Republic Cement Corporation

September 15, 1998 PSE CIRCULAR FOR BROKERS NO. 2146-98 SUBJECT : Republic Cement Corporation Further to Circular No. 1922-98 dated August 18, 1998 pertaining to the purchase by Blue Circle Industries PLC ("Blue Circle") from Jardine Davies, Inc. ("JDI") of 415,909,703 common shares in Republic Cement Corporation ("RCC") and, together with Round Royal, Inc. ("Round Royal"), its purchase from the Amon group 130,000,000 common shares out of their shareholdings in RCC, attached herewith is a comprehensive corporate disclosure from RCC on the following: llcd I. Background information on the following companies: a. Blue Circle Philippines, Inc. b. Round Royal, Inc. c. The Amon Group II. Ownership Structure of RCC before and after the transaction; III. RCC's Company and Capital Structure before and after the change in ownership; IV. Effects of the transaction on RCC's operations and management. V. Latest audited Financial Statements of Blue Circle Philippines, Inc. Financial statements of the company and other related parties are available for reference at the PSE Library. For your information. (SGD.) REYNOLD P. ONG Vice-President, Listings and Disclosure Group COMPREHENSIVE CORPORATE DISCLOSURE REPUBLIC CEMENT CORPORATION Republic Cement Corporation (RCC) is a publicly-listed company engaged in the manufacture of cement. RCC was registered with the Securities and Exchange Commission on May 3, 1955. Its cement plant is located at Bo. Minuyan, Norzagaray, Bulacan. Amon Trading Corporation and Jardine Davies Inc. are among the major shareholders of RCC until recently. On August 17, 1998, Blue Circle Philippines, Inc. (BCPI), a wholly owned subsidiary of Blue Circle Home Products, BV, a division of Blue Circle Industries PLC of United Kingdom, purchased from Jardine Davies Inc. and its subsidiaries, a total of 415,909,703 common shares or 24.948% of the total outstanding common shares of RCC. BCPI together with Round Royal, Inc., a local investment holding company, also purchased on August 17, 1998 from the Amon Group 130,000,000 common shares out of their shareholdings in RCC or 7.798% of the total outstanding common shares of RCC. There is no planned corporate restructuring of Republic Cement Corporation. The transaction described above affected RCC in terms of the change in ownership structure only. Background Information on Blue Circle Phils . , Inc . Blue Circle Philippines, Inc. was incorporated on April 2, 1997. It has an authorized capital stock of 52,664 at Php 100 par value with an application for increase in capitalization still to be filed with the Securities and Exchange Commission. Total subscribed and paid-up capital is Php 5,258,600 and deposits for future stock subscriptions as of December 31, 1997 of Php 65,123,694. BCPI is wholly-owned subsidiary of Blue Circle Home Products, BV, a division of Blue Circle Industries PLC of United Kingdom. Its affiliate companies are South Western Cement Corporation, South Western Cement Ventures, Inc., and Round Royal, Inc. The following are its Board of Directors and Principal Officers: LLjur Board of Directors : Michael A. Fitch Jeffrey Pope Andres B. Sta. Maria Jocelyn L. Sanchez-Salazar Cristina V. Uy Principal Officers : Michael A. Fitch President Cristina V. Uy Corporate Secretary Benedicto Panigbatan Assistant Corp. Secretary BCPI's audited financial statements for the year ended December 31, 1997 is shown on Annex A. Background Information on Round Royal, Inc . Round Royal, Inc. (RRI) was incorporated under Philippine laws on February 5, 1998. Its primary purpose is to engage in the business of trading goods such as office equipment and plant machinery on wholesale basis. The capital structure of RRI, pending application by the corporation for an increase in its capital stock, is as follows: Authorized Capital Stock Php 681,808,404 Subscribed Capital Stock 170,452,100 Paid-up Capital Stock including deposits for future subscriptions 730,605,000 RRI's capital stock is owned up to 40% by Blue Circle Philippines, Inc. and 60% by a group of Filipino investors. Following are the members of the Board and Principal Officers of RRI. Andres B. Sta. Maria Director and President Cristina V. Uy Corporate Secretary Michael A. Fitch Director Jocelyn I. Sanchez-Salazar Director Julito R. Sarmiento Director Having