SECURITIES AND EXCHANGE COMMISSION SEC …admin.cic.ph/uploads/Financial/financial_2015415105053.pdf · securities and exchange commission sec form 17-a annual report pursuant to

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141

OF THE CORPORATION CODE OF THE PHILIPPINES

s

1. For the fiscal year ended December 31, 2014

2. SEC Identification Number A1997-13456 3. BIR Tax Identification No. 005-029-401-000

4. Exact name of issuer as specified in its charter - CONCEPCION INDUSTRIAL CORPORATION

5. Philippines 6. (SEC Use Only)

Province, Country or other jurisdiction of

incorporation or organization

Industry Classification Code:

7. 308 Sen. Gil Puyat Avenue, Makati City, Philippines 1209

Address of principal office Postal Code

8. +632 7721819

Issuer's telephone number, including area code

9. ................................................................................................................................................

Former name, former address, and former fiscal year, if changed since last report.

10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA

Title of Each Class Number of Shares of Common Stock

Outstanding and Amount of Debt Outstanding

COMMON 339,617,226

(as of September 8, 2014)

11. Are any or all of these securities listed on a Stock Exchange.

Yes [ X ] No [ ]

If yes, state the name of such stock exchange and the classes of securities listed therein:

Philippine Stock Exchange Common Stock

12. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder

or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The

Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period

that the registrant was required to file such reports);

Yes [ X ] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [ X ] No [ ]

13. The aggregate market value of the voting stock held by non-affiliates of the registrant is P 14.1

billion. The price used for this computation is the closing price as of December 31, 2014 is P 43.00

(2)

TABLE OF CONTENTS

Part I - BUSINESS AND GENERAL INFORMATION 3

Item 1 Business 3

Item 2 Properties 5

Item 3 Legal Proceedings 5

Item 4 Submission of Matters to a Vote of Security Holders 5

Part II - OPERATIONAL AND FINANCIAL INFORMATION 5

Item 5 Market for Issuer’s Common Equity and Related Stockholder 5

Item 6 Management Discussion and Analysis or Plan of Operation 7

Item 7 Financial Statements 16

Item 8 Information on Independent Accountant and Other Related Matters 17

Part III - CONTROL AND COMPENSATION INFORMATION 17

Item 9 Directors and Executive Officers of the Issuer 18

Item 10 Executive Compensation 24

Item 11 Security Ownership of Certain Beneficial Owners and Management 26

Item 12 Certain Relationships and Related Transactions 27

Part IV - CORPORATE GOVERNANCE 29

Item 13 Corporate Governance 29

Part V - EXHIBITS AND SCHEDULES 31

Item 14 Exhibits and Reports on SEC Form 17-C 31

SIGNATURES 32

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES 34

(3)

Part I - BUSINESS AND GENERAL INFORMATION

Item 1 Business

A. Description of the Business

The Company, formerly Concepcion Air Conditioning Corporation (“CAC”), is one of the Philippines’ most

established and leading suppliers of air conditioners, air conditioning solutions, and refrigerators, and has

recently expanded into other consumer appliance products and building solutions, ie, elevators and

escalators. The Company is primarily a holding company which operates principally through its three

subsidiaries, Concepcion-Carrier Air Conditioning Company (“CCAC”), Concepcion Durables, Inc. (“CDI”),

Concepcion Otis Philippines Inc, (“COPI”) and an affiliate Comcepcion Midea Inc (“CMIP”). .

The Company’s air conditioning and refrigeration products and brands have received numerous awards in

recognition of their quality and value to customers. Carrier and Condura brand air conditioners have received

“Most Trusted Brand” awards from Reader’s Digest Philippines for each year for the past 12 and 10 years,

respectively. Condura brand refrigerators received the same award in 2012. In 2009 and 2010, Carrier was

awarded “No. 1 Air Conditioning Brand” by GfK Retail and Technology (“GfK”).

For the year ended December 31, 2014, the Company’s pro-forma consolidated net sales and services

amounted to P9,175.4 million and its pro-forma consolidated net income was P1,056.1 million and a profit

after tax after minority interest of P 637.2 million.

(1) Business Development

Concepcion Industries Inc. (“CII”) was established in 1962 by Jose Concepcion Sr. and obtained a license

from Carrier International in the same year to offer Carrier brand air conditioners in the Philippines. In 1977, a

license for Kelvinator was obtained. In 1987, the Condura brand was introduced.

