the Board of Directors have

attended the Orientation-Seminar on Public Corporation Governance for

BOD/BOT of GOCCs l a s t 2 0 1 4 .

It is the policy of Philsucor to also encourage its directors to attend on-going or

continuous professional education program. Whenever the management

receives any information about seminars that are suitable for its directors, it is

immediately disseminated to them. They have attended the following in

connection therewith:

(i) The 2016 Philsutech convention held in Cebu City last August 15 to 19, 2016; and

Effectively therefore, the foregoing enabled the Board of Directors of the

Corporation to attend at least one training / convention for continuous

professional developments for calendar year 2016.

E. Orientation and Continuous Professional Education Program

PHILSUCOR 27

PHILSUCOR IN ACTION

GENDER AND DEVELOPMENT

The Philippine Sugar Corporation, in compliance with the PCW-NEDA-DBM Joint Circular No. 2012 – 01

Re: “Guidelines for the Preparation of Annual Gender and Development (GAD) Plans and Budget and

Accomplishment Reports to implement the Magna Carta for Women”, implements gender perspective

policies, plans, programs, activities and projects (PAPs) to carry out the law’s procedural, policy and

sectoral program requirements.

The Philsucor created a GAD Focal Point System, a group which consists of employees of Philsucor, to

ensure that GAD issues and concerns, gender equality and women’s empowerment be mainstreamed

within the Organization.

Philsucor aims to accomplish the following objectives:

1. Organization – Focused Objectives:

To adopt a gender mainstreaming policy and the changes in existing Philsucor policies and

guidelines to ensure gender mainstreaming in Philsucor operations.

To make the Organization more gender responsive.

2. Client – Focused Objectives:

Encourage Philsucor clients to exercise awareness on Gender Issues.

Philsucor kicks-off the gender mainstreaming through its client-based activity the “Forum

on Magna Carta of Women and Anti-VAWC Laws” held on the 19th of November. Followed

by the Participation of Philsucor on the 25-day Campaign on Violence against Women

which started on 25th of November. And lastly the 3-day Gender Sensitivity Training for

Philsucor employees which started on the 9th day of December.

The following are the highlights of the activities:.

ACTIVITY 1: Forum on Magna Carta of Women and Anti-VAWC Laws

DATE: November 19, 2016

VENUE: Malaruhatan Country Club, Lian, Batangas

SPEAKER: Mr. James Arsenio O. Ponce

PARTICIPANTS: Members of Kamahari Agri-based MPC, Lucban MPC and Nefrospa MPC

DESCRIPTION: This Client-Based Activity is the very first activity of Philsucor concerning

Gender and Development, held at the Malaruhatan Country Club, Lian,

Batangas. This 8 hour forum tackles issues concerning Gender and

Development, issues which is notfamiliar with sugar cane farmers such as

VAWC, Child Labor and Human Trafficking.

Arrival of Participants in the Venue

PHILSUCOR 28

.

Photo of Mr. Ponce, the Resource Speaker, as he

was explaining Magna Carta of Women.

Photo of one of the participants as he was

writing in the attendance sheet.

Participants and Employees as they listen to the

discussions.

Mr. Ponce with the Participants and employees

of Philsucor as the activity ended.

PHILSUCOR 29

ACTIVITY 2: 18-day Campaign on End Violence Against Women

DATE: November 25 – December 12, 2016

VENUE: Philsucor Office

PARTICIPANTS: All Philsucor Employees

DESCRIPTION: Pursuant to the Proclamation 1172 s. 2006 – Declaring 25 November to 12

December as the 18-Day Campaign to End Violence against Women

(VAW), Philsucor willingly participate in the said campaign by wearing the

Orange T-Shirt with printed awareness on the VAW every Friday from

November 25-December 12. Philsucor also printed freebees like the

foldable fan and gave it to the people who visited the Philsucor Office.

Photo of Philsucor employees as they wear

orange on the start of 18-day Campaign to End

VAWC.

ACTIVITY 3: 3-day Gender Sensitivity Training

DATE: December 9-11, 2016

VENUE: Corporate Inn Hotel, Malate, Manila

SPEAKER: Mr. James Arsenio O. Ponce

PARTICIPANTS: All Philsucor Employees

DESCRIPTION: Gender Sensitivity Training is a crucial part of GAD Mainstreaming so that

the organization especially the GAD Focal Point System will acquire

enough knowledge to mainstream Gender and Development into its

operations.

Photo of Mr. Ponce as he explains the meaning

of the work of the participants.

PHILSUCOR 30

Photo of the Participants in one of the activities

while wearing cut-offs of colorful cartolina as

their props.