been recently incorporated, RRI is not yet required by law to file its audited financial statements. Background Information on the Amon Group The companies under the Amon Group with holdings in Republic Cement Corporation include the following: Company Name Nature of Business 1. Amon Trading Corporation Trading 2. Western Resources Corporation Cement Trading 3. Amon Securities Corporation Stock Brokers 4. Arsel Development Corporation Stock Transfer 5. Amon Industries Corporation Trucking 6. Monti-Rey Inc. Real Estate Lessor & Management Services 7. Molave Transport Corporation Cement Trading & Hauling 8. Seyrel Investment & Realty Corporation Investment 9. Carillon Corporation Cement Trading 10. Reymont, Inc. General Investment 11. Amon Multi-Employer Retirement Plan Retirement Fund 12. Heritage Management & Securities Insurance 13. Montivar, Inc. Real Estate Lessor 14. Piedra Realty Corporation Real Estate Amon Trading Corp. Western Resources, Amon Securities, Arsel Development, and Amon Industries sold some of their shareholdings in RCC to Blue Circle Phils., Inc. and Round Royal, Inc. Summarized in Annex B are information on these companies including its capital and ownership structure, Board of Directors and principal officers. The audited financial statements of the companies under the Amon Group which sold its shareholdings in RCC are also attached. Ownership Structure of RCC before and after the transaction Republic Cement Corporation's ownership structure before and after the change in ownership is as follows: Pre-change in Ownership Post-change in Ownership Shareholder Number of Shares Sold at Php 1.00 par value Equity Percentage Php 1.00 par value Number of Shares Purchased at Equity Sale of JDI shareholdings to Blue Circle Jardine Davies Inc. 413,509,643 24.8040% JDI Retirement Fund 1,486,798 0.0892% Bogo-Medellin Milling 912,848 0.0548% Pasig Land, Inc. 414 0.0000% 415,909,703 24.9480% 0 0.0000% Blue Circle Phils., Inc. 0 0.0000% 415,909,703 24.9480% Sale of Amon Group shareholdings to Blue Circle Amon Trading Corp. 38,702,017 2.3215% Amon Industries Corp. 10,000,000 0.5998% Amon Securities Corp. 2,000,000 0.1200% Arsel Development Corp. 2,000,000 0.1200% Western Resources Corp. 1,000,000 0.0600% Lourdes R. Montinola 800,000 0.0480% Gianna R. Montinola 200,000 0.0120% 54,702,017 3.2813% 0 0.0000% Blue Circle Phils., Inc. 0 0.0000% 54,702,017 3.2813% Total Blue Circle Phils., Inc. shareholdings in RCC 470,611,702 28.2290% Sale of Amon Group shareholdings to Round Royal, Inc. Amon Trading Corp. 75,297,983 4.5167% 0 0.0000% Round Royal, Inc. 0 -0.0000% 75,297,983 4.5167% Summarized below is the total shareholdings of Jardine Davies Inc. and the Amon Group in Republic Cement Corporation before and after the sale of its shares in RCC to Blue Circle Phils., Inc. and Round Royal, Inc. Stockholders No. of Shares Equity No. of Shares Equity Prior to Sale % After the Sale % Jardine Group Jardine Davies Inc. 413,509,643 24.8040% 0.0000% JDI Retirement Fund 1,486,798 0.0892% 0.0000% Bogo-Medellin Milling Co., Inc. 912,848 0.0548% 0.0000% Pasig Land, Inc. 414 0.0000% 0.0000% Total Shareholdings 415,909,703 24.9479% 0.0000% Amon Group Alejandro M. Recto 63 0.0000% 63 0.0000% Alfonso M. Recto, Jr. 442,991 0.0266% 442,991 0.0266% Alicia M. Recto 2,284,175 0.1370% 2,284,175 0.1370% Amon Industries Corporation 13,783,166 0.8268% 3,783,166 0.2269% Amon Multi-Employer Retirement 2,036,733 0.1222% 2,036,733 0.1222% Plan Amon Securities Corporation 2,549,676 0.1529% 549,676 0.0330% Amon Trading Corporation 284,893,824 17.0891% 170,893,824 10.2509% Antonio R. Montinola, Jr. 275,425 0.0165% 275,425 0.0165% Arsel Development Corporation 2,743,659 0.1646% 743,659 0.0446% Aurelio Montinola Sr. 39 0.0000% 39 0.0000% Aurelio R. Montinola III 2,556,889 0.1534% 2,556,889 0.1534% Carillon Corporation 9,041,857 0.5424% 9,041,857 0.5424% Catalina Rafael/Bayani S. Rafael 85,766 0.0051% 85,766 0.0051% Gianna M. Romero-Salas 670,620 0.0402% 670,620 0.0402% Gianna R. Montinola 1,057,706 0.0634% 857,706 0.0514% Heritage Management & Securities 3,655,845 0.2193% 3,655,845 0.2193% Juan Miguel R. Montinola 986,523 0.0592% 986,523 0.0592% Leonor V. Montinola 929,431 0.0558% 929,431 0.0558% Lourdes R. Montinola 3,535,221 0.2121% 2,735,221 0.1641% Molave Transport Corporation 13,284,210 0.7968% 13,284,210 