SteelAsia Manufacturing

Corporation and Subsidiaries

Consolidated Financial Statements

December 31, 2015 and 2014

and

Independent Auditors Report

 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018

INDEPENDENT AUDITORS REPORT

The Board of Directors

SteelAsia Manufacturing Corporation

We have audited the accompanying consolidated financial statements of SteelAsia Manufacturing

Corporation and its subsidiaries, which comprise the consolidated balance sheets as at December 31,
2015 and 2014, and the consolidated statements of income, consolidated statements of comprehensive
income, consolidated statements of changes in equity and consolidated statements of cash flows for
the years then ended and a summary of significant accounting policies and other explanatory
information.

Managements Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditors judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entitys preparation and fair presentation of the consolidated 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 entitys 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 consolidated
financial statements.

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

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A member firm of Ernst & Young Global Limited
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Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of SteelAsia Manufacturing Corporation and its subsidiaries as at December 31,
2015 and 2014 and its financial performance and its cash flows for the years then ended in accordance
with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Catherine E. Lopez
Partner
CPA Certificate No. 86447
SEC Accreditation No. 0468-AR-2 (Group A),
February 14, 2013, valid until April 30, 2016
Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2015,
February 27, 2015, valid until February 26, 2018
PTR No. 5321648, January 4, 2016, Makati City

March 28, 2016

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A member firm of Ernst & Young Global Limited
STEELASIA MANUFACTURING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31
2015 2014
ASSETS
Current Assets
Cash (Note 4) P
=929,591,024 =832,747,541
P
Receivables (Notes 5, 10, 12 and 17) 6,405,222,596 7,847,562,009
Inventories (Notes 6, 10 and 17) 9,910,072,539 11,041,484,287
Other current assets (Note 7) 1,745,323,129 1,763,775,638
Total Current Assets 18,990,209,288 21,485,569,475
Noncurrent Assets
Available-for-sale financial assets (Note 22) 875,500 915,500
Deposits for future stock subscription (Note 17) 1,861,557,500
Property, plant and equipment (Notes 8 and 12)
At cost 1,615,790,206 1,104,556,605
At appraised value 4,020,884,350 3,843,411,460
Investment properties (Notes 9 and 12) 41,513,279 44,112,393
Derivative assets (Notes 17 and 22) 113,428,006 29,932,808
Deferred income tax assets - net (Note 19) 65,982,191 27,974,580
Other noncurrent assets (Notes 4 and 23) 194,365,191 232,790,966
Total Noncurrent Assets 7,914,396,223 5,283,694,312
TOTAL ASSETS =26,904,605,511 P
P =26,769,263,787

LIABILITIES AND EQUITY

Current Liabilities
Short-term loans (Notes 5 and 10) =10,448,481,690 =
P P12,085,601,079
Liabilities under trust receipts (Note 6) 6,048,478,597 5,488,433,717
Trade and other payables (Notes 11 and 17) 2,327,609,998 2,366,543,119
Current maturities of long-term debt (Notes 5, 8, and 12) 501,928,554 262,674,473
Total Current Liabilities 19,326,498,839 20,203,252,388
Noncurrent Liabilities
Long-term debt - net of current maturities (Notes 5, 8 and 12) 413,654,017 1,015,362,772
Derivative liabilities (Notes 17 and 22) 113,428,006
Net pension liabilities (Note 18) 58,322,905 9,612,011
Deferred income tax liabilities - net (Note 19) 153,420,429 133,113,939
Other noncurrent liabilities (Note 17) 18,569,239
Total Noncurrent Liabilities 757,394,596 1,158,088,722
Total Liabilities 20,083,893,435 21,361,341,110
Equity
Equity attributable to equity holders of the Company (Note 13) 6,540,078,737 5,127,809,739
Noncontrolling interest 280,633,339 280,112,938
Total Equity 6,820,712,076 5,407,922,677
TOTAL LIABILITIES AND EQUITY =26,904,605,511 P
P =26,769,263,787

See accompanying Notes to Consolidated Financial Statements.

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STEELASIA MANUFACTURING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31

2015 2014
NET REVENUE =27,187,301,713 P
P =25,563,179,424
COST OF SALES AND SERVICES (Note 14) 22,928,455,841 22,577,936,459

GROSS PROFIT 4,258,845,872 2,985,242,965

Selling expenses (Note 15) (790,942,237) (645,698,910)

General and administrative expenses (Note 16) (433,054,086) (284,047,755)
Financing charges (Notes 6, 10 and 12) (1,028,332,321) (701,013,060)
Foreign exchange loss - net (136,889,299) (40,009,980)
Interest income (Note 4) 1,168,183 1,595,808
Others - net (1,290,007) (1,092,886)
INCOME BEFORE INCOME TAX 1,869,506,105 1,314,976,182

PROVISION FOR INCOME TAX (Note 19)

Current 423,607,201 122,167,374
Deferred 834,754 (26,604,635)
424,441,955 95,562,739
NET INCOME P
=1,445,064,150 P
=1,219,413,443

Net income attributable to:

Equity holders of the Company P
=1,444,543,749 =1,218,936,751
P
Noncontrolling interest 520,401 476,692
P
=1,445,064,150 P
=1,219,413,443

See accompanying Notes to Consolidated Financial Statements.

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STEELASIA MANUFACTURING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2015 2014
NET INCOME P
=1,445,064,150 P
=1,219,413,443
OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Changes in fair values of available-for-sale
financial assets (Note 22) (40,000) 100,000
Income tax effect 2,400 (6,000)
(37,600) 94,000
Revaluation increment on property and equipment (Note 8) 46,485,299 193,453,520
Income tax effect (13,945,590) (58,036,056)
32,539,709 135,417,464
32,502,109 135,511,464
Other comprehensive income not to be reclassified
to profit or loss in subsequent periods:
Remeasurement gain (loss) on retirement benefits (Note 18) (81,115,095) 62,921,407
Income tax effect 24,334,529 (18,876,422)
(56,780,566) 44,044,985
Total Other Comprehensive Income (Loss) (24,278,457) 179,556,449
TOTAL COMPREHENSIVE INCOME P
=1,420,785,693 P
=1,398,969,892

Total comprehensive income attributable to:

Equity holders of the Company P
=1,420,265,292 =1,377,493,200
P
Noncontrolling interest 520,401 21,476,692
P
=1,420,785,693 P
=1,398,969,892

See accompanying Notes to Consolidated Financial Statements.

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STEELASIA MANUFACTURING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

Equity Attributable to Equity Holders of the Company

Unrealized Revaluation
Loss on Increment on Remeasurement
Available-for- Property and Gain (Loss)
Sale Financial Equipment on Retirement
Assets - Net of - Net of Deferred Benefits - Net of
Capital Stock Additional Deferred Income Income Tax Deferred Income Retained Earnings Noncontrolling
(Note 13) Paid in Capital Tax (Note 22) (Note 8) Tax (Note 18) Appropriated Unappropriated Subtotal Interest Total
BALANCES AT DECEMBER 31, 2013 P
= 500,000,000 P
= 1,299,035,110 (P
= 667,572) P
= 437,342,829 (P
= 28,784,061) =
P P
= 1,544,343,250 P
= 3,751,269,556 P
= 258,636,246 P
= 4,009,905,802
Effect of pooling (Note 2) (953,017) (953,017) (953,017)
BALANCES AT JANUARY 1, 2014 500,000,000 1,299,035,110 (667,572) 437,342,829 (28,784,061) 1,543,390,233 3,750,316,539 258,636,246 4,008,952,785
Net income 1,218,936,751 1,218,936,751 476,692 1,219,413,443
Other comprehensive income 94,000 114,417,464 44,044,985 158,556,449 21,000,000 179,556,449
Total comprehensive income 94,000 114,417,464 44,044,985 1,218,936,751 1,377,493,200 21,476,692 1,398,969,892
Transfer of portion of revaluation increment
on property and equipment realized
through depreciation - net of deferred
income tax (19,003,919) 19,003,919
BALANCES AT DECEMBER 31, 2014 500,000,000 1,299,035,110 (573,572) 532,756,374 15,260,924 2,781,330,903 5,127,809,739 280,112,938 5,407,922,677
Net income 1,444,543,749 1,444,543,749 520,401 1,445,064,150
Other comprehensive income (37,600) 32,539,709 (56,780,566) (24,278,457) (24,278,457)
Total comprehensive income (37,600) 32,539,709 (56,780,566) 1,444,543,749 1,420,265,292 520,401 1,420,785,693
Transfer of portion of revaluation increment
on property and equipment realized
through depreciation - net of deferred
income tax (20,628,705) 20,628,705
Appropriation of retained earnings (Note 13) 2,221,000,000 (2,221,000,000)
Stock issue costs (7,996,294) (7,996,294) (7,996,294)
BALANCES AT DECEMBER 31, 2015 P
= 500,000,000 P
= 1,299,035,110 (P
= 611,172) P
= 544,667,378 (P
= 41,519,642) P
= 2,221,000,000 P
= 2,017,507,063 P
= 6,540,078,737 P
= 280,633,339 P
= 6,820,712,076

See accompanying Notes to Consolidated Financial Statements.

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STEELASIA MANUFACTURING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31

2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax =1,869,506,105 =
P P1,314,976,182
Adjustments for:
Financing charges 1,028,332,321 701,013,060
Unrealized foreign exchange loss (gain) - net 153,832,043 154,713,805
Depreciation and amortization (Notes 8 and 9) 138,221,539 107,120,759
Movement in net pension liabilities (Note 18) (13,834,962) (3,958,532)
Interest income (1,168,183) (1,595,808)
Loss (gain) on disposal of property and equipment 1,344,987 (634,000)
Net operating income before working capital changes 3,176,233,850 2,271,635,466
Decrease (increase) in:
Receivables (419,218,087) (1,392,363,664)
Inventories 1,131,411,748 (4,230,739,749)
Other current assets (277,629,211) 58,696,879
Increase (decrease) in:
Suppliers credits (5,947,702,949) 4,475,522,269
Liabilities under trust receipts 551,858,997 2,063,535,586
Trade and other payables (35,033,212) (1,258,244,544)
Net cash from (used in) operations (1,820,078,864) 1,988,042,243
Income tax paid (includes creditable withholding and final taxes) (211,020,679) (184,553,336)
Net cash flows from (used in) operating activities (2,031,099,543) 1,803,488,907
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (Note 8) (783,831,466) (2,360,855,152)
Proceeds from disposal of transportation equipment 4,642,862 634,000
Interest received 1,168,183 1,595,808
Decrease (increase) in refundable deposits 38,425,775 (137,935,462)
Net cash flows used in investing activities (739,594,646) (2,496,560,806)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from:
Short-term loans (Note 10) 20,827,092,238 9,363,737,888
Long-term loans (Note 12) 597,048,267
Payments of:
Short-term loans (16,667,755,276) (7,875,430,376)
Long-term loans (Note 12) (362,454,674) (651,788,796)
Financing charges (929,366,066) (629,497,564)
Net cash flows from financing activities 2,867,516,222 804,069,419
EFFECT OF EXCHANGE RATE CHANGES ON CASH 21,450 (113,820)
NET INCREASE IN CASH 96,843,483 110,883,700
CASH AT BEGINNING OF YEAR (Note 4) 832,747,541 721,863,841
CASH AT END OF YEAR (Note 4) P
=929,591,024 P
=832,747,541

See accompanying Notes to Financial Statements.

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STEELASIA MANUFACTURING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

SteelAsia Manufacturing Corporation (the Company) and all of its subsidiaries, collectively
referred to as the Group, were incorporated in the Philippines and registered with the Philippine
Securities and Exchange Commission (SEC). The Group is primarily engaged in the business of
manufacturing and processing of steel billets into steel bars. Following are the subsidiaries and
the respective ownership as of December 31, 2015 and 2014:

Percentage of
Ownership
SteelAsia Development & Management Corporation (SDMC) (a)
BalambanSteel Inc. (BSI) (b) (e) 100.00
Del PilarSteel Inc. (DPSI) (c) (e) 100.00
San MartinSteel Inc. (SMSI) (d) (e) 100.00

(a) Special purpose entity of the Company

(b) Incorporated on September 9, 2013
(c) Incorporated on September 18, 2013
(d) Incorporated on October 8, 2013
(e) Became a wholly owned subsidiary of the Company on January 1, 2014

As of December 31, 2015 and 2014, PlaridelSteel Inc. (PlaridelSteel) owns 40% of the outstanding
shares of stock of the Company.

On December 7, 2015, the Board of Directors (BOD) and stockholders approved to amend the
Companys Articles of Incorporation (AOI) to change the principal office address from 2/F
Building 2, Bonifacio High Street, Bonifacio Global City, Taguig City to 2F, B2 Bonifacio High
Street, Bonifacio Global City, Taguig City, Metro Manila. The amended AOI was approved by the
Philippine SEC on March 15, 2016.

The financial statements as at and for the years ended December 31, 2015 and 2014 were
authorized for issue by the BOD on March 28, 2016.

2. Summary of Significant Accounting and Financial Reporting Policies

Basis of Preparation
The consolidated financial statements of the Group have been prepared using the historical cost
convention, except for available-for-sale (AFS) financial assets that are carried at fair value and
land and land improvements, building and building improvements and machinery and equipment
that are carried at appraised value. The consolidated financial statements are presented in
Philippine peso (Peso), which is the Companys functional currency. Amounts are rounded to the
nearest Peso, unless otherwise indicated.

Statement of Compliance
The consolidated financial statements have been prepared in compliance with Philippine Financial
Reporting Standards (PFRS). The term PFRS, in general, includes all applicable PFRS, Philippine
Accounting Standards (PAS), and interpretations issued by former Standing Interpretations

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Committee, the Philippine Interpretations Committee and the International Financial Reporting
Interpretations Committee (IFRIC) which have been approved by the Philippine Financial
Reporting Standards Council (FRSC) and adopted by the Philippine SEC.

Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Company and
entities controlled by the Company (its subsidiaries) as at December 31 of each year. Control is
achieved when the Company is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Company controls an investee if and only if the Company has all the following:

Power over the investee (i.e., existing rights that give it the current ability to direct the
relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and,
The ability to use its power over the investee to affect its returns.

When the Company has less than a majority of the voting rights of an investee, the Company
considers all relevant facts and circumstances in assessing whether it has power over the investee,
including:

Any contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements
The Companys voting rights and potential voting rights

The Company reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the
Company obtains control, and continue to be consolidated until the date when such control ceases.
Specifically, income and expenses of a subsidiary acquired or disposed of during the year are
included in the consolidated statement of income from the date the Company gains control until
the date when the Company ceases to control the subsidiary.

The financial statements of the subsidiaries are prepared for the same reporting period as the
Company, using consistent accounting policies. All intra-group balances, transactions and gains
and losses resulting from intra-group transactions and dividends are eliminated in full. Profit or
loss and each component of other comprehensive income (OCI) are attributed to the equity holders
of the Company and to the noncontrolling interests, even if this results in the noncontrolling
interests having a deficit balance.

