Cal-Comp Technology (Philippines), Inc. and Subsidiary€¦ · summary of significant accounting policies. In our opinion, the accompanying interim consolidated financial statements

Cal-Comp Technology (Philippines),Inc. and Subsidiary

Interim Consolidated Financial StatementsJune 30, 2019 and December 31, 2018For the Six Months Ended June 30, 2019and 2018

and

Independent Auditor’s Report

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C O V E R S H E E Tfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

C S 2 0 1 2 1 0 3 0 1

C O M P A N Y N A M E

C A L - C O M P T E C H N O L O G Y ( P H I L I P P I N

E S ) , I N C . A N D S U B S I D I A R Y

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

B L O C K 7 , L O T 1 , M A I N B O U L E V A R D

, L I M A T E C H N O L O G Y C E N T E R - S E Z L

I P A C I T Y , B A T A N G A S

Form Type Department requiring the report Secondary License Type, If Applicable

A A C F S C R M D N / A

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

N/A (043) 233-8888 N/A

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

12 Third Thursday of June 6/30

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Michael Hsueh [email protected] (043) 233-8888 0917-862-1642

CONTACT PERSON’s ADDRESS

Block 7, Lot 1, Main Boulevard, Lima Technology Center - SEZ Lipa City, Batangas

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commissionwithin thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.

2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the Commissionand/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

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INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of DirectorsCal-Comp Technology (Philippines), Inc. and SubsidiaryBlock 7, Lot 1, Main BoulevardLima Technology Center-SEZLipa City, Batangas

Opinion

We have audited the interim consolidated financial statements of Cal-Comp Technology (Philippines), Inc.and its subsidiary (the Group), which comprise the consolidated statements of financial position as ofJune 30, 2019 and December 31, 2018, the consolidated statements of comprehensive income,consolidated statements of changes in equity and consolidated statements of cash flows for the six-monthperiods ended June 30, 2019 and 2018, and consolidated notes to the financial statements, including asummary of significant accounting policies.

In our opinion, the accompanying interim consolidated financial statements present fairly, in all materialrespects, the financial position of the Group as of June 30, 2019 and December 31, 2018 and theirconsolidated financial performance and their consolidated cash flows for the six-month periods endedJune 30, 2019 and 2018 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Group in accordance withthe Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with theethical requirements that are relevant to our audit of the consolidated financial statements in thePhilippines, and we have fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

Management is responsible for the preparation and fair presentation of the consolidated financialstatements in accordance with PFRSs, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, October 4, 2018, valid until August 24, 2021SEC Accreditation No. 0012-FR-5 (Group A), November 6, 2018, valid until November 5, 2021

A member firm of Ernst & Young Global Limited

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In preparing the consolidated financial statements, management is responsible for assessing the Group’sability to continue as a going concern, disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless management either intends to liquidate the Group or tocease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee thatan audit conducted in accordance with PSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these consolidated financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

§ Identify and assess the risks of material misstatement of the consolidated financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.

§ Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.

§ Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

§ Conclude on the appropriateness of management’s use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up tothe date of our auditor’s report. However, future events or conditions may cause the Group to ceaseto continue as a going concern.

§ Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.


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§ Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.We are responsible for the direction, supervision and performance of the audit. We remain solelyresponsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.

SYCIP GORRES VELAYO & CO.

Ma. Genalin Q. ArevaloPartnerCPA Certificate No. 108517SEC Accreditation No. 1613-A (Group A), March 2, 2017, valid until March 1, 2020Tax Identification No. 224-024-926BIR Accreditation No. 08-001998-123-2017, February 9, 2017, valid until February 8, 2020PTR No. 7332522, January 3, 2019, Makati City

August 6, 2019


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The Stockholders and the Board of DirectorsCal-Comp Technology (Philippines), Inc. and Subsidiary

Opinion

We have audited the interim consolidated financial statements of Cal-Comp Technology (Philippines), Inc.and its subsidiary (the Group), which comprise the consolidated statements of financial position as ofJune 30, 2019 and December 31, 2018, the consolidated statements of comprehensive income,consolidated statements of changes in equity and consolidated statements of cash flows for the six-monthperiods ended June 30, 2019 and 2018, and consolidated notes to the financial statements, including asummary of significant accounting policies.

In our opinion, the accompanying interim consolidated financial statements present fairly, in all materialrespects, the financial position of the Group as of June 30, 2019 and December 31, 2018 and theirconsolidated financial performance and their consolidated cash flows for the six-month periods endedJune 30, 2019 and 2018 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Group in accordance withthe Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with theethical requirements that are relevant to our audit of the consolidated financial statements in thePhilippines, and we have fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

Management is responsible for the preparation and fair presentation of the consolidated financialstatements in accordance with PFRSs, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.


Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph



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In preparing the consolidated financial statements, management is responsible for assessing the Group’sability to continue as a going concern, disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless management either intends to liquidate the Group or tocease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee thatan audit conducted in accordance with PSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these consolidated financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

§ Identify and assess the risks of material misstatement of the consolidated financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.

§ Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.

§ Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

§ Conclude on the appropriateness of management’s use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up tothe date of our auditor’s report. However, future events or conditions may cause the Group to ceaseto continue as a going concern.

§ Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.


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§ Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.We are responsible for the direction, supervision and performance of the audit. We remain solelyresponsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.



August 6, 2019


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CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYINTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(With comparative figures as at December 31, 2018)

June 30 December 312019 2018

ASSETS

Current AssetsCash (Note 4) $22,901,955 $25,146,366Trade and other receivables (Notes 5 and 13) 122,372,880 94,899,293Inventories (Note 6) 107,559,276 80,132,090Other current assets 2,205,803 1,886,797Total Current Assets 255,039,914 202,064,546

Noncurrent AssetsProperty, plant and equipment (Note 7) 86,757,843 89,114,361Investment property (Note 8) 39,584,009 28,757,841Right-of-use assets (Notes 2 and 9) 21,486,107 –Intangible assets (Note 10) 308,266 21,117,050Other noncurrent assets 3,416,496 2,147,113Total Noncurrent Assets 151,552,721 141,136,365

TOTAL ASSETS $406,592,635 $343,200,911

LIABILITIES AND EQUITY

Current LiabilitiesTrade and other payables (Note 11) $110,771,995 $61,390,832Loans payable (Note 12) 94,000,000 104,000,000Due to related parties (Note 13) 16,049,454 14,193,641Current portion of lease liability (Notes 2 and 19) 710,064 –Income tax payable 98,972 56,401Total Current Liabilities 221,630,485 179,640,874

Noncurrent LiabilitiesLease liability - net of current portion (Notes 2 and 19) 2,671,150 –Retirement benefit obligation (Note 20) 142,741 101,522Deferred income tax liability - net (Note 22) 331,113 557,127Total Noncurrent Liabilities 3,145,004 658,649Total Liabilities 224,775,489 180,299,523

Equity (Note 21)Capital stock 22,658,478 22,658,478Additional paid-in capital 81,970,043 81,970,043Retained earnings 68,932,355 50,016,597Equity reserve (Note 2) 8,000,000 8,000,000Remeasurement of employee benefits (Note 20) 256,270 256,270Total Equity 181,817,146 162,901,388

TOTAL LIABILITIES AND EQUITY $406,592,635 $343,200,911

See accompanying Notes to Interim Consolidated Financial Statements.

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CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYINTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Six Months Ended June 302019 2018

REVENUESSale of goods (Notes 13 and 14) $277,407,816 $190,610,510Rental revenue (Notes 8 and 19) 1,344,742 1,209,208

278,752,558 191,819,718

COSTS (Note 15)Cost of goods sold 240,523,140 166,871,632Cost of rent 1,019,454 838,464

241,542,594 167,710,096

GROSS PROFIT 37,209,964 24,109,622

GENERAL AND ADMINISTRATIVE EXPENSES (Note 16) 6,605,970 4,691,125

OTHER INCOME (CHARGES) - NetInterest expense (Note 12) (1,501,459) (1,067,057)Net foreign exchange gains (losses) (117,460) 791,559Scrap sales 159,506 59,419Interest accretion on lease liability (Note 19) (87,006) –Interest income (Note 4) 6,905 5,148Other charges (63,026) (912)

(1,602,540) (211,843)

INCOME BEFORE INCOME TAX 29,001,454 19,206,654

PROVISION FOR (BENEFIT FROM)INCOME TAX (Note 22)

Current 775,238 132,897Deferred (226,014) 406,000

549,224 538,897

NET INCOME 28,452,230 18,667,757

OTHER COMPREHENSIVE INCOMEItem not to be reclassified to profit or loss in subsequent periods:

Remeasurement of employee benefits (Note 20) – –

TOTAL COMPREHENSIVE INCOME $28,452,230 $18,667,757

EARNINGS PER SHARE (Note 27) $0.0257 $0.0168


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CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYINTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

Capital Stock(Note 21)

Additional Paid-in Capital

(Note 21)

RetainedEarnings(Note 21)

Equity Reserve(Notes 2 and 21)

Remeasurement ofEmployee Benefits

(Note 20) TotalBalances at January 1, 2019 $22,658,478 $81,970,043 $50,016,597 $8,000,000 $256,270 $162,901,388Total comprehensive income − − 28,452,230 − − 28,452,230Cash dividends declared (Note 21) − − (9,536,472) − − (9,536,472)Balances at June 30, 2019 $22,658,478 $81,970,043 $68,932,355 $8,000,000 $256,270 $181,817,146

Balances at January 1, 2018 $5,000,000 $− $18,599,033 $108,000,000 ($47,593) $131,551,440Issuance of shares 17,658,478 82,341,528 − − − 100,000,006Share issue costs − (371,485) − − − (371,485)Adjustment for the acquisition of KPPH − − − (100,000,000) − (100,000,000)Total comprehensive income − − 18,667,757 − − 18,667,757Balances at June 30, 2018 $22,658,478 $81,970,043 $37,266,790 $8,000,000 ($47,593) $149,847,718See accompanying Notes to Interim Consolidated Financial Statements.

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CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYINTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax $29,001,454 $19,206,654Adjustments for:

Depreciation and amortization (Notes 15, 16 and 17) 5,597,231 3,941,199Interest expense (Note 12) 1,501,459 1,067,057Interest accretion on lease liability (Note 19) 87,006 −Loss on retirement and disposal of machinery and equipment 61,987 −Net unrealized foreign exchange losses (gains) 45,410 (22,550)Retirement benefit expense (Note 20) 40,585 1,520Interest income (Note 4) (6,905) (5,148)

Operating income before working capital changes 36,328,227 24,188,732Decrease (increase) in:

Trade and other receivables (27,412,120) (34,151,019)Inventories (27,427,186) (15,945,377)Other current assets (318,471) 766,529

Increase in:Trade and other payables 48,698,023 27,005,457Due to related parties 3,217,087 1,332,656

Net cash generated from operations 33,085,560 3,196,978Interest paid (1,556,872) (1,020,682)Income taxes paid (731,346) (150,472)Interest received 6,905 5,148Net cash flows provided by operating activities 30,804,247 2,030,972

CASH FLOWS FROM INVESTING ACTIVITIESAdditions to:

Property, plant and equipment (Notes 7 and 24) (14,791,920) (9,054,490)Investment property (Note 8) (53,481) (1,091,224)Intangible assets (Note 10) − (182,470)Other noncurrent assets − (57,427)

Net cash flows used in investing activities (14,845,401) (10,385,611)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from:

Loans 141,500,000 87,220,000Issuance of shares (Note 21) − 100,000,006

Payments for:Loans (151,500,000) (84,153,647)Dividends (8,130,096) −Lease liability (153,172) −Acquisition of KPPH (Note 21) − (100,000,000)Share issue costs (Note 21) − (371,485)

Net cash flows from (used in) financing activities (18,283,268) 2,694,874

(Forward)

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EFFECT OF EXCHANGE RATE CHANGES ON CASH $80,011 ($73,097)

NET DECREASE IN CASH (2,244,411) (5,732,862)

CASH AT BEGINNING OF PERIOD 25,146,366 26,403,834

CASH AT END OF PERIOD (Note 4) $22,901,955 $20,670,972


20

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CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Cal-Comp Technology (Philippines), Inc. (the Parent Company) was registered with the PhilippineSecurities and Exchange Commission (SEC) on June 1, 2012 primarily to engage in the importationof raw materials, experimentation, testing and manufacturing of electronic equipment of every kind aswell as their spare parts; the calibration of testing tools and equipment in support of themanufacturing processes; and to engage in the marketing, sale and distribution for wholesale of themanufactured electronic equipment in the Philippines and for export thereof.

On June 25, 2012, the Parent Company was registered with the Philippine Economic Zone Authority(PEZA) pursuant to the provisions of Presidential Decree No. 66, as amended, under Republic ActNo. 7916 “The Special Economic Zone Act of 1995” to engage in the manufacture of electronicproducts, computer peripherals and telecommunications products.

Under the terms and conditions of the registration, the Parent Company is subject to certainrequirements primarily related to the monitoring of its registered activities. As a non-pioneerregistered enterprise, the Parent Company is entitled to certain tax and non-tax incentives including,among others, income tax holiday (ITH) for four (4) years. Tax incentives can be extended foranother two years provided certain conditions are met. Effective October 1, 2017, the ParentCompany already applies the 5% preferential tax on the gross income from sale of electronicproducts.

On March 11, 2016, the Parent Company registered with PEZA another income generating activitypertaining to their leasing facility in Calamba, Laguna. Income generated from this activity is taxedat 5% on the gross income for such activity. Pursuant to Bureau of Internal Revenue (BIR) RevenueRegulations No. 14-2002, income payments to PEZA registered enterprises under the ITH and 5%Gross Income Tax (GIT) regime are exempted from expanded withholding tax.

All income derived from non-PEZA registered activities shall be subject to the regular corporateincome tax rate of 30%.

On January 22, 2018, Kinpo International (Singapore) Pte. Ltd. (KPSG), a corporation organizedunder the existing laws of Singapore, subscribed to 895,637,700 new shares of the Parent Companyfor $100.0 million representing 80.81% of the outstanding capital stock of the Parent Company,effectively making KPSG as the Parent Company’s immediate parent. Prior to January 22, 2018, theParent Company is a wholly owned subsidiary of Cal-Comp Electronics (Thailand) Public CompanyLimited (CCET), a corporation organized under the existing laws of Thailand. KPSG and CCET aresubsidiaries of Kinpo Electronics, Inc. (KPO), a corporation organized under the existing laws ofTaiwan, which is the Parent Company’s ultimate parent company.

On January 27, 2018, the Parent Company entered into a Deed of Assignment of Shares with KPSG.KPSG legally and beneficially transfers 99.99% of Kinpo Electronics (Philippines), Inc. (KPPH)subscribed capital stock to the Parent Company for and in consideration amounting toP=5,072,000,000 (or $100.0 million), effectively making KPPH as a wholly owned subsidiary of theParent Company. As the Parent Company and its subsidiary, KPPH, are entities under the commoncontrol of KPO before and after the business combination, the business acquisition was accounted forusing the pooling-of-interest method (see Note 2).

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KPPH was incorporated and registered with SEC on January 16, 2014 to engage in the manufactureof electronic products, computer peripherals and telecommunications products. KPPH also leasesout its warehouse facility to PEZA-registered enterprises.

The interim consolidated financial statements comprise the financial statements of the ParentCompany and its subsidiary (collectively called as the “Group”).

The registered office address of the Parent Company is Block 7, Lot 1, Main Boulevard, LimaTechnology Center-SEZ, Lipa City, Batangas.

The accompanying interim consolidated financial statements of the Group were approved andauthorized for issue by the Parent Company’s Board of Directors (BOD) on August 6, 2019.

2. Summary of Significant Accounting Policies

Basis of PreparationThe Group’s interim consolidated financial statements have been prepared under the historical costbasis and are presented in United States dollar ($), which is the Group’s functional currency.Amounts are rounded to the nearest dollar unless otherwise indicated. These interim consolidatedfinancial statements have been prepared solely for inclusion in the offering circular to be prepared bythe Group in relation to its planned initial public offering in 2019.