In 1992 and 1998, CII opened its air conditioning and commercial refrigeration factories, respectively, in the

Light Industry and Science Park in Cabuyao, Laguna in the Philippines. In 1997, Concepcion Air

Conditioning Corporation (“CAC”) was formed as a subsidiary of CII, and Carrier Air Conditioning Philippines

and CAC formed CCAC, a joint venture for the production of air conditioning units. The following year, CII

opened its second factory in the Light Industry and Science Park for the manufacturing of refrigeration

equipment. In 2006, CDI was incorporated to manufacture, assemble, export, retail and trade refrigeration

equipment. In 2009, CAC became a holder of majority interest in CCAC. The following year, CAC, through

its ownership interest in CCAC, acquired the business of Carrier Linde Refrigeration through an asset

purchase. Through a restructuring in 2013, CII’s ownership interest in the Company was transferred to CHI,

Hy-land, and Horizons. On May 8, 2013, CAC purchased CDI from CII. On June 20, 2013, CAC was

renamed Concepcion Industrial Corporation. On October 9, 2013, the Parent Company’s application for

listing of its entire 700 million shares was approved by the Philippine Stock Exchange (PSE) that was

followed by its formal listing and commencement of trading on November 27, 2013. On November 20, 2013,

CIC formed a joint venture with Midea to expand its consumer offering to include other consumer white

goods and on March 28 2014, CIC through CCAC purchased 51% share in Otis Philippines (now named

COPI).

The Company is part of the Concepcion group of companies (the “Concepcion Group”), which includes

interests in air conditioning, refrigeration, durable goods, communications, malls and real estate properties.

(2) Business of Issuer

The Company has expanded its business beyond being a trusted expert in the air conditioning and

refrigeration industries, toward becoming a complete consumer and building and industrial solutions

company with a range of solutions and after-market service across multiple international and Philippine

brands including Carrier, Toshiba, Condura, Kelvinator, and now Midea and Otis. These solutions are

designed to serve a wide array of customers and structure types, from individuals and single families living in

(4)

small residences to thousands of residents, visitors and workers spread across large residential towers and

office buildings, entertainment facilities and commercial and industrial warehouses and factories. These

solutions are also designed to meet a variety of different needs, such as durability, noise reduction features,

aesthetical appeal, varying price points and customized features to match individual requirements. Moreover,

many of the Company’s air conditioning and refrigeration solutions are designed to meet the growing

demand for energy efficient technologies, and the Company offers and will continue to develop these

technologies as the demand for such solutions grows and the benefit payback in terms of reduced energy

consumption becomes more widely known and accepted. In addition, the Company offers an array of after-

market services such as periodic maintenance, parts supply, repairs and other services intended to support

its products through their entire life cycle. The Company believes that these after-market services, combined

with its wide range of air conditioning and refrigeration products catering to various customer needs, offer

customers enhanced value that distinguishes the Company’s air conditioning and refrigeration solutions from

those of its competitors.

Subsidiaries

As of year-end 2014, CIC has three major subsidiaries and an affiliate. The Company owns 60% of CCAC,

100% of CDI, 51% of COPI, and 40% of CMIP.

Concepcion-Carrier Air Conditioning Company

CCAC engages in the manufacture, sale, distribution, installation, and service of heating, ventilating, air

conditioning, and refrigeration products and services for residential, commercial, and industrial use. CCAC is

a joint venture of the Company with Carrier Corporation, which allows it to offer Carrier and Toshiba brand air

conditioners and Totaline parts. CCAC also offers other brands such as Condura and Kelvinator. CCAC

manufactures a select range of its air conditioning equipment at its factory in Light Industry and Science Park

in Cabuyao, Laguna, Philippines, the Philippines’ largest air conditioning facility with a capacity of

approximately 500,000 units per year and a production area of 19,620 sq. m. CCAC’s products are

distributed and sold primarily in the Philippines. The Company believes CCAC has the largest share of the

total air conditioning market in the Philippines as measured be revenues, including leading market positions

in the residential, light commercial and commercial and industrial segments.

Concepcion Durables, Inc.

CDI engages primarily in the manufacture, assembly, wholesale, retail, purchase, and trade of refrigeration

equipment, including Condura and Kelvinator brand refrigerators and freezers. CDI’s refrigeration equipment

is manufactured at its factory at Light Industry and Science Park in Cabuyao, Laguna, adjacent to CCAC’s air

conditioning and commercial refrigeration factory. The CDI factory has a capacity of 300,000 units per year

and a production area of 16,420 sq. m. The Company believes CDI had the largest share of the residential

and light commercial (“RLC”) refrigeration market in the Philippines in 2012 as measured by revenues.

Concepcion Midea, Inc. (CMIP)

The Company and CCAC recently formed of a joint venture which aims to introduce Midea brand products in

the Philippine market as a supplier of a whole range of appliances such as air conditioners, refrigerators, and

laundry and kitchen appliances. This will not only expand the Company’s multi-brand offering to the

Philippine market but will also allow it to expand into the wider white goods market. Established in 1968,

Midea is a leading white goods and air conditioning systems manufacturer, with operations around the world,

recording approximately U.S.$16.6 billion in revenues in 2012. Midea is a brand leader in China and has 16

domestic production bases in China as well as overseas production bases in Vietnam, Belarus, Egypt, Brazil,

Argentina, and India. It is also a joint venture and/or business partner of Carrier Corporation in selected

countries worldwide.

