SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF THE CORPORATION CODE OF THE PHILIPPINES 1. For the fiscal year ended: August 31, 2013 2. SEC Identification Number: PW-364 3. BIR Tax Identification No.: 000-270-220-000 4. Exact name of Issuer as specified in its charter: VICTORIAS MILLING COMPANY, INC. 5. Plant site: Victorias City, Negros Occidental2020 6. (SEC Use Only) Province, Country or other jurisdiction of Industry Classification Code: incorporation or organization 7. VMC Compound Victorias City, Negros Occidental 6119 Address of office Postal Code 8. (034) 399-33-78; (034) 399-35-88 Issuer's telephone number, including area code 9. Not Applicable a Former name, former address, and former fiscal year, if changed since last report. 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding (a) Common Stock (Par Value of P1.00 per share) Authorized Capital Stock 2,563,035,708 shares Subscribed and Paid-up 2,297,474,418 shares Amount of Debt Outstanding as of August 31, 2013: 2,544,632,633 11. Are any or all of these securities listed on a Stock Exchange. Yes [ X ] No [ ] If yes, state the name of such stock exchange and the classes of securities listed therein: Philippine Stock Exchange, - Common Stocks 12. Check whether the issuer: (a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports); 1 Yes [ X ] No [ ] (b) has been subject to such filing requirements for the past ninety (90) days. Yes [ X ] No [ ] 13. Aggregate market value of the voting stock held by non-affiliates: P2,018,792,134 (at P1.00 par value) APPLICABLE ONLY TO ISSUERS INVOLVED IN INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS DURING THE PRECEDING FIVE YEARS: 14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 of the Code subsequent to the distribution of securities under a plan confirmed by a court or the Commission. Yes [ X ] No [ ] DOCUMENTS INCORPORATED BY REFERENCE 15. Briefly describe the documents incorporated by reference and identify the part of the SEC Form 17-A into which the document is incorporated: 2012-2013 Consolidated Financial Statements (Incorporated as reference for Item 7 of SEC Form 17- A) 2 TABLE OF CONTENTS PART I - BUSINESS AND GENERAL INFORMATION Page Item 1. Business 4 Item 2. Property 18 Item 3. Legal Proceedings 19 Item 4. Submission of Matters to a Vote of Security Holders 20 PART II - OPERATIONAL AND FINANCIAL INFORMATION Item 5. Market for Registrant's Common Equity and Related 20 Stockholder Matters Item 6. Management's Discussion and Analysis or Plan of 20 Operation. Item 7. Financial Statements 30 Item 8. Changes in and Disagreements With Accountants on 30 Accounting and Financial Disclosure PART III - CONTROL AND COMPENSATION INFORMATION Item 9. Directors and Executive Officers of the Issuer 31 Item 10. Executive Compensation 34 Item 11. Security Ownership of Certain Beneficial Owners and 35 Management Item 12. Certain Relationships and Related Transactions 36 PART IV- EXHIBITS AND SCHEDULES (a) Exhibits 36 (b) Reports on SEC Form 17-C 36 3 PART I- BUSINESS AND GENERAL INFORMATION ITEM 1 - BUSINESS DESCRIPTION OF BUSINESS Victorias Milling Company, Inc. (VMC) is a domestic corporation located in Victorias City, Negros Occidental. Since its incorporation on May 7, 1919, VMC has engaged in integrated raw and refined sugar manufacturing. It also operates engineering services and the following subsidiaries: DATE OF REGISTRATION % Ownership Description of Business Victorias Foods Corporation February 24, 1993 100% produces and sells canned sardines, hot (VFC) bangus, mackerel, luncheon meat, lechon paksiw, ham, bacon and other meat products Canetown Development February 9, 1979 88% develops and sells real estate properties; Corporation (CDC) develops, operates and sells memorial lots Victorias Quality Packaging July 4, 1990 55% sells special packaging products such as Corporation (VQPC) polyethylene and polyprophelene bags Victorias Golf and Country May 5, 1994 81% operates a golf club Club, Inc. (VGCCI) Victorias Agricultural Land June 30, 1987 100% acquires and owns agricultural lands and Corporation (VALCO) properties BUSINESS DEVELOPMENT DURING THE PAST THREE (3) YEARS VMC is serious in its efforts to further improve its efficiency as well as product quality and the same is manifested in its zeal to engage in major expansion programs for the past three (3) years. Its