Accounting for Common Control Business Combinations

Effective January 1, 2014, the Company acquired 100% of the shares of stocks of BSI, DPSI and
SMSI (see Note 1). The acquisition was deemed as a common control business combination and
was accounted for prospectively using the pooling of interests method. Under the pooling of
interests method:

The assets and liabilities of the combining entities are reflected in the consolidated financial
statements at their carrying amounts. No adjustments are made to reflect fair values, or
recognize any new assets or liabilities, at the date of the combination that otherwise would
have been done under the acquisition method. The only adjustments that are made are those
adjustments to harmonize accounting policies.

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No 'new' goodwill is recognized as a result of the combination. The only goodwill that is
recognized is any existing goodwill relating to either of the combining entities. Any difference
between the consideration paid or transferred and the equity 'acquired' is reflected within
equity.
The consolidated statement of income reflects the results of the combining entities for the full
year, irrespective of when the combination took place.

As a result of the application of the pooling of interests method, the Company recognized the
combined deficit of BSI, DPSI and SMSI amounting to = P953,017 as of December 31, 2013 as an
addition to its Retained earnings (shown as Effect of pooling in the statement of changes in
equity).

Noncontrolling Interest
Noncontrolling interest represents the income and expense and net assets in SDMC not held by the
Company and are presented separately in the consolidated statement of income, consolidated
statement of comprehensive income and within equity in the consolidated balance sheet, separate
from the equity attributable to the equity holders of the Company.

Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year except for
the adoption of the following amendments effective beginning January 1, 2015:

Amendments to PAS 19, Employee Benefits - Defined Benefit Plans: Employee

Contributions

PAS 19 requires an entity to consider contributions from employees or third parties when
accounting for defined benefit plans. Where the contributions are linked to service, they
should be attributed to periods of service as a negative benefit. These amendments clarify that,
if the amount of the contributions is independent of the number of years of service, an entity is
permitted to recognize such contributions as a reduction in the service cost in the period in
which the service is rendered, instead of allocating the contributions to the periods of service.
These amendments have no impact on the Groups financial statements since the Groups
retirement plan is noncontributory.

Annual Improvements to PFRS (2010 to 2012 cycle)

The adoption of the amendments below did not have a significant impact on the financial
statements of the Group.

PFRS 2, Share-based Payment - Definition of Vesting Condition

This improvement is applied prospectively and clarifies various issues relating to the
definitions of performance and service conditions which are vesting conditions, including:

A performance condition must contain a service condition

A performance target must be met while the counterparty is rendering service
A performance target may relate to the operations or activities of an entity, or to those
of another entity in the same group
A performance condition may be a market or non-market condition
If the counterparty, regardless of the reason, ceases to provide service during the
vesting period, the service condition is not satisfied.

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PFRS 3, Business Combinations - Accounting for Contingent Consideration in a

Business Combination

The amendment is applied prospectively for business combinations for which the
acquisition date is on or after July 1, 2014. It clarifies that a contingent consideration that
is not classified as equity is subsequently measured at fair value through profit or loss
whether or not it falls within the scope of PAS 39, Financial Instruments: Recognition
and Measurement.

PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation

of the Total of the Reportable Segments Assets to the Entitys Assets

The amendments are applied retrospectively and clarify that:

An entity must disclose the judgments made by management in applying the

aggregation criteria in the standard, including a brief description of operating
segments that have been aggregated and the economic characteristics (e.g., sales and
gross margins) used to assess whether the segments are similar.
The reconciliation of segment assets to total assets is only required to be disclosed if
the reconciliation is reported to the chief operating decision maker, similar to the
required disclosure for segment liabilities.

PAS 16, Property, Plant and Equipment: Revaluation Method - Proportionate

Restatement of Accumulated Depreciation, and PAS 38, Intangible Assets: Revaluation
Method - Proportionate Restatement of Accumulated Amortization

The amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the
asset may be revalued by reference to the observable data on either the gross or the net
carrying amount. In addition, the accumulated depreciation or amortization is the
difference between the gross and carrying amounts of the asset after taking into account
any accumulated impairment losses.

PAS 24, Related Party Disclosures - Key Management Personnel

The amendment is applied retrospectively and clarifies that a management entity, which is
an entity that provides key management personnel services, is a related party subject to
the related party disclosures. In addition, an entity that uses a management entity is
required to disclose the expenses incurred for management services.

Annual Improvements to PFRS (2011 to 2013 cycle)

The adoption of the amendments below did not have a significant impact on the financial
statements of the Group.

PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements

The amendment is applied prospectively and clarifies the following regarding the scope
exceptions within PFRS 3:

Joint arrangements, not just joint ventures, are outside the scope of PFRS 3.
This scope exception applies only to the accounting in the financial statements of the
joint arrangement itself.

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PFRS 13, Fair Value Measurement - Portfolio Exception

The amendment is applied prospectively and clarifies that the portfolio exception in
PFRS 13 can be applied not only to financial assets and financial liabilities, but also to
other contracts within the scope of PAS 39.

PAS 40, Investment Property

The amendment is applied prospectively and clarifies that PFRS 3, and not the description
of ancillary services in PAS 40, is used to determine if the transaction is the purchase of
an asset or business combination. The description of ancillary services in PAS 40 only
differentiates between investment property and owner-occupied property (i.e., property,
plant and equipment).

New Accounting Standards, Amendments to Existing Standards

and Interpretations Effective Subsequent to December 31, 2015
The standards, amendments and interpretations which have been issued but not yet effective as at
December 31, 2015 are disclosed below. Except as otherwise stated, the Group does not expect
that the adoption of the applicable new and amended standards will have a significant impact on
the financial statements.

Deferred

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate

This interpretation covers accounting for revenue and associated expenses by entities that
undertake the construction of real estate directly or through subcontractors. The Philippine
SEC and the FRSC have deferred the effectivity of this interpretation until the final Revenue
standard is issued by the International Accounting Standards Board (IASB) and an evaluation
of the requirements of the final Revenue standard against the practices of the Philippine real
estate industry is completed. Adoption of the interpretation, when it becomes effective, will
not have any impact on the financial statements of the Group.

PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and
Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture (Amendments)

These amendments address an acknowledged inconsistency between the requirements in

PFRS 10 and those in PAS 28 in dealing with the sale or contribution of assets between an
investor and its associate or joint venture. The amendments require that a full gain or loss is
recognized when a transaction involves a business (whether it is housed in a subsidiary or
not). A partial gain or loss is recognized when a transaction involves assets that do not
constitute a business, even if these assets are housed in a subsidiary. In December 2015, the
IASB deferred indefinitely the effective date of these amendments pending the final outcome
of its research project on the equity method of accounting. The Group shall consider these
amendments when they become effective.

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Effective in 2016

PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification of
Acceptable Methods of Depreciation and Amortization (Amendments)

The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of
economic benefits that are generated from operating a business (of which the asset is part)
rather than the economic benefits that are consumed through use of the asset. As a result, a
revenue-based method cannot be used to depreciate property, plant and equipment and may
only be used in very limited circumstances to amortize intangible assets. These amendments
are not expected to have any impact to the Group given that the Group is not using a revenue-
based method to depreciate its noncurrent assets.

PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants
(Amendments)

The amendments change the accounting requirements for biological assets that meet the
definition of bearer plants. Under the amendments, biological assets that meet the definition of
bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply. The
amendments also require that produce that grows on bearer plants will remain in the scope of
PAS 41 measured at fair value less costs to sell. For government grants related to bearer
plants, PAS 20, Accounting for Government Grants and Disclosure of Government
Assistance, will apply. These amendments are not expected to have any impact to the Group
as the Group does not have any bearer plants.

PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements
(Amendments)

The amendments will allow entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements. Entities
already applying PFRS and electing to change to the equity method in its separate financial
statements will have to apply that change retrospectively. These amendments will not have
any impact on the Groups consolidated financial statements.

PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations
(Amendments)

The amendments to PFRS 11 require that a joint operator that is accounting for the acquisition
of an interest in a joint operation, in which the activity of the joint operation constitutes a
business, must apply the relevant PFRS 3 principles for business combinations accounting.
The amendments also clarify that a previously held interest in a joint operation is not
remeasured on the acquisition of an additional interest in the same joint operation while joint
control is retained. In addition, a scope exclusion has been added to PFRS 11 to specify that
the amendments do not apply when the parties sharing joint control, including the reporting
entity, are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and the
acquisition of any additional interests in the same joint operation and are prospectively
effective for annual periods beginning on or after January 1, 2016, with early adoption
permitted. These amendments are not expected to have any impact to the Group.

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PFRS 14, Regulatory Deferral Accounts

PFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-
regulation, to continue applying most of its existing accounting policies for regulatory deferral
account balances upon its first-time adoption of PFRS. Since the Group is an existing PFRS
preparer, this standard will not apply.

PAS 1, Presentation of Financial Statements - Disclosure Initiative (Amendments)

The amendments are intended to assist entities in applying judgment when meeting the
presentation and disclosure requirements in PFRS. They clarify the following:

That entities shall not reduce the understandability of their financial statements by either
obscuring material information with immaterial information; or aggregating material items
that have different natures or functions
That specific line items in the statement of income and other comprehensive income and
the balance sheet may be disaggregated
That entities have flexibility as to the order in which they present the notes to financial
statements
That the share of OCI of associates and joint ventures accounted for using the equity
method must be presented in aggregate as a single line item, and classified between those
items that will or will not be subsequently reclassified to profit or loss.

Early application is permitted and entities do not need to disclose that fact as the amendments
are considered to be clarifications that do not affect an entitys accounting policies or
accounting estimates. The Group is currently assessing the impact of these amendments on
the financial statements.

PFRS 10, Consolidated Financial Statements, PFRS 12, Disclosure of Interests in Other
Entities, and PAS 28, Investments in Associates and Joint Ventures - Investment Entities:
Applying the Consolidation Exception (Amendments)

These amendments clarify that the exemption in PFRS 10 from presenting consolidated
financial statements applies to a parent entity that is a subsidiary of an investment entity that
measures all of its subsidiaries at fair value and that only a subsidiary of an investment entity
that is not an investment entity itself and that provides support services to the investment
entity parent is consolidated. The amendments also allow an investor (that is not an
investment entity and has an investment entity associate or joint venture), when applying the
equity method, to retain the fair value measurement applied by the investment entity associate
or joint venture to its interests in subsidiaries.

Annual Improvements to PFRS (2012-2014 cycle)

The Annual Improvements to PFRS (2012-2014 cycle) are effective for annual periods
beginning on or after January 1, 2016 and are not expected to have a material impact on the
Groups financial statements. They include:

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PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in
Methods of Disposal

The amendment is applied prospectively and clarifies that changing from a disposal
through sale to a disposal through distribution to owners and vice-versa should not be
considered to be a new plan of disposal, rather it is a continuation of the original plan.
There is, therefore, no interruption of the application of the requirements in PFRS 5. The
amendment also clarifies that changing the disposal method does not change the date of
classification.

PFRS 7, Financial Instruments: Disclosures - Servicing Contracts

PFRS 7 requires an entity to provide disclosures for any continuing involvement in a

transferred asset that is derecognized in its entirety. The amendment clarifies that a
servicing contract that includes a fee can constitute continuing involvement in a financial
asset. An entity must assess the nature of the fee and arrangement against the guidance for
continuing involvement in PFRS 7 in order to assess whether the disclosures are required.
The amendment is to be applied such that the assessment of which servicing contracts
constitute continuing involvement will need to be done retrospectively. However,
comparative disclosures are not required to be provided for any period beginning before
the annual period in which the entity first applies the amendments.

PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim Financial

Statements (Amendments)

This amendment is applied retrospectively and clarifies that the disclosures on offsetting
of financial assets and financial liabilities are not required in the condensed interim
financial report unless they provide a significant update to the information reported in the
most recent annual report.

PAS 19, Employee Benefits - Regional Market Issue Regarding Discount Rate

This amendment is applied prospectively and clarifies that market depth of high quality
corporate bonds is assessed based on the currency in which the obligation is denominated,
rather than the country where the obligation is located. When there is no deep market for
high quality corporate bonds in that currency, government bond rates must be used.

PAS 34, Interim Financial Reporting - Disclosure of Information Elsewhere in the

Interim Financial Report

The amendment is applied retrospectively and clarifies that the required interim
disclosures must either be in the interim financial statements or incorporated by cross-
reference between the interim financial statements and wherever they are included within
the greater interim financial report (e.g., in the management commentary or risk report).

Effective in 2018

PFRS 9, Financial Instruments

In July 2014, the final version of PFRS 9 was issued. PFRS 9 reflects all phases of the
financial instruments project and replaces PAS 39 and all previous versions of PFRS 9. The
standard introduces new requirements for classification and measurement, impairment, and

*SGVFS018923*
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hedge accounting. Retrospective application is required, but comparative information is not

compulsory. Early application of previous versions of PFRS 9 is permitted if the date of initial
application is before February 1, 2015. The Group is currently assessing the impact of
adopting this standard.

The following new standards issued by the IASB has not yet been adopted locally. The Group is
currently assessing the impact of these standards and plans to adopt them on their required
effective dates once adopted locally.

International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with
Customers

IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to
revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an
amount that reflects the consideration to which an entity expects to be entitled to in exchange
for transferring goods or services to a customer. The principles in IFRS 15 provide a more
structured approach to measuring and recognizing revenue. The new revenue standard is
applicable to all entities and will supersede all current revenue recognition requirements under
IFRS. Either a full or modified retrospective application is required for annual periods
beginning on or after January 1, 2018, with early adoption permitted.

IFRS 16, Leases

IFRS 16 was issued in January 2016. Under the new standard, lessees will no longer classify
their leases as either operating or finance leases in accordance with PAS 17. Rather, leases
will apply the single-asset model, wherein lessees will recognize the assets and the related
liabilities for most leases in their balance sheets and, subsequently, will depreciate the lease
assets and recognize interest on the lease liabilities in their profit or loss. The new standard is
effective for annual periods beginning on or after January 1, 2019, with early adoption
permitted.

Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash in banks earn interest at the respective bank
deposit rates. Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three months or less and that are
subject to an insignificant risk of change in value. The Group has no outstanding cash equivalents
as of December 31, 2015 and 2014.

Cash and cash equivalents exclude any restricted cash (presented under Other noncurrent assets)
that is not available for use by the Group and therefore is not considered highly liquid, such as
standby letters of credit.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist
only of cash and cash equivalents as defined above.

Inventories
Inventories are valued at the lower of cost and net realizable value. Cost is determined primarily
on the basis of the moving average method. Net realizable value is the selling price in the
ordinary course of business, less the costs of completion, marketing and distribution. In
determining net realizable value, the Group considers any necessary adjustment for obsolescence.

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Other Current Assets

Advances to suppliers, prepayments and deposits are amounts paid in advance for goods and
services that are yet to be delivered and from which future economic benefits are expected to flow
to the Group within its normal operating cycle or within 12 months from the reporting date.