Statement of ComplianceThe Group’s interim consolidated financial statements have been prepared in accordance with thePhilippine Financial Reporting Standards (PFRSs).

Basis of ConsolidationThe Parent Company and its subsidiary, KPPH, are entities under the common control of KPO beforeand after the business combination. Accordingly, the acquisition of KPPH from KPSG wasaccounted for using the pooling-of-interest method. The interim consolidated financial statementsinclude that of the Parent Company and of KPPH even for the periods prior to January 27, 2018, thedate of the business combination, as if the business combination had taken place at the beginning ofthe earliest comparative period presented (see Note 1).

The Group controls an investee if and only if the Group has:§ 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.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactionsbetween members of the Group are eliminated in full on consolidation.

The interim consolidated financial statements of the subsidiary are prepared for the same reporting yearas the Parent Company using consistent accounting policies.

Common Control Business CombinationsBusiness combinations involving entities or businesses under common control are businesscombinations in which all of the combining entities or businesses are ultimately controlled by thesame party or parties both before and after the business combination, and that control is not transitory.

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Business combinations under common control are accounted for similar to pooling-of-interestmethod.

Under the pooling-of-interest method:§ The assets, liabilities and equity of the acquired companies for the reporting period in which the

common control business combinations occur and for the comparative periods presented, areincluded in the interim consolidated financial statements at their carrying amounts as if thecombinations had occurred from the beginning of the earliest period presented in the interimconsolidated financial statements, regardless of the actual date of the combination;

§ No adjustments are made to reflect the fair values, or recognize any new assets or liabilities at thedate of the combination. The only adjustments would be to harmonize accounting policiesbetween the combining entities;

§ No ‘new’ goodwill is recognized as a result of the business combination;§ Retained earnings reflect the accumulated earnings of the Parent Company and the earnings of

KPPH as if the entities had always been combined;§ Prior to the acquisition of KPPH in 2018, equity reserve pertains to the total legal capital of

KPPH. On the date of acquisition, the total consideration for the acquisition of KPPH wasadjusted against equity reserve. As of December 31, 2018 and June 30, 2019, equity reservepertains to the difference between the consideration for the acquisition and the legal capital ofKPPH which is separately presented in the equity section of the interim consolidated statement offinancial position; and,

§ The interim consolidated statements of comprehensive income and interim consolidatedstatements of cash flows reflect the results of the Parent Company and KPPH, irrespective ofwhen the combination took place.

Changes in Accounting PoliciesThe accounting policies adopted are consistent with those of the previous financial year, except thatthe Group has adopted the following new accounting pronouncements starting January 1, 2019.

§ Amendments to PFRS 9, Prepayment Features with Negative Compensation

Under PFRS 9, a debt instrument can be measured at amortized cost or at fair value through othercomprehensive income (OCI), provided that the contractual cash flows are ‘solely payments ofprincipal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrumentis held within the appropriate business model for that classification. The amendments to PFRS 9clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance thatcauses the early termination of the contract and irrespective of which party pays or receivesreasonable compensation for the early termination of the contract.

The amendment does not have any impact on the Group’s interim consolidated financialstatements as it does not have debt instruments with negative compensation prepayment features.

§ PFRS 16, Leases

PFRS 16 was issued in January 2016 and it replaces PAS 17, Leases, IFRIC 4, Determiningwhether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27Evaluating the Substance of Transactions Involving the Legal Form of a Lease. PFRS 16 setsout the principles for the recognition, measurement, presentation and disclosure of leases andrequires lessees to account for all leases under a single on-balance sheet model similar to theaccounting for finance leases under PAS 17. The standard includes two recognition exemptionsfor lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e.,leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee

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will recognize a liability to make lease payments (i.e., the lease liability) and an asset representingthe right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lesseeswill be required to separately recognize the interest expense on the lease liability and thedepreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events(e.g., a change in the lease term, a change in future lease payments resulting from a change in anindex or rate used to determine those payments). The lessee will generally recognize the amountof the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting underPAS 17. Lessors will continue to classify all leases using the same classification principle as inPAS 17 and distinguish between two types of leases: operating and finance leases. Therefore,PFRS 16 did not have an impact for leases where the Group is the lessor.

Further, PFRS 16 also requires lessees and lessors to make more extensive disclosures than underPAS 17.

Transition to PFRS 16

The Group has chosen to apply the modified retrospective transition method whereby thecumulative effect of initially applying this standard is recognized at the date of initial application,January 1, 2019 by measuring the right-of-use-asset at an amount equal to the lease liability.Accordingly, the comparative consolidated financial statements was not restated.

The Group has elected to apply PFRS 16 to contracts that were previously identified as leasesapplying PAS 17 and IFRIC 4. The Group has elected to apply the practical expedient allowedby this standard to use a single discount rate to a portfolio of leases with reasonably similarcharacteristics.

The effect of PFRS 16 adoption is as follows:

January 1, 2019(As previously stated) Reclassifications Adjustments

January 1, 2019(As restated)

AssetsRight-of-use assets $− $20,644,503 $1,144,489 $21,788,992Land-use rights 21,117,050 (20,644,503) − 472,547

$21,117,050 $− $1,144,489 $22,261,539

LiabilitiesCurrent portion of

lease liability $− $− $244,041 $244,041Lease liability - net of

current portion − − 900,448 900,448$− $− $1,144,489 $1,144,489

As a result of adoption to PFRS 16, land-use rights amounting to $20,644,503 was reclassified toright-of-use assets as at January 1, 2019.

Further, the adoption to PFRS 16 did not have an impact on equity and cash flows as ofJanuary 1, 2019.

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The aggregate lease liability recognized in the interim consolidated statement of financialposition at January 1, 2019 and the Group’s operating lease commitment at December 31, 2018can be reconciled as follows:

Operating lease commitments disclosed at the end of 2018 $1,313,081Effect of discounting those lease commitments at an annual rate of 6% (168,592)Total lease liability recognized as at January 1, 2019 $1,144,489

§ Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement

The amendments to PAS 19 address the accounting when a plan amendment, curtailment orsettlement occurs during a reporting period. The amendments specify that when a planamendment, curtailment or settlement occurs during the annual reporting period, an entity isrequired to:

· Determine current service cost for the remainder of the period after the plan amendment,curtailment or settlement, using the actuarial assumptions used to remeasure the net definedbenefit liability (asset) reflecting the benefits offered under the plan and the plan assets afterthat event

· Determine net interest for the remainder of the period after the plan amendment, curtailmentor settlement using: the net defined benefit liability (asset) reflecting the benefits offeredunder the plan and the plan assets after that event; and the discount rate used to remeasurethat net defined benefit liability (asset).

The amendments also clarify that an entity first determines any past service cost, or a gain or losson settlement, without considering the effect of the asset ceiling. This amount is recognized inprofit or loss. An entity then determines the effect of the asset ceiling after the plan amendment,curtailment or settlement. Any change in that effect, excluding amounts included in the netinterest, is recognized in other comprehensive income.

These amendments did not have any significant impact on the Group’s interim consolidatedfinancial statements.

§ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments clarify that an entity applies PFRS 9 to long-term interests in an associate orjoint venture to which the equity method is not applied but that, in substance, form part of the netinvestment in the associate or joint venture (long-term interests). This clarification is relevantbecause it implies that the expected credit loss model in PFRS 9 applies to such long-terminterests.

The amendments also clarified that, in applying PFRS 9, an entity does not take account of anylosses of the associate or joint venture, or any impairment losses on the net investment,recognized as adjustments to the net investment in the associate or joint venture that arise fromapplying PAS 28, Investments in Associates and Joint Ventures.

Since the Group does not have such long-term interests in its associate and joint venture, theamendments will not have an impact on its interim consolidated financial statements.

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§ Philippine Interpretation IFRIC 23, Uncertainty over Income Tax Treatments

The Interpretation addresses the accounting for income taxes when tax treatments involveuncertainty that affects the application of PAS 12, Income Taxes. It does not apply to taxes orlevies outside the scope of PAS 12, nor does it specifically include requirements relating tointerest and penalties associated with uncertain tax treatments.

The Interpretation specifically addresses the following:§ Whether an entity considers uncertain tax treatments separately§ The assumptions an entity makes about the examination of tax treatments by taxation

authorities§ How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax

credits and tax rates§ How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or togetherwith one or more other uncertain tax treatments. The approach that better predicts the resolutionof the uncertainty needs to be followed.

The Group applies significant judgement in identifying uncertainties over income tax treatments.

The adoption of this Interpretation did not have any significant impact on the Group’sconsolidated financial statements.

§ Annual Improvements to PFRSs 2015–2017 Cycle

· Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements,Previously Held Interest in a Joint Operation

The amendments clarify that, when an entity obtains control of a business that is a jointoperation, it applies the requirements for a business combination achieved in stages,including remeasuring previously held interests in the assets and liabilities of the jointoperation at fair value. In doing so, the acquirer remeasures its entire previously held interestin the joint operation.

A party that participates in, but does not have joint control of, a joint operation might obtainjoint control of the joint operation in which the activity of the joint operation constitutes abusiness as defined in PFRS 3. The amendments clarify that the previously held interests inthat joint operation are not remeasured.


· Amendments to PAS 12, Income Tax Consequences of Payments on Financial InstrumentsClassified as Equity

The amendments clarify that the income tax consequences of dividends are linked moredirectly to past transactions or events that generated distributable profits than to distributionsto owners. Therefore, an entity recognizes the income tax consequences of dividends inprofit or loss, other comprehensive income or equity according to where the entity originallyrecognized those past transactions or events.

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· Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization

The amendments clarify that an entity treats as part of general borrowings any borrowingoriginally made to develop a qualifying asset when substantially all of the activities necessaryto prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning ofthe annual reporting period in which the entity first applies those amendments.

Since the Group’s current practice is in line with these amendments, these amendments didnot have any impact on its interim consolidated financial statements.

Effective beginning on or after January 1, 2020

§ Amendments to PFRS 3, Definition of a Business

The amendments to PFRS 3 clarify the minimum requirements to be a business, remove theassessment of a market participant’s ability to replace missing elements, and narrow thedefinition of outputs. The amendments also add guidance to assess whether an acquired processis substantive and add illustrative examples. An optional fair value concentration test isintroduced which permits a simplified assessment of whether an acquired set of activities andassets is not a business.

An entity applies those amendments prospectively for annual reporting periods beginning on orafter January 1, 2020, with earlier application permitted.

These amendments will apply on future business combinations of the Group.

§ Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies,Changes in Accounting Estimates and Errors, Definition of Material

The amendments refine the definition of material in PAS 1 and align the definitions used acrossPFRSs and other pronouncements. They are intended to improve the understanding of theexisting requirements rather than to significantly impact an entity’s materiality judgements.

An entity applies those amendments prospectively for annual reporting periods beginning on orafter January 1, 2020, with earlier application permitted.

The Group is currently assessing the impact of adopting these amendments.

Effective beginning on or after January 1, 2021

§ PFRS 17, Insurance Contracts

PFRS 17 is a comprehensive new accounting standard for insurance contracts coveringrecognition and measurement, presentation and disclosure. Once effective, PFRS 17 will replacePFRS 4, Insurance Contracts. This new standard on insurance contracts applies to all types ofinsurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of

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entities that issue them, as well as to certain guarantees and financial instruments withdiscretionary participation features. A few scope exceptions will apply.

The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that ismore useful and consistent for insurers. In contrast to the requirements in PFRS 4, which arelargely based on grandfathering previous local accounting policies, PFRS 17 provides acomprehensive model for insurance contracts, covering all relevant accounting aspects.

The core of PFRS 17 is the general model, supplemented by:· A specific adaptation for contracts with direct participation features (the variable fee

approach)· A simplified approach (the premium allocation approach) mainly for short-duration contracts

PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, withcomparative figures required. Early application is permitted.

The Group has assessed that the adoption of this standard does not have any impact on its interimconsolidated financial statements.

Deferred effectivity

§ Amendments to PFRS 10, Consolidated Financial Statements and PAS 28, Sale or Contributionof Assets between an Investor and its Associate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss ofcontrol of a subsidiary that is sold or contributed to an associate or joint venture. Theamendments clarify that a full gain or loss is recognized when a transfer to an associate or jointventure involves a business as defined in PFRS 3, Business Combinations. Any gain or lossresulting from the sale or contribution of assets that does not constitute a business, however, isrecognized only to the extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council (FRSC) deferred the originaleffective date of January 1, 2016 of the said amendments until the International AccountingStandards Board completes its broader review of the research project on equity accounting thatmay result in the simplification of accounting for such transactions and of other aspects ofaccounting for associates and joint ventures.

These amendments are not expected to have any significant impact on the Group’s interimconsolidated financial statements.

Summary of Significant Accounting PoliciesThe principal accounting and financial reporting policies adopted in preparing the interimconsolidated financial statements are as follows:

Fair Value MeasurementCertain assets and liabilities are required to be measured or disclosed at fair value at each reportingdate. Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date.

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The fair value measurement is based on the presumption that the transaction to sell the asset ortransfer 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 participantswould use when pricing the asset or liability, assuming that market participants act in their economicinterest.

A fair value measurement of a nonfinancial asset takes into account a market participant’s ability togenerate economic benefits by using the asset in its highest and best use or by selling it to anothermarket 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 whichsufficient data are available to measure fair value, maximizing the use of relevant observable inputsand minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the Group’s interimconsolidated 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; and§ 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 interim consolidated financial statements on arecurring basis, the Group determines whether transfers have occurred between Levels in thehierarchy by reassessing categorization (based on the lowest level input that is significant to the fairvalue measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities onthe basis of the nature, characteristics and risks of the asset or liability and the level of the fair valuehierarchy as explained above.

Financial Instruments

Date of RecognitionThe Group recognizes a financial asset or a financial liability in the interim consolidated statement offinancial position when it becomes a party to the contractual provisions of the instrument. Purchasesor sales of financial assets that require delivery of assets within the time frame established by regulationor convention in the marketplace are recognized on the settlement date.

Initial Recognition of Financial InstrumentsAll financial assets and liabilities are recognized initially at fair value. Except for financial assetsand financial liabilities at fair value through profit or loss (FVPL), the initial measurement includestransaction costs.

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Classification and measurementThe Group’s financial assets are classified and subsequently measured at FVPL, amortized cost, orfair value through other comprehensive income (FVOCI) in accordance with PFRS 9.

The classification of financial assets is based on the following criteria:(a) the Group’s business model for managing the assets; and,(b) whether contractual cash flow represents ‘solely payments of principal and interest’ on the

principal amount outstanding (the ‘SPPI criterion’).

The classification and measurement of the Group’s debt financial assets are as follows:

At amortized cost. Debt financial assets are measured at amortized cost when the Group’s businessmodel is to hold the financial assets to collect contractual cash flows and the contractual terms of thefinancial assets give rise, on specified dates, to cash flows that represent solely payments of principaland interest.

These financial assets are subsequently measured at amortized cost using the effective interest ratemethod, less allowance for impairment losses. Amortized cost is calculated by taking into accountany discount or premium on acquisition and fees that are an integral part of the effective interest rate.The amortization, if any, is included as interest income in profit or loss. The losses arising fromimpairment of receivables are recognized in profit or loss. The level of allowance for impairmentlosses is evaluated by management on the basis of factors that affect the collectability of accounts.

This classification includes the Group’s cash and trade and other receivables.

The Group classifies its financial liabilities into financial liabilities at FVPL and financial liabilitiesmeasured at amortized cost. Financial instruments are classified as liabilities or equity in accordancewith the substance of the contractual agreement. Interest, dividends, gains and losses relating to afinancial instrument or a component that is a financial liability are reported as expense or income.Distributions to holders of financial instruments classified as equity are charged directly to equityaccount, net of any related income tax benefits.