unprecedented expansion programs resulted to high milling efficiency rates for Crop Years 2009-2010 and 2010-2011 by milling 2,552,299 MT and 3,115,914 MT, respectively. For Crop Year 2011-2012 VMC was able to mill 3,100,509 tonnes cane, producing 6,400,064 Lkg. raw sugar. For Crop Year 2011-2012, VMC milled 3,100,509 MT, slightly lower by 15,405 tonnes cane from last crop year’s 3,115,914 tonnes cane, lower by 99,491 tonnes cane or three (3%) percent from the projection of 3.2 million tonnes cane. Although this production is lower than the previous crop year, VMC has retained its leadership when it comes to tons cane milled in the province with 25.82% share. CURRENT STATUS OF REHABILITATION PROGRAM In 1997, VMC filed with the Securities and Exchange Commission (SEC) a Petition for the Declaration of Suspension of Payments, and for the Approval of a Rehabilitation Plan. VMC’s total principal obligations and interest at that time stood at P7.9 Billion. Part of the rehabilitation plan was the restructuring of P4.4 Billion of debt over a period of fifteen (15) years beginning on 1 September 2003. Over the years, VMC has continued to pay its creditors in accordance with the scheduled amortization payments of its restructured debts. In fiscal year 2013, VMC paid in full the remaining restructured loans to its secured and unsecured creditors. 4 Another component of the rehabilitation plan was the conversion of P2.4 Billion of debt into convertible notes in accordance with the conversion schedules as provided for in the Debt Restructuring Agreement (DRA). As of FY 2013, VMC has converted a total of P702 Million convertible notes into common shares at the ratio of P1 convertible note to 1 common share. P273 Million worth of debts were converted in 2013, while P429 Million convertible notes were converted in previous years. The conversion of the notes into equity contributed significantly to the reversal of the previous negative Net Worth to a positive equity position. As of August 31, 2013, VMC’s Net Worth stood at P2.6 Billion. The continuous improvement in operations resulting to healthier bottom lines contributed to the significant reduction of the deficit for the past eight years by a total of P3.38 Billion from 2005, to only P421 million in 2013. VMC’s shares of stock (“VMC”) are listed in the Philippine Stock Exchange (PSE) and has resumed being traded in the Exchange on May 21, 2012 following the lifting by the Securities and Exchange Commission and the PSE of the temporary suspension of its trading. Victorias Milling Company, Inc. and Subsidiaries Schedule of Equity Conversion As of August 31, 2013 For the year ended 8/31/2010 310,046,219.00 For the year ended 8/31/2011 118,628,250.00 For the year ended 8/31/2012 272,857,966.00 As of August 31, 2013 701,532,435.00 Schedule of Debt Outstanding (Long-term Debt) As of August 31, 2013 3 1 - A u g - 1 3 3 1 - A u g - 1 2 u c u R e s t r t r e d l o a n s : Foreign currency denominated 331,513,741 Philippine peso denominated 2,000,909,766 - 2,332,423,507 Convertible notes 1,504,328,206 1,520,878,389 Accrued interest on convertible notes 1,203,462,565 1,202,171,488 2,707,790,771 5,055,473,385 Less unamortized interest and discounts 163,158,138 228,566,018 2 , 5 4 4 , 6 3 2 , 6 3 3 4 , 8 2 6 , 9 0 7 , 3 6 6 Less current portion of debt - 358,834,386 2,544,632,633 4,468,072,981 5 MILL PERFORMANCE The following table and figures show the comparative performance of the mills between the present and previous crop years. The recent crop year had been more productive and efficient in the operations, which are apparent in the increase in sucrose extraction and reduction in bagasse percent pol and moisture. These results were made possible due to improvements made in the operations. Reduction of downtimes due to Adjusted Milling Rate or AMR was noted. Increased imbibition was a result of the improvements in the Boiling House Area. One significant improvement made in the Mills is the upgrading of C- Mill No. 6 by installation of semi-independent hydraulic drives resulting to an outstanding efficiency of C-Mill. PARAMETER CROP YEAR 2011-2012 CROP YEAR 2012-2013 Pol % Bagasse 2.35 2.27 Moisture % Bagasse 51.22 50.46 Act. Sucrose Extraction 93.77 94.33 Red. Sucrose Extraction 94.84 95.26 Total Cane Milled, Tons 3,100,508.98 3,208,588.54 Start of Operation Sept.