Concepcion Midea Inc. (CMI), is an entity registered and doing business in the Philippines. CIC has a 40%

effective share in CMI.

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Concepcion Otis Philippines Inc (COPI)

COPI’s primary business is to import, buy and sell, at wholesale, distribute,,maintain and repair, elevators,

escalators, moving walkways, and shuttle systems and all supplies, material, tools, machinery and

part/components. In March 2014, CCAC acquired 85% of the outstanding shares of the Company from UTC-

Asia Pte Ltd., who retained 15% ownership. Following the acquisition, CIC became the Company’s ultimate

parent owning 51% of the shares of COPI.

Item 2 Properties

As of the date of this Report, the Company does not own any material real properties, and all of its

manufacturing facilities and laboratories are located on land owned by CII.

The Company leases all real property and facilities for its air conditioning manufacturing facilities and

laboratories from CII under a three-year renewable lease agreement, set to expire in December 2015, which

the Company intends to renew.

The Company’s refrigeration manufacturing facilities and laboratories are situated on land owned by CII.

Currently, the Company does not maintain a lease agreement with CII for these facilities, instead paying all

property related expenses and real estate tax associated with such land.

Office space and warehouses for the Company’s air conditioning products as well as other white goods

distributed through CMIP are covered by a three-year renewable lease agreement with Foresight Realty

Development Inc. set to expire in December 2015, which the Company intends to renew.

Warehouses for the Company’s refrigeration products are covered by two lease agreements, set to expire in

July 2017 and March 2017 which the Company intends to both renew. The Company leases additional

warehouse space for its refrigeration business from LSL Realty Corporation (“LSL”), which the Company

intends to renew upon expiration in November 2013, January 2014, and March 2014.

Item 3 Legal Proceedings

In the ordinary course of business, the Company is a party to various legal actions that it believes are routine

and incidental to the operation of its business. In the opinion of the Company’s management, the outcome

and potential liability of these aforementioned legal actions are not likely to have a materially adverse effect

on the Company’s business, financial condition and results of operations

Item 4 Submission of Matters to a Vote of Security Holders

There were no matters submitted during the fourth quarter of 2014 to a vote of security holders, through the

solicitation of proxies or otherwise.

Part II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuer’s Common Equity and Related Stockholder

(1) Market Information

The Company’s Common shares were officially listed and first traded at the Philippine Stock

Exchange on November 27, 2013.

The price performance of the shares for each quarter has been follows:

(Philippine Peso) High Low

Quarter ended December 2013 26.00 23.80

Quarter ended March 2014 27.90 22.50

Quarter ended June 2014 45.00 28.00

(6)

Quarter ended September 2014 53.50 40.00

Quarter ended December 2014 46.00 39.00

Quarter ended March 2015 65.80 43.00

(2) Holders

The Company had approximately 640 shareholders of record as of March 2015. Common shares

outstanding as of said date stood at 339,617,226 which 22.82% are held by foreign shareholders.

The top 20 shareholders as of December 31, 2014 based on PDTC report are as follows

Name of Shareholder No. of Shares Held No. of Shares Held

1 FORESIGHT REALTY &

DEVELOPMENT CORP

(Formerly Concepcion Holdings,

Inc)

76,120,985 22.41%

2 HY-LAND REALTY AND

DEVELOPMENT CORP

76,500,064 22.53%

3 HORIZONS REALTY INC 78,120,855 23.00%

4 MAYBANK ATR KIM ENG

SECURITIES, INC.

236,769,926 69.72%

5 THE HONGKONG AND

SHANGHAI BANKING CORP.

LTD.- CLIENTS' ACCT

45,697,552 13.46%

6 DEUTSCHE BANK MANILA

BRANCH A/C CLIENTS

22,258,838 6.55%


SECURITIES, INC.

11,492,520 3.38%

8 CITIBANK N.A. 5,725,605 1.69%

9 PCCI SECURITIES BROKERS

CORP.

3,799,386 1.12%

10 STANDARD CHARTERED

BANK

2,962,553 0.87%

11 COL FINANCIAL GROUP, INC. 1,571,660 0.46%

12 THE INSULAR LIFE

ASSURANCE COMPANY, LTD.

1,559,960 0.46%

13 THE INSULAR LIFE

ASSURANCE COMPANY, LTD.

1,426,260 0.42%

14 ATR KIM ENG CAPITAL

PARTNERS, INC.

1,300,000 0.38%

15 A & A SECURITIES, INC. 1,012,310 0.30%

16 PAPA SECURITIES

CORPORATION

744,471 0.22%


SECURITIES, INC.

703,820 0.21%

18 ABACUS SECURITIES

CORPORATION

620,862 0.18%

19 MERIDIAN SECURITIES, INC. 250,900 0.07%

20 BPI SECURITIES

CORPORATION

241,931 0.07%

(7)

(3) Dividends

The Company is authorized under Philippine laws to declare dividends, subject to certain requirements.