Financial liabilities at amortized cost. Issued financial liabilities or their components, which are notdesignated at FVPL are categorized as other financial liabilities, where the substance of thecontractual arrangement results in the Group having an obligation either to deliver cash or anotherfinancial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amountof cash or another financial asset for a fixed number of own equity shares. After initialmeasurement, other financial liabilities are subsequently measured at amortized cost using theeffective interest rate method. Amortized cost is calculated by taking into account any discount orpremium on the issue and fees that are an integral part of the effective interest rate.

This accounting policy applies primarily to the Group’s trade and other payables excluding statutorypayables, due to related parties, lease liability and loans payable. Financial liabilities at amortizedcost are classified as current liabilities when these are expected to be settled within twelve monthsfrom the reporting date or the Group does not have an unconditional right to defer settlement for atleast twelve months from the reporting date. Otherwise, these are classified as noncurrent liabilities.

As of June 30, 2019 and December 31, 2018, the Group does not have financial liabilities at FVPL.

Impairment of Financial AssetsThe Group assesses at each reporting date whether there is objective evidence that a financial asset orgroup of financial assets is impaired.

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Impairment losses on the Group’s financial assets are measured following the expected credit loss(ECL) approach. ECLs are based on the difference between the contractual cash flows due inaccordance with the contract and all the cash flows that the Group expects to receive. The shortfall isthen discounted at an approximation to the asset’s original effective interest rate.

For trade receivables measured at amortized cost, the Group applies the simplified approach incalculating the allowance for impairment losses on financial assets. Under the simplified approach,tracking of changes in credit risk is not required and impairment losses is based on the lifetimeexpected credit losses on the financial assets. The Group has established a provision matrix that isbased on the Group’s historical credit loss experience, adjusted for forward-looking factors specific tothe debtors and the economic environment. Expected credit losses are recognized in profit or loss.

For any other financial assets carried at amortized cost (which are due within 12 months), theexpected credit losses is based on the 12-month expected credit losses. The 12-month expectedcredit losses is the proportion of lifetime expected credit losses that results from default events on afinancial instrument that are possible within 12 months after the reporting date. However, whenthere has been a significant increase in credit risk since origination, the allowance will be based on thelifetime expected credit losses. When determining whether the credit risk of a financial asset hasincreased significantly since initial recognition and when estimating expected credit losses, the Groupconsiders reasonable and supportable information that is relevant and available without undue cost oreffort. This includes both quantitative and qualitative information and analysis, based on the Group’shistorical experience and informed credit assessment including forward-looking information.

The Group considers a financial asset to be in default when internal or external information indicatesthat the Group is unlikely to receive the outstanding contractual amounts in full before taking intoaccount any credit enhancements held by the Group.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the interimconsolidated statement of financial position if, and only if, the Group has a legally enforceable rightto offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assetand settle the liability simultaneously. The Group assesses that it has a currently enforceable right ofoffset if the right is not contingent on a future event, and is legally enforceable in the normal course ofbusiness, event of default, and event of insolvency or bankruptcy of the Group and all of thecounterparties.

Derecognition of Financial Instruments

Financial AssetsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financialassets) is derecognized when:§ the rights to receive cash flows from the asset have 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,§ the Group has transferred its rights to receive cash flows from the asset and either

(a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferrednor retained the risk and rewards of the asset but has transferred the control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into apass-through arrangement, and has neither transferred nor retained substantially all the risks andrewards of the asset nor transferred control of the asset, the asset is recognized to the extent of theGroup’s continuing involvement in the asset. Continuing involvement that takes the form of a

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guarantee over the transferred asset is measured at the lower of the original carrying amount of theasset and the maximum amount of consideration that the Group could be required to repay.

Financial LiabilitiesA financial liability is derecognized when the obligation under the liability is discharged or cancelledor has expired.

Where an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a newliability, and the difference in the respective carrying amounts of a financial liability is recognized ininterim consolidated statement of comprehensive income.

CashCash includes cash in bank and on hand, which are subject to an insignificant risk of change in value.

InventoriesInventories are valued at the lower of cost (weighted average method) and net realizable value(NRV).

Costs incurred in bringing each product to its present location and conditions are accounted for asfollows:

§ Raw materials: purchase cost on first in, first out basis§ Finished goods and work in progress: cost of direct materials and labor and a portion of

manufacturing overheads based on the normal operating capacity, excluding borrowing costs

NRV of finished goods is based on estimated selling price, less estimated costs necessary to make thesale. The NRV for raw materials is the current replacement cost. In determining NRV, the Groupconsiders any adjustment for obsolescence.

Property, Plant and EquipmentProperty, plant and equipment, except for construction in progress, is stated at cost net ofaccumulated depreciation and accumulated impairment losses, if any.

The initial cost of property, plant and equipment consists of its purchase price, including importduties, nonrefundable taxes and any directly attributable costs of bringing the property, plant andequipment to its working condition and location for its intended use. Such cost includes the cost ofreplacing part of such property, plant and equipment when that cost is incurred if the recognitioncriteria are met.

Expenditures incurred after the property, plant and equipment have been put into operations, such asrepairs and maintenance, are normally charged to profit or loss in the period in which the costs areincurred. In situations where it can be clearly demonstrated that the expenditures have resulted in anincrease 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 arecapitalized as additional costs of property, plant and equipment. Depreciation is computed using thestraight-line method over the estimated useful lives of the assets.

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The estimated useful lives of property, plant and equipment are as follows:

Number of YearsBuildings and building improvements 11 to 50Machinery and factory equipment 3 to 15Office furniture and equipment 5 to 11Transportation equipment 5 to 10Miscellaneous equipment 3 to 10Molds 1 to 5

The depreciation method and estimated useful lives are reviewed periodically. Changes in theexpected useful lives or the expected pattern of consumption of future economic benefits embodied inthe items of property, plant and equipment are accounted for by changing the depreciation methodand useful lives, as appropriate, and treated as a change in accounting estimates. The depreciationexpense on the items of property, plant and equipment is recognized in interim consolidated statementof comprehensive income.

When property, plant and equipment are retired or otherwise disposed of, their cost, accumulateddepreciation and any allowance for impairment in value are eliminated from the accounts and anyresulting gain or loss is credited to or charged to current operations. Fully depreciated property, plantand equipment are retained in the accounts until these are no longer in use.

Construction in progress, included in property, plant and equipment, is stated at cost. This includescost of construction, property and equipment and other direct costs. Construction in progress is notdepreciated until such time when the relevant assets are completed and put into operational use.

Investment PropertyInvestment property is measured initially at cost, including transaction costs.

Initial cost consists of purchase price of the purchased investment property or construction cost forself-constructed investment property and any directly attributable expenditure such as professionalfees for legal services, borrowing costs during construction, property transfer taxes and othertransaction costs, in bringing the asset to its working condition for its intended use.

Subsequent to initial recognition, investment property is stated at cost less any impairment in value.

The building and building improvement included in investment property of the Group are depreciatedon a straight-line basis over the estimated useful life of 41 and 11 years, respectively.

Investment property is derecognized when either it has been disposed of or when the investmentproperty is permanently withdrawn from use and no future economic benefit is expected from itsdisposal. Any gains or losses on the retirement or disposal of an investment property are recognizedin the interim consolidated statement of comprehensive income in the year of derecognition.

Expenditures incurred after the investment property have been put into operations are normallycharged to profit or loss in the period in which the costs are incurred.

Transfers are made to investment property when, and only when, there is a change in use, evidencedby the end of owner occupation, commencement of an operating lease to another party or completionof construction or development. Transfers are made from investment property when, and only when,there is a change in use, evidenced by commencement of owner occupation or commencement ofdevelopment with a view to sale.

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For transfers from investment property to owner-occupied property, the deemed cost of property forsubsequent accounting is its carrying amount at the time of transfer. If the property occupied by theGroup as an owner-occupied property becomes an investment property, the Group accounts for suchproperty in accordance with the policy stated under “Property, plant and equipment” up to the date ofchange in use.

Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. Following initialrecognition, intangible assets are carried at cost less any accumulated amortization and anyaccumulated impairment losses. Internally generated intangible assets, excluding capitalizeddevelopment costs, are not capitalized and expenditure is reflected in the interim consolidatedstatement of comprehensive income in the year in which the expenditure is incurred.

Computer software licenseComputer software license is initially recognized at cost. Following initial recognition, the computersoftware license cost is carried at cost less accumulated amortization and any accumulatedimpairment in value.

The computer software license is amortized on a straight-line basis over its estimated useful economiclife of 3 to 5 years and assessed for impairment whenever there is an indication that the intangibleasset may be impaired. The amortization commences when the computer software license isavailable for use. The amortization period and the amortization method for the license are reviewedat each financial year end. Changes in the estimated useful life is accounted for by changing theamortization period or method, as appropriate, and treated as changes in accounting estimates. Theamortization expense is recognized in the interim consolidated statement of comprehensive income inthe expense category consistent with the function of the computer software license.

Gains or losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized in theinterim consolidated statement of comprehensive income when the asset is derecognized.

Land-use rightsLand-use rights represents the exclusive right to use the land where the Group’s buildings are situatedis stated at cost less accumulated amortization and any impairment in value. The cost of the land-use rights represents payment made for the whole term of the contract. Amortization is computedusing the straight-line method over 50 to 75 years based on the contract period for the exclusive rightto use the land.

The amortization method and estimated useful lives for land-use rights are reviewed periodically.Changes in the expected useful life or the expected pattern of consumption of future economicbenefits embodied in the land-use rights are accounted for by changing the amortization method anduseful life, as appropriate, and treated as a change in accounting estimates. The amortizationexpense on land-use rights is recognized in the interim consolidated statement of comprehensiveincome.

Effective January 1, 2019, upon adoption of PFRS 16, land-use rights is classified as part of theGroup’s right-of-use assets. Refer to the accounting policy on Right-of-use Assets for thediscussion.

Impairment of Nonfinancial AssetsThe Group assesses at each reporting date whether there is an indication that these nonfinancial assetsmay be impaired. If any such indication exists, or when annual impairment testing for an asset is

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required, the Group estimates these nonfinancial assets’ recoverable amount. An asset’s recoverableamount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and itsvalue in use and is determined for an individual asset, unless the asset does not generate cash inflowsthat are largely independent of those from other assets or groups of assets. Where the carryingamount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and iswritten down to its recoverable amount. In assessing value in use, the estimated future cash flows arediscounted to their present value using a discount rate that reflects current market assessments of thetime value of money and the risks specific to the asset. In determining fair value less costs to sell, anappropriate valuation model is used.

These calculations are corroborated by valuation multiples or other available fair value indicators.Impairment losses from continuing operations are recognized in the interim consolidated statement ofcomprehensive income.

An assessment is made at each reporting date to determine whether there is any indication thatpreviously recognized impairment losses may no longer exist or may have decreased. If suchindication exists, the Group makes an estimate of recoverable amount. Any previously recognizedimpairment loss is reversed only if there has been a change in the estimates used to determine theasset’s recoverable amount since the last impairment loss was recognized. If that is the case, thecarrying amount of the asset is increased to its recoverable amount. That increased amount cannotexceed 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 inthe interim consolidated statement of comprehensive income.

ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as a resultof a past event, it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and 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 made by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments of the time value of moneyand, where appropriate, the risks specific to the liability. Where discounting is used, the increase inthe provision due to the passage of time is recognized as an interest expense.

Where the Group expects some or all of a provision to be reimbursed, the reimbursement isrecognized as a separate asset but only when the reimbursement is virtually certain. The expenserelating to any provision is presented in the interim consolidated statement of comprehensive income,net of any reimbursement.

Income Taxes

Current Income TaxCurrent income tax liabilities for the current and prior periods are measured at the amount expected tobe recovered from or paid to the tax authority. The tax rates and tax laws used to compute theamount are those that have been enacted or substantively enacted at the reporting date.

Deferred Income TaxDeferred income tax is provided, using the balance sheet liability method, on all temporarydifferences at the reporting date between the tax bases of assets and liabilities and their carryingamounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred incometax assets are recognized for all deductible temporary differences to the extent that it is probable that

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taxable profit will be available against which the deductible temporary differences and carryforwardof unused tax credits can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced tothe extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the deferred income tax assets to be utilized. Unrecognized deferred income tax assets arereassessed at each reporting date and are recognized to the extent that it has become probable thatfuture taxable profit will allow the deferred income tax assets to be recovered.

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

Capital StockThe Group has issued capital stock that is classified as equity. Capital recognized as issued whenthe stock is paid for or subscribed under a binding subscribing agreement and is measured at par valuefor all issued shares.

Additional Paid-in Capital (APIC)Consideration received in excess of par value are recognized as APIC, net of incremental costs thatare directly attributable to the issuance of new shares.

Retained EarningsRetained earnings include accumulated profits and losses attributable to the Group’s equity holders.Dividends, if any, are recognized as a liability and deducted from equity when they are declared.Dividends for the year that are approved after the reporting date are dealt with as an event after thereporting date. Retained earnings may also include effect of changes in accounting policy as may berequired by the standard’s transitional provisions.

Equity ReserveEquity reserve pertains to the legal capital of acquired entity under common control prior to theParent Company’s actual purchase of shares and obtaining control. Subsequent to the acquisition,equity reserve pertains to the excess of consideration over the legal capital of the acquired entity.

Revenue RecognitionRevenue is measured based on the consideration to which the Group expects to be entitled inexchange for transferring promised goods or services to a customer, excluding amounts collected onbehalf of third parties.

Revenue is recognized when the Group satisfies a performance obligation by transferring a promisedgood or service to the customer, which is when the customer obtains control of the good or service. Aperformance obligation may be satisfied at a point in time or over time. The amount of revenuerecognized is the amount allocated to the satisfied performance obligation.

Sale of GoodsRevenue is recognized when the goods are delivered to the customer and all criteria for acceptancehave been satisfied at a point in time. The amount of revenue recognized is based on the contractualprice.

For the six-month periods ended June 30, 2019 and 2018, the Group has no variable consideration andthe timing of revenue recognition currently does not result in any contract assets or liabilities andthere are no unfulfilled performance obligations at any point in time.

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Rental RevenueRental income arising from operating leases on investment property is accounted for on a straight-linebasis over the lease term.

Interest IncomeInterest income is recognized as it accrues using the effective interest rate method.

Other IncomeOther income is recognized when there is an incidental economic benefit, other than the usualbusiness operations, that will flow to the Group through increase in asset or decrease in liability.

Costs and ExpensesExpenses are decreases in economic benefits during the accounting period in the form of outflows ordepletions of assets or incurrence of liabilities that result in decreases in equity, other than thoserelating to distributions to equity participants. Costs and expenses are generally recognized when theservices are used or the expenses arise.

Costs of Goods SoldCosts of goods sold include direct material costs, personnel expenses, utilities and othermanufacturing costs. This is recognized when the inventories are sold and title is transferred to thebuyer.

Costs of RentCosts of rent include depreciation expense, repairs and maintenance and taxes and licenses. This isrecognized when incurred.

General and Administrative ExpensesGeneral and administrative expenses are incurred in the direction and general administration ofday-to-day operations of the Group. General and administrative expenses are generally recognizedwhen the services are used or the expenses arise.

Retirement BenefitsThe Group does not have an established retirement plan and only conforms to the minimumregulatory benefit under the Retirement Pay Law [Republic Act. (RA) No. 7641] which is of thedefined benefit type. Since the Group does not have formal retirement plan, benefit claims under theretirement obligation are paid directly by the Group when they become due.

The defined benefit obligation is the aggregate of the present value of the defined benefit obligation atthe end of the reporting period. The cost of providing benefits under the defined benefit plan isactuarially determined by an independent qualified actuary using the projected unit credit method.