Input value-added tax (VAT) represents VAT imposed on the Group by its suppliers for the
acquisition of goods and services. Output VAT represents indirect tax on consumption levied on
the sale of goods and services, which is passed on by the Group to its customers. Where VAT
incurred on a purchase of asset or services is not recoverable from the taxation authority, such
VAT is recognized as part of the cost of acquisition of the asset or part of the expense item, as
applicable.

Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.

A fair value measurement of a nonfinancial asset takes into account a market participants ability
to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the
Group determines whether transfers have occurred between Levels in the hierarchy by re-
assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at each reporting date.

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For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the assets or liability and the level of the fair
value hierarchy.

Financial Assets and Financial Liabilities

Date of Recognition. The Group recognizes a financial asset or financial liability in the balance
sheet when it becomes a party to the contractual provision of the instrument. All regular way
purchases and sales of financial assets are recognized on the trade date, which is the date that the
Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of assets within a period generally established by
regulation or convention in the marketplace. Derivatives are also recognized on a trade date basis.

Initial Recognition of Financial Instruments. Financial assets and financial liabilities are
recognized initially at fair value. Directly attributable transaction costs, if any, are included in the
initial measurement of financial assets and financial liabilities, except for financial instruments
measured at fair value through profit or loss fair value through profit or loss (FVPL).

Financial assets within the scope of PAS 39 are classified as either financial assets at FVPL, loans
and receivables, held-to-maturity investments (HTM), or AFS financial assets, as appropriate.
Financial liabilities, on the other hand, are classified as either financial liabilities at FVPL or other
financial liabilities, as appropriate. The Group determines the classification of its financial assets
and financial liabilities at initial recognition and, where allowed and appropriate, reevaluates this
designation at each reporting date.

Day 1 Difference. Where the transaction price in a non-active market is different from the fair
value from other observable current market transactions in the same instrument or based on a
valuation technique whose variables include only data from observable market, the Group
recognizes the difference between the transaction price and the fair value (a Day 1 difference) in
profit or loss. In cases where data used is not observable, the difference between the transaction
price and model value is only recognized in profit or loss when the inputs become observable or
when the instrument is derecognized. For each transaction, the Group determines the appropriate
method of recognizing the Day 1 difference amount.

As of December 31, 2015 and 2014, the Groups financial instruments consist of loans and
receivables, AFS financial assets, derivatives recognized at FVPL and other financial liabilities.

Financial Assets and Financial Liabilities at FVPL. Financial assets and financial liabilities at
FVPL include financial instruments held for trading, derivative financial instruments and those
designated upon initial recognition as at FVPL.

Financial assets and financial liabilities are classified as held for trading if they are acquired for
the purpose of selling or repurchasing in the near term or are designated by management as at
FVPL upon initial recognition. Derivatives, including separated embedded derivatives, are also
classified as held for trading.

Where a contract contains one or more embedded derivatives, the hybrid contract may be
designated as financial asset at FVPL, except where the embedded derivative does not
significantly modify the cash flows or it is clear that separation of the embedded derivative is
prohibited.

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Financial instruments may be designated as at FVPL by management upon initial recognition if

any of the following criteria is met:

The designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets and liabilities or recognizing gains or losses on
them on a different basis
The assets or liabilities are part of a group of financial assets or financial liabilities, or both
financial assets and financial liabilities, which are managed and their performance is evaluated
on a fair value basis, in accordance with a documented risk management or investment
strategy
The financial instrument contains an embedded derivative, unless the embedded derivative
does not significantly modify the cash flows or it is clear, with little or no analysis, that it
would not be separately recorded.

Financial assets and financial liabilities classified under this category are carried at fair value in
the balance sheet, with any gains or losses on changes in fair values recognized in profit or loss.
Interest earned or incurred and dividend income is recorded when the right to receive payment has
been established.

The Group accounts for its derivative transactions under this category with fair value changes
being reported directly to profit or loss.

Derivatives Financial Instruments

Freestanding Derivatives
Derivative financial instruments are recognized and measured at fair value. The method of
recognizing the resulting gain or loss depends on whether or not the derivative is designated as a
hedge of an identified risk and qualifies for hedge accounting treatment.

The Group uses derivative financial instruments such as foreign currency contracts to hedge its
risks associated with foreign currency fluctuations. These derivative instruments provide
economic hedges under the Groups policies but are not designated as accounting hedges. Any
gains or losses arising from changes in fair value of derivatives that do not qualify for hedge
accounting are taken directly to the consolidated statement of income.

The fair value of forward currency contracts is calculated by reference to the counterpartys
current forward exchange rates as of the date of the financial statements.

The Group has outstanding freestanding derivative assets and derivative liabilities as of
December 31, 2015 and 2014.

Embedded Derivatives
An embedded derivative is separated from the host contract and accounted for as a derivative if all
of the following conditions are met: a) the economic characteristics and risks of the embedded
derivative are not closely related to the economic characteristics and risks of the host contract;
b) a separate instrument with the same terms as the embedded derivative would meet the definition
of a derivative; and c) the hybrid or combined instrument is not recognized at FVPL.

The Group assesses whether embedded derivatives are required to be separated from the host
contracts when the Group first becomes a party to the contract. Embedded derivatives that are
bifurcated from the host contract are accounted for as financial asset at FVPL. Changes in the fair
values are included in the consolidated statement of income.

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The Group makes a reassessment on the review of embedded derivatives only if there is a change
to the contract that significantly modifies the cash flows. The Group has no bifurcated embedded
derivatives as of December 31, 2015 and 2014.

Loans and Receivables

Loans and receivables are nonderivative financial assets with fixed or determinable payments that
are not quoted in an active market. Such assets are carried at amortized cost using the effective
interest rate method. Amortized cost is calculated taking into account any discount or premium on
the acquisition and includes fees that are integral part of the effective interest rates and transaction
costs. Gains and losses are recognized in profit or loss when the loans and receivables are
derecognized or impaired, as well as through the amortization process. Loans and receivables are
included in current assets if maturity is within 12 months from the balance sheet date. Otherwise,
these are classified as noncurrent assets.

The Groups cash in banks, receivables and refundable deposits are included under this category.

AFS Financial Assets.

AFS financial assets are those nonderivative financial assets that are designated as AFS or are not
classified in any of the three preceding categories. They are purchased and held indefinitely, and
may be sold in response to liquidity requirements or changes in market conditions. After initial
recognition, AFS financial assets are measured at fair value with gains or losses being recognized
in OCI and as a separate component of equity until the investment is derecognized or until the
investment is determined to be impaired at which time the cumulative gains or losses previously
reported in equity is included in profit or loss.

The Group has designated its investments in golf club shares as AFS financial assets.

Other Financial Liabilities.

Other financial liabilities are nonderivative financial liabilities with fixed or determinable
payments that are not quoted in an active market. Other financial liabilities are initially
recognized at the fair value of the consideration received plus directly attributable transaction
costs. After initial recognition, other financial liabilities are subsequently measured at amortized
cost using the effective interest rate method. Gains and losses are recognized in profit or loss
when the liabilities are derecognized, as well as through the amortization process. Other financial
liabilities (or portion of other financial liabilities) are included in current liabilities when they are
expected to be settled within 12 months from the reporting date of the Group and does not have an
unconditional right to defer settlement of the liability for at least 12 months from the reporting
date.

The Groups short-term loans, liabilities under trust receipts, trade and other payables and
long-term debt are included under this category.

Derecognition of Financial Assets and Financial Liabilities

Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of
similar financial assets) is derecognized when:

the right to receive cash flows from the asset has expired;
the Group retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a pass-through arrangement;
or

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the Group has transferred its right to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of ownership of the asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of ownership of the asset, but
has transferred control of the asset.

Where the Group has transferred its right to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of ownership of the asset nor
transferred control of the asset, the asset is recognized to the extent of the Groups continuing
involvement in the asset.

If a transfer of financial asset does not result in derecognition since the Group has retained
substantially all the risks and rewards of the ownership of the transferred asset, the Group
continues to recognize the transferred asset in its entirety and recognizes a liability for the
consideration received.

Financial Liabilities. A financial liability is derecognized when the obligation under the liability
is discharged, cancelled or has expired.

Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability at fair value, and any resulting difference is recognized in profit or loss.

Impairment of Financial Assets

The Group assesses at each balance sheet date whether a financial asset or group of financial
assets is impaired.

Assets Carried at Amortized Cost. The Group first assesses whether objective evidence of
impairment exists individually for financial assets that are individually significant, and
individually or collectively for financial assets that are not individually significant. If it is
determined that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, the asset is included in a group of financial assets with similar
credit risk characteristics and that group of financial assets is collectively assessed for impairment.
The Group reviews the age and status of the receivable and evaluates on the basis of factors that
affect the collectability of the accounts. These factors include, but are not limited to, the length of
the Groups relationship with the customer, the type of the customer, the customers payment
behavior, and known market factors. Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.

If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the assets
carrying amount and the present value of estimated future cash flows discounted at the financial
assets original effective interest rate. Objective evidence of impairment, includes, but is not
limited to, bankruptcy or insolvency on the part of the customer and adverse changes in the
economy. The carrying amount of the asset is reduced through the use of an allowance account
and any loss determined is recognized in profit or loss. The financial assets, together with the
associated allowance accounts, are written-off when there is no realistic prospect of future
recovery and all collateral has been realized.

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If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in profit or loss, to the extent that the carrying value of the asset does not exceed its
amortized cost at the reversal date.

Assets Carried at Cost. If there is objective evidence that an impairment loss on an unquoted
equity instrument that is not carried at fair value because its fair value cannot be reliably
measured, or on a derivative asset that is linked to and must be settled by delivery of such an
unquoted equity instrument has been incurred, the amount of the loss is measured as the difference
between the assets carrying amount and the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset.

AFS Financial Assets. 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 profit or loss, is transferred from equity to profit or loss.
Reversals in respect of equity instruments classified as AFS are not recognized in profit or loss.
Reversals of impairment losses on debt instruments are reversed through profit or loss, if the
increase in fair value of the instrument can be objectively related to an event occurring after the
impairment loss was recognized in profit or loss.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet
if, and only if, there is a currently enforceable legal right to offset the recognized amounts and
there is an intention to settle on a net basis, or to realize the asset and settle the liability
simultaneously. The Group assesses that it has a currently enforceable right of offset if the right is
not contingent on a future event, and is legally enforceable in the normal course of business, event
of default, and event of insolvency or bankruptcy of the Group and all of the counterparties. This
is not generally the case with master netting agreements, where the related assets and liabilities are
presented gross in the balance sheet.

Property, Plant and Equipment

The Groups land and land improvements, building and building improvements and machinery
and equipment are stated at appraised values as determined by an independent firm of appraisers
as at December 31, 2014. Land owned by DPSI is stated at appraised value as determined by an
independent firm of appraisers as at December 31, 2015. Office furniture, fixtures and equipment,
transportation equipment and leasehold improvements, on the other hand, are stated at cost less
accumulated depreciation, amortization and any accumulated impairment.

The net revaluation increment resulting from the revaluation is credited to Revaluation increment
on property and equipment - net of deferred income tax shown in the statement of changes in
equity. The accumulated depreciation at the date of the revaluation is eliminated against the gross
carrying amount of the asset. The amount of adjustment to accumulated depreciation forms part of
the increase or decrease in the carrying amount. The amount of the revaluation increment realized
through depreciation is transferred to retained earnings.

The initial cost of property, plant and equipment comprises its purchase price, including import
duties, taxes and any directly attributable costs of bringing the assets to their working condition
and location for their intended use. Cost includes interest related to the financing of property,
plant and equipment during the construction period. Expenditures incurred after the fixed assets
have been put into operation, such as repairs and maintenance and overhaul costs, are normally
charged against income in the period in which the costs are incurred. In situations where it can be

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clearly demonstrated that the expenditures have resulted in an increase in the future economic
benefits expected to be obtained from the use of an item of property, plant and equipment beyond
its originally assessed standard of performance, the expenditures are capitalized as an additional
cost of property, plant and equipment.

Depreciation and amortization, recognition of which commences when the asset becomes
available for its intended use, is computed on a straight-line basis over the following estimated
useful lives:

Land improvements 8 years

Building 8-35 years
Building improvements 10 years
Machinery and equipment 3-30 years
Office furniture, fixtures and equipment 2-5 years
Transportation equipment 5 years
Leasehold improvements 10 years or term of lease, whichever is shorter

The estimated useful lives and depreciation and amortization method are reviewed periodically to
ensure that the periods, estimated residual values and method of depreciation and amortization are
consistent with the expected pattern of economic benefits from the items of property, plant and
equipment.

When assets are retired or otherwise disposed of, the cost and the related accumulated
depreciation, amortization and any impairment in value are removed from the accounts. Any
resulting gain or loss is credited to or charged against current operations.

Construction in progress is stated at cost. This includes cost of construction of plant and
equipment and other direct costs. Construction in progress is not depreciated until such time as
the relevant assets are completed and ready for its intended use.

Investment Properties
Investment properties are measured at cost, including transaction costs. The carrying amount
includes the cost of replacing part of an existing investment property at the time that cost is
incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an
investment property.

Depreciation is calculated on a straight-line basis over the estimated useful life of 20 to 30 years.
The estimated useful life, depreciation method and residual values are reviewed periodically to
ensure that the period, method of depreciation and estimated residual values are consistent with
the expected pattern of economic benefits from items of investment properties.

Investment properties are derecognized when either they have been disposed of or when the
investment property is permanently withdrawn from use and no future economic benefit is
expected from its disposal. Any gains or losses on the retirement or disposal of an investment
property are recognized in profit or loss in the year of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change in use,
evidenced by ending of owner-occupation or commencement of an operating lease to another
party. Transfers are made from investment property when, and only when, there is a change in
use, evidenced by commencement of owner-occupation or ending/termination of an operating
lease.

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Impairment of Nonfinancial Assets

The carrying values of property, plant and equipment, investment property and other nonfinancial
assets are reviewed for impairment when events or changes in circumstances indicate that the
carrying value may not be recoverable. If any such indication exists and where the carrying values
exceed the estimated recoverable amount, the assets or cash-generating units are written down to
their recoverable amounts. The recoverable amount of the assets is the greater of fair value less
cost to sell and value-in-use.

The fair value less cost to sell is the amount obtainable from the sale of an asset in an arms-length
transaction while value-in-use is the present value of the estimated future cash flows expected to
arise from continuing use of an asset and from its disposal at the end of its useful life. For an asset
that does not generate largely independent cash inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs. Any impairment losses are recognized in
profit or loss.

An assessment is made at each reporting date as to whether there is any indication that previously
recognized impairment losses may no longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed
only if there has been change in the estimates used to determine the assets recoverable amount
since the last impairment loss was recognized. If that is the case, the carrying amount of the asset
is increased to its recoverable amount. That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation and amortization, had no impairment loss
been recognized for the asset in prior years. Such reversal is recognized in profit or loss. After
such a reversal, the depreciation charge is adjusted in future periods to allocate the assets revised
carrying amount, on a systematic basis over its remaining useful life.