0.7968% Monti-Rey, Inc. 20,232,707 1.2136% 20,232,707 1.2136% Montivar, Inc. 1,250,878 0.0750% 1,250,878 0.0750% Piedra Realty Corporation 182,146 0.0109% 182,146 0.0109% Renato C. Sunico 438,386 0.0263% 438,386 0.0263% Reymont, Inc. 3,968,185 0.2380% 3,968,185 0.2380% Seyrel Investment & Realty Corp. 12,231,494 0.7337% 12,231,494 0.7337% Western Resources Corporation 17,238,653 1.0340% 16,238,653 0.9741% Total Shareholdings 400,356,268 24.0150% 270,356,268 16.2171% RCC's Company and Capital Structure before and after the change in ownership Republic Cement Corporation's capital structure before and after the sale of part of the Amon Group's and all of Jardine Davies Inc.'s shareholdings in RCC remained as follows: Authorized Capital 2,999,978,500 common shares 215 preferred shares Par value Php 1.00 common share Php 100.00 preferred share Issued and Outstanding Shares 1,667,111,198 common shares 130 preferred shares (85 preferred shs held in treasury) Paid-up Capital Php 1,667,111,198 common 21,500 preferred The Board of Directors of RCC prior to the entry of Blue Circle Phils., Inc. and Round Royal, Inc. are as follows: Ms. Bi Yong So Chungunco Mr. David C. Clymo Mr. Aloysius B. Colayco Mr. Michael A. Fitch Mr. Aurelio R. Montinola III Mr. Juan Miguel R. Montinola Ms. Ana B. Pastelero Mr. Alfonso M. Recto, Jr. Mr. Philip Anthony Roseberg Mr. Henry Sy, Sr. Mr. Alfonso S. Yuchengco III On August 27, 1998, Mr. David C. Clymo and Ms. Bi Yong So Chungunco of Jardine Davies Inc., tendered their resignation effective August 27, 1998. During the regular meeting of the Board of Directors held also on August 27, 1998 the remaining members of the Board constituting a quorum elected the Mr. James T. Wilson and Atty. Jocelyn I. Salazar of Blue Circle Phils., Inc. to serve for the unexpired portion of the terms of Mr. Clymo and Ms. Chungungco. aisadc The major Stockholders owning 10% or more of RCC's total issued and outstanding capital stock before and after the transaction are as follows: Pre-Change in Ownership Shareholders No. of Shares Equity % Jardine Davies Inc. 413,509,643 24.8040% South Western Cement Ventures, Inc. 349,862,668 20.9862% Amon Trading Corporation 284,893,826 17.0891% Calumboyan Properties, Inc. 219,279,662 13.1533% 1,267,545,795 76.0326% Post-Change in Ownership Shareholders No. of Shares Equity % Blue Circle Philippines, Inc. 470,611,720 28.2292% South Western Cement Ventures, Inc. 349,862,668 20.9862% Calumboyan Properties, Inc. 219,279,662 13.1533% Amon Trading Corporation 170,893,824 10.2509% 1,210,647,876 72.6196% Operation and Management of RCC There is no change in the Management of Republic Cement Corporation after the entry of Blue Circle Phils., Inc. and Round Royal, Inc.. Blue Circle Phils., Inc. will be sharing its technical expertise in cement manufacturing and the efficient management and operation of the cement plant. ANNEX A Report Financial Statements BLUE CIRCLE PHILIPPINES, INC. ( A Wholly Owned Subsidiary of Blue Circle Home Products BV ) December 31, 1997 REPORT OF INDEPENDENT AUDITORS The Board of Directors Blue Circle Philippines, Inc. (A Wholly Owned Subsidiary of Blue Circle Home Products BV) We have audited the accompanying balance sheet of Blue Circle Philippines, Inc. as of December 31, 1997, and the related statements of income and cash flows for the period April 2, 1997 to December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The Company was incorporated on April 2, 1997 and started commercial operations on the same day. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blue Circle Philippines, Inc. as of December 31, 1997, and the results of its operations and its cash flows for the period then ended in conformity with generally accepted accounting principles. PTR No. 1288337 January 9, 1998 Makati City February 18, 1998 BALANCE SHEET DECEMBER 31, 1997 A S S E T S CURRENT ASSETS Cash P8,195,703 Receivables: Trade (Note 5) 22,129,430 Others 79,950 Total Current Assets 30,405,083 INVESTMENT IN SHARES OF STOCK - At cost (Note 6) 63,933,344 P94,338,427 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses P7,788,680 Due to an affiliate (Note 3) 16,354,073 24,142,753 STOCKHOLDERS' EQUITY Capital stock P100 par value Authorized 52,664 shares Subscribed and fully paid 52,586 shares 5,258,600 Deposits for future stock subscriptions (Note 