Photo on the last activity in the Training as the

participants gives their promises for Gender

and Development

Photo of Mr. Ponce

with all the

participants in the

training as it ended.

PHILSUCOR 31

LOAN ACCEPTANCE

MACAESSA MULTI-PURPOSE COOPERATIVE

March 11, 2016

FIRST FARMERS HOLDING CORPORATION

March 14, 2016

PHILSUCOR 32

ASSOCIATION OF SUGAR PLANTERS OF CENTRAL LUZON

April 26, 2016

KAMAHARI AGRI-BASED MULTI-PURPOSE COOPERATIVE

April 15, 2016

PHILSUCOR 33

NEFROSPA MULIT-PURPOSE COOPERATIVE

May 30, 2016

ORMOC SUGAR PLANTERS ASSOCIATION, INC.

June 17, 2016

PHILSUCOR 34

LUCBAN MULTI-PUPOSE COOPERATIVE

July 12, 2016

NORTHERN NEGROS PLANTERS ASSOCIATION, INC.

September 12, 2016

PHILSUCOR 35

ANNUAL AUDIT REPORT FOR THE YEAR ENDED DECEMBER 31, 2016

INDEPENDENT AUDITOR’S REPORT

THE BOARD OF DIRECTORS

Philippine Sugar Corporation

Ayala Avenue, Makati City

We have audited the accompanying financial statements of the Philippine Sugar Corporation (PHILSUCOR), which comprise the

statement of financial position as of December 31,2016, and the statement of comprehensive income, statement of changes in

equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory

information.

Management's Responsibility for the Financial Statement

Management is responsible for the preparation and fair presentation of these financial statements in accordance with State

accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance

with lnternational Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform

the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the

financial statements, whether due to fraud or error. ln making those risk assessments, the auditor considers internal control

relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal

control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our qualified

audit opinion.

Basis for Qualified Opinion

The balances of Sinking Fund (SF) account of P386.907 million and Bonds and lnterest Payables presented under Other Payables

account in the total amount of P414.568 million remained outstanding in the books, notwithstanding that the SF had already been

terminated in February 2014 lo redeem the bonds, as the issue on three sugar millers' accounts remained unsettled and is still

under mediation between the Philippine National

Bank (PNB) and PHILSUCOR, thus overstating the reported assets and liabilities as of December 31,2A16.

Opinion

ln our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements

present fairly, in all material respects, the financial' position of PHILSUCOR as at December 31 , 2016, and of its financial

performance and its cash flows for the year then ended in accordance with State accounting principles.

Emphasis of Matter

We draw attention to Note 13 of the Notes to Financial Statements which discusses about PHILSUCOR's receivable from the

Bureau of the Treasury of P272.794 million representing PHILSUCOR's share from the remittance by the then Asset Privatization

Trust, now the Privatization and Management Office, of the proceeds from the sales of various sugar mills. Our opinion is not

qualified in respect of this matter.

COMMISSION ON AUDIT

ANNIE L. RECABO

OIC-Supervising Auditor

Audit Group C

Cluster 5 - Agricultural and Natural Resources

Corporate Government Sector

March 30,2017

PHILSUCOR 36

PHILSUCOR 37

Table 7. Financial Highlights of PHILSUCOR for the year 2016

I. Statement of Financial Position

2016 2015 As restated Increase

Total Assets 1,521.216 1,517.240 3.976

Total Liabilities 420.000 420.879 0.077

Equity 1,100.326 1,096.361 3.965

II. Statement of Comprehensive Income

2016 2015 As restated Increase

(Decrease)

Income-interest on loans 19.106 16.407 2.699

Total operating expenses 14.605 19.367 (4.762)

Income (Loss) from operation 4.501 (2.960) 7.461

Other income 4.974 4.447 0.527

Net profit before income tax 9.475 1.487 7.986

Income tax 2.051 0.390 1.661

Net profit 7.424 1.097 6.327

III. Comparison of Calendar Year (CY) 2016 Budget and Actual Amounts

Corporate Operating Budget

Actual Expenses Savings

Personal Services 13.394 7.148 6.246

Maintenance and other operating expenses 7.855 6.144 1.711

Provision for income tax 2.051 2.051 -

Capital Outlay 409.100 149.734 259.366

432.400 165.077 267.323

see: http://philsucor.gov.ph/aboutus/Audited%20Annual%20Report.2016.pdf for the complete and

detailed 2016 Annual Audit Report of Commission on Audit (COA) to PHILSUCOR.

FINANCIAL HIGHLIGHTS (In Million Pesos)