Defined benefit costs comprise the following:§ Service cost§ Interest expense on the defined benefit obligation§ Remeasurements of defined benefit obligation

Service costs which include current service costs, past service costs and gains or losses on non-routinesettlements are recognized as expense in the interim consolidated statement of comprehensiveincome. Past service costs are recognized when plan amendment occurs.

Interest expense on the defined benefit obligation is the change during the period in the definedbenefit obligation that arises from the passage of time which is determined by applying the

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discount rate based on government bonds to the defined benefit obligation. Interest expense on thedefined benefit obligation is recognized as expense in the interim consolidated statement ofcomprehensive income.

Remeasurements comprising actuarial gains and losses (excluding interest expense on defined benefitobligation) are recognized immediately in Other Comprehensive Income (OCI) in the period in whichthey arise. Remeasurements are not reclassified to profit or loss in subsequent periods.

LeasesThe Group’s lease contracts pertain to operating leases of warehouses (as lessee) and productionfacility (as lessor).Before the adoption of PFRS 16, the Group classified each of its leases at the inception date as eithera finance lease or an operating lease.

Operating Lease Commitments – Group as Lessor. Leases where the Group does not transfersubstantially all the risk and benefits of ownership of the assets are classified as operating leases.Lease payments received are recognized as income when received.

Operating Lease Commitments – Group as Lessee. Leases where the lessor retains substantially allthe risks and benefits of ownership of the asset are classified as operating leases. Operating leasepayments on cancellable leases are recognized as expense in the interim consolidated statement ofcomprehensive income based on the terms of the lease.

Effective January 1, 2019, upon adoption of PFRS 16, the Group applies a single recognition andmeasurement approach for all leases that it is the lessee, except for short-term leases and leases oflow-value assets. The Group recognizes lease liability to make lease payments and right-of-useassets representing the right to use the underlying assets.

Right-of-use AssetThe Group recognizes right-of-use asset at the commencement date of the lease. Right-of-use assetis measured at cost, less any accumulated depreciation and impairment losses, and adjusted for anyremeasurement of lease liability. The cost of right-of-use asset includes the amount of lease liabilityrecognized, initial direct costs incurred, and lease payments made at or before the commencementdate less incentives received. Unless the Group is reasonably certain to obtain ownership of theleased asset at the end of the lease term, the recognized right-of-use asset is depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use asset is subjectto impairment.

Lease LiabilityThe lease liability is measured at amortized cost using effective interest method. At thecommencement date of the lease, the Group recognizes lease liability measured at the present value oflease payments to be made over the lease term. The lease payments include fixed payments(including in-substance fixed payments) less any lease incentives receivable, variable lease paymentsthat depend on an index or a rate, and amounts expected to be paid under residual value guarantees.The lease payments also include the exercise price of a purchase option reasonably certain to beexercised by the Group and payments of penalties for terminating a lease, if the lease term reflects theGroup exercising the option to terminate. The variable lease payments that do not depend on anindex or a rate are recognized as expense in the period on which the event or condition that triggersthe payment occurs.

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The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases ofequipment that have a lease term of 12 months or less and leases of low-value assets such as facilitycharges.

In calculating the present value of lease payments, the Group used discount rate of 6.00%. After thecommencement date, the amount of lease liability is increased to reflect the accretion of interest andreduced for the lease payments made. In addition, the carrying amount of lease liability isremeasured if there is a modification, a change in the lease term, a change in the in-substance fixedlease payments or a change in the assessment to purchase the underlying asset.

Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of an asset thatnecessarily takes a substantial period of time to get ready for its intended use are capitalized as part ofthe cost of the asset. All other borrowing costs are expensed in the period in which they occur.Borrowing costs consists of interest and other costs that an entity incurs in connection with theborrowing of funds.

Foreign Currency TransactionsTransactions in foreign currencies are recorded using the exchange rate at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are retranslated using the closingexchange rate at the reporting date. Foreign exchange differences between the rates at transactiondate and settlement date or reporting date are recognized in the interim consolidated statement ofcomprehensive income. Nonmonetary items that are measured in terms of historical cost in foreigncurrency are translated using the exchange rates at the dates of the initial transactions.

Earnings Per ShareBasic earnings per share is calculated by dividing profit for the year attributable to equity holders ofthe Parent Company (excluding other comprehensive income) by the weighted average number ofordinary shares in issue during the year.

Diluted earnings per share is calculated by dividing profit for the year attributable to equity holders ofthe Parent Company (excluding other comprehensive income) by the weighted average number ofordinary shares in issue during the year plus the weighted average number of ordinary shares whichwould need to be issued to convert all dilutive potential ordinary shares into ordinary shares. Thecalculation assumes that the conversion took place either at the beginning of the year or on the datethe potential ordinary shares were issued.

Segment ReportingThe Group’s operating businesses are organized and managed separately according to the nature ofthe products and services provided, with each segment representing a strategic business unit thatoffers different products and serves different markets.

The Group’s only reportable segment is the sale of electronic equipment. Financial information onGroup’s reportable segment is presented in Note 26 in the notes to the interim consolidated financialstatements.

ContingenciesContingent liabilities are not recognized in the interim consolidated financial statements. These aredisclosed unless the possibility of an outflow of resources embodying economic benefits is remote.Contingent assets are not recognized in the interim consolidated financial statements but disclosed inthe notes to interim consolidated financial statements when an inflow of economic benefits isprobable.

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Events after the Reporting DatePost period-end events that provide additional information about the Group’s position at thereporting date (adjusting events) are reflected in the interim consolidated financial statements. Postperiod-end events that are not adjusting events are disclosed in the notes to the interim consolidatedfinancial statements when material.

3. Significant Accounting Judgments and Estimate

The Group’s interim consolidated financial statements, prepared in compliance with PFRSs, requirethe Group to make judgments and estimates that affect amounts reported in the Group’s interimconsolidated financial statements and related notes. In preparing these interim consolidated financialstatements, the Group made its best judgments and estimates of certain amounts, giving dueconsideration to materiality. The Group believes that the following represent a summary of thesesignificant accounting judgments and estimates and related impact and associated risks in the Group’sinterim consolidated financial statements.

Judgments and estimates are continually evaluated and are based on historical experiences and otherfactors, including expectations of future events that are believed to be reasonable under thecircumstances.

Judgments

Determining Functional CurrencyBased on the economic substance of the underlying circumstances relevant to the Group, thefunctional currency of the Group has been determined to be the US dollar since the Group’s revenueand expenses are denominated mostly in US dollar. It is the currency that best reflects the economicsubstance of the underlying events and circumstances relevant to the Group.

Determining Useful Lives of Property, Plant and Equipment, Investment Property and IntangibleAssets

The Group estimates the useful lives of property, plant and equipment, investment property andintangible assets based on the period over which these assets are expected to be available for use.The estimated useful lives are reviewed periodically and are updated if expectations differ fromprevious estimates due to physical wear and tear, technical or commercial obsolescence and legal orother limits on the use of these assets. In addition, estimation of the useful lives is based oncollective assessment of industry practice, internal technical evaluation and experience with similarassets. It is possible that future results of operations could be materially affected by changes in theseestimates brought about by changes in the factors mentioned. The amounts and timing of recordedexpenses for any period would be affected by changes in these factors and circumstances.

Distinction between Property, Plant and Equipment, Investment Property and Land-Use RightsThe Group determines whether a property and land-use right qualifies as investment property. Inmaking its judgment, the Group considers whether the property and land-use right is not occupiedsubstantially for use by, or in operations of the Group, not for sale in the ordinary course of business,but are held primarily to earn rental income and capital appreciation. Owner-occupied propertiesgenerate cash flows that are attributable not only to property but also to the other assets used in theproduction or supply process.

Some properties and land-use rights comprise a portion that is held to earn rentals or for capitalappreciation and another portion that is held for use in the production or supply of goods or servicesor for administrative purposes. If these portions cannot be sold separately as of reporting date, the

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property is accounted for as investment property only if an insignificant portion is held for use in theproduction or supply of goods or services or for administrative purposes. Judgment is applied indetermining whether ancillary services are so significant that a property does not qualify asinvestment property. The Group considers each property and land-use right separately in making itsjudgment.

Transfers are made to investment property when, and only when, there is a change in use, evidencedby the end of owner occupation, commencement of an operating lease to another party or completionof construction or development. Transfers are made from investment property when, and only when,there is a change in use, evidenced by commencement of owner occupation or commencement ofdevelopment with a view to sale.

Valuation of Lease Liability and Right-of-use AssetUpon adoption of PFRS 16, the Group recognizes lease liability to make lease payments and right-of-use assets representing the right to use the underlying assets. This requires the Group to makeestimates that affect the valuation of lease liability and right-of-use assets. These include:

§ Determining contracts in scope of PFRS 16;§ Determining the contract term; and,§ Determining the interest rate used for discounting the future lease payments.

In determining the lease term, the Group considers non-cancellable period of the lease contracts,periods covered by an option to extend the lease if the Group is reasonably certain to exercise thatoption and periods covered by an option to terminate the lease if the Group is reasonably certain notto exercise that option.

The Group’s interest rate used to discount the future lease payments represents the Group’sincremental borrowing rate based on the Group’s observable debt transactions which is furtheradjusted to reflect the effects of the following:

§ matching with the Group’s lease term and total lease payments;§ presence and/or quality of collateral or security;§ currency of the lease

The amount of lease liability and right-of-use assets could be materially affected by changes in theseestimates brought about by changes in the factors mentioned.

Estimate

Estimating Retirement BenefitsThe cost of the defined benefit pension plan and other post-employment and the present value of thepension obligation are determined using actuarial valuations. An actuarial valuation involvesmaking various assumptions that may differ from actual developments in the future. These includethe determination of the discount rate, future salary increases, mortality rates and future pensionincreases. Due to the complexities involved in the valuation and its long-term nature, a definedbenefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewedat each reporting date.

The discount rate assumption is based on the theoretical spot yield curve calculated from the BankersAssociation of the Philippines (BVAL Rate) market yields by stripping the coupons from governmentbonds to create virtual zero coupon bonds as of valuation date and considering the average years ofremaining working life of the employees as the estimated term of the benefit obligation.

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The mortality rate is based on publicly available mortality tables and is modified accordingly withestimates of mortality improvements. Future salary increases are based on expected inflation rates.

Further details about assumptions used are provided in Note 20.

Retirement benefit expense recognized in the interim consolidated statements of comprehensiveincome amounted to $40,585 and $1,520 for the six-month periods ended June 30, 2019 and 2018,respectively. The retirement benefit obligation amounted to $142,741 and $101,522 as ofJune 30, 2019 and December 31, 2018 (see Note 20).

4. Cash

June 30, 2019 December 31, 2018Cash on hand $15,730 $11,146Cash in banks 22,886,225 25,135,220

$22,901,955 $25,146,366

Cash in banks earn interest at the respective bank deposit rates. Interest income earned from cash inbanks amounted to $6,905 and $5,148 for the six-month periods ended June 30, 2019 and 2018,respectively.

5. Trade and Other Receivables

June 30, 2019 December 31, 2018Trade receivables:

Third parties $100,710,969 $85,625,869Related parties (see Note 13) 18,383,615 7,287,325

Others:Third parties 1,899,633 611,877Related parties (see Note 13) 1,378,663 1,374,222

$122,372,880 $94,899,293

Trade receivables from third parties are noninterest-bearing and generally have credit terms rangingfrom 45 to 91 days.

Related party receivables are noninterest-bearing and are expected to be collected within a period ofthree months.

Other receivables from third parties include receivable from lessees representing utilities expense andother recharges to customers.

No provision for credit losses was recognized on trade and other receivables for the six-month periodsended June 30, 2019 and 2018 as a result of the Group’s assessment.

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6. Inventories

June 30, 2019 December 31, 2018At cost:

Raw materials $79,525,185 $61,163,741Work in progress 13,261,431 4,967,738Finished goods 2,123,902 8,834,104

94,910,518 74,965,583

At NRV:Raw materials - net of allowance for

inventory write-down of $90,615 in 2019and $36,369 in 2018 $936,083 $1,626,571

Work in progress - net of allowance forinventory write-down of $19,857 in 2019and $11,050 in 2018 11,693,019 3,352,245

Finished goods - net of allowance forinventory write-down of $10,744 in 2019and $18,502 in 2018 19,656 187,691

12,648,758 5,166,507$107,559,276 $80,132,090

Movement in the allowance for inventory write-down is as follows:

June 30, 2019 December 31, 2018Balances at beginning of period $65,921 $102,944Provision 55,295 −Reversal − (37,023)Balances at end of period $121,216 $65,921

Inventories charged to costs of goods sold amounted to $219.9 million and $151.0 million for thesix-month periods ended June 30, 2019 and 2018, respectively (see Note 15).

Reversal of inventory write-down for the year ended December 31, 2018 amounting to $37,023 arosefrom the change in net realizable value due to increase in market selling price.

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7. Property, Plant and Equipment

June 30, 2019

Buildings andBuilding

Improvements

Machineryand FactoryEquipment

TransportationEquipment

OfficeFurniture

andEquipment

MiscellaneousEquipment

ConstructionIn-Progress Molds Total

CostBalances at beginning of

period $49,070,635 $27,814,401 $355,663 $1,180,669 $11,643,991 $17,016,395 $2,661,380 $109,743,134Additions 42,198 761,036 467,920 18,675 2,640,844 6,714,171 181,050 10,825,894Disposals − − − (80,779) (79,940) − − (160,719)Reclassifications 19,155,040 577,686 − − 35,632 (19,768,358) − −Transfer to investment

property (see Note 8) (8,696,998) − − − − − − (8,696,998)Balances at end of period 59,570,875 29,153,123 823,583 1,118,565 14,240,527 3,962,208 2,842,430 111,711,311

Accumulated depreciationBalances at beginning of

period 2,957,743 11,379,781 211,156 768,538 3,581,599 – 1,729,956 20,628,773Depreciation for the period

(see Notes 15, 16 and 17) 717,332 2,210,442 31,679 39,985 989,107 – 433,953 4,422,498Disposals − − − (79,816) (17,987) – – (97,803)Balances at end of the period 3,675,075 13,590,223 242,835 728,707 4,552,719 – 2,163,909 24,953,468Net book value $55,895,800 $15,562,900 $580,748 $389,858 $9,687,808 $3,962,208 $678,521 $86,757,843

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December 31, 2018

Buildings andBuilding

Improvements

Machineryand FactoryEquipment

TransportationEquipment

OfficeFurniture

andEquipment

MiscellaneousEquipment

ConstructionIn-Progress Molds Total

CostBalances at beginning of year $30,419,511 $20,854,480 $433,281 $1,266,734 $8,105,110 $32,580,580 $1,564,329 $95,224,025Additions 25,029 7,767,456 − 3,378 3,507,609 13,550,743 1,174,355 26,028,570Disposals − (807,535) (77,618) (89,443) − − (46,032) (1,020,628)Reclassifications 29,114,928 − − − 31,272 (29,114,928) (31,272) −Transfer to investment

property (see Note 8) (10,488,833) − − − − − − (10,488,833)Balances at end of year 49,070,635 27,814,401 355,663 1,180,669 11,643,991 17,016,395 2,661,380 109,743,134

Accumulated depreciationBalances at beginning of year 1,774,169 7,705,383 213,330 762,640 2,098,141 – 1,028,251 13,581,914Depreciation for the year

(see Notes 15, 16 and 17) 1,183,574 3,740,803 60,747 92,634 1,459,477 – 748,941 7,286,176Disposals − (66,405) (62,921) (86,736) – – (23,255) (239,317)Reclassifications − − − − 23,981 – (23,981) –Balances at end of the year 2,957,743 11,379,781 211,156 768,538 3,581,599 – 1,729,956 20,628,773Net book value $46,112,892 $16,434,620 $144,507 $412,131 $8,062,392 $17,016,395 $931,424 $89,114,361

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Construction in progress pertains to the costs incurred for the construction of factory buildings ofKPPH located in Lipa City that is expected to be completed in the second half of 2019. In 2019,FPIP Buildings 2 and 4, and Pueblo de Oro Dorms were completed and were transferred to Buildingsand Building Improvements. Subsequently, FPIP Building 4, with a carrying value of $8.7 million,was reclassified to “Investment Property” upon the commencement of the Company’s leaseagreement with Cal-Comp Precision (Philippines), Inc. on June 1, 2019. On the other hand, FPIPBuilding 2 is used for the Company’s operations and Pueblo de Oro Dorms is used as dormitories bythe Company’s employees.