4) 65,123,694 Net loss ( 186,620) 70,195,674 P94,338,427 See Notes to Financial Statements . STATEMENT OF INCOME FOR THE PERIOD APRIL 2, 1997 TO DECEMBER 31, 1997* PROFESSIONAL FEES (Notes 5 and 6) P20,117,688 OPERATING EXPENSES Salaries, wages and employee benefits 16,773,429 Travel 4,685,880 Professional fees 818,730 Representation and entertainment 474,542 Miscellaneous 493,839 23,246,420 LOSS FROM OPERATIONS 3,128,732 OTHER INCOME Unrealized foreign exchange gain 2,820,950 Interest income 121,162 2,942,112 NET LOSS P186,620 See Notes to Financial Statements . * The Company was incorporated on April 2, 1997 and started commercial operations on the same day. STATEMENT OF CASH FLOWS FOR THE PERIOD APRIL 2, 1997 TO DECEMBER 31, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net loss (P186,620) Adjustments to reconcile net loss to net cash used in operating activities: Increase in: Receivables ( 22,209,380) Accounts payable and accrued expenses 7,788,680 Net Cash Used in Operating Activities ( 14,607,320) CASH FLOWS FROM INVESTING ACTIVITY Investment in shares of stock ( 63,933,344) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from subscriptions to capital stock 5,258,600 Deposits for future stock subscriptions 65,123,694 Advances from an affiliate 16,354,073 Net Cash Provided by Financing Activities 86,736,367 CASH AT END OF YEAR 8,195,703 See Notes to Financial Statements . * The Company was incorporated on April 2, 1997 and started commercial operations on the same day. NOTES TO FINANCIAL STATEMENTS 1. GENERAL The Company was incorporated on April 2, 1997 primarily to provide management, technical, consultancy and advisory services to cement manufacturing and related industries. The Company is a wholly owned subsidiary of Blue Circle Home Products BV, a Dutch company wholly owned by Blue Circle Industries, PLC. LLphil The Company started commercial operations on the day it was incorporated. 2. SIGNIFICANT ACCOUNTING POLICIES Investment in Shares of Stock Investment in shares of stock is carried at cost. Foreign Currency Transactions Gains and losses resulting from foreign currency transactions are credited or charged to operations. 3. RELATED PARTY TRANSACTIONS In the normal course of business, the Company obtains advances from an affiliate for its working capital requirements. These advances are interest-free and are due on demand. 4. DEPOSITS FOR FUTURE STOCK SUBSCRIPTIONS In preparation for an increase of its authorized capital stock, the Company's stockholders have contributed cash to the Company. The application has not yet been submitted to the Securities and Exchange Commission. The amount received is temporarily recorded under Deposits for Future Stock Subscriptions. 5. TECHNICAL AGREEMENT On January 15, 1997, the Company entered into a three-year Technical Agreement with South Western Cement Corporation (SWCC) to provide technical and administrative expertise to SWCC during the pre-production and production periods. Under the Agreement, the Company is required to second and/or hire qualified staff to be assigned to SWCC subject to certain terms and conditions. These staff will be under the control, supervision and responsibility of the Company. SWCC, in turn, will pay the Company the agreed man-month fees plus all costs and expenses it will incur in carrying out its responsibilities. Unless terminated by either party, the Agreement shall automatically be extended on similar terms and conditions for five years, provided that the Company remains a shareholder of SWCC. 6. SHAREHOLDERS' AGREEMENT On January 15, 1997, Blue Circle Industries, PLC (BCI), an affiliate of the Company and a shareholder of SWCC, entered into a Shareholders' Agreement (Agreement) with the other stockholders of SWCC whereby all the existing stockholders agreed on certain terms and conditions covering the capitalization and ownership, management and operation of SWCC. As permitted in the Agreement, BCI assigned to the Company its rights under the agreement. The Company becomes a party to the Agreement and is bound by all its terms and conditions. Under the Agreement, the shareholders committed to contribute such amounts of money to the capital of SWCC to permit the timely completion of the cement manufacturing plant at a certain debt-to-equity ratio and at agreed ownership percentages.