Capital Stock
Capital stock is measured at par value of the shares issued. When the shares are sold at premium,
the difference between the proceeds and the par value is credited to additional paid-in capital.
When shares are issued for a consideration other than cash, the proceeds are measured by the fair
value of the consideration received. In case the shares are issued to extinguish or settle the
liability of the Group, the shares are measured either at the fair value of the shares issued or fair
value of the liability settled, whichever is more readily determinable.

Retained Earnings
Retained earnings represents the cumulative balance of net income or loss, net of any dividend
declaration and other adjustments, such as realization of revaluation increment through
depreciation.

Revenue
Revenue is recognized when the significant risks and rewards of ownership of the goods have
passed to the buyer, the amount of revenue can be measured reliably and it is probable that the
economic benefits will flow to the Group. Net sales is measured at the fair value of the
consideration received, excluding discounts and sales taxes or duties. The following specific
criteria must also be met before revenue is recognized:

Sale of Goods
Revenue is recognized when products are shipped or delivered to and accepted by the customers.

Rendering of Services
Revenue from tolling services are recognized when services are rendered.

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Interest
Interest income is recognized as the interest accrues based on the effective interest rate method.

Other Comprehensive Income

OCI comprises items of income and expense (including items previously presented under the
consolidated statement of changes in equity) that are not recognized in profit or loss for the year in
accordance with PFRS. The Groups OCI includes the net increase in revaluation increment due
to property appraisal, net changes in fair value of AFS financial assets and remeasurement gain or
loss on retirement benefits.

Costs and Expenses

Costs and expenses are recognized when incurred. These are measured at the fair value of the
consideration paid or payable.

Short-term Employee Benefits

Short-term employee benefits include items such as salaries and wages, social security
contributions and nonmonetary benefits, that are expected to be settled wholly within twelve
months after the end of the reporting period in which the employees rendered the related services.
Short-term employee benefits are recognized as expense as incurred. When an employee has
rendered service to the Group during the reporting period, the Group recognizes the undiscounted
amount of short-term employee benefits expected to be paid in exchange for that service as a
liability (accrued expense), after deducting any amount already paid.

Retirement Benefits Cost

Starting 2015, the Group participates in a group retirement plan, The Metal Asia Group of
Companies Multiemployer Retirement Plan, which shares risks between entities under common
control. Such retirement plan is accounted for as a defined benefit plan. There is no stated policy
for charging the net defined benefit cost to the entities participating in the plan. Each entity
determines its retirement benefit costs based on its own employee profile.

Net pension liability, as presented in the consolidated balance sheet, is the aggregate of the present
value of the defined benefit obligation reduced by the fair value of plan assets, adjusted for the
effect of limiting a net defined benefit asset to the asset ceiling, each at the end of the reporting
period. The asset ceiling is the present value of any economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plan is actuarially determined using the
projected unit credit method. The retirement benefit costs comprise of the service cost and net
interest on the net defined benefit liability or asset.

Service costs which include current service costs, past service costs and gains or losses on non-
routine settlements are recognized as expense in the consolidated statement of income. Past
service costs are recognized when plan amendment or curtailment occurs. These amounts are
calculated periodically by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in the
consolidated statement of income.

*SGVFS018923*
 - 19 -

Remeasurements comprising actuarial gains and losses, any difference in the interest income and
actual return on plan assets and any change in the effect of the asset ceiling (excluding net interest
on defined benefit liability) are recognized immediately in OCI in the period in which they arise.
Remeasurements are not reclassified to profit or loss in subsequent periods.

Plan assets are assets that are held in trust and managed by a trustee bank. Plan assets are not
available to the creditors of the Group, nor can they be paid directly to the Group. The fair value
of plan assets is based on market price information. When no market price is available, the fair
value of plan assets is estimated by discounting expected future cash flows using a discount rate
that reflects both the risk associated with the plan assets and the maturity or expected disposal date
of those assets (or, if they have no maturity, the expected period until the settlement of the related
obligations). If the fair value of the plan assets is higher than the present value of the defined
benefit obligation, the measurement of the resulting defined benefit asset is limited to the present
value of economic benefits available in the form of refunds from the plan or reductions in future
contributions to the plan.

Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of
a qualifying asset. All other borrowing costs are expensed as incurred. Capitalization of
borrowing costs commences when the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the
assets are substantially ready for their intended use. If the carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recorded.

Leases
The determination of whether the arrangement is, or contains a lease, is based on the substance of
the arrangement at inception date of whether the fulfillment of the arrangement depends on the use
of a specific asset or assets and the arrangement conveys a right to use the asset. A reassessment
is made after the inception of the lease, only if any of the following applies: (a) there is a change
in contractual terms, other than a renewal or extension of the arrangement; (b) a renewal option is
exercised or extension granted, unless the term of the renewal or extension was initially included
in the lease term; (c) there is a change in the determination of whether fulfillment is dependent on
a specified asset; or (d) there is substantial change to the asset.

Where the reassessment is made, lease accounting shall commence or cease from the date when
the change in circumstances gave rise to the reassessment for scenarios (a), (c), or (d) above, and
at the date of renewal or extension period for scenario (b).

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease expense is recognized in profit or loss on a straight-
line basis over the terms of the lease agreements.

Income Taxes
Current Income Tax
Current income tax assets and income tax liabilities for the current and prior periods are measured
at the amount expected to be recovered or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted at the
reporting date.

*SGVFS018923*
 - 20 -

Deferred Income Tax

Deferred income tax is provided, using the balance sheet liability method, on all temporary
differences at the reporting date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes. Deferred income tax liabilities are recognized for all
taxable temporary differences. Deferred income tax assets are recognized for all deductible
temporary differences and carryforward benefits of unused tax credits from excess minimum
corporate income tax (MCIT) over the regular corporate income tax (RCIT) and net operating loss
carryover (NOLCO), but only to the extent that it is probable that future taxable profit will be
available against which the deductible temporary differences and carryforward benefits of unused
tax credits from MCIT and NOLCO can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient future taxable profit will be available to
allow all or part of the deferred income tax assets to be utilized.

Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realized or the liability is settled, based on tax
rates and tax laws that have been enacted or substantively enacted at the reporting date.

Income tax relating to items recognized directly in equity is recognized in equity and not in profit
or loss.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable
right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to
the same taxable entity and the same tax authority.

Foreign Currency-denominated Transactions

Transactions denominated in foreign currency are recorded using the exchange rate at the date of
the transaction. Outstanding monetary assets and liabilities denominated in foreign currencies are
translated using the exchange rate at balance sheet date. Foreign exchange gains or losses are
credited to or charged against current operations.

Provisions
Provisions are recognized when: (1) the Group has a present obligation (legal or constructive) as a
result of past events, (2) it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, and (3) a reliable estimate can be made of the amount of
the obligation. If the effect of the time value of money is material, provisions are determined by
discounting the effective future cash flows at a pretax rate that reflects current market assessment
of the time value of money and where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognized as an
interest expense.

Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. They are
disclosed in the notes to consolidated financial statements unless the possibility of an outflow of
resources embodying economic benefits is remote. A contingent asset is not recognized in the
consolidated financial statements but disclosed in the notes to consolidated financial statements
when an inflow of economic benefits is probable. If it is virtually certain that an inflow of
economic benefits will arise, the asset and the related income is recognized in the consolidated
financial statements.

*SGVFS018923*
 - 21 -

Events After the Reporting Date

Post year-end events that provide additional information about the Groups position at the
reporting date (adjusting events) are reflected in the consolidated financial statements. Post year-
end events that are not adjusting events are disclosed in the notes to consolidated financial
statements when material.

3. Significant Accounting Judgments and Estimates

The preparation of the Groups consolidated financial statements in accordance with PFRS
requires management to make judgments, estimates and assumptions that affect the amounts
reported in the consolidated financial statements. The judgments, estimates and assumptions used
in the consolidated financial statements are based upon managements evaluation of relevant facts
and circumstances that are believed to be reasonable as of the date of the comparable consolidated
financial statements. While the Group believes that the assumptions are reasonable and
appropriate, differences in the actual experience or changes in the assumptions may materially
affect the estimated amounts. The effects of any change in estimates are reflected in the
consolidated financial statements as they become reasonably determinable.

Judgments
In the process of applying the accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognized in the consolidated financial statements.

Determination of functional currency

The functional currency of the Group is the currency of the primary economic environment in
which it operates. It is the currency that mainly influences the revenue and cost of products.
Based on the economic substance of the relevant underlying circumstances, the functional
currency of the Group is the Peso.

Determination of control over a subsidiary

An entity is considered a subsidiary and included in consolidation even in cases where the
Company has no ownership or owns less than one-half of the subsidiarys equity, when the
Company controls the subsidiary such that it is exposed, or has rights, to variable returns from its
involvement with the subsidiary and has the ability to affect those returns through its power over
the entity. While the Company has no equity interest in SDMC, the Company has the power over
SDMC through its rights to appoint, reassign or remove members of SDMCs key management
personnel who have the ability to direct the relevant activities. In 2013, the Company and SDMC
formalized this practice through a confirmatory agreement. Also, the excess cash flow of SDMC
is used to offset against its advances from the Company and the parcel of land of SDMC was used
to secure the debts of the Company. Moreover, the Company has the ability to dictate the terms of
the lease agreement which affects the returns. Based on these facts and circumstances,
management concluded that the Company controls SDMC and as such, is considered its
subsidiary.

In 2014, the Company invested in shares of stocks of BSI, SMSI and DPSI. Being wholly-owned
subsidiaries of the Company, management has assessed that the Company has control over these
entities. Prior to and after the acquisition, the Company and these subsidiaries are considered to be
under common control. Thus, the Company applied the pooling of interest method in
consolidating these subsidiaries.

*SGVFS018923*
 - 22 -

Classification of financial instruments

The Group exercises judgment in classifying a financial instrument, or its component parts, on
initial recognition as a financial asset, a financial liability or an equity instrument in accordance
with the substance of the contractual arrangement and the definitions of a financial asset, financial
liability or an equity instrument. The substance of a financial instrument, rather than its legal
form, governs its classification in the consolidated balance sheet. The Groups financial assets and
liabilities are disclosed in Note 22.

Determination of operating lease - Company as lessee

The Group has operating lease agreements for its office space and a warehouse building. The
Group has determined that the risks and rewards of ownership for the underlying properties have
been retained by the lessors. Accordingly, the leases are accounted for as operating leases
(see Note 23).

Assessment on whether an agreement contains a lease

The Group has tolling agreements with its related parties. Management has reviewed the terms of
the agreements and has assessed that they do not contain a lease considering that the related
parties administer and manage their operations and the Group does not have the ability or right to
control the physical access over the assets. Accordingly, the arrangements are accounted for as
tolling agreements (see Note 17).

Derecognition of accounts receivable

In 2015 and 2014, the Company sold its rights to the cash flows arising from certain trade
receivables. The Company has determined that substantially all the risks and rewards of the
portfolio have been retained considering that the credit risk is borne by the Company and
consequently, the receivables were not derecognized. The Company accounted for the transactions
as collateralized borrowings (see Notes 5 and 10).

Contingencies
The Group is involved in certain legal proceedings and other contingencies that are normal to its
business. The assessment as to the probability of the outcome of these cases was made in
consultation with legal counsels and was based on the merits and status of the cases. The Group
currently does not believe these proceedings will have a material adverse effect on the Groups
financial position and results of operations. As such, no provision was made for these
contingencies (see Note 26).

Impairment of property, plant and equipment, and investment properties

The Group assesses the impairment of property, plant and equipment and investment properties
whenever events or changes in circumstances indicate that the carrying amount of these assets
may not be recoverable. The factors that the Group considers important and which could trigger
an impairment review, include the following:

significant adverse changes in the technological, market, or economic environment where the
Company operates
significant decrease in the market value of an asset
evidence of obsolescence and physical damage
significant changes in the manner in which an asset is used or expected to be used
plans to restructure or discontinue an operation
significant decrease in the capacity utilization of an asset, or
evidence is available from internal reporting that the economic performance of an asset is, or
will be, worse than expected.

*SGVFS018923*
 - 23 -

There was no indication of impairment as of December 31, 2015 and 2014.

Estimates and Assumptions

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and future periods if the revision affects
both current and future periods.

Estimation of allowance for doubtful accounts

Provisions are made for specific and groups of accounts where objective evidence of impairment
exists. The Group evaluates these accounts based on available facts and circumstances, including,
but not limited to, the length of the Groups relationship with the customer, the customers current
credit status, average age of accounts, collection and historical experiences. The Group identifies
and provides for specific accounts that are doubtful of collection. Objective evidence of
impairment, includes, among others, bankruptcy or insolvency on the part of the customer and
adverse changes in the economy. The remaining accounts that are not individually assessed as
impaired, are assessed collectively applying an estimated default rate determined based on the
Groups historical collection. The amount and timing of recognition of the related expenses for
any period could differ based on the judgments or estimates made.

As of December 31, 2015 and 2014, the allowance for doubtful accounts amounted to
P
=637.0 million and P =557.3 million, respectively. Receivables, net of related allowance, amounted
to =
P6.4 billion and =
P7.8 billion as of December 31, 2015 and 2014, respectively (see Note 5).

Estimation of fair value of financial assets and financial liabilities

The fair value of financial instruments traded in an active market at the balance sheet date is based on
their quoted market price or dealer price quotations (bid price for long positions and ask price for
short positions), without any deduction for transaction costs. Where the fair values of financial assets
and financial liabilities recorded on the balance sheet cannot be derived from active markets, they are
determined using a variety of valuation techniques that include the use of mathematical models. The
input to these models is taken from observable markets where possible, but where this is not feasible,
a degree of judgment and estimation is required in establishing fair values. Any change in value of
these financial assets and financial liabilities (including derivatives) would affect the statement of
income. The fair values of financial assets and financial liabilities are disclosed in Note 22.

Estimation of probable losses on input VAT

The Group estimates the level of provision for probable losses on input VAT based on the
probability that the input VAT may be used in the future, taking into consideration the prescription
period within which the Group can apply for a tax refund or tax credit. The carrying value of the
input VAT with application for refund (included under Other current assets) amounting to
P
=44.1 million as of December 31, 2014 was fully provided with valuation allowance in 2015
(see Note 7).

Determination of net realizable value of inventories

The Groups estimates of the net realizable values of inventories are based on the most reliable
evidence (e.g., age and physical condition of the inventory) available at the time the estimates are
made of the amount that these assets are expected to be realized. The carrying amount of
inventories as of December 31, 2015 and 2014 amounted to P =9.9 billion and P =11.0 billion,
respectively (see Note 6).

*SGVFS018923*
 - 24 -

Fair value of property, plant and equipment carried at appraised value

The Group follows the revaluation model in valuing its land, building and improvements and
machinery and equipment. The fair values of these properties were determined by professionally
qualified appraisers using generally acceptable valuation techniques and methods (e.g., by
considering the replacement or reproduction costs of the assets adjusted to account from economic
and market depreciation, and comparable market listings for the parcel of land). As of
December 31, 2015 and 2014, the carrying value of property, plant and equipment carried at
appraised value amounted to P =4.0 billion and =P3.8 billion, respectively. The related revaluation
increment attributable to the equity holders of the Company, net of the related deferred income tax
liability, amounted to P=544.7 million and P =532.8 million as of December 31, 2015 and 2014,
respectively (see Notes 8 and 13). The revaluation increment attributable to noncontrolling interest
amounted to P=244.4 million as of December 31, 2015 and 2014.