The Group leased out FPIP Building 3 in 2018 to Cal-Comp Precision (Philippines), Inc. which islocated in Sto. Tomas, Batangas. In line with this, the carrying value of FPIP Building 3 amountingto $10.5 million was reclassified to “Investment Property” in the year of the commencement of thelease (see Note 8).

The Group capitalized borrowing costs amounting to $375,910, $90,350 and $341, 109 for the six-month periods ended June 30, 2019 and 2018, and the year ended December 31, 2018, respectively.The rate used to determine the amount of borrowing costs eligible for capitalization for the six-monthperiods ended June 30, 2019 and 2018, and the year ended December 31, 2018 are 3.74%, 2.80% and3.33%, respectively. The observed increase in the capitalization rate was caused by the increase ingeneral borrowings of the Group.

8. Investment Property

June 30, 2019

Building andBuilding

ImprovementsLand-use

Rights TotalCostBalances at beginning of period $27,117,151 $4,127,051 $31,244,202Additions 53,481 – 53,481Transfer from property, plant and

equipment (see Note 7) 8,696,998 – 8,696,998Transfer from right-of-use assets

(see Note 9) – 2,802,531 2,802,531Balances at end of period 35,867,630 6,929,582 42,797,212Accumulated depreciation and

amortizationBalances at beginning of period 2,258,326 228,035 2,486,361Transfer from right-of-use assets

(see Note 9) – 132,273 132,273Depreciation and amortization for the

period (see Notes 15, 16 and 17) 560,455 34,114 594,569Balances at end of period 2,818,781 394,422 3,213,203Net book value $33,048,849 $6,535,160 $39,584,009

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December 31, 2018

Building andBuilding

ImprovementsLand-use

Rights TotalCostBalances at beginning of year $15,471,725 $2,340,964 $17,812,689Additions 1,156,593 – 1,156,593Transfer from property, plant and

equipment (see Note 7) 10,488,833 – 10,488,833Transfer from intangible assets (see Note 10) – 1,786,087 1,786,087Balances at end of year 27,117,151 4,127,051 31,244,202Accumulated depreciation and

amortizationBalances at beginning of year 1,214,736 121,976 1,336,712Transfer from intangible assets

(see Note 10) – 49,055 49,055Depreciation and amortization for the year

(see Notes 15, 16 and 17) 1,043,590 57,004 1,100,594Balances at end of year 2,258,326 228,035 2,486,361Net book value $24,858,825 $3,899,016 $28,757,841

Investment property consists of buildings, building improvements and land-use rights which areleased out to third parties and Cal-Comp Precision (Philippines), Inc., a related party.

In 2019 and 2018, portion of buildings, building improvements and land-use rights that are beingleased out to the lessees were transferred from property, plant and equipment and intangible assets toinvestment property.

The fair value of investment properties amounted to $43.07 million and $30.35 million as of June 30,2019 and December 31, 2018, respectively. The fair value has been determined based on valuationsperformed by an independent appraiser using a combination of income and cost approach. Thevaluation techniques used are categorized within level 3 of the fair value hierarchy (see Note 25).

Rental revenue from the investment property amounted to $1.3 million and $1.2 million for thesix-month periods ended June 30, 2019 and 2018, respectively (see Note 19). Direct expensesrelated to leasing of the investment property amounted to $1.02 million and $0.84 millionsix-month periods ended June 30, 2019 and 2018, respectively (see Note 15).

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9. Right-of-Use Assets

June 30, 2019

BuildingsLand-use

Rights TotalCostBalance at beginning of period $– $– $–Effect of adoption of PFRS 16

(see Notes 2 and 10) 1,144,489 21,758,695 22,903,184Balances at January 1 (see Note 2) 1,144,489 21,758,695 22,903,184Additions (see Note 19) 2,302,891 480,365 2,783,256Transfer to investment property (see Note 8) – (2,802,531) (2,802,531)Balances at end of period 3,447,380 19,436,529 22,883,909

Accumulated amortizationBalance at beginning of period – – –Effect of adoption of PFRS 16

(see Notes 2 and 10) – 1,114,192 1,114,192Balances at January 1 (see Note 2) – 1,114,192 1,114,192Amortization during the period (see Note 17) 258,954 156,929 415,883Transfer to investment property (see Note 8) – (132,273) (132,273)Balances at end of period 258,954 1,138,848 1,397,802Right-of-use assets at June 30, 2019 $3,188,426 $18,297,681 $21,486,107

There were no leases with residual value guarantees or leases not yet commenced to which the Groupis committed.

10. Intangible Assets

June 30, 2019

Land-useRights

ComputerSoftware Total

CostBalances at beginning of period $21,758,695 $896,012 $22,654,707Effect of adoption of PFRS 16

(see Notes 2 and 9) (21,758,695) – (21,758,695)Balances at January 1 (as restated) and at end

of period – 896,012 896,012

Accumulated amortizationBalances at beginning of year 1,114,192 423,465 1,537,657Effect of adoption of PFRS 16

(see Notes 2 and 9) (1,114,192) – (1,114,192)Balances at January 1 (as restated) – 423,465 423,465Amortization (see Notes 15, 16 and 17) – 164,281 164,281Balances at end of period – 587,746 587,746Net book value $– $308,266 $308,266

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December 31, 2018

Land-useRights

ComputerSoftware Total

CostBalances at beginning of year $23,225,214 $650,557 $23,875,771Additions 319,568 245,455 565,023Transfer to investment property (see Note 8) (1,786,087) – (1,786,087)Balances at end of year 21,758,695 896,012 22,654,707

Accumulated amortizationBalances at beginning of year 814,258 139,923 954,181Amortization (see Notes 15, 16 and 17) 348,989 283,542 632,531Transfer to investment property (see Note 8) (49,055) – (49,055)Balances at end of year 1,114,192 423,465 1,537,657Net book value $20,644,503 $472,547 $21,117,050

11. Trade and Other Payables

June 30, 2019 December 31, 2018Trade $101,900,625 $56,796,146Accruals:

Utilities 1,890,551 1,081,092Payroll 1,361,180 1,078,310Personnel expense 1,060,835 439,644Transportation and travel 318,432 32,711Interest (see Note 12) 179,180 234,593Outside services 139,074 90,570Professional fees 133,188 126,234

Others 3,788,930 1,511,532$110,771,995 $61,390,832

Trade payables are noninterest-bearing and are generally on a 30-day credit term.

Accrued expenses are normally settled within a year.

Other payables consist mainly of statutory payables such as withholding taxes, SSS premium, healthinsurance and other liabilities to the government. Other payables are noninterest-bearing and arenormally settled within 30 days.

12. Loans Payable

As of June 30, 2019, and December 31, 2018, loans payable amounted to $94,000,000 and$104,000,000, respectively.

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The Group obtained short-term loans from different banks as follows:

June 30, 2019

Banks Credit Line Drawdown Interest ratesOutstanding

balanceCTBC Bank (Philippines) Corporation $30,000,000 $33,000,000 2.85%-3.80% $22,000,000BDO Unibank Inc. 20,000,000 20,000,000 3.75%-4.40% 20,000,000Mega International Commercial Bank 25,000,000 30,000,000 3.57%-3.72% 16,500,000Cathay United Bank Co., Ltd. 24,000,000 25,000,000 3.92%-4.17% 15,000,000Metropolitan Bank and Trust Company 13,000,000 26,000,000 4.00% 13,000,000First Commercial Bank Ltd, Manila Branch 10,000,000 7,500,000 2.85%-3.20% 7,500,000Taiwan Cooperative Bank 15,000,000 – 3.74%-4.19% –Bank of the Philippine Islands 10,000,000 – 3.95%-4.55% –

$147,000,000 $141,500,000 $94,000,000

December 31, 2018

Banks Credit Line Drawdown Interest ratesOutstanding

balanceCTBC Bank (Philippines) Corporation $30,000,000 $27,000,000 2.85%-3.60% $27,000,000BDO Unibank Inc. 20,000,000 15,000,000 3.75%-4.00% 15,000,000Mega International Commercial Bank 20,000,000 10,000,000 3.56%-3.79% 15,000,000Cathay United Bank Co., Ltd. 24,000,000 14,000,000 3.92%-3.97% 14,000,000Metropolitan Bank and Trust Company 13,000,000 13,000,000 4.00% 13,000,000Bank of the Philippine Islands 10,000,000 9,000,000 4.55% 9,000,000First Commercial Bank Ltd, Manila Branch 10,000,000 14,000,000 2.35%-3.20% 8,000,000Taiwan Cooperative Bank 15,000,000 13,000,000 4.18% 3,000,000Australia and New Zealand Banking Group

Limited 10,000,000 1,000,000 3.56%-3.79% –Standard Chartered Bank 5,000,000 5,000,000 3.95% –

$157,000,000 $121,000,000 $104,000,000

§ In June 2019, the Parent Company entered into a credit line agreement with Mega InternationalCommercial Bank amounting to $5,000,000. Amount of drawdown amounted to $3,000,000with a term not exceeding 180 days and bears interest at 3.59% per annum. In December 2018,KPPH entered into a credit line agreement with Mega International Commercial Bank Co. Ltd.amounting to $20,000,000. Amount of drawdown in 2019 and 2018 amounted to $27,000,000and $10,000,000, respectively with terms of not exceeding 180 days and bears interest at 3.56%-3.79% per annum.

§ The loans of KPPH are secured by letters of support from the Ultimate Parent, Kinpo ElectronicsInc. The credit line agreements entered into by KPPH are all revolving credit lines which areconsidered short-term borrowings with terms of not exceeding 180 days. Each borrowing can berolled over within the same period as long as the Company’s outstanding balance does not exceedthe maximum credit line.

§ In November 2017, KPPH entered into a revolving credit line agreement with First CommercialBank, Ltd., Manila Branch with a credit line amounting to $9,000,000 which was renewed inFebruary 2019. Amount of drawdown in 2019 and 2018 amounted to $7,500,000 and$14,000,000, respectively. The loan was considered short-term with a term of not exceeding 180days at 3.97-3.98% per annum.

§ In October 2018, KPPH entered into a revolving credit line agreement with Taiwan CooperativeBank Manila Offshore Banking Branch amounting to $15,000,000. Amount of drawdown in

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2018 amounted to $13,000,000 were considered short-term with term of not exceeding 180 daysat 4.18% per annum.

§ In September 2018, KPPH entered into a revolving credit line agreement with Cathay UnitedBank amounting to $24,000,000. Amount of drawdown in 2019 and 2018 amounted to$25,000,000 and $14,000,000, respectively and have terms of not exceeding 180 days and bearsinterest at 3.92%-3.97% per annum.

§ In August 2018, KPPH entered into revolving credit line agreements with CTBC Bank(Philippines), Corp. and BDO Unibank, Inc. amounting to $30,000,000 and $20,000,000,respectively, with a term of not exceeding 180 days and bear interest at 2.85%-3.60% and 3.75%-4.00% per annum, respectively. Amount of drawdown from CTBC Bank in 2019 and 2018amounted to $33,000,000 and $27,000,000, respectively while amount of drawdown from BDOUnibank in 2019 and 2018 amounted to $20,000,000 and $15,000,000, respectively.

§ In April 2018, KPPH entered into a credit line agreement with Bank of the Philippine Islandsamounting to $10,000,000. Amount of drawdown in 2019 and 2018 amounted to nil and$9,000,000, respectively with terms of not exceeding 180 days and bears interest at 3.95%-4.55%per annum.

§ In April 2018, KPPH entered into a credit line agreement with Metrobank amounting to$13,000,000 with a term of not exceeding 90 days and bears interest of 4.00% per annum.Amount of drawdown in 2019 and 2018 amounted to $26,000,000 and $13,000,000, respectively.

§ In March 2018, KPPH entered into a credit line agreement with Standard Chartered Bankamounting to $5,000,000 with a term not exceeding 90 days at 3.43% per annum. Amount ofdrawdown in 2019 and 2018 amounted to nil, $5,000,000, respectively.

§ In January 2018, KPPH entered into a credit line agreement with Australia and New ZealandBanking Group amounting to $10,000,000. First drawdown was made in 2018 amounting to$1,000,000 with a term of not exceeding 180 days and bears interest at 5.2658% per annum.

Interest expense incurred, excluding capitalized borrowing costs, amounted to $1.5 million and$1.1 million for six-month periods ended June 30, 2019 and 2018, respectively. Accrued interestamounted to $179,180 and $234,593 as of June 30, 2019 and December 31, 2018, respectively (seeNote 11).

13. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party or exercise significant influence over the other party in making financial and operatingdecisions. Parties are also considered to be related if they are subject to common control or commonsignificant influence. The Group, in its regular course of business, has entered into transactions withrelated parties at terms and conditions agreed upon by the parties.

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The significant transactions with related parties follow:

For the Six Months Ended and as of June 30, 2019

Transactions duringthe six-month period

OutstandingBalance

Receivable(Payable) Terms Conditions

KPO (Ultimate Parent)Sale of goods $89,928,325 $16,590,299 60 days;

Noninterest-bearingUnsecured;

No impairmentOther trade receivables 28,238 28,238 60 days;


No impairmentStockholderCCET

Acquisition of property andequipment

22,847 (679,960) 90 daysNoninterest-bearing

Unsecured;No impairment

Purchase of raw materials 4,483 (4,235) 90 daysNoninterest-bearing

Unsecured

Sales of machinery and equipment 857 727,640 90 daysNoninterest-bearing


Entities under common controlKinpo International Ltd.

Purchase of raw materials 8,552 (764,995) 90 days;Noninterest-bearing

Unsecured

Sale of goods 4,934 4,934 30 days;Noninterest-bearing



554 (554) 90 days;Noninterest-bearing

Unsecured

Cal-Comp Precision (Philippines), Inc.Purchase of raw materials 79,098,668 (14,594,378) 30 days;

Noninterest-bearing Unsecured

Rental revenue 436,970 1,568,884 On demand;Noninterest-bearing


Other trade receivables – rentrelated

627,354 627,354 On demand;Noninterest-bearing


Cal-Comp Big Data, Inc.Sale of goods 73,886 172,090 On demand;


No impairmentCrownpo Technology, Inc.


Unsecured

XYZ Life Philippines, Inc.Sale of goods − 18,629 90 days;


No impairmentOther recharges − 23,670 90 days;


No impairmentCal-Comp Automation and Industrial

4.0 Service (Thailand) Co., Ltd.Sale of materials/supplies 540 540 90 days;


No impairment$19,762,278

($16,049,454)

For the Six Months Ended June 30, 2018 and as of December 31, 2018

Transactions during thesix-month period

OutstandingBalance


KPO (Ultimate Parent)Sale of goods $78,878,661 $6,038,953 60 days;


No impairmentOther recharges 27,767 27,641 30 days;


No impairmentStockholderCCET

Sales of machinery and equipment – 726,784 90 daysNoninterest-bearing



– (662,004) 90 daysNoninterest-bearing

Unsecured

Purchase of raw materials 13,420 (10,691) 90 daysNoninterest-bearing

Unsecured

Sale of goods 169 − 90 daysNoninterest-bearing


Repairs and Maintenance 180 − 90 daysNoninterest-bearing


(Forward)

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For the Six Months Ended June 30, 2018 and as of December 31, 2018

Transactions during thesix-month period

OutstandingBalance


Entities under common controlKinpo International Ltd.