These requirements include, for example, that the Board is authorized to declare dividends only from its

distributable retained earnings, calculated based on existing regulations. Dividends may be payable in cash,

shares or property, or a combination of the three, as the Board shall determine and subject to the approval of

the Philippine SEC, as may be required by law. A cash dividend declaration does not require any further

approval from shareholders. The declaration of stock dividends is subject to the approval of shareholders

holding at least two-thirds of the Company’s outstanding capital stock. The Board may not declare dividends

which will impair its capital.

Cash dividends declared for the year ended December 31, 2014 are as follows:

Date declared Dates paid Per share 2014 2013 2012

2-Apr-14 30-Apr-14 0.59 154,134 - - 18-Jul-13 15-Sep-13 0.42 - 105,000 -

In July 23, 2014, the shareholders on record approved the distribution of stock dividends of 30% of the outstanding shares with a par value of PhP 1.00 each to be taken from the unrestricted retained earnings of the company as of December 31, 2013. The record date was set at August 22, 2014 and payment date of September 8, 2014. Post-stock dividend total shares outstanding is at 339, 617, 226 shares. During CIC’s Board meeting last April 8, 2015, the board of directors approved the declaration of a regular stock dividend of PhP 200, 374, 163 or PhP 0.59 per share with a record date of April 22, 2015 and a payment date of May 14, 2015.

(4) Recent Sales of Unregistered Securities

There were no sales of unregistered securities within the past year.

Item 6 Management Discussion and Analysis or Plan of Operation

The following tables present information from the Company’s Consolidated Financial Statements as of

December 31, 2014, 2013 and 2012, and for the three (3) years ended December 31, 2014, 2013 and 2012

as audited by Isla Lipana & Co., independent auditors.

Factors Affecting the Company’s Results of Operations

The following factors have affected the Company’s financial and operational results in full year 2014

Philippine Macroeconomic Conditions: Company operations were positively boosted by strong Philippine macroeconomic conditions. Demand for, and prevailing prices of, the Company’s products are directly related to the strength of the Philippine economy, including overall growth levels, and the amount of business activity in the Philippines. In the past three years, the Philippine economy has been among the fastest growing economies in Southeast Asia, with real GDP growth rates of 6.8%, 7.2% and 6.5% in 2012, 2013 and 2014, respectively, according to the Philippine National Statistical Coordination Bureau (“NSCB”). The outlook remains optimistic and many experts continue to predict healthy economic growth as private consumption continues to drive growth, supported by strong remittance inflows and upbeat consumer sentiment.

Changing Demographic showing a growing middle class, rising GDP per capita, and a young population driving housing demand coupled with low penetration rates for airconditioning and domestic refrigerators has resulted in a continuing increase in first time buyers.

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• The high cost of electricity and the popularity gained by energy efficient technology (inverters) continues to be manifested in a growth in replacement market thereby increasing demand for energy efficient products both in the residential as well as light commercial segments.

• The Company’s air conditioning segment revenue is also dependent upon its ability to secure and retain

the business of large property developers. High-rise developments have begun to be built with identified air conditioning unit brands and models in mind. Continued growth in the property segment, especially the high rise residential condominium sector has led to a growing projects pipeline translating into actual deliveries during the first nine months of 2014.

• Seasonality and Weather: The Company experiences seasonal- and weather-related fluctuations in the

Company’s operations, particularly on consumer air conditioning and refrigeration segments. Furthermore, during the long and atypically hot summer seasons, as occurred in the second quarter of 2014, normally result in stronger demand for the Company’s air conditioning products with its peak months between March to June. This year, a delay in the onset of the summer was felt as peak sell-out did not occur until after mid-April. The third quarter of 2014 was punctuated by strong weather-related interruptions causing flooding and damage in different parts of Metro Manila. This affected operations of the Company as work was shut down for a number of days during this period.

• Commodity Prices and Foreign Exchange Fluctuation: The Company depends on raw materials sourced

from third parties to produce a majority of its products. Raw materials expense represent about 75% of the Company’s cost of sales. The cost of the Company’s compressors is the largest component of its raw materials. Imported commodities such as copper, aluminum and steel represent the second largest component of raw materials cost, prices of which remained steady during the quarter. The prices of raw materials and components to the Company are also affected by the Philippine Peso’s relative strength against other currencies, primarily the US dollar. In Q1, we saw a significantly weaker peso as it traded in the Php 44-45 range to USD vs. Q1 2013’s 40-41 range. To recover from the impact, CCAC announced a 2%-3% price increase beginning Q2 across its products. In Q3, FX continued to be weak as the period closed with Php44.92 rate to the USD. Slight increases in cost of goods were also seen as an inflationary effect due to the logistical issues caused by the port congestion.

• The expansion through CMIP and COPI are key developments in 2014. The Financial performance of

CIC in 2014 includes the net loss of CMIP in the early stages of its expansion. The contribution of COPI to company sales and profitability is reflected beginning Q2 of 2014.