Estimation of useful lives and residual values of property, plant and equipment and investment
properties
The Group estimated the useful lives and residual values of its property, plant and equipment and
investment properties based on the period over which the assets are expected to be available for
use. The Group reviews annually the estimated useful lives and residual values of these properties
based on factors that include, among others, asset utilization, internal technical evaluation,
technological changes, and anticipated use of the assets. As of December 31, 2015 and 2014, the
total carrying value of property, plant and equipment amounted to = P5.6 billion and P
=4.9 billion,
respectively, while investment properties amounted to = P41.5 million and = P44.1 million,
respectively. Depreciation expense recognized for property, plant and equipment amounted to
P
=135.6 million and P =104.5 million in 2015 and 2014, respectively. Depreciation expense
recognized for investment properties amounted to = P2.6 million in 2015 and 2014
(see Notes 8 and 9).

Recognition of deferred income tax assets

The Group reviews the carrying amounts of deferred income tax assets at each balance sheet date
and recognizes deferred income tax assets to the extent that it is probable that sufficient future
taxable profit will be available to allow all or part of the deferred income tax assets to be utilized.
The Groups assessment on the recognition of deferred tax assets on deductible temporary
differences is based on forecasted taxable income of the subsequent reporting period. The forecast
is based on past results and future expectations of revenue and expenses.

As of December 31, 2015 and 2014, the recognized deferred income tax assets amounted to
P
=271.3 million and P
=219.7 million, respectively (see Note 19).

Determination of retirement benefits obligation

The determination of the obligation and cost of retirement benefits is dependent on the selection of
certain assumptions used by the actuary in calculating such amounts. Those assumptions are
described in Note 18 and include, among others, discount rates and future salary rate increase.
Actual results that differ from the Groups assumptions are recognized directly in profit or loss.
While the Group believes that the assumptions are reasonable and appropriate, significant
differences in the actual experience or significant changes in the assumptions may materially
affect the retirement obligation.

Net pension liabilities amounted to =P58.3 million and =P9.6 million as of December 31, 2015 and
2014, respectively. Further details are provided in Note 18.

*SGVFS018923*
 - 25 -

4. Cash

2015 2014
Cash on hand P
=300,692 =359,412
P
Cash in banks 929,290,332 832,388,129
P
=929,591,024 =832,747,541
P

Cash in banks earn interest rates at applicable market rates. Interest income earned on cash and
cash equivalents amounted to =
P1.2 million and P=1.6 million in 2015 and 2014, respectively.

In 2013, High Street (SPV-AMC), Inc. (HSI), an entity with common stockholders and key
management personnel with the Company, assigned to the Company the Power Supply Agreement
with a power supplier. Under the agreement, the Company is required to place security deposits
as guarantee for the performance of its obligations. The related standby letters of credit of HSI
amounting to = P62.83 million were also assigned to the Company. As of December 31, 2015 and
2014, total standby letters of credit amounted to =
P99.5 million and = P111.0 million, respectively.
These are presented as part of Other noncurrent assets in the consolidated balance sheets.

5. Receivables

2015 2014
Trade P
=3,446,174,778 =3,346,653,871
P
Amounts due from affiliates (Note 17) 3,541,820,722 4,792,451,583
Others 54,263,493 265,708,784
7,042,258,993 8,404,814,238
Less allowance for doubtful accounts 637,036,397 557,252,229
P
=6,405,222,596 =7,847,562,009
P

Trade receivables are noninterest-bearing and are generally on 30 to 60-day terms.

The Group recognized provision for doubtful accounts amounting to P =79.8 million in 2015 (nil in
2014). The allowance for doubtful accounts amounting to = P557.3 million as of December 31,
2015 and 2014 relates to amounts due from affiliates. The remaining allowance amounting to
=
P79.8 million as of December 31, 2015 pertains to trade receivables.

As of December 31, 2015 and 2014, receivables totaling P =3.1 billion and = P1.0 billion,
respectively, are held as collateral for the Companys short-term loans (see Note 10).

6. Inventories - at cost

2015 2014
Finished goods =2,904,807,758 P
P =1,922,437,625
Raw materials 4,419,645,507 3,653,086,550
Materials and supplies 241,355,895 363,149,863
Raw materials and supplies in transit 2,344,263,379 5,102,810,249
=9,910,072,539 =
P P11,041,484,287

Under the terms of agreements covering liabilities under trust receipts, certain inventories have
been released to the Group in trust for certain banks. The Group is accountable to these banks for

*SGVFS018923*
 - 26 -

the trusteed merchandise or their sales proceeds. Liabilities under trust receipts amounted to
=
P6.0 billion and P
=5.5 billion as of December 31, 2015 and 2014, respectively. Interest expense on
liabilities under trust receipts recognized in 2015 and 2014 amounted to = P449.4 million and
=
P251.0 million, respectively.

7. Other Current Assets

2015 2014
Advances to suppliers P
=193,111,286 =157,510,021
P
Input value-added tax (VAT) - net 1,156,696,335 1,075,103,315
Creditable withholding taxes 220,681,813 433,268,335
Derivative assets (Note 22) 97,022,659 13,767,817
Prepaid taxes - net of allowance for probable losses
of P
=44.1 million in 2015 44,152,767
Prepayments and others 77,811,036 39,973,383
P
=1,745,323,129 =1,763,775,638
P

8. Property, Plant and Equipment

a. At Cost

2015
Office
Furniture,
Fixtures and Transportation Leasehold Construction
Equipment Equipment Improvements In-progress Total
Cost
Beginning balances P
= 151,034,053 P
= 9,289,791 P
= 200,174,391 P
= 950,829,712 P= 1,311,327,947
Additions 4,399,646 76,339 602,948,261 607,424,246
Reclassifications 6,237,558 27,264,972 (100,618,710) (67,116,180)
Ending balances 161,671,257 9,366,130 227,439,363 1,453,159,263 1,851,636,013
Accumulated Depreciation and
Amortization
Beginning balances 118,456,761 7,465,686 80,848,895 206,771,342
Additions (Notes 14, 15 and 16) 11,650,848 666,143 16,757,474 29,074,465
Ending balances 130,107,609 8,131,829 97,606,369 235,845,807
Net Book Values P
= 31,563,648 P
= 1,234,301 P
= 129,832,994 P
= 1,453,159,263 P
= 1,615,790,206

2014
Office
Furniture,
Fixtures and Transportation Leasehold Construction
Equipment Equipment Improvements In-progress Total
Cost
Beginning balances P
=146,413,431 P
=10,687,625 P
=197,835,878 P
=51,616,474 P
=406,553,408
Effect of pooling of interest 356,973 151,118,389 151,475,362
Additions 4,263,649 1,006,322 2,338,513 813,819,497 821,427,981
Disposal (2,404,156) (2,404,156)
Reclassifications (65,724,648) (65,724,648)
Ending balances 151,034,053 9,289,791 200,174,391 950,829,712 1,311,327,947
Accumulated Depreciation and
Amortization
Beginning balances 103,884,428 9,275,546 61,319,529 174,479,503
Additions (Notes 14, 15 and 16) 14,572,333 594,296 19,529,366 34,695,995
Disposal (2,404,156) (2,404,156)
Ending balances 118,456,761 7,465,686 80,848,895 206,771,342
Net Book Values P
=32,577,292 P
=1,824,105 P
=119,325,496 P
=950,829,712 P
=1,104,556,605

*SGVFS018923*
 - 27 -

Construction in progress pertains to various machineries and structures under installation and
construction, respectively.

b. At Appraised Value

2015
Land and Building
Land and Building Machinery and
Improvements Improvements Equipment Total
Appraised Value
Beginning balances P
= 1,029,020,856 P
= 614,507,776 P
= 3,055,397,705 P
= 4,698,926,337
Revaluation 46,485,299 46,485,299
Additions 155,423,362 3,497,584 17,486,274 176,407,220
Disposal (7,314,835) (7,314,835)
Reclassifications 2,022,623 65,093,557 67,116,180
Ending balances 1,230,929,517 620,027,983 3,130,662,701 4,981,620,201
Accumulated Depreciation
Beginning balances 103,125 151,776,763 703,634,989 855,514,877
Additions (Note 14) 174,522 20,546,030 85,827,408 106,547,960
Disposal (1,326,986) (1,326,986)
Ending balances 277,647 172,322,793 788,135,411 960,735,851
Net Book Values P
= 1,230,651,870 P
= 447,705,190 P
= 2,342,527,290 P
= 4,020,884,350

2014
Land and Building
Land and Building Machinery and
Improvements Improvements Equipment Total
Appraised Value
Beginning balances P
=370,000,000 P
=443,385,776 P
=2,128,393,149 P
=2,941,778,925
Revaluation 49,713,675 35,146,994 67,134,924 151,995,593
Additions 608,275,931 135,975,006 795,176,234 1,539,427,171
Reclassifications 1,031,250 64,693,398 65,724,648
Ending balances 1,029,020,856 614,507,776 3,055,397,705 4,698,926,337
Accumulated Depreciation
Beginning balances 142,017,221 685,129,933 827,147,154
Revaluation (5,496,970) (35,960,957) (41,457,927)
Additions (Note 14) 103,125 15,256,512 54,466,013 69,825,650
Ending balances 103,125 151,776,763 703,634,989 855,514,877
Net Book Values P
=1,028,917,731 P
=462,731,013 P
=2,351,762,716 P
=3,843,411,460

The Group adopts the revaluation model in valuing its land, building and building improvements
and machinery and equipment based on appraised values as determined by an independent firm of
appraisers. The appraised values of the Company, SDMC, and SMSIs land, building and
building improvements and machinery and equipment as of December 31, 2015 and 2014 was
based on the appraisal valuation as of December 31, 2014 while land owned by DPSI was based
on the appraisal valuation as of September 8, 2015 and are categorized under Level 3 fair value
hierarchy. As of December 31, 2015 and 2014, no revaluation increment was recognized for the
newly acquired land of the Company since its purchase price fairly represents its fair value.
Depreciation transferred from revaluation increment to retained earnings in 2015 and 2014
amounted to = P20.6 million and = P19.0 million, respectively, net of related deferred income tax
liability of P
=8.8 million and = P8.1 million, respectively. The balance of revaluation increment
attributable to equity holders of the Company, net of deferred income tax effect, amounted to
P
=544.7 million and P =532.8 million as of December 31, 2015 and 2014, respectively. The
revaluation increment on the land owned by SDMC presented under noncontrolling interest
amounted to = P244.4 million as of December 31, 2015 and 2014, respectively.

The description of valuation techniques used and key inputs to the valuation of these assets are as
follows. Increase (decrease) in the unobservable input will significantly increase (decrease) the
fair value of the assets.

*SGVFS018923*
 - 28 -

Significant
Valuation technique unobservable input Range
Land Sales comparison approach Price per square meter P
=1,392 to P
=7,000
per square meter
Building and building and Cost approach Reproduction cost P
=25,000 to
land improvements P
=206 million
Machinery and equipment Cost approach Replacement cost P
=1,500 to
=
P2 billion

If land and land improvements, building and building improvements and machinery and
equipment were carried at cost less accumulated depreciation, the cost and accumulated
depreciation would be as follows:

2015
Land Building
and Land and Building Machinery
Improvements Improvements and Equipment Total
Cost P
=814,608,383 P
=391,755,556 P
=2,854,748,668 P
=4,061,112,607
Accumulated depreciation 57,026 149,875,491 1,017,482,905 1,167,415,422
P
=814,551,357 P
=241,880,065 P
=1,837,265,763 P
=2,893,697,185

2014
Land Building
and Land and Building Machinery
Improvements Improvements and Equipment Total
Cost P
=660,216,271 P
=386,235,350 P
=2,778,658,670 P
=3,825,110,291
Accumulated depreciation 103,125 140,331,752 951,435,397 1,091,870,274
P
=660,113,146 P
=245,903,598 P
=1,827,223,273 P
=2,733,240,017

On April 11, 2012, the Group entered into a chattel mortgage indenture over certain property and
equipment in its Bulacan plant and investment properties to collateralize its new bank loan
(see Note 12). The carrying value of properties used as collateral amounted to P
=1.2 billion as of
December 31, 2015 and 2014.

9. Investment Properties

2015
Condominium
Land and Others Total
Cost =6,112,007
P =55,482,060
P =61,594,067
P
Accumulated depreciation:
Beginning balances 17,481,674 17,481,674
Additions (Note 16) 2,599,114 2,599,114
Ending balances 20,080,788 20,080,788
Net book value P
=6,112,007 P
=35,401,272 P
=41,513,279

2014
Condominium
Land and Others Total
Cost =6,112,007
P =55,482,060
P =61,594,067
P
Accumulated depreciation:
Beginning balances 14,882,560 14,882,560
Additions (Note 16) 2,599,114 2,599,114
Ending balances 17,481,674 17,481,674
Net book value =6,112,007
P =38,000,386
P =44,112,393
P

*SGVFS018923*
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As of December 31, 2015 and 2014, the estimated fair values of the Groups investment properties
amounted to = P63.43 million. The fair value was based on the appraisal valuation from
independent firm of appraisers as of March 25, 2013 and is categorized under Level 3 fair value
hierarchy. The fair value was determined by referring to the extent, character and utility of the
properties, sales and holding prices of comparable properties, the highest and best use of the
properties and zoning and current usage in the locality where the properties are situated.
Management believes that there are no events or changes in circumstances indicating a significant
change in the fair value of the investment property from the last appraisal made.

The description of valuation techniques used and key inputs to valuation of these assets are as
follows. Increase (decrease) in the unobservable input will significantly increase (decrease) the
fair value of the assets.

Significant
Valuation technique unobservable input Range
P
=54,475 to
P
=175,659
Residential condominium Market comparison approach Price per square meter per square meter
P
=4,700 to P
=5,000
Land Market comparison approach Price per square meter per square meter

Direct costs incurred related to the investment properties amounted to P

=0.8 million in 2015 and
2014.

In 2012, the Company entered into a credit facility with United Coconut Planters Bank (UCPB).
The proceeds of the loan were used to support the Companys permanent working capital
requirements. On April 11, 2012, the Company signed a mortgage trust indenture (MTI) over its
investment properties to collateralize the loan (see Note 12).

10. Short-term Loans

Short-term loans include loans payable to local banks and suppliers credits.

Loans payable to local banks

As of December 31, 2015 and 2014, the Company has loans payable to local banks amounting to
P
=6.9 billion and =P2.8 billion, respectively, with interest rates ranging from 4.0% to 9.0% in 2015
and 5.5% to 15.0% in 2014. These were obtained under a receivable discounting arrangement
with interest rates ranging from 4.0 to 7.0% per annum in 2015 and 5.0% to 15.0% per annum in
2014.