$− ($1,392,251) 90 days;Noninterest-bearing

Unsecured


Unsecured

Sale of goods 2,050 1,838 30 days;Noninterest-bearing


Cal-Comp Precision (Philippines), Inc.Purchase of raw materials 14,615,035 (11,908,181) 30 days;

Noninterest-bearing Unsecured

Rental revenue 243,146 1,123,738 On demand;Noninterest-bearing


Other receivables - rent related 1,403,085 595,456 On demand;Noninterest-bearing


Cal-Comp Big Data, Inc.Sale of goods 6,160 104,642 On demand;


No impairmentCrownpo Technology, Inc.


Unsecured

XYZ Life Philippines, Inc.Sale of goods 16,228 18,154 90 days;


No impairmentOther recharges 17,538 23,067 90 days;


No impairmentCal-Comp Electronics &

Communications Co., LtdAcquisition of property and

equipment59,685 − 90 days;

Noninterest-bearingUnsecured

Logistar Holdings, Co.,Ltd.Sale of materials/supplies − 1,274 90 days;


No impairment$8,661,547

($14,193,641)

Outstanding balances with related parties are generally settled in cash.

Compensation of Key Management Personnel of the GroupThe compensation of the Group’s key management personnel by benefit type as follows:


Short-term employee benefits $37,017 $16,520Post-employment pension benefits 1,661 36

$38,678 $16,556

14. Revenue from Contracts with Customers

Set out below is the disaggregation of the Group’s revenue from contracts with customers:

Type of Goods or ServiceRevenue recognized by the Group from sale of electronic equipment amounted to $277,407,816 and$190,610,510 for the six-month periods ended June 30, 2019 and 2018, respectively.

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Geographical Market


Sale of electronic equipmentPhilippines* $187,403,198 $111,723,471Taiwan 89,985,705 78,884,821Hong Kong 18,913 −British Virgin Islands − 2,049Thailand − 169

$277,407,816 $190,610,510*Sales in Philippines pertain to sales to PEZA-registered entities

Timing of Revenue RecognitionRevenue recognized when goods were transferred at a point in time amounted to $277,407,816 and$190,610,510 for the six-month periods ended June 30, 2019 and 2018, respectively.

No provision for credit losses on receivables arising from contracts with customers is recognized forthe six-month periods ended June 30, 2019 and 2018.

The timing of revenue recognition did not result in any contract assets or liabilities as there are nounfulfilled performance obligations as of June 30, 2019 and December 31, 2018.

15. Costs


Cost of goods soldDirect materials (see Note 6) $219,901,261 $150,959,205Salaries, wages and benefits (see Note 18) 12,654,764 9,693,894Depreciation and amortization (see Notes 7, 8, 9, 10 and 17) 3,845,393 2,662,653Light and water 1,466,074 1,127,056Supplies 922,594 780,758Transportation and travel 639,567 591,814Outside services 470,162 482,663Operating leases - short term and low value 107,638 121,079Taxes and licenses 107,619 65,644Repairs and maintenance 90,585 110,021Meals 60,356 48,914Retirement benefit expense (see Notes 18 and 20) 26,814 1,025Insurance 24,637 25,558Communication 6,779 3,794Professional fees 1,415 –Others 197,482 197,554

$240,523,140 $166,871,632

(Forward)

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Cost of rentDepreciation and amortization (see Notes 7, 8, 9, 10 and 17) $758,431 $529,876Taxes and licenses 80,559 92,427Personnel expense (see Note 18) 54,885 37,316Transportation 28,243 14,333Security charges 23,952 34,060Facilities 15,538 11,599Repairs and maintenance 10,794 3,254Supplies 8,339 65,748Insurance 5,733 7,323Rental – 25,996Others 32,980 16,532

1,019,454 838,464$241,542,594 $167,710,096

Others under “Cost of goods sold” mainly pertain to training expenses and handling charges whileother expenses under “Cost of rent” pertain to security services, meal expenses, building maintenanceexpenses and other miscellaneous expenses.

16. General and Administrative Expenses


Transportation and freight $3,052,129 $2,126,850Salaries, wages and benefits (see Note 18) 1,414,075 992,163Depreciation and amortization (see Notes 7, 8, 9, 10 and 17) 993,407 748,670Taxes and licenses 487,727 266,259Professional fees 172,910 61,095Supplies 154,982 79,136Insurance 92,505 89,089Meals 72,474 34,550Light and water 54,138 60,642Repairs and maintenance 38,072 9,983Communication 14,502 7,949Retirement benefit expense (see Notes 18 and 20) 13,771 495Handling charges 912 488Others 44,366 213,756

$6,605,970 $4,691,125

Others mainly pertain to rental expenses, security services, facilities expense, handling charges andrepresentation expenses.

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17. Depreciation and Amortization

Depreciation and amortization are distributed as follows:


Cost of goods soldProperty, plant and equipment (see Note 7) $3,398,495 $2,561,597Right-of-use assets (see Note 9) 363,424 ‒Intangible assets (see Note 10) 77,022 99,570Investment properties (see Note 8) 6,452 1,486

3,845,393 2,662,653Cost of rentInvestment properties (see Note 8) 587,685 383,879Property, plant and equipment (see Note 7) 127,032 145,997Right-of-use assets (see Note 9) 43,714 ‒

758,431 529,876General and administrative expenseProperty, plant and equipment (see Note 7) 896,971 572,238Intangible assets (see Note 10) 87,259 176,000Right-of-use assets (see Note 9) 8,745 ‒Investment properties (see Note 8) 432 432

993,407 748,670$5,597,231 $3,941,199

18. Personnel Expenses

Personnel expenses consist of:


Salaries and wages (see Notes 15 and 16) $12,837,623 $9,750,367Other employment benefits (see Notes 15 and 16) 1,286,101 973,006Retirement benefit expense (see Notes 15, 16 and 20) 40,585 1,520

$14,164,309 $10,724,893

Personnel expenses are distributed as follows:


Cost of goods sold $12,681,578 $9,694,919Cost of rent 54,885 37,316General and administrative expense 1,427,846 992,658

$14,164,309 $10,724,893

Other employment benefits pertain to expenses incurred for trainings, employees’ insurances,uniforms, personal protective equipment (e.g. security gears, gowns, gloves, etc.) and other personnelexpenses.

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19. Contract and Commitments

The Group, as a lessor, has entered into various lease agreements as follows:

a. On October 1, 2015, KPPH entered into a contract of lease with Yiking Plastic Production, Inc.,Fong Shann Printing Philippines Inc. and Voion Packaging Philippines Inc. for the use of itsfactory building for a period of five (5) years commencing on October 1, 2015 toSeptember 30, 2020, renewable upon mutual agreement of the parties.

b. On November 1, 2015, KPPH entered into a contract of lease with Bo Cheng Rubber Philippines,Inc. for the use of its factory building for a period of five (5) years commencing onNovember 1, 2015 to October 31, 2020, renewable upon mutual agreement of the parties.

c. On May 24, 2016, the Parent Company entered into a lease contract with a lessee for the use of itsland and factory building for a period of three (3) years commencing on June 1, 2016 toMay 31, 2019, renewable for another 3 years upon mutual agreement of the parties. OnMay 29, 2019, the lessee requested for a two-month extension from June 1, 2019 to July 31, 2019.As of June 30, 2019, the parties are still negotiating to extend the lease contract for additional 3years.

d. On November 1, 2016, KPPH entered into a contract of lease with Cal-Comp Precision(Philippines), Inc. (CPPH) for the use of its parcel of land for a period of one (1) year and two (2)months commencing on November 1, 2016 to December 31, 2017, renewable upon mutualagreement of the parties. The lease agreement was immediately renewed upon its expiration foranother one (1) year in 2018 and 2019. In May 2018, the parties agreed to increase the leasedspace from 18,310 sq.m to 29,296.80 sq.m at a rate of $2.19/sq.m.

The rental revenue earned from the lease agreement amounted to $1.3 million and $1.2 million for thesix-month periods ended June 30, 2019 and 2018, respectively.

The future minimum lease receivable as of June 30, 2019 and December 31, 2018 for the above leaseis as follows:

June 30, 2019 December 31, 2018Within one year $2,703,646 $3,349,992After one year but not more than five years 1,528,149 3,823,754

$4,231,795 $7,173,746

The Group, as a lessee, has entered into the following lease agreements:

a. On December 7, 2017, KPPH entered into a lease agreement with FPIP Property Developers andManagement Corporation for the rental of warehouse for a period of five (5) years commencingon December 9, 2017 to December 8, 2022, renewable upon mutual agreement of the parties.

b. On June 18, 2018, KPPH entered into another lease agreement with FPIP Property Developersand Management Corporation for the rental of warehouse for a period of five (5) yearscommencing on June 29, 2018 and expiring on June 28, 2023, renewable upon mutual agreementof the parties.

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c. On March 29, 2019, KPPH entered into a new lease agreement with FPIP Property Developersand Management Corporation for the rental of warehouse for a period of 5 years commencing onApril 1, 2019 until March 31, 2024, renewable upon mutual agreement of the parties.

Movement of the Group’s lease liability related to these lease agreements follows:

Balance at January 1 $–Effect of adoption of PFRS 16 (see Note 2) 1,144,489Balance at January 1 1,144,489Additions during the period (see Note 9) 2,302,891Lease payments during the period (153,172)Interest accretion on lease liability 87,006Balance at June 30 $3,381,214

As of June 30, 2019, the maturity analysis of the Group’s undiscounted lease liability is as follows:

Within one year $874,616After one year but not more than five years 3,086,822

$3,961,438

The undiscounted lease payments as of December 31, 2018 for the above leases is as follows:

Within one year $304,192After one year but not more than five years 1,008,889

$1,313,081

20. Retirement Benefits

The Group is in the process of setting up a funded, noncontributory, defined benefit pension plan(“Plan”) covering all regular and full-time employees and requiring contributions to be made toseparately administered fund.

Under the existing regulatory framework, Republic Act No. 7641, Retirement Pay Law, requires aprovision for retirement pay to qualified private sector employees in the absence of any retirementplan in the entity, provided however that the employee’s retirement benefits under any collectivebargaining and other agreements shall not be less than those provided under the law. The law doesnot require minimum funding of the plan.

Movements in present value of the defined benefit obligation are as follows:

June 30, 2019 June 30, 2018 December 31, 2018Balances at beginning of year $101,522 $247,596 $247,596Retirement benefit expense

recognized in profit or loss:Current service cost (Note 18) 40,585 1,520 158,928Interest cost – – 13,429

40,585 1,520 172,357

(Forward)

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June 30, 2019 June 30, 2018 December 31, 2018Remeasurement loss (gain) in other

comprehensive income: Change in demographic

assumptions $– $– ($302,648)Change in financial assumptions – – (38,196)Experience adjustments – – 36,981

– – (303,863)Translation adjustments 634 (3,330) (14,568)Balance at end of period $142,741 $245,786 $101,522

The principal actuarial assumptions used in determining the projected benefit obligation of the Groupas of June 30, 2019 and December 31, 2018 are as follows:

June 30, 2019 December 31, 2018Discount rate 7.61% to 7.72% 7.61% to 7.72%Salary increase rate 5.00% 5.00%Retirement age Age 60 Age 60

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as of June 30, 2019 and December 31, 2018assuming all other assumptions were held constant. There were no changes in the methods andassumptions used in preparing the sensitivity analysis.

Increase (decrease)in basis points

Increase (decrease) in defined benefit obligationJune 30, 2019 December 31, 2018

Discount rate +1.00% ($55,822) ($14,603)- 1.00% 23,573 17,646

Salary increase rate +1.00% $23,263 $17,956- 1.00% (56,283) (15,064)

The average duration of the defined benefit obligation as of June 30, 2019 and December 31, 2018 is15.3 to 17.6 years.

21. Equity

Capital StockDetails of the Parent Company’s authorized, issued and outstanding common shares as ofJune 30, 2019 and June 30, 2018 are as follows:

Shares Amount in Philippine Pesos (P=) Amount in US Dollars ($)June 30,

2019June 30,

2018June 30,

2019June 30,

2018June 30,

2019June 30,

2018Authorized capital stock - P=1 ($0.02)

par value 1,700,000,000 1,700,000,000 P=1,700,000,000 P=1,700,000,000 $34,753,834 $34,753,834

Issued and outstanding:Balance at beginning of period 1,108,350,000 2,127,120 1,108,350,000 212,712,000 22,658,478 5,000,000Issuance of additional shares

to existing shareholders dueto change in par value – 210,584,880 – – – –

Issuance of additional shares – 895,638,000 – 895,638,000 – 17,658,4781,108,350,000 1,108,350,000 P=1,108,350,000 P=1,108,350,000 $22,658,478 $22,658,478

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On January 10, 2018, the BOD and the stockholders resolved to approve the proposed increase inauthorized capital stock of the Parent Company from P=215,000,000 representing 2,150,000 shareswith a par value of P=100.00 per share to P=1,700,000,000 representing 1,700,000,000 shares with apar value of P=1.00 per share. Amended articles of incorporation of the Parent Company wasapproved by the Philippine SEC on March 2, 2018.

On January 22, 2018, the Parent Company executed a subscription agreement with KPSG in whichKPSG agrees to subscribe 895,637,700 common shares of the Parent Company with par value ofP=895.6 million or $17.7 million, representing 80.81% of the increased outstanding capital stock of theCompany for a consideration of $100.0 million. The excess over par of $82.3 million (P=4.2 billion)was credited to APIC.

Legal fees and other costs incurred related to the application for increase in authorized shares andsubsequent issuance of shares amounting to $0.4 million was presented as deduction from theadditional paid-in capital.

Retained EarningsThe consolidated retained earnings include the accumulated earnings of the subsidiary amounting to$56.4 million and $29.5 million as of June 30, 2019 and December 31, 2018, respectively. These arenot available for dividends until declared by the subsidiary.

On May 9, 2019, the BOD of the Parent Company declared cash dividends amounting to P=0.45 pershare or a total of P=498.8 million ($9.5 million) out of the Parent Company’s unrestricted retainedearnings as of December 31, 2018 to stockholders of record as of May 9, 2019 and are payable if andwhen 30 days have passed after all necessary regulatory approvals are secured. Cash dividends waspaid on June 19, 2019.

Equity ReserveAs of June 30, 2019 and December 31, 2018, the amount retained in the ‘Equity reserve’ accountpertains to the difference between the consideration for the acquisition and the legal capital of KPPHwhich is separately presented in the equity section of the interim consolidated financial statements(see Note 2).

22. Income Taxes

The current provision for income tax for the six-month periods ended June 30, 2019 and 2018represents regular corporate income tax arising from income on non-PEZA registered activities and5% tax on gross income from the sale of electronic products and from rental revenue of the ParentCompany.

The reconciliation of the provision for income tax computed at the statutory tax rate to actualprovision for income tax shown in the interim consolidated statements of comprehensive income is asfollows:


Tax at 5% $1,860,498 $1,205,481Adjustments to income tax resulting from:

Income from ITH registered activities (1,155,758) (1,099,727)

(Forward)

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Tax effect of the difference between theaccounting and tax base of non-monetaryassets ($226,014) $405,115

Income from non-PEZA registered activities 47,874 17,798Nondeductible expense and others 22,624 10,230

$549,224 $538,897

The component of the net deferred income tax liability is as follows:

June 30, 2019 December 31, 2018Deferred income tax liability recognized in profit or

loss for difference between the accounting andtax base of nonmonetary assets ($331,113) ($557,127)

23. Financial Instruments

Financial Risk Management Objectives and PoliciesThe Group’s principal financial instruments comprise cash, trade and other receivables, trade andother payables, due to related parties and loans payable. The main purpose of these financialinstruments is to finance for the Group’s operations.