• Port congestion arising from limited window for transport (truck ban) has served to increase the cost of

outbound logistics as well as warehousing as it necessitated building up stock to ensure availability of supplies and goods to the market. While the delays have not been markedly felt by the Company in the first half, in the second half, the challenge of meeting the timely fulfillment of orders as a result of unpredictable and long berthing periods have become much more evident through rising costs and the necessity to keep additional inventory.

Description of Selected Income Statement Items

Net Sales:

The Company generates revenues primarily from sales of its air conditioning units and refrigeration units

through its subsidiaries CCAC and CDI.

Segment Breakdown:

The following table presents a breakdown of the Company’s revenues, cost of sales and gross profit by

respective business for the periods indicated:

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For the years ended December 31

Millions

2014 2013 2012

Net Sales and Services CCAC

Air conditioning equipment

5,794 4,963 4,342

After sales market

326 259 247

Commercial refrigeration

58 78 57

CDI

Residential refrigeration 2,615 2,289 2,294

COPI

Elevators and Escalators

381 - -

Cost of sales and services

CCAC

Air conditioning equipment

3,641 3,091 2,652

After sales market

194 167 127

Commercial refrigeration 50 27 45

CDI

Residential refrigeration 2,001 1,843 1,895

COPI

Elevators and Escalators

230 - -

Gross profit

3,060 2,460 2,221

Net Income Attributable to Parent:

Net Income Attributable to Parent represents the Company’s share in the net income of CCAC, proportionate

to approximately a 60% stake in CCAC, 100% of the net income of CDI, and 51% of of the net income of

COPI (for the last nine months of 2014 following CIC acquisition of share).

Costs and Expenses:


The Company’s cost of sales and services comprise the cost of raw materials used for the

Company’s business, installation costs, labor, and various overhead.

Expenses

The Company’s operating expenses include employee costs, outside services, freight out, rent and

utilities, warranty cost, marketing and advertising costs, transportation, travel and entertainment,

provisions for commission, impairment of receivables, and obsolescence legal disputes and

assessments, repairs and maintenance, royalties, non-income taxes and licenses, depreciation and

amortization, commission expense, supplies, insurance, and professional fees.

Other Net Operating Income comprises interest income on bank deposits and short-term placements,

interest expense on loans, commission income, foreign exchange gains or losses, service income, gain on

property and equipment, and interest expense on bank loans.

Provision for income tax:

The Company’s provision for income tax comprises the income taxes accrued and/or paid by the Company

and its respective subsidiaries

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Key Performance Indicators The Company monitors its financial and operating performance in terms of the following indicators:

For The Period For The Period For The Period

end December 31, 2014



Gross Profit Margin (%) 33.3% 32.4% 32.0%

Before Tax Return on Sales (%)

17.1% 16.0% 14.0%

Net Income Attributable to Shareholders (PHP M)

637.2 510.6 426.1

Net Income Attributable to Shareholders (% to Sales)

6.9% 6.7% 6.1%

Return on Average Equity (%) 25.2% 28.5% 29.8%

Return on Average Assets (%) 17.1% 17.0% 15.0%

Earnings per Share * 1.88 1.50 1.25

As of As of As of




Debt to Equity Ratio 0.94 0.57 1.46

Asset-to-Equity Ratio 1.94 1.57 2.46

Book Value Per Share * 8.13 6.73 3.81

Key Performance Indicator Definition

Gross Profit Margin Gross Profit/Net Sales

Before Tax Return on Sales Income before Tax/Net Sales

Return on Average Equity

Net Income after Minority Interest/ Average Shareholder's Equity net

of Minority Interest

Return on Average Assets Net Income / Average Assets

Debt to Equity Ratio Total Liabilities/Total Equity

Asset-to-Equity Ratio Total Assets/Total Equity

Earnings Per Share Net Income after Minority

Interest/Total Shares Outstanding

Book Value Per Share Shareholder's Equity/Total Shares

Outstanding

*Total Number of Shares used is 339,617,226

(11)

Results of Operations

Year ended December 31, 2014 compared with Year ended December 31, 2013

Net sales and services

The Company’s net sales for full year 2014 was PhP 9.2 billion, an increase of PhP 1.6 billion or 20.9% from 2013 as both the CCAC Airconditioning Consumer and Building and Industrial Solutions segments along with the CDI’s domestic refrigeration business continue to deliver strong performances of the year.

CCAC. The net sales of CCAC (largely in the Air conditioning segment) was at 6.2 billion, a 17% increase from the same period last year. The Consumer segment grew 15% during the year as the business benefited from the expanding first-time buyers’ market and replacement markets. The Building and Industrial Solutions segment rose 21% supported by a growing commercial backlog and offshore sales business.

CDI. CDI net sales was at PhP 2.6 billion, an increase of 14% from the same period last year. This was driven by continued growth in the market and the introduction of new models.