Suppliers credits
As of December 31, 2015 and 2014, suppliers credits which represent special financing-related
arrangements with suppliers amounted to P =3.5 billion and P
=9.3 billion, respectively. Interest rates
on these liabilities range from 3.6% to 8.2% in 2015 and 2.0% to 3.0% in 2014.

Interest expense on short-term loans amounted to P

=445.1 million and =
P356.8 million in 2015 and
2014, respectively.

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11. Trade and Other Payables

2015 2014
Trade P
=181,223,982 =615,189,675
P
Due to customers 1,604,478,721 1,146,769,023
Derivative liabilities (Notes 17 and 22) 24,625,638 71,908,835
Due to an affiliate (Note 17) 68,067,463
Accrued manufacturing expenses 201,319,920 285,398,251
Accrued interest 98,966,255 71,515,496
Others 148,928,019 175,761,839
P
=2,327,609,998 =2,366,543,119
P

Trade payables are noninterest-bearing and are generally on one to 60-day terms.

Due to customers represent amounts received from customers as deposits for steel bars purchases.

Others include accruals for other operating expenses and other taxes.

12. Long-term Debt

The long-term debt consists of:

2015 2014
Term loans P
=915,582,571 =1,278,037,245
P
Current portion 501,928,554 262,674,473
P
=413,654,017 =1,015,362,772
P

a. In October 2014, SMSI availed of a = P600.0 million unsecured loan from a local bank payable
in five years at 8% interest per annum for the first year and to be repriced quarterly thereafter.
The carrying value of the loan amounted to P =507.3 million and = P597.0 million as of
December 31, 2015 and 2014, respectively, with current portion amounting to = P119.8 million
and P=112.2 million, respectively. Unamortized debt issue costs related to the loan amounted
to =
P2.7 million and =
P3.0 million as of December 31, 2015 and 2014, respectively, with current
portion amounting to =P0.2 million and =
P0.3 million, respectively.

b. In 2012, the Company availed of a bank loan to support its permanent working capital
requirements. The loan consists of seven drawdowns, and are payable in quarterly
installments with interest based on the higher of (i) the prevailing three-month Philippine
Dealing System Treasury-Fixing (PDST-F) plus spread of 4.25%, or (ii) 5.5% per annum,
subject to quarterly review and resetting, at the option of the lender. Outstanding balance
amounted to = P373.3 million and = P637.2 million as of December 31, 2015 and 2014,
respectively.

Pursuant to the bank loans, the Company entered into a real estate mortgage (REM) and
chattel mortgage indenture (CMI) over certain property and equipment in its Bulacan plant
and investment properties, including that of SDMC, to collateralize the loan. As of
December 31, 2015 and 2014, the carrying value of the collateralized assets of the Company
amounted to =P1.5 billion.

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As provided for in the loan agreement, the Company shall maintain a current ratio of at least
1:1, and maximum Debt-to-Equity (D/E) ratio, as follows:

Year D/E Ratio

2012 5.25
2013 4.50
2014 4.00
2015 3.50
2016 3.00
2017 2.00
2018 2.00

The Company is also prohibited from declaring and distributing any dividends to shareholders
without any prior written consent from the creditor bank.

In addition, the Company shall execute a continuing assignment of its receivables from
contracts with its clients or customers at an amount equivalent to the outstanding balance of
the term loan.

The terms of the loan also require the Company to obtain prior written consent from the bank
to do any of the following:

incur additional capital expenditures amounting to P

=30.0 million and above;
incur new bank borrowings;
make new investments; and
make advances to related parties in excess of P
=10.0 million.

In 2015, the Company was not able to obtain written consent prior to entering into these
transactions. As a result, the noncurrent portion of the loan amounting to P
=266.7 million was
reclassified to current liabilities as of December 31, 2015.

c. Term loans also include loans to finance the acquisition of certain machineries and equipment
from 2010 to 2012. The loans are payable in quarterly and monthly installments and bear
interest rates ranging from 7% to 12.5% per annum. The outstanding balance amounted to
P
=35.0 million and =P43.8 million as of December 31, 2015 and 2014, respectively.

Interest expense on term loans recognized in 2015 and 2014 amounted to = P77.4 million and
P
=81.9 million, respectively. Amortization of debt issue cost recognized in 2015 and 2014
amounted to =P0.2 million and =
P0.05 million, respectively.

13. Equity Attributable to Equity Holders of the Company

The equity attributable to equity holders of the Company as of December 31, 2015 and 2014
comprises the following:

2015 2014
Capital stock P
=500,000,000 P500,000,000
=
Additional paid-in capital 1,299,035,110 1,299,035,110

(Forward)

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2015 2014
Unrealized loss on AFS financial assets - net of
deferred income tax (Note 22) (P
=611,172) (P
=573,572)
Revaluation increment on property and equipment -
net of deferred income tax (Note 8) 544,667,378 532,756,374
Remeasurement gain (loss) on retirement benefits -
net of deferred income tax (Note 18) (41,519,642) 15,260,924
Retained earnings
Appropriated 2,221,000,000
Unappropriated 2,017,507,063 2,781,330,903
P
=6,540,078,737 =5,127,809,739
P

Capital Stock
As of December 31, 2015 and 2014, the Companys capital stock consists of the following
common shares, each with P
=10 par value:

Class A - 20,000,000 shares authorized and issued =200,000,000

P
Class B - 10,000,000 shares authorized and issued 100,000,000
Class C - 20,000,000 shares authorized and issued 200,000,000
=500,000,000
P

All common shares of stock have the same rights and preferences, except as may, from time to
time, be otherwise specified in the AOI and indicated on the stock certificates.

The Companys authorized capital stock also includes 37,040,274 Class AA Preference Shares
with par value of = P10 per share. These Class AA Preference Shares are nonvoting,
nonparticipating, cumulative, convertible and redeemable.

As provided in the Companys AOI, all Class AA Preference Shares redeemed shall be cancelled
and the Company shall not be entitled to keep the same alive for re-issue. In March 2013, the
BOD and stockholders approved the cancellation of the 37,040,274 Class AA Preference Shares,
which were redeemed in 2012.

As of March 28, 2016, the Company is in the process of amending the AOI to effect the retirement
of the Preference Share.

Retained Earnings
On December 7, 2015, the Companys BOD approved the appropriation of retained earnings
amounting to =
P2.2 billion to fund or invest in the following:

Mill Description Timeline Appropriation

Meycauayan Facility upgrade 2016-2017 =450,000,000
P
Del Pilar New mill 2016-2017 1,150,000,000
Compostela New mill 2016-2017 465,000,000
Candelaria New mill 2016 135,000,000
=2,200,000,000
P

On November 2, 2015, SMSIs BOD approved the appropriation of retained earnings amounting
to =
P21.0 million as reserve for 2016 capital expenditures.

*SGVFS018923*
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The following are the major capital expenditures of SMSI expected to be acquired or
accomplished by December 2016:

Acquisition of generator set and accessories

Acquisition of motor and motor starter
Automation of furnace control
Fabrication of new recuperator
Acquisition of spectrometer
Construction of quality assurance laboratory
Fire protection and alarm system
Major repair of rolling mill furnace roofing

On March 7, 2016, the Company declared dividends amounting to P =300.0 million to stockholders
of record as of December 31, 2015 payable on the following dates:

Dividend
Date of Payment per share Total
On or before June 15, 2016 =1.50
P =75,000,000
P
On or before September 15, 2016 1.50 75,000,000
On or before December 15, 2016 1.50 75,000,000
On or before March 15, 2017 1.50 75,000,000
=300,000,000
P

14. Cost of Sales and Services

2015 2014
Materials used and changes in inventory (Note 17) =19,122,807,616 =
P P19,214,557,850
Tolling costs (Note 17) 2,281,372,400 1,909,675,700
Power and fuel 1,145,829,669 1,129,209,761
Personnel costs (Notes 16 and 18) 140,001,424 116,682,004
Depreciation and amortization (Note 8) 108,065,315 70,348,840
Others 130,379,417 137,462,304
=22,928,455,841 P
P =22,577,936,459

15. Selling Expenses

2015 2014
Freight, delivery and shipping costs P
=570,496,688 =469,888,871
P
Personnel costs (Notes 16 and 18) 69,951,724 60,519,407
Contracted services 63,152,141 45,886,544
Lease expense 21,127,674 13,244,796
Materials and supplies 16,243,493 14,984,864
Commission 13,510,917 5,538,139
Depreciation and amortization (Note 8) 12,087,196 15,988,431
Insurance and bonds 6,718,824 2,838,621
Vehicle expenses 4,071,020 4,100,287
Others 13,582,560 12,708,950
P
=790,942,237 =645,698,910
P

*SGVFS018923*
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16. General and Administrative Expenses

2015 2014
Provision for probable losses (Notes 5 and 7) P
=123,893,647 =
P
Personnel costs (Note 18) 91,118,788 92,478,016
Professional fees 76,366,175 44,833,432
Rental and utilities (Note 23) 42,979,840 48,327,481
Taxes and licenses 29,234,410 7,129,774
Depreciation and amortization (Notes 8 and 9) 18,069,028 20,783,488
Transportation 13,220,883 21,771,252
Postage and communication 8,285,824 8,726,974
Vehicle expenses 4,186,935 5,827,902
Entertainment, amusement and recreation 4,085,128 4,858,727
Repairs and maintenance 3,850,481 4,505,091
Contracted services 3,256,116 6,113,982
Office supplies 2,876,213 5,490,187
Others 11,630,618 13,201,449
P
=433,054,086 =284,047,755
P

Personnel costs consist of the following:

2015 2014
Salaries and wages P
=219,107,090 =175,856,099
P
Other short-term benefits 53,662,457 69,480,509
Pension expense (Note 18) 28,302,389 24,342,819
P
=301,071,936 =269,679,427
P

17. Related Party Transactions

Related party relationship exists when one party has the ability to control, directly or indirectly,
through one or more intermediaries, or exercise significant influence over the other party in
making financial and operating decisions. Such relationships also exist between and/or among
entities which are under common control with the reporting entity and its key management
personnel, directors or stockholders. In considering each possible related entity relationship,
attention is directed to the substance of the relationship and not merely the legal form.

The following are the related parties of the Group:

Entities with common stockholders:

New Carcar Manufacturing Corporation (NCMI)
HSI
SteelAsia Industries, Inc. (SII)
Plaridel Energy Corporation (PEC)
Steelasia Fabricators Inc. (SFI)
SAMC Structural Steel Inc. (SAMC Structural)
HS Focal Inc. (HSFI)

Stockholder:
PlaridelSteel

*SGVFS018923*
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The Groups transactions with related parties are as follows:

2015
Outstanding
balance as at
December 31
Transactions - Receivable
Related Parties Nature during the year (Payable) Terms and Conditions
Stockholder Receivable P
= 224,570,206 = 1,353,792,913 Non-interest bearing; demandable
P
Entities with common Non-interest bearing, unsecured,
stockholders Receivable 1,234,393,768 2,188,027,809 demandable
Tolling expense 3,167,631,412 (68,067,463) Non-interest bearing, unsecured, 7-day
Cross-currency Net-settled, semi-annual amortization until
swap 133,446,798 133,446,798 June 2019
Transfer of pension
liability 18,569,239 (18,569,239) Non-interest bearing, unsecured, 30-day

2014
Outstanding
balance as at
Transactions during December 31
Related Parties Nature the year - Receivable Terms and Conditions
Stockholder Receivable (P
=123,545,502) P
=1,129,222,707 Non-interest bearing; demandable
Entities with common
stockholders Receivable 2,925,637,637 3,663,228,876 Non-interest bearing, unsecured, demandable
Tolling expense 2,991,863,169 Non-interest bearing, unsecured, 7-day
Purchases of billets 681,412,069 Non-interest bearing, unsecured, 30-day

NCMI
The Company and NCMI have tolling agreements for NCMIs reinforcing steel bar manufacturing
plant in Cebu and Davao whereby NCMI provides tolling services in the production of steel billets
and rebars to the Company on exclusive basis. In consideration thereof, the Company shall pay
NCMI = P2,200 (exclusive of VAT) and P =2,800 (exclusive of VAT) per metric ton of deformed
steel bars of Cebu and Davao, respectively. The Company also agreed to assume responsibility
for the payment of the costs of power, transmission and related charges of Cebu plant. The
agreements shall remain in full force and effect unless terminated by either party by giving prior
written notice. The related tolling cost in 2015 and 2014 amounted to P =1.3 billion and
P
=597.4 million, respectively (see Note 14).

In 2014, NCMI imported billets to accommodate the requirements of the Company. These billets
were purchased by the Company for a total price of P
=681.41 million. The Company also shares
expenses and advances amounts to NCMI for working capital, capital expenditures and financing
purposes. The receivables from NCMI are offset against the outstanding and future tolling fees to
be billed by NCMI to the Company.

In June 2015, the Company and NCMI entered into a back-end only currency swap which mirrors
the terms of the Companys swap with a third party bank. The swap matures semi-annually based
on the maturity of NCMIs bank loan with the final amortization in June 2019. The Company may
set-off any obligation due under this agreement with the outstanding receivable from NCMI.
Derivative liability under this agreement amounted to P
=133.4 million, including current portion of
P
=20.0 million, as of December 31, 2015.

On December 1, 2015, the Companys BOD approved the conversion of its advances to NCMI
amounting to P =1.9 billion into equity. The amount is presented as Deposits for future stock
subscription in the 2015 balance sheet.

The Company also handles certain administrative functions for NCMI.

*SGVFS018923*
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The outstanding amount due from (to) NCMI which is presented as part of Receivables (Trade
and other payables) account in the balance sheets, amounted to (P
=68.1 million) and =
P1.5 billion
as of December 31, 2015 and 2014, respectively (see Notes 5 and 11).

In 2015, the Company recognized liability to NCMI amounting to P

=18.6 million related to pension
liability on employees transferred to NCMI.

HSI
The Company and HSI has a tolling agreement whereby HSI provides tolling services in the
production of steel billets and rebars to the Company on exclusive basis. In consideration thereof,
the Company pays HSI P =2,200 (exclusive of VAT) per metric ton of deformed steel bars in 2015
and 2014 and =P3,100 and = P3,700 (exclusive of VAT) per metric ton of billets delivered by HSI in
2015 and 2014, respectively. The agreement shall remain in full force and effect unless
terminated by either party by giving prior written notice.

The tolling costs related to the production of steel billets which are presented as part of Cost of
sales and services - Materials used and changes in inventory amounted to P =886.6 million in 2015
and P=1.1 billion in 2014. Tolling costs for rebars, presented as Cost of sales and services -
Tolling costs amounted to P =999.3 million and = P1.3 billion in 2015 and 2014, respectively
(see Note 14).

The Company and HSI also entered into an agreement whereby both parties agreed to share the
common costs and expenses based on sharing formula in order to derive operational savings and
efficiency. The costs and expenses include, among others, personnel costs, logistics, professional
fees, operation and maintenance expenses, communication, travel and transportation, and other
costs and expenses that may be agreed upon from time to time. The Company also agreed to
participate in the (i) operating materials and supplies and maintenance expenses, and (ii) other
costs and expenses which may be agreed upon from time to time. The agreement may be
terminated at any time by either party by giving prior written notice.