The BOD has overall responsibility for the establishment and oversight of the Group’s riskmanagement framework. The Group’s risk management policies are established to identify andmanage the Group’s exposure to financial risks, to set appropriate transaction limits and controls, andto monitor and assess risks and compliance to internal control policies. Risk management policiesand structure are reviewed regularly to reflect changes in market conditions and the Group’sactivities.

The Group has exposure to liquidity risk, credit risk, foreign currency risk and interest rate risk fromthe use of its financial instruments. The BOD reviews and approves the policies for managing eachof these risks and they are summarized below.

Liquidity RiskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they falldue. The Group’s objectives to managing liquidity risk is to ensure, as far as possible, that it willalways have sufficient liquidity to meet its liabilities when due, under both normal and stressedconditions, without incurring unacceptable losses or risking adverse effect to the Group’s creditstanding.

The Group monitors its cash flow position, debt maturity profile and overall liquidity position inassessing its exposure to liquidity risk. The Group maintains a level of cash deemed sufficient tofinance operations and to mitigate the effects of fluctuation in cash flows. Accordingly, its loanmaturity profile is regularly reviewed to ensure availability of funding through an adequate amount ofcredit facilities with financial institutions.

Overall, the Group’s funding arrangements are designed to keep an appropriate balance betweenequity and debt, to give financing flexibility while continuously enhancing the Group’s operations.

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The tables below summarize the maturity profile of the Group’s financial assets and liabilities atamortized cost based on contractual undiscounted payments:

As of June 30, 2019Total On demand 1 to 30 Days Over 30 Days

Financial AssetsCash $22,901,955 $22,901,955 $− $−Trade and other receivables:

Third parties 102,610,602 174,838 87,094,234 15,341,530Related parties 19,762,278 1,111,279 17,256,479 1,394,520

Refundable guarantee deposit(included under “Other noncurrentassets”) 352,687 − − 352,687

145,627,522 24,188,072 104,350,713 17,088,737Financial LiabilitiesTrade and other payables:

Trade 101,900,625 8,972,397 73,380,415 19,547,813Accruals 5,082,440 1,601,773 1,294,721 2,185,946Others* 1,363,846 420,266 740,512 203,068

Loans payable** 94,986,436 − − 94,986,436Due to related parties 15,530,544 270,146 9,461,729 5,798,669Lease liability 3,843,325 − 72,677 3,770,648

222,707,216 11,264,582 84,950,054 126,492,580Net Financial Assets (Liabilities) ($77,079,694) $12,923,490 $19,400,659 ($109,403,843)*Excluding statutory payables**Including interest to maturity

As of December 31, 2018Total On demand 1 to 30 Days Over 30 Days

Financial AssetsCash $25,146,366 $25,146,366 $− $−Trade and other receivables:

Third parties 86,237,746 499,161 − 85,738,585Related parties 8,661,547 4,955,940 − 3,705,607

Refundable guarantee deposit(included under “Other noncurrentassets”) 216,986 − − 216,986

120,262,645 30,601,467 − 89,661,178Financial LiabilitiesTrade and other payables:

Trade 54,648,836 15,168,758 29,591,302 9,888,776Accruals 5,230,464 3,012,606 2,011,899 205,959Others* 1,383,812 944,819 370,581 68,412

Loans payable** 104,732,371 − − 104,732,371Due to related parties 14,193,641 5,997,147 8,173,864 22,630

180,189,124 25,123,330 40,147,646 114,918,148Net Financial Assets (Liabilities) ($59,926,479) $5,478,137 ($40,147,646) ($25,256,970)*Excluding statutory payables**Including interest to maturity

Credit RiskThe Group’s exposure to credit risk on loans and receivables arise from default of the counterparty,with a maximum exposure equal to the carrying amounts of these receivables. Credit risk from cashis mitigated by transacting only with reputable banks duly approved by management.

Concentration of credit risk arises from exposure to the Group’s dependence on three majorcustomers. The Group manages the risk by adopting appropriate credit control policies andprocedures and therefore does not expect to incur material financial losses.

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The ability of the customers to meet its obligation can be adversely affected by changes in economiccondition and changes in the manufacturing industry.

Trade receivables are generally on a 45 to 91 days term. As of June 30, 2019 and December 31,2018, the Group assessed that its debtor has good credit standing and trade receivables are collectible.

The following are the details of the Group’s assessment of credit quality and the related ECLs as atJune 30, 2019 and December 31, 2018:

General approach§ Cash and cash equivalents – These are of high quality as the amounts are deposited in reputable

banks which have good bank standing and is considered to have low credit risk. Accordingly,management assessed that no ECL relating to the cash and cash equivalents of the Group isrecognized.

§ Other receivables and refundable guarantee deposit – These are high grade since these pertain tocounterparties who have a very remote likelihood of default and have consistently exhibited goodpaying habits. Accordingly, management assessed that no ECL relating to these receivables anddeposits of the Group is recognized. This assessment is undertaken each financial year throughexamining the financial position of the counterparties and the markets in which they operate.

Simplified approach§ Trade receivables – There are high grade since these pertain to receivables from customers who

have established good credit standing with the Group. The Group applied the simplified approachunder PFRS 9, using a ‘provision matrix’. Accordingly, management assessed that no ECLrelating to trade receivables of the Group is recognized. Trade receivables are regarded as short-term and while there are certain accounts that are past-due, the Group evaluates the credit riskwith respect to trade receivables as low as there were no history of default payments.

Foreign Currency RiskForeign exchange risk is the risk that the value of a financial instrument will fluctuate because ofchanges in foreign exchange rates. The Group is exposed to both transactional and translationalfluctuations in the value of financial instruments due to exchange rate movements of foreigncurrencies. These exposures arise mainly from the purchase of goods and services in the ordinarycourse of business. Transactional exposure arises from income earned and expenses paid incurrencies other than USD, the Group’s functional currency. Translational exposure arises on theconversion of the foreign-currency-denominated monetary assets and liabilities into its USDequivalent.

In the normal course of business, the Group transacts with certain companies based outside thePhilippines, with these transactions being settled in Philippine Peso (PHP), Euro (“EUR”) andJapanese Yen (JPY). The Group follows a policy to manage its currency risk by closely monitoringits cash flow position and by providing forecasts on all other exposures in currencies other than theUS dollar.

- 44 -

*SGVFS037783*

The Group’s foreign currency-denominated monetary assets and liabilities and their US Dollarequivalents follow:

As of June 30, 2019

PHP EUR JPYUS Dollar

Equivalent

Financial AssetsCash P=200,726,574 €229,591 ¥2,360,442 $4,200,371Trade and other receivables 156,830,267 − – 3,060,700

357,556,841 229,591 2,360,442 7,261,071Financial LiabilityTrade and other payables 471,066,596 1,655,191 – 11,075,620Net Foreign Currency-Denominated Assets

(Liabilities) (P=113,509,755) (€1,425,600) ¥2,360,442 ($3,814,549)

As of December 31, 2018

PHP EUR JPYUS DollarEquivalent

Financial AssetsCash P=226,474,233 €− ¥− $4,307,231Trade and other receivables 78,231,722 − – 1,487,861

304,705,955 – – 5,795,092Financial LiabilityTrade and other payables 231,483,378 422,410 – 4,885,693Net Foreign Currency-Denominated Assets

(Liabilities) P=73,222,577 (€422,410) ¥− $909,399

The exchange rates used follow:

June 30, 2019 December 31, 2018Philippine Peso (PHP) $0.02 to P=1 $0.02 to P=1Euro (EUR) $1.14 to €1 $1.14 to €1Japanese Yen (JPY) $0.01 to ¥1 $0.01 to ¥1

The table below demonstrates the sensitivity to a reasonably possible change in exchange rates, withall other variables held constant, of the Group’s income before income tax. There is no other impacton the Group’s equity other than those already affecting profit or loss.

Change in US Dollar to Philippine Peso5% appreciation of P=

against $5% depreciation of P=

against $Increase (decrease) in income before

income tax:2019 ($110,763) $110,7632018 69,630 (69,630)

Change in US Dollar to Euro5% appreciation of €

against $5% depreciation of €

against $Increase (decrease) in income before

income tax:2019 ($81,259) $81,2592018 (24,160) 24,160

- 45 -

*SGVFS037783*

Change in US Dollar to Japanese Yen5% appreciation of ¥

against $5% depreciation of ¥

against $Increase (decrease) in income beforeincome tax:

2019 $1,095 ($1,095)2018 – –

In calculating the sensitivity analysis, it is assumed that foreign exchange rate sensitivity has asymmetric impact on the Group’s results, that is, an increase in rates results in the same amount ofmovement as a decrease in rates.

There is no change in the methods and assumptions used in preparing the sensitivity analysis duringthe six-month periods ended June 30, 2019 and year ended December 31, 2018.

Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes inmarket interest rates relates primarily to the Group’s short-term debt obligations with floating interestrates.

To manage this risk, the Group obtain loans only with recognized counterparties that offers reasonableand competitive interest rates and the exposure to interest rate risk is monitored on an ongoing basiswith the result that the Group’s exposure to floating rates is not significant.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, withall variables held constant, of the Group’s income before income tax (through the impact on floating-rate borrowings). There is no other impact on the Group’s equity except those already affectingprofit or loss.

Change in basis pointsIncrease in

basis pointsDecrease inbasis points

Increase (decrease) in income before income tax: 2019 at 5 basis points ($49,322) $49,322

2018 at 5 basis points (36,619) 36,619

Capital ManagementThe Group considers the equity presented in the statement of financial position as its core capital.The primary objective of the Group’s capital management is to ensure that the Group has sufficientfunds in order to support its business, pay existing obligations and maximize shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economicconditions. To maintain or adjust the capital structure, the Group may obtain additional advancesfrom stockholders or issue new shares. The Group is not subject to externally imposed capital ratios.No changes were made in the objectives, policies or processes during the periods endedJune 30, 2019 and December 31, 2018.

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24. Notes to Statement of Cash Flows

Noncash investing activityNoncash investing activity pertains to the acquisition of property, plant and equipment on accountamounting to $1,864,724 and $2,672,500 for the six-month periods ended June 30, 2019 and 2018,respectively (see Note 7).

Changes in liabilities arising from financing activities

Noncash changes

January 1,2019

Drawdowns/Additions Payments

DividendsDeclared Other

ForeignExchange

MovementJune 30,

2019Loans payable (see Note 12) $104,000,000 $141,500,000 ($151,500,000) $– $– $– $94,000,000Dividends payable (see Note 21) – – (8,130,096) 9,536,472 (1,430,471) 24,095 –Lease liability

(see Notes 2 and 19) 1,144,489 2,302,891 (153,172) – 87,006 – 3,381,214Total liabilities from financing

activities $105,144,489 $143,802,891 ($159,783,268) $9,536,472 $1,343,465 $24,095 $97,381,214

January 1, 2018 Drawdowns Repayments June 30, 2018Loans payable (see Note 12) $69,053,647 $87,220,000 ($84,153,647) $72,120,000

Other pertains to the interest accretion of lease liability during the period and final withholding taxesof dividends still outstanding as of June 30, 2019.

25. Fair Value Measurement

The carrying amounts of the Group’s financial assets and liabilities are equal to or approximate theirfair values as these have short-term maturities.

The fair value measurement of investment properties is classified under Level 3 of the fair valuehierarchy in which fair value is required to be disclosed. The fair value has been determined basedon valuations performed by an independent appraiser using a combination of income and costapproach (see Note 8). The key unobservable inputs used in the fair value measurement includeprice per square meter, external factor (adjustment to the price per square meter), location size,reproduction cost and remaining economic life.

There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers intoand out of Level 3 fair value measurements.

26. Segment Information

The Group is currently organized into two operating segments: (1) sale of electronic equipment,including computer peripherals and telecommunications products and (2) lease of manufacturingfacility. These operating segments are consistent with those reported to the BOD, the Group’s chiefoperating decision maker.

Only the sale of electronic equipment operating segment has been aggregated to form the abovereportable operating segment. The chief operating decision maker monitors the operating results ofthe business units separately for the purpose of making decisions about resource allocation and

- 47 -

*SGVFS037783*

assessing performance. Segment performance is measured based on operating profit or loss and totalassets on a basis consistent with that used to measure operating profit or loss and total assets in theinterim consolidated financial statements.

The Group operates only in the Philippines (i.e., one geographical location). Thus, geographicalsegment information is not presented.

No inter-segment revenues are earned within the Group in 2019 and 2018.

For the Six Months Ended June 30, 2019Sale of electronic

products Rental Eliminations ConsolidatedRevenues from external customers $187,400,131 $965,118 $– $188,307,903Revenue from affiliates 90,007,685 436,970 (57,346) 90,444,655

277,407,816 1,402,088 (57,346) 278,752,558Income from operations 30,168,670 382,634 52,690 30,603,994Interest expense (1,508,946) – 7,487 (1,501,459)Net foreign exchange losses (117,488) – 28 (117,460)Scrap sales 159,506 – – 159,506Interest accretion on lease liability (87,006) – – (87,006)Interest income 6,905 – – 6,905Others (63,026) – – (63,026)Income before income tax 28,558,615 382,634 60,205 29,001,454Income tax expense (526,93) (22,631) – (549,224)Net income $28,032,022 $360,003 $60,205 $28,452,230

For the Six Months Ended June 30, 2018Sale of electronic

products Rental Eliminations ConsolidatedRevenues from external customers $111,707,242 $1,007,815 $– $112,739,494Revenue from affiliates 78,903,268 259,374 (57,981) 79,080,224

190,610,510 1,267,189 (57,981) 191,819,718Income from operations 18,989,782 428,725 (10) 19,418,497Interest expense (1,067,057) – – (1,067,057)Net foreign exchange losses 794,335 – (2,776) 791,559Scrap sales 59,419 – – 59,419Interest income 5,148 – – 5,148Others 2,245 – (3,157) (912)Income before income tax 18,783,872 428,725 (5,943) 19,206,654Income tax expense (515,001) (23,896) – (538,897)Net income $18,268,871 $404,829 ($5,943) $18,667,757

27. Earnings Per Share

The following presents the information necessary to calculate earnings per share attributable to equityholders of the Parent Company:

For the six months ended June 302019 2018

Net income $28,452,230 $18,667,757Weighted average number of shares issued and

outstanding 1,108,350,000 1,108,349,750Basic/Diluted earnings per share $0.0257 $0.0168

There are no potentially dilutive shares issued as of June 30, 2019 and 2018.

- 48 -

*SGVFS037783*

The basic and diluted EPS for the six-month period ended June 30, 2018 has been retroactivelyadjusted to take into consideration the effect of applying pooling-of-interest method in accounting forthe acquisition of KPPH (see Note 2). For purposes of EPS calculation, the issuance of shares to theexisting shareholders due to the change in par value and the issuance of new shares by the ParentCompany to KPSG was accounted for as if the issuance has taken place on January 1, 2018, thebeginning of the earliest comparative period presented.

*SGVFS037783*



We have audited the accompanying interim consolidated financial statements of Cal-Comp Technology(Philippines), Inc. and its subsidiary as of June 30, 2019 and December 31, 2018 and for the six-monthperiods ended June 30, 2019 and 2018, on which we have rendered the attached report datedAugust 6, 2019.

In compliance with Securities Regulation Code Rule 68, As Amended (2011), we are stating that theabove Parent Company has a total of ten (10) stockholders owning one hundred (100) or more shareseach.



August 6, 2019


Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph



*SGVFS037783*

INDEPENDENT AUDITOR’S REPORTON SUPPLEMENTARY SCHEDULES


We have audited in accordance with Philippine Standards on Auditing, the consolidated financialstatements of Cal-Comp Technology (Philippines), Inc. and its subsidiary (the Group) as of and for thesix-month period ended June 30, 2019 and have issued our report thereon dated August 6, 2019. Ouraudits were made for the purpose of forming an opinion on the basic financial statements taken as awhole. The schedules listed in the Index to the Interim Consolidated Financial Statements andSupplementary Schedules are the responsibility of the Group’s management. These schedules arepresented for purposes of complying with the Securities Regulation Code Rule 68, As Amended (2011)and are not part of the basic financial statements. These schedules have been subjected to the auditingprocedures applied in the audit of the basic financial statements and, in our opinion, fairly state, in allmaterial respects, the information required to be set forth therein in relation to the basic financialstatements taken as a whole.