COPI. The consolidation of the escalators and elevators business of CIC added PhP 381 mllion in sales representing Q2 – Q4 2014 figures.


CIC’s cost of sales and services (COS) increased to PhP 6.1 billion, a PhP 987 million or 19.3% year-on-year growth for the period ending December 31, 2014. This includes the reclassification of accounts such as project-specific overhead from operating expense to cost of sales in 2014.

Gross Profit

The Company registered a gross profit of PhP 3.1 billion for full year 2014, a PhP 600 million or 24.4% increase. Gross margin was at 33.3% vis-à-vis December 2013’s 32.4%.

CCAC. The gross profit contribution of Air conditioning, Commercial Refrigeration and After-sales was at PhP 2.3 billion as of December 2014 or 37.1 % of sales. Of the total, Airconditioning equipment contributed 94%, After Market Sales at 5%, and the balance represents commercial refrigeration.

CDI. The domestic refrigeration business posted a significantly higher gross profit margin of 23.5% vs. 19.5% in 2013 as cost of sales and services for consumer refrigeration was contained to an 14.0% sales growth. The improved profitability is largely a result of both cost reduction as well as the introduction of higher margin models.

COPI. The new acquisition added PhP 151 million in gross profit on the back of PhP 381 million in sales for the period.

Operating expenses

CIC’s operating expense was PhP 1.5 billion showing an expansion of 22% from PhP1.3 billion in the comparable period last year largely due to the consolidation of new business (COPI). Core business OPEX increased 17% from the same base in 2013. The key drivers include increased selling and marketing activities particularly merchandiser and after-sales cost reflected in outsourced services, advertising and promotion. Logistics costs particularly warehousing as well as delivery and shipping costs also show a sharp rise resulting from increased inventory as well as higher trucking rates. These were offset by a reduction in provisions for receivables impairment resulting from improved collection performance, lower warranty costs, and a reduction in transportation and travel expenses.

Other operating income

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The growth in the Company’s other operating income to PhP 102 million from last year’s PhP 33.5 million was largely due to commission income from related parties as well as revaluation gains.

Provision for income tax

Provisions for Income tax was PhP 512.6 million, a 35.9% increase from 2013’s PhP 377.1 million attributed to higher income for the period.

Net income

Net Income was PhP 1.056 billion, a 26% increase from the PhP 840.6 million in December 31, 2013. Net Income attributable to parent company was at PhP 637.2 million, 25% higher vis-à-vis PhP 510.6 million from the same period last year.

This translates to a Return on Average Equity of 25.2% compared to the 28.5% from year-ago figures and an earnings-per-share of 1.88 vis-à-vis 2013’s 1.50. Financial Condition Period end of December 31, 2014 compared with the Period end of December 31, 2013 Total Assets for the period ending December 31, 2014 was PhP 7.5 billion, an increase of PhP 2.7 billion or 56.3% from end of 2013 which was at PhP 4.8 billion. Total assets was partially boosted by the consolidation of COPI assets as end of year 2014 of PhP 621 million, the impact of the purchase on Goodwill of PhP 895 million, and the additional investment in CMIP of PhP180 million. Net of the impact of COPI, total assets increased by 25% as a result mainly of an increase in inventory particularly finished goods with new model introductions in the residential and light commercial segments as well as increase in safety stock to manage port congestion issues. Total Liabilities at PhP 3.7 billion versus PhP 1.7 billion from December 2013 was boosted by short-term borrowings (PhP1.0 billion) incurred for the purchase of COPI as well as the increase in Trade Payables aligned with the inventory buildup. Total equity increased to PhP 3.9 billion as retained earnings expanded to PhP 1.5 billion from yearend 2013’s PhP 1.0 billion. Last April 30, 2014, CIC paid PhP .59 per share as part of its regular dividend for 2014. And in Sept 8, 2014, 30% stock dividends were paid out.

Year ended December 31, 2013 compared with Year ended December 31, 2012


The Company’s net sales for the audited full year were PhP 7,588 million, an up-tick of PhP 648.4 million or 9.3% from end of 2012 numbers.

Air conditioning. The net sales of the air conditioning segment increased by 14.1% or PhP 613.1 million to PhP 4,954 million for 2013 from last year’s PhP 4,342 million. The Residential and Light Commercial segment remained to be the main driver with significant growth in first time buyer and replacement segments as demand for window room and energy-efficient hi-wall split air conditioning products continued to grow. VRF (variable refrigerant flow) sales grew significantly as well as CCAC penetrated the commercial inverter market.

Refrigeration. On the refrigeration side, net sales was PhP 2,368 million, only PhP 17 million from the end of the year 2012 resulting from higher trade inventory on the domestic refrigeration at the end of 2012.

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After Sales., After Sales contributed PhP 265.1 million, jumping from PhP 246.8 million, translating to a growth of 7.4% or PhP 18.3 million for 2013.