The outstanding amount due from HSI, which is presented as part of Receivables account in the
balance sheets, amounted to =
P1.6 billion as of December 31, 2015 and 2014 (see Note 5).

PlaridelSteel
In 2013, PlaridelSteel has payable to the Company for funds used in the acquisition of shares of
stock of its associates. These funds were sourced by the Company from third party banks. The
related annual interest and debt issue cost were also passed on by the Company to PlaridelSteel.
The outstanding receivable amounted to = P1.4 billion and =
P1.1 billion as of December 31, 2015 and
2014, respectively.

SII
As of December 31, 2015 and 2014, receivable from SII amounting to = P557.3 million, pertains to
prior year long-outstanding accounts with full allowance for impairment (see Note 5).

PEC, HSFI, SFI and SAMC Structural

Certain operating expenses of these affiliates were paid by the Company on their behalf.
Receivables from these affiliates amounted to P
=5.6 million and =
P5.1 million as of December 31,
2015 and 2014, respectively.

*SGVFS018923*
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Key Management Personnel

The compensation of key management personnel follows:

2015 2014
Short-term employee benefits P
=29,528,870 =26,697,828
P
Post-employment benefits 5,732,104 4,676,441
P
=35,260,974 =31,374,269
P

18. Retirement Benefits Cost

The Group has a funded, noncontributory defined benefit retirement plan covering all its regular
employees. In 2015, the plan was amended into a multi-employer plan, Metal Asia Group of
Companies Multiemployer Retirement Plan, to cover entities under common control as well as
subsidiaries. There is no policy for allocation of benefit costs to the participants. The Group
accounts for the plan as defined benefit plan. The benefits are based on a certain percentage of
final monthly basic salary for every year of credited service. The latest actuarial valuation is as of
December 31, 2015.

Changes in net pension liabilities in 2015 are as follows:

Present value of
defined benefit Fair value Net pension
obligation of plan assets liability
At January 1, 2015 P
=306,616,000 P
=297,003,989 P
=9,612,011
Pension expense in consolidated
statement of income:
Current service cost 30,099,475 30,099,475
Net interest 11,835,398 13,632,484 (1,797,086)
41,934,873 13,632,484 28,302,389
Benefits paid (6,335,694) (1,698,343) (4,637,351)
Transferred obligation (Note 17) (18,569,239) (18,569,239)
Remeasurements in other comprehensive
income:
Experience adjustments 79,924,703 79,924,703
Changes in financial assumptions (13,809,455) (13,809,455)
Return on plan assets, excluding net
interest (14,999,847) 14,999,847
66,115,248 (14,999,847) 81,115,095
Contributions 37,500,000 (37,500,000)
At December 31, 2015 P
=389,761,188 P
=331,438,283 P
=58,322,905

Changes in net pension liabilities in 2014 are as follows:

Present value of
defined benefit Fair value Net pension
obligation of plan assets liability
At January 1, 2014 P
=323,628,300 P
=247,136,350 P
=76,491,950
Pension expense in consolidated
statement of income:
Current service cost 25,747,500 25,747,500
Net interest 11,520,550 12,925,231 (1,404,681)
37,268,050 12,925,231 24,342,819
Benefits paid (6,499,177) (6,197,826) (301,351)

(Forward)

*SGVFS018923*
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Present value of
defined benefit Fair value Net pension
obligation of plan assets liability
Remeasurements in other comprehensive
income:
Experience adjustments (P
=66,632,373) =
P (P
=66,632,373)
Changes in financial assumptions 18,851,200 18,851,200
Return on plan assets, excluding net
interest 15,140,234 (15,140,234)
(47,781,173) 15,140,234 (62,921,407)
Contributions 28,000,000 (28,000,000)
At December 31, 2014 P
=306,616,000 P
=297,003,989 P
=9,612,011

The fund is administered by a trustee bank (Trustee). The Trustee is responsible for investing the
assets. The Groups current strategic investment strategy consists of 50% of equity instruments
and 50% of debt instruments.

The Company expects to contribute about =

P32.1 million to the retirement fund in 2016.

The fair value of net plan assets by class as a percentage of the fair value of total plan assets as of
December 31 are as follows:

2015 2014
Debt instruments
Government securities 25% 32%
AAA rated debt securities 19% 12%
Equity instruments
Financial institutions 25% 38%
Power 12% 4%
Manufacturing and others 8% 5%
Cash and cash equivalents
and others 11% 9%
100% 100%

All equity and debt instruments held have quoted prices in active market.

The principal actuarial assumptions used to determine retirement benefits of the Company are as
follows:

SMSI SAMC
2015 2014 2015 2014
Discount rate per annum 4.90% 4.46% 4.97% 4.59%
Average annual increase in salary 10.00% 10.00% 10.00% 10.00%
Turnover rate A scale ranging A scale ranging A scale ranging A scale ranging
from 8% at age 20 from 8% at age 20 from 10% at age from 10% at age
decreasing to 0% decreasing to 0% 20 decreasing to 20 decreasing to
at age 60 at age 60 0% at age 50 5% at age 49

*SGVFS018923*
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The sensitivity of the present value of the defined benefit obligation with respect to the possible
changes in the assumptions is as follows:

Increase Effect on defined benefit obligation

(Decrease) SAMC SMSI
Discount rate 2015 1.00% (P
=30,730,217) (P
=7,536,694)
(1.00%) 36,135,713 10,673,394
2014 1.00% (27,683,800) (207,900)
(1.00%) 33,887,940 258,000
Future salary increase 2015 1.00% 36,843,170 10,625,057
(1.00%) (32,056,973) (7,535,313)
2014 1.00% 33,641,780 237,700
(1.00%) (27,812,140) (198,200)

The maturity profile of the undiscounted benefits payment as of December 31 is as follows:

SMSI SAMC
2015 2014 2015 2014
Less than one year =1,012,650
P =4,574
P =75,753,460
P =63,744,019
P
More than one year to five years 824,919 780,986 78,127,397 82,087,216
More than five years to 10 years 2,393,714 1,810,224 187,824,027 174,522,506
More than 10 years to 15 years 6,695,931 2,539,476 252,107,654 245,405,248
More than 15 years to 20 years 6,039,823 241,241 300,854,656 320,510,572
More than 20 years 464,818,236 20,510,778 793,919,840 905,324,161

19. Income Tax

a. The current provision for income tax consists of the following:

2015 2014
RCIT P
=423,331,313 =121,825,692
P
Final tax on interest income 275,888 341,682
P
=423,607,201 =122,167,374
P

b. The components of the Groups net deferred income tax assets and liabilities are as follows:

Net deferred income tax assets of the Company

2015 2014
Deferred income tax assets on:
Allowance for doubtful accounts P
=191,110,919 =167,175,669
P
Unrealized foreign exchange loss - net 47,829,744 46,414,142
Pension liability 14,856,203 2,438,943
Transferred retirement liability 7,088,268
Unamortized past service cost 4,904,172 379,707
NOLCO 775,886
Accrued expenses and others 5,500,436 2,525,615
271,289,742 219,709,962

(Forward)

*SGVFS018923*
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2015 2014
Deferred income tax liabilities on:
Revaluation increment on properties and machinery (P
=183,580,945) (P
=191,725,482)
Unrealized mark-to-market gain (21,719,106)
Unrealized gain on available for sale assets (7,500) (9,900)
(205,307,551) (191,735,382)
Deferred income tax assets - net P
=65,982,191 =27,974,580
P

Net deferred income tax liabilities of SDMC, DPSI and SMSI

2015 2014
Deferred income tax assets on:
NOLCO P
=36,535 =
P
Pension liability 1,123,172
1,159,707
Deferred income tax liabilities on:
Revaluation increment on properties and machinery (154,575,205) (133,113,939)
Unrealized foreign exchange gain (4,931)
154,580,136 (133,113,939)
(P
=153,420,429) (P
=133,113,939)

BSI did not recognize deferred income tax asset on NOLCO as of December 31, 2015
amounting to P
=1.0 million.

c. As of December 31, 2015, BSIs NOLCO that can be claimed as deduction from future
taxable income are as follows:

Period Incurred Expiry Date Amount

December 31, 2015 December 31, 2018 P115,725
=
December 31, 2014 December 31, 2017 853,584
December 31, 2013 December 31, 2016 6,886
=
P976,195

In 2015, SMSI applied its NOLCO amounting to =

P25.9 million incurred in 2014 and 2013 to
its taxable income.

DPSIs NOLCO incurred in 2014 and 2013 amounting to P =5.1 million and = P0.2 million,
respectively, were applied against the taxable income in 2015. The remaining NOLCO
incurred in 2014 amounting to =P121,783 is available for application against future taxable
income until 2017.

d. The reconciliation between the provision for income tax based on statutory income tax rate
and the provision for income tax shown in the statements of income follows:

2015 2014
Income tax at statutory rate P
=560,851,832 =394,492,855
P
Adjustments resulting from:
Income under income tax holiday (ITH)
(Note 25) (158,330,125) (302,225,599)

(Forward)

*SGVFS018923*
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2015 2014
Nondeductible interest and other expenses P
=21,994,814 =3,372,802
P
Interest income subject to final tax (74,566) (77,319)
Income tax at effective rate P
=424,441,955 =95,562,739
P

20. Financial Risk Management Objectives and Policies

The Groups principal financial instruments comprise of long-term loans, liabilities under trust
receipts, short-term loans, due from affiliates and cash and cash equivalents. The main purpose of
these financial instruments is to finance the Groups operating requirements. The other financial
assets and liabilities arising directly from its operations are trade receivables and payables,
refundable deposits and other receivables. The main risks arising from the Groups financial
instruments are liquidity risk, credit risk, foreign currency risk and interest rate risk.

The general risk management policies of the Group, which the BOD reviews and approves, are
discussed below:

Liquidity Risk
Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they
fall due under normal and stress circumstances. The Group tries to maintain its current ratio to at
least 1:1. In addition, sufficient volume of sales is pursued to create enough profit and cash flows
to meet all of the Companys maturing obligations.

The tables below summarize the maturity profile of the Groups financial liabilities (principal and
interest) as of December 31, 2015 and 2014, based on contractual undiscounted payments.

2015
Less than
6 Months 6 to 12 Months 1 to 6 Years Total
Short-term loans* =10,575,801,835
P =
P = =
P P10,575,801,835
Liabilities under trust receipts** 6,103,625,169 6,103,625,169
Trade and other payables*** 611,598,194 113,428,006 725,026,200
Long term debt**** 535,890,168 415,976,234 951,866,402
=17,291,025,198 P
P =535,890,168 =529,404,240 P
P =18,356,319,606
* Inclusive of interest amounting to =
P127,320,145.
** Inclusive of interest amounting to =
P 55,146,572.
*** Excluding nonfinancial liabilities amounting to =
P 1,716,011,804 and inclusive of noncurrent portion of derivative liabilities.
**** Inclusive of interest amounting to =P36,283,831.

2014
Less than
6 Months 6 to 12 Months 1 to 6 Years Total
Short-term loans* =12,223,904,606
P =
P = =
P P12,223,904,606
Liabilities under trust receipts** 5,565,701,510 5,565,701,510
Trade and other payables*** 1,139,044,231 1,139,044,231
Long term debt**** 302,390,353 1,030,080,309 1,332,470,662
=18,928,650,347 P
P =302,390,353 =P1,030,080,309 P=20,261,121,009
* Inclusive of interest amounting to =
P138,303,527.
** Inclusive of interest amounting to =
P 77,267,793.
*** Excluding nonfinancial liabilities amounting to =
P 1,227,498,888.
**** Inclusive of interest amounting to =P54,433,417.

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The profile of the Groups financial assets as of December 31 that will be used to finance its
maturing financial liabilities are as follows:

2015
Less than 6 to 12
6 Months months Total
Cash in banks P
=929,290,332 P= P
=929,290,332
Trade receivables 1,433,440,140 1,932,950,470 3,366,390,610
P
=2,362,730,472 P
=1,932,950,470 P
=4,295,680,942

2014
Less than 6 to 12
6 Months months Total
Cash in banks =832,388,129
P =
P P832,388,129
=
Trade receivables 1,280,366,819 2,066,287,052 3,346,653,871
=2,112,754,948
P =2,066,287,052
P =4,179,042,000
P

Credit Risk
Credit risk arises because the counterparty may fail to perform its obligations. With respect to
credit risk arising from the financial assets of the Company, the exposure to credit risk arises from
default of the counterparty.

To manage the risk, all new customers undergo credit evaluation. A regular/annual review and
evaluation of accounts is being performed, to assess the credit standing of customers. There are
no concentrations of credit risk.

Gross Maximum Exposure to Credit Risk

The maximum exposure to credit risk as of December 31 is equal to the carrying amount of
instruments except for derivatives which are supported by master netting agreement:

2015
Gross amounts
offset in
accordance
Gross with the Net amount Fair value of
Maximum offsetting presented in Master netting financial
Exposure criteria balance sheet agreement collateral Net exposure
Financial Assets
Cash in banks = 929,290,332
P =
P P929,290,332,
= =
P = P
P = 929,290,332
Trade receivables 3,366,390,610 3,366,390,610 3,366,390,610
Amounts due from affiliates 2,984,568,493 2,984,568,493 2,984,568,493
Other receivables 54,263,493 54,263,493 54,263,493
Refundable deposits 121,442,438 121,442,438 121,442,438
Derivative assets 210,450,665 210,450,665 169,587 210,281,078
= 7,666,406,031
P =
P = 7,666,406,031
P = 169,587
P = P
P = 7,666,236,444

Financial Liabilities
Derivative liabilities
= 138,053,644
P =
P = 138,053,644
P = 169,587
P =
P = 137,884,057
P

2014
Gross amounts
offset in
Gross accordance with Net amount Fair value of
Maximum the offsetting presented in Master netting financial
Exposure criteria balance sheet agreement collateral Net exposure
Financial Assets
Cash in banks P
=832,388,129 P
= P=832,388,129 =
P P
= P=832,388,129
Trade receivables 3,346,653,871 3,346,653,871 3,346,653,871

(Forward)

*SGVFS018923*
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2014
Gross amounts
offset in
Gross accordance with Net amount Fair value of
Maximum the offsetting presented in Master netting financial
Exposure criteria balance sheet agreement collateral Net exposure
Amounts due from affiliates P
=4,235,199,354 P
= P=4,235,199,354 =
P P
= P=4,235,199,354
Other receivables 265,708,784 265,708,784 265,708,784
Refundable deposits 140,422,145 140,422,145 140,422,145
Derivative assets 43,700,625 43,700,625 43,700,625
P
=8,864,072,908 P
= P=8,864,072,908 P
= P
= P=8,864,072,908

Financial Liabilities
Derivative liabilities P
=71,908,835 P
= P
=71,908,835 =
P P
= P
=71,908,835

The tables below show the credit quality of financial assets as of December 31.