August 6, 2019


Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph



CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE OF ALL EFFECTIVE STANDARDS AND INTERPRETATIONSEFFECTIVE AS OF JUNE 30, 2019

PHILIPPINE FINANCIAL REPORTING STANDARDSAND INTERPRETATIONSEffective as at JUNE 30, 2019 Adopted

NotAdopted

NotApplicable

Framework for the Preparation and Presentation of Financial StatementsConceptual Framework Phase A: Objectives and qualitative characteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine Financial Reporting Standards

Amendments to PFRS 1 and PAS 27: Cost of an Investment in aSubsidiary, Jointly Controlled Entity or Associate

Amendments to PFRS 1: Additional Exemptions for First-timeAdopters

Amendment to PFRS 1: Limited Exemption from ComparativePFRS 7 Disclosures for First-time Adopters

Amendments to PFRS 1: Severe Hyperinflation and Removal of FixedDate for First-time Adopters

Amendments to PFRS 1: Government Loans

Amendments to PFRS 1: Borrowing Costs

Amendments to PFRS 1: Meaning of Effective PFRSs

SPFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions and Cancellations

Amendments to PFRS 2: Group Cash-settled Share-based PaymentTransactions

Amendments to PFRS 2: Definition of Vesting Condition

Amendments to PFRS 2: Clarification and Measurement of Share-based Payment Transactions

PFRS 3(Revised)

Business Combinations

Amendment to PFRS 3: Accounting for Contingent Consideration in aBusiness Combination

Amendments to PFRS 3: Scope Exceptions for Joint Arrangements

Amendments to PFRS 3 and PFRS 11: Previously Held Interest in aJoint Venture See footnote ˡ

Amendments to PFRS 3: Definition of a Business See footnote ˡ

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts

Amendments to PFRS 4: Applying PFRS 9, Financial Instruments,with PFRS 4

PFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Changes in Method of Disposal

- 2 -


NotAdopted

NotApplicable

PFRS 6 Exploration for and Evaluation of Mineral Resources

PFRS 7 Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7: Reclassification of FinancialAssets

Amendments to PAS 39 and PFRS 7: Reclassification of FinancialAssets - Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures about FinancialInstruments

Amendments to PFRS 7: Disclosures - Transfers of Financial Assets

Amendments to PFRS 7: Disclosures - Offsetting Financial Assets andFinancial Liabilities

Amendments to PFRS 7: Mandatory Effective Date of PFRS 9 andTransition Disclosures

Amendments to PFRS 7: Servicing Contracts

Amendments to PFRS 7: Applicability of the Amendments to PFRS 7to Condensed Interim Financial Statements

PFRS 8 Operating Segments

Amendments to PFRS 8: Aggregation of Operating Segments andReconciliation of the Total of the Reportable Segments’ Assets toCondensed Interim Financial Statements.

PFRS 9 Financial Instruments

Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 andTransition Disclosures

Financial Instruments - New hedge accounting requirements

Amendments to PFRS 9: Prepayment Features with NegativeCompensation See footnote ˡ

PFRS 10 Consolidated Financial Statements

Amendments to PFRS 10: Transition Guidance

Amendments to PFRS 10: Investment Entities

Amendments to PFRS 10: Investment Entities: Applying theConsolidation Exception

Amendments to PFRS 10 and PAS 28: Sale or Contribution of AssetsBetween Investor and its Associate or Joint Venture Deferred effectivity

PFRS 11 Joint Arrangements

Amendments to PFRS 11: Accounting for Acquisitions of Interests inJoint Operations

Amendment to PFRS 3 and PFRS 11: Previously Held Interest in aJoint Venture See footnote ˡ

- 3 -


NotAdopted

NotApplicable

PFRS 12 Disclosure of Interests in Other Entities

Amendments to PFRS 11: Transition Guidance

Amendment to PFRS 11: Accounting for Acquisitions of Interests inJoint Operations

PFRS 13 Fair Value Measurement

Amendment to PFRS 13: Short-term Receivables and Payables

Amendment to PFRS 13: Portfolio Exception

PFRS 14 Regulatory Deferral Accounts

PFRS 15 Revenue from Contracts with Customers

PFRS 16 Leases

PFRS 17 Insurance Contracts See footnote ˡ

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments andObligations Arising on Liquidation

Amendments to PAS 1: Presentation of Items of Other ComprehensiveIncome

Amendment to PAS 1: Clarification of the Requirements ofComparative Information

Amendments to PAS 1: Disclosure Initiative

Amendments to PAS 1: Definition of Material See footnote ˡ

PAS 2 Inventories

PAS 7 Statement of Cash Flows

Disclosure Initiative

PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

PAS 10 Events after the Reporting Period

PAS 12 Income Taxes

Amendment to PAS 12: Deferred Tax: Recovery of Underlying Assets

Recognition of Deferred Tax Assets for Unrealized Losses

Amendments to PAS 12: Income Tax Consequences of Payments onFinancial Instruments Classified as Equity See footnote ˡ

PAS 16 Property, Plant and Equipment

Amendment to PAS 16: Classification of Servicing and Equipment

Amendment to PAS 16: Revaluation Method - ProportionateRestatement of Accumulated Depreciation

- 4 -


NotAdopted

NotApplicable

Amendment to PAS 16: Clarification of Acceptable Methods ofDepreciation and Amortization

Amendment to PAS 16: Bearer Plants

PAS 17 Leases

PAS 19 Employee Benefits

Amendments to PAS 19: Actuarial Gains and Losses, Group Plans andDisclosures

Employee Benefits - Defined Benefit Plans: Employee Contributions(Amendments)

Employee Benefits: Regional Market Issue Regarding Discount Rate

Amendments to PAS 19: Plan Amendment, Curtailment or Settlement See footnote ˡ

PAS 20 Accounting for Government Grants and Disclosure of GovernmentAssistance

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23 Borrowing Costs

Amendments to PAS 23: Borrowing Costs Eligible for Capitalization See footnote ˡ

PAS 24(Revised)

Related Party Disclosures

Amendments to PAS 24: Key Management Personnel

PAS 26 Accounting and Reporting by Retirement Benefit Plans

PAS 27(Amended)

Separate Financial Statements

Amendments to PAS 27: Investment Entities

Amendments to PAS 27: Equity Method in Separate FinancialStatements

PAS 28(Amended)

Investments in Associates and Joint Ventures

Amendment to PAS 28, Investment Entities: Applying theConsolidation Exception

Amendment to PAS 28: Measuring an Associate or Joint Venture atFair Value

Amendments to PAS 28: Long-term Interests in Associates and JointVentures See footnote ˡ

Amendment to PFRS 10 and PAS 28: Sale or Contribution of AssetsBetween an Investor and its Associate or Joint Venture Deferred effectivity

PAS 29 Financial Reporting in Hyperinflationary Economies

PAS 32 Financial Instruments: Disclosure and Presentation

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments andObligations Arising on Liquidation

Amendment to PAS 32: Classification of Rights Issues

- 5 -


NotAdopted

NotApplicable

Amendments to PAS 32: Offsetting Financial Assets and FinancialLiabilities

Amendments to PAS 32: Tax Effect of Distribution to Holders ofEquity Instruments

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

Amendments to PAS 34: Interim Financial Reporting and SegmentInformation for Total Assets and Liabilities

Amendments to PAS 34: Disclosure of Information Elsewhere in theInterim Financial Report

PAS 36 Impairment of Assets

Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendments)

PAS 37 Provisions, Contingent Liabilities and Contingent Assets

PAS 38 Intangible Assets

Amendments to PAS 38: Revaluation Method - ProportionateRestatement of Accumulated Amortization

Amendments to PAS 38: Clarification of Acceptable Methods ofDepreciation and Amortization

PAS 40 Investment Property

Amendments to PAS 40: Clarifying the Interrelationship betweenPFRS 3 and PAS 40 when Classifying Property as Investment Propertyor Owner Occupied Property

Amendments to PAS 40: Transfers of Investment Property

PAS 41 Agriculture

Amendments to PAS 41: Bearer Plants

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration and SimilarLiabilities

IFRIC 2 Members' Share in Co-operative Entities and Similar Instruments

IFRIC 4 Determining Whether an Arrangement Contains a Lease

IFRIC 5 Rights to Interests arising from Decommissioning, Restoration andEnvironmental Rehabilitation Funds

IFRIC 6 Liabilities arising from Participating in a Specific Market - WasteElectrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29 FinancialReporting in Hyperinflationary Economies

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC 9 and PAS 39:Embedded Derivatives

- 6 -


NotAdopted

NotApplicable

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 12 Service Concession Arrangements

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction

Amendments to Philippine Interpretations IFRIC 14, Prepayments of aMinimum Funding Requirement

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

IFRIC 21 Levies

IFRIC 22 Foreign Currency Transactions and Advance Consideration

IFRIC-23 Uncertainty over Income Tax Treatments

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation to Operating Activities

SIC-15 Operating Leases - Incentives

SIC-25 Income Taxes - Changes in the Tax Status of an Entity or itsShareholders

SIC-27 Evaluating the Substance of Transactions Involving the Legal Form ofa Lease

SIC-29 Service Concession Arrangements: Disclosures

SIC-32 Intangible Assets - Web Site Costs

ˡ Effective Subsequent to December 31, 2018

CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYINDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTARY SCHEDULES

SUPPLEMENTARY SCHEDULES

Independent Auditor’s Report on Supplementary Schedules:

A. Financial AssetsB. Amounts Receivable from Directors, Officers, Employees, Related Parties, and

Principal Stockholders (Other than Related parties)C. Amounts Receivable from Related Parties which are Eliminated during the

Consolidation of Financial StatementsD. Intangible Assets - Other AssetsE. Long-Term DebtF. Indebtedness to Related PartiesG. Guarantees of Securities of Other IssuersH. Capital Stock

Schedule of All the Effective Standards and Interpretations under Philippine FinancialReporting Standards as of June 30, 2019

Schedule of Retained Earnings Available for Dividend Declaration as at June 30, 2019

Map of the Relationships of the Companies within the Group

CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE A - FINANCIAL ASSETSRECEIVABLES, AVAILABLE-FOR-SALE INVESTMENTS AND OTHER SHORT-TERM INVESTMENTSJUNE 30, 2019

Name of Issuing Entity and Description of Each Issue

Number of Sharesor Principal Amountof Bonds and Notes

Amount Shownin the Balance

Sheet/Notes

Value Basedon Market

Quotations atBalance

Sheet Date

IncomeReceived

and Accrued

Financial Assets at amortized cost:Cash and cash equivalents – $22,901,955 $22,901,955 $6,905Trade and other receivables:

Third parties – 102,610,602 102,610,602 –Related parties – 19,762,278 19,762,278 –

– 122,372,880 122,372,880 –Refundable guarantee deposit (included under “Other noncurrent assets”) – 352,687 352,687 –

Total financial assets – $145,627,522 $145,627,522 $6,905

CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE B - AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES, RELATED PARTIES,AND PRINCIPAL STOCKHOLDERS (OTHER THAN RELATED PARTIES)JUNE 30, 2019

Balance atBeginning of

PeriodBalance at End of Period

Name and Designation of Debtor Additions Collections Write Offs Current Noncurrent Total

– Not applicable –

CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE C - AMOUNTS RECEIVABLE FROM RELATED PARTIES WHICH ARE ELIMINATEDDURING THE CONSOLIDATION OF FINANCIAL STATEMENTSJUNE 30, 2019

Balance atBeginning of

PeriodBalance at End of Period

Name and Designation of Debtor Additions Collections Write Offs Revaluation Current Noncurrent Total

Kinpo Electronics (Philippines), Inc. $85,292 $7,199 $– ($4,967) $87,524 $– $87,524

CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE D - INTANGIBLE ASSETS - OTHER ASSETSJUNE 30, 2019

DescriptionBeginning

Balance

Effect ofAdoption of

PFRS 16

BeginningBalance

(As Restated)Additions

at CostCharged to Cost

and ExpensesCharged to

Other Accounts

Other changesAdditions

(Deductions) Ending Balance

Land-use rights $20,644,503 ($20,644,503) $− $− $− $− $− $−Computer software 472,547 − 472,547 − (164,281) – – 308,266

$21,117,050 ($20,644,503) $472,547 $− ($164,281) $− $− $308,266

See Note 10 of the Consolidated Financial Statements.

CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE E - LONG-TERM DEBTJUNE 30, 2019

Title of Issue and Type of Obligation

AmountAuthorized

by Indenture

CurrentPortion of

Long-term Debt Long-term Debt– Not applicable –


CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE F - INDEBTEDNESS TO RELATED PARTIES (LONG-TERM LOANS FROM RELATED COMPANIES)JUNE 30, 2019

Name of Related Party Balance at Beginning of Period Balance at End of Period


CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE G - GUARANTEES OF SECURITIES OF OTHER ISSUERSJUNE 30, 2019

Name of Issuing Entity of Securities Guaranteed bythe Company for which this Statement is Filed

Title of Issue of Each Classof Securities Guaranteed

Total AmountGuaranteed and Outstanding

Amount Owned by Personfor which Statement is Filed Nature of Guarantee


CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYSCHEDULE H - CAPITAL STOCKJUNE 30, 2019

Title of Issue

Number ofShares

Authorized

Number ofShares Issued

and Outstandingas Shown under

RelatedConsolidatedStatement of

FinancialPosition Caption

Number ofShares Reserved

for Options,Warrants,

Conversion andOther Rights Affiliates

Directors andOfficers Others

Capital stock 1,700,000,000 1,108,350,000 – 1,108,349,000 900 100


CAL-COMP TECHNOLOGY (PHILIPPINES), INC.SCHEDULE OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND

DECLARATIONFOR THE SIX MONTHS ENDED JUNE 30, 2019

Items Amount

Parent Company’s Unappropriated Retained Earnings,January 1, 2019 $20,561,932

AdjustmentsPrevious year's unrealized foreign exchange gain - net (except those

attributable to cash and cash equivalents) 3,187Unappropriated Retained Earnings,

as Adjusted, January 1, 2019 20,565,119

Parent Company’s Net income for the six months endedJune 30, 2019 1,575,490

Less: Non-actual/Unrealized Income Net of TaxEquity in net income of associate/joint venture –Unrealized foreign exchange gain - net (except those attributable to

cash) 41,624Unrealized actuarial gain –Fair value adjustment (M2M gains) –Fair value adjustment of investment property resulting to gain –Adjustment due to deviation from PFRS/GAAP-gain –Other unrealized gains or adjustments to the retained earnings as a

result of certain transactions accounted for under the PFRS –Deferred income tax assets that reduced the amount of provision

for income tax –

Add: Non-actual LossesDepreciation on revaluation increment (after tax) –Adjustment due to deviation from PFRS/GAAP - loss –Loss on fair value adjustment of investment property (after tax) –Net Income Actual/Realized 1,617,114

Add (Less):Dividend declarations during the period (9,536,472)Appropriations of retained earnings during the period –Reversals of appropriations –Effects of prior period adjustments –Treasury shares –

TOTAL RETAINED EARNINGS AVAILABLE FORDIVIDEND DECLARATION, June 30, 2019 $12,645,761

CAL-COMP TECHNOLOGY (PHILIPPINES), INC. AND SUBSIDIARYMAP OF THE RELATIONSHIPS OF THE COMPANIES WITHIN THE GROUPJUNE 30, 2019

Documents

Cal-Comp Technology (Philippines), Inc. and Subsidiary€¦ · summary of significant accounting policies. In our opinion, the accompanying interim consolidated financial statements