CIC’s cost of sales and services increased to PhP 5,128 million, a PhP 409.3 million or 8.7% year-on-year growth as a result of an increase in total sales. The increase in manufacturing costs and the unfavorable impact of foreign exchange was more that offset by purchasing savings and lower commodity costs with inflation remaining steady in the country for the year 2013. This resulted in a lower cost of sales increase relative to the growth in sales.

Air conditioning. Air Conditioning cost of sales and services was at PhP 3,263 million, a 17.4% increase from December 2012’s PhP 2,788 million.

Refrigeration. Cost of sales and services for consumer refrigeration remains steady at PhP 1,865 million as it inched down by 4%.

Gross Profit

As a result of the above, the gross profit of the Company was close to PhP 2,460 million for the year, a PhP 239.1 million increase. On the back of a faster growth clip in sales vis-à-vis cost of sales and services, gross margin showed an improvement from 32.0% same period in 2012 to 32.4% in 2013.

Operating expenses

CIC’s operating expense was PhP 1,266 million showing a dip of PhP 43.2 million or 3.3% from PhP 1,309 million in 2012. Increases were seen in advertising and promotions and delivery and transportation while offset by lower employee costs, rent and utilities and provisions for warranty and receivables.


The Company’s other operating income declined at PhP 33.5 million in 2013 compared to PhP 62.8 million in 2012 due to the impact of balance sheet FX revaluation loss as FX closed at 44.4 vs. 41.1 in December 2012. Other operating income includes writeback of provisions for legal disputes and assessments as well as cross-territorial commissions.


Provisions for Income tax was PhP 377.1 million, a 30.6% increase from PhP 288.8 million, a PhP 88.3 million jump from the same period last year. This is attributed to higher income for the period. Tax rate is slightly higher due to a higher net loss in CIC.

Net income

As a result of the above, net income was PhP 840.6 million, a 22.8% increase from the PhP 684.4 million from end of the year 2012. Net Income attributable to parent company was at 510.6 million and 426.1 million in 2012 (20% growth). This translates to a 6.7% Return on Sales and a Return on Average Equity of 28.5%.

Year ended December 31, 2012 compared with year ended December 31, 2011


For the year ended December 31, 2012, the Company’s net sales excluding intercompany transactions was ₱6,940 million, an increase of 23.8% compared to ₱5,606 million in the year ended December 31, 2011.

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Air conditioning. The net sales of the air conditioning segment (excluding aftermarket sales) increased by 24.3% from ₱3,492 million for the year ended December 31, 2011 to ₱4,342 million for the year ended December 31, 2012. This increase in net sales was largely due to a 76.2% growth in revenues from the commercial and industrial segment. There was also a significant rise in large chiller and AHU sales, driven by growth in construction as well as the entry of the Company into selling VRF technology products. Residential and light commercial sales grew at 12.3%. Prices for the Company’s air conditioning products generally remained stable during the year ended December 31, 2012.

Refrigeration. The net sales of the refrigeration segment increased by 24.9% from ₱1,883 million for the year ended December 31, 2011 to ₱2,351 million for the year ended December 31, 2012. This increase in net sales was largely due to a significant increase in domestic refrigeration with a 30.9% increase in sales volume from 161,399 units for the year ended December 31, 2011 to 211,245 units for the year ended December 31, 2012. The increase was also the result of a general price increase in the Company’s refrigeration products during the year ended December 31, 2012.

After Sales. The net sales from the after sales segment, which is primarily related to the Company’s air conditioning business, increased by 7.4% from ₱230 million for the year ended December 31, 2011 to ₱247 million for the year ended December 31, 2012. This increase in net sales was largely due to the growth in aftermarket service with increases in repairs as well as periodic maintenance agreements.


In the year ended December 31, 2012, the Company’s cost of sales and services was ₱4,719 million, an increase of 26.2% compared to ₱3,738 million in the year ended December 31, 2011. This increase in cost of sales and services was largely due to the increase in sales.

Air conditioning. The cost of sales and services of the air conditioning segment (including aftermarket) increased by 28.8% from ₱2,157 million for the year ended December 31, 2011 to ₱2,778 million for the year ended December 31, 2012. This increase in cost of sales and services was largely due to costs associated with higher volume sales.

Refrigeration. The cost of sales and services of the refrigeration segment increased by 22.8% from ₱1,580 million for the year ended December 31, 2011 to ₱1,940 million for the year ended December 31, 2012. This increase in cost of sales and services was largely due to costs associated with higher sales of domestic refrigerators.

Gross Profit

In the year ended December 31, 2012, the Company’s gross profit was ₱2,221 million, representing an increase of 18.9% compared to ₱1,868 million in the year ended December 31, 2011. This increase resulted primarily from higher sales volumes for the Company’s air conditioners and domestic refrigerators, which was partially offset by decreased overall gross margins for air conditioners. Gross margin decreased from 2011 to 2012 as a result of a significant increase in lower-margin commercial/industrial air conditioning sales and shift in sales towards lower capacity, lower margin air conditioners (owing to increased sales of entry-level units, which typically have capacities of 0.5 to 1.0 hp), and the increase in volume-related discounts.