2015
Past Due
Neither Past Due nor Impaired but Not
High Grade Standard Grade Impaired Impaired Total
Cash in banks P
=929,290,332 P
= P
= P
= P
=929,290,332
Trade receivables 1,433,440,140 1,932,950,470 79,784,168 3,446,174,778
Amounts due from affiliates 2,984,568,493 557,252,229 3,541,820,722
Other receivables 54,263,493 54,263,493
Refundable deposits 121,442,438 121,442,438
P
=5,523,004,896 P
= P
=1,932,950,470 P
=637,036,397 P
=8,092,991,763

2014
Past Due
Neither Past Due nor Impaired but Not
High Grade Standard Grade Impaired Impaired Total
Cash in banks P
=832,388,129 =
P =
P P
= =
P832,388,129
Trade receivables 1,280,366,819 2,066,287,052 3,346,653,871
Amounts due from affiliates 4,235,199,354 557,252,229 4,792,451,583
Other receivables 265,708,784 265,708,784
Refundable deposits 140,422,145 140,422,145
P
=6,754,085,231 P
= P
=2,066,287,052 P
=557,252,229 P=9,377,624,512

High grade accounts consist of receivables from customers and other counterparties and
refundable deposits with good credit standing with the Group and with history of no or little delay
in payments. With respect to the Groups cash, the counterparties to these instruments are various
reputable financial institutions evaluated and duly approved by the Groups BOD. Standard grade
accounts consist of receivables from customers and other counterparties with good credit standing
with the Group but have existing arrangements with the Group for term extensions. The Group
constantly monitors the receivables from these customers in order to identify any potential adverse
changes in the credit quality.

Aging analysis of past due but not impaired financial assets as of December 31 is as follows:

130 days 3160 days 6190 days 91120 days Over 120 days Total
2015 P
=916,881,384 P
=437,197,113 P
=251,466,327 P
=123,808,583 P
=203,597,063 P=1,932,950,470
2014 990,346,183 435,166,588 231,019,347 197,323,555 212,431,379 2,066,287,052

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows from the Groups foreign
currency-denominated assets and liabilities may fluctuate due to changes in foreign exchange
rates. The Group continuously evaluates the movements of foreign exchange rates with the
possible risk given its financial position. The Group uses foreign currency forwards, swaps and
options to economically hedge a portion of its exposure.

*SGVFS018923*
 - 44 -

Foreign Currency-denominated Financial Assets and Financial Liabilities

Information on the Groups foreign currency-denominated monetary financial assets and financial
liabilities and their Peso equivalents are as follows:

2015 2014
Foreign Peso Foreign Peso
Currency Amount Equivalent Currency Amount Equivalent
Assets
Cash USD 628,896 P
= 29,595,846 USD 103,226 P
=4,616,269
Liabilities
Short-term loans USD (75,004,729) (3,529,722,547) USD (212,701,689) (9,326,178,901)
Liabilities under trust receipts USD (31,730,669) (1,493,245,283) USD (16,974,883) (759,116,773)
(5,022,967,830) (10,085,295,674)
Total (P
= 4,993,371,984) (P
=10,080,679,405)

As of December 31, 2015 and 2014, the closing exchange rate was P
=47.06 and =
P44.72 for each
U.S. dollar (USD), respectively.

The following table demonstrates the sensitivity to a reasonably possible change in the foreign
exchange rates, with all other variables held constant, of the Groups income before tax (due to
revaluation of monetary assets and liabilities). There is no impact on equity other than those already
affecting pretax income.

Change in Foreign
Currency Rate Effect on
Foreign Currency as Against Peso Pretax Income
2015 USD Increase by 4.5% (P
=224,701,439)
Decrease by 4.5% 224,701,439
2014 USD Increase by 4.5% (P
=453,630,573)
Decrease by 4.5% 453,630,573

The change in foreign currency rate is based on the Groups estimate of expected change
considering historical trends and experiences.

Positive change in foreign currency rate reflects a weaker peso against foreign currency. On the
other hand, a negative change in currency rate reflects a stronger peso against foreign currency.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Groups exposure to the risk for
changes in market interest rates relates primarily to the Groups long-term debt obligations subject
to floating interest rate. The Group relies on budgeting and forecasting techniques to address cash
flows concerns. The Companys exposure to interest rate risk is related primarily to fair value
interest rate risk.

21. Capital Management

The primary objective of the Groups capital management is to ensure that the Group maintains
sufficient financial resources to support its business, meet its obligations and enhance
shareholders value. Towards this end, management actively seeks and evaluates alternative
sources of financing, optimum utilization of resources, cost effectiveness and efficiencies in the
Groups business processes and profit enhancement given the evolving threats and opportunities in
the business environment.

*SGVFS018923*
 - 45 -

The effectiveness of capital management is currently measured by relating earnings before

interests, taxes, depreciation and amortization (EBITDA) with total assets.

2015 2014
Income before income tax P
=1,869,506,105 =1,314,976,182
P
Add:
Financing charges 1,028,332,321 701,013,060
Depreciation and amortization
(Notes 14, 15 and 16) 138,221,539 107,120,759
EBITDA =3,036,059,965 P
P =2,123,110,001
Total Assets =26,904,605,511 P
P =26,769,263,787
EBITDA over Total Assets 11% 8%

EBITDA is a non-PFRS measure.

22. Financial Assets and Financial Liabilities

Fair Value and Fair Value Hierarchy

The table below presents the carrying amounts and fair values of the Groups financial assets and
financial liabilities as of December 31 for which their fair values are disclosed.

2015
Quoted prices in Significant Significant
Carrying Fair active markets observable unobservable
Value Value (Level 1) inputs (Level 2) inputs (Level 3)
Assets and liabilities measured at fair
value:
Derivative assets =
P210,450,665 =
P210,450,665 P
= =
P210,450,665 P
=
AFS financial assets 875,500 875,500 875,500
Property, plant and equipment at
appraised values 4,020,884,350 4,020,884,350 4,020,884,350
Derivative liabilities 138,053,644 138,053,644 138,053,644

Assets and liabilities for which fair

values are disclosed:
Refundable deposits 121,442,438 115,524,223 115,524,223
Investment properties 41,513,279 63,435,007 63,435,007
Term loans 915,582,571 898,403,368 898,403,368

2014
Quoted prices in Significant Significant
Carrying Fair active markets observable unobservable
Value Value (Level 1) inputs (Level 2) inputs (Level 3)
Assets and liabilities measured at fair
value:
Derivative assets P
=43,700,625 P
=43,700,625 =
P P
=43,700,625 =
P
AFS financial assets 915,500 915,500 915,500
Property, plant and equipment at
appraised values 3,843,411,460 3,843,411,460 3,843,411,460
Derivative liabilities 71,908,835 71,908,835 71,908,835

Assets and liabilities for which fair

values are disclosed:
Refundable deposits 140,422,145 130,847,84 130,847,84
Investment properties 44,112,393 63,435,007 63,435,007
Term loans 1,278,037,245 1,192,344,774 1,192,344,774

There were no transfers between hierarchy levels in 2015 and 2014.

*SGVFS018923*
 - 46 -

The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value:

Derivatives
The fair values of flexi-forward contracts, currency forward contracts and cross currency swap
contract are calculated by reference to current forward exchange rates for contracts with similar
maturity profiles. These derivative financial instruments are valued using valuation techniques,
which employs the use of market observable inputs.

AFS Financial Assets

The fair values of publicly-traded instruments and similar investments are based on the quoted bid
prices.

As of December 31, 2015 and 2014, unrealized loss on AFS financial assets, net of deferred
income tax, recognized in equity amounted to P
=0.61 million and =
P0.57 million, respectively. Net
changes in fair value of the AFS investments included in OCI amounted to P=37,600 loss (net of
P
=2,400 deferred income tax) in 2015 and =P94,000 gain (net of P=6,000 deferred income tax) in
2014.

Refundable Deposits
The fair value of refundable deposits is estimated by discounting future cash flows using the
market rates for similar type of transactions. Discount rate used 6.4% in 2015 and 6.0% in 2014.

Term Loans
The fair value of term loans is estimated by discounting future cash flows using the market rates
for similar type of transactions. Discount rates used range from 5.6% to 8.5% in 2015 and 5.6% to
7.2% in 2014.

Other Financial Instruments

The carrying amounts of cash in banks, receivables, short-term loans, liabilities under trust
receipts and trade and other payables approximate their fair values due to the relatively short-term
maturities of these financial instruments.

Derivative Financial Instruments

The derivative financial instruments set out in this section have been entered into to achieve the
Companys risk management objectives. The Companys derivative financial instruments are
accounted for at fair value through profit or loss.

The following table provides information about the Companys derivative financial instruments
outstanding and the related fair values as of December 31:

2015 2014
Assets Liabilities Assets Liabilities
Current
Cross currency swap P
=20,018,792 P
=20,018,792 =4,302,803
P P
=
Flexi-forwards 9,465,014 27,748,935
Vanilla forwards 77,003,867 4,606,846 44,159,900
Noncurrent
Cross currency swap 113,428,006 113,428,006 29,932,808
P
=210,450,665 P
=138,053,644 =43,700,625
P =71,908,835
P

*SGVFS018923*
 - 47 -

As of December 31, 2015 and 2014, the current portions of positive and negative fair values of
derivative positions are classified under Other current assets and Trade and other payables,
respectively.

Cross currency swap

The Companys cross currency swap contracts are carried at fair value in the balance sheet with
fair value changes directly recognized in profit or loss. The Companys outstanding cross
currency swaps contracts are to swap USD currencies with Peso. The notional amount is $35.5
million and $40.6 million as of December 31, 2015 and 2014, respectively.

Flexi-forwards
The Companys flexi-forward contracts are carried at fair value in the balance sheet with fair value
changes directly recognized in profit or loss. The notional amount of these instruments amounted
to $81.5 million. The net negative fair value of these derivative financial instruments amounts to
P
=18.3 million as of December 31, 2014 (nil in 2015).

Vanilla forwards
The Companys vanilla forward contracts are carried at fair value in the balance sheet with fair
value changes directly recognized in profit or loss. The notional amount of these instruments
amounted to $112.7 million and $117.7 million as of December 31, 2015 and 2014, respectively.
The negative fair value of these derivative financial instruments amounts to
=
P4.6 million and =P44.2 million as of December 31, 2015 and 2014, respectively. The positive fair
value of these derivative financial instruments amounts to =
P77.0 million as of December 31, 2015.

Fair value changes on derivatives

The net change in the fair values of all derivative instruments is recognized under Foreign
exchange loss - net of the statements of income. The net changes in the fair values of all
derivative instruments are as follows:

2015 2014
Beginning of year (P
=28,208,210) =
P
Net changes in fair values of derivatives during the
year (189,181,695) (158,095,513)
Fair value of settled instruments 289,786,926 129,887,303
End of year P
=72,397,021 (P
=28,208,210)

23. Commitments

The Company has a 10-year operating lease contract up to January 8, 2017 for its office space.
This is subject to escalation rate of 5% to 10% annually. The Company also has a one year
operating lease agreement covering a warehouse building.

Future minimum rental commitments under the foregoing non-cancellable lease agreement follow:

2015 2014
Within one year P
=8,085,986 =3,163,588
P
After one year but not more than five years 220,350 3,231,622
P
=8,306,336 =6,395,210
P

These leases require deposits which are refundable upon termination of the contracts.

*SGVFS018923*
 - 48 -

24. Summarized Financial Information of Subsidiaries

SDMC

December 31, December 31,

2015 2014
Total current assets P
=64,759 =47,788
P
Total noncurrent assets 400,825,000 400,928,125
Total current liabilities 15,529,147 16,135,702
Total noncurrent liabilities 104,727,273 104,727,273
Equity 280,633,339 280,112,938

2015 2014
Lease income P
=4,800,000 P4,800,000
=
Income before income tax 743,430 30,680,989
Net income / Total comprehensive income 520,401 21,476,692

BSI

December 31, December 31,

2015 2014
Total current assets P
=671,101 =3,536,165
P
Total noncurrent assets 354,176,315 347,347,501
Total current liabilities 354,800,624 350,484,548
Total noncurrent liabilities 4,931
Equity 41,861 399,118

2015 2014
Interest income P
=3,036 P3,472
=
Loss before income tax 96,251 850,112
Net loss / Total comprehensive loss 357,257 594,037

DPSI

December 31, December 31,

2015 2014
Total current assets P
=82,424,912 =14,381,690
P
Total noncurrent assets 1,236,971,464 991,568,347
Total current liabilities 501,442,564 1,016,580,641
Total noncurrent liabilities 13,909,055
Equity (Capital deficiency) 804,044,757 (10,630,604)

2015 2014
Interest income P
=8,613 P6,709
=
Loss before income tax 945,578 11,961,502
Net loss 1,428,854 11,495,212
Total comprehensive income (loss) 31,110,855 (11,495,212)

*SGVFS018923*
 - 49 -

SMSI

December 31, December 31,

2015 2014
Total current assets P
=96,487,041 =102,328,143
P
Total noncurrent assets 1,216,795,460 1,230,207,224
Total current liabilities 769,340,056 750,610,338
Total noncurrent liabilities 431,104,046 514,671,465
Equity 112,838,399 67,253,564

2015 2014
Tolling income P
=390,036,090 =
P
Income (loss) before income tax 66,944,520 (26,197,106)
Net income (loss) 46,874,603 (18,332,571)
Total comprehensive income 45,584,835 67,064,344

25. Registration with the Board of Investments (BOI)

On February 23, 2011, the BOI approved the Companys registration under the Omnibus
Investments Code of 1987, as amended (Executive Order No. 226), as an Expanding Producer of
Philippine National Standards (PNS) 49 Concrete Reinforcing Steel Bars on a non-pioneer status.
The registration covers the Companys activity in Cebu. Under the terms of its registration, the
Company is required to achieve certain production and sales volume of steel bars that must be
compliant with the applicable PNS.

The Company is also registered with the BOI as a New Producer of Reinforcing Steel Bars under
the Red Program on a pioneer status, under Executive Order No. 226. The registration covers the
Companys activity in Batangas. Under the terms of its registration, the Company is required to
achieve certain production and sales volume of steel bars.

As a registered enterprise, the Company is entitled to certain tax incentives which include, among
others:

Income tax holiday (ITH) for three (3) years from July 2011 for Cebu activity and
August 2014 for Batangas activity, or actual start of commercial operations, whichever is
earlier, but in no case earlier than the dates of registration. Only the income generated
from the registered activity in Cebu and Batangas shall be entitled to ITH;
For the first five (5) years from the date of registration, additional deduction from taxable
income of 50% of the wages corresponding to the additional workers hired, provided that
it is not simultaneously availed with the ITH; and
Tax credit for taxes and duties paid on raw materials for its export product.

Tax benefit availed in 2015 and 2014 amounted to P

=158.3 million and =
P310.3 million,
respectively.

*SGVFS018923*
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26. Contingencies

There are certain legal cases and other contingencies that are pending or may be asserted in the
future against the Group from litigation and claims incident to the ordinary course of business.
Management believes that any sum the Group may have to pay in connection with any of these
matters would not have a material adverse effect on the Groups financial position or operating
results.

*SGVFS018923*