Operating expenses

In the year ended December 31, 2012, the Company’s operating expenses were ₱1,309 million, an increase of 30.2% or ₱304 million compared to ₱1,005 million in the year ended December 31, 2011. This increase in operating expenses was largely due to a 18.0% increase in employment costs as the Company expanded capabilities for its commercial and industrial air conditioning business, as well as a substantial increase in risk provisioning as a result of policy changes for warranty, receivables, and sales commissions.


Other operating income representing interest income, foreign exchange gains or losses and cross-territorial commissions increased 1.6% from P62 million in the year ended December 31, 2011 to P63 million in the year ended December 31, 2012.

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In the year ended December 31, 2012, the Company’s provision for income tax was ₱289 million which was 4.0% higher than the ₱278 million recorded in the year ended December 31, 2011. The increase was attributable mainly to increase in earnings as the tax rate remained steady at approximately 30.0%.

Net income

As a result of the factors above, the Company’s net income was ₱684 million in 2012, an increase of 5.7% compared to ₱647 million in 2011.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its liquidity requirements principally through cash flow from operating

activities, principally sales and operating income, with less reliance on short-term borrowings. The

Company’s principal uses of cash have been largely operating costs and working capital to fund continuous

growth. Net cash from operating activities were sufficient to cover the Company’s working capital and additions to property and equipment for the years ended December 31, 2012 and 2013 and 2014. CDI incurred a loan in 2012 to fund importation and inventory as it neared the peak season. The Company is in a net positive cash position on a consolidated basis with cash and cash equivalents at P1,669 million in December 2012 , P1,355 million in December 2013 and P 1,807 million as of December 2014. As of December 2014, the Company has a short-term borrowing of PhP 1.1 billion to finance the purchase of COPI in Q1 2014.

WORKING CAPITAL

As of December 31, 2012, December 31, 2013 and December 31, 2014, the Company’s net current assets, or the difference between total current assets, including cash and cash equivalents, and total current liabilities, was P1,758 million, P2,746 million and P2,491 million, respectively, representing a working capital sufficiency.

The Company’s current assets consist of cash and cash equivalents, trade and other current receivables,

non-trade receivables, inventories and prepaid expenses and other current assets. The Company’s current

liabilities consist of trade payables, accrued expenses, provisions for warranty, income tax payable, other

provisions, and dividends payable.

CASH FLOWS

The following table sets forth information from the Company’s statements of cash flows for the periods

indicated. The translation of peso amounts into U.S. dollars as of December 31, 2013 and for the six months

ended June 30, 2014 are provided for convenience only and are unaudited.

For the years Ended

December

2014 2013 2012

Net cash flows provided by (used in) operating activities 678.1 1,023.4 539.9

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Net cash flows used in investing activities (870.0) (350.0) (56.8)

Net cash flows provided by (used in) financing activities 644.4 (987.5) (9.1)

Net increase (decrease) in cash and cash equivalents 446.2 (314.1) 474.0

The net cash flows provided by operating activities for the 2014 were ₱678.1 million which comprise income

before provision for income tax of ₱1,569 million, excluding adjustments, changes in working capital and

interest received and including actual income tax paid. The changes in working capital were mainly

attributable to increase in inventories and prepaid expenses.

In 2014, net cash flows used in investing activities was ₱870 million, which resulted mainly from the

acquisition of COPI and the investment in CMI.

Net cash flows used in financing activities was P644 million in 2014. This is mainly from proceed of the

short-term loan net of dividends declared.

INDEBTEDNESS

The Company had no long-term debt as of December 31, 2014

CAPITAL EXPENDITURES

The Company makes regular capital expenditures annually to support its business goals and objectives,

investing in ongoing maintenance of its property, plant and equipment. The Company has historically funded

its capital expenditures primarily through working capital derived from operating income.

Events that will trigger direct or contingent financial obligation that is material to the company,

including any default or acceleration of an obligation

There were no events that will trigger direct or contingent financial obligation that is material to the company,

including any default or acceleration of an obligation.

Material Commitments for Capital Expenditures

The Company commitments for capital expenditures will be funded out of cash flows from operations.

Material Impact on Income from Continuing Operations

In the normal course of operations, the Company’s activities are affected by changes in interest rates, foreign

currency exchange rates and other market changes. The Company follows a prudent policy on managing its

assets and liabilities so as to ensure that exposure to fluctuations in interest rates and foreign currency

exchange rates are kept within acceptable limits and within regulatory guidelines.

Significant Elements of Income or Loss that did not arise from Continuing Operations

There are no significant elements of income or loss that did not arise from continuing operations of the

Company.

Item 7 Financial Statements

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The consolidated financial statements of the Company are filed as part of this Form 17-A (please refer to the

Index to Financial Statements and Supplementary Schedules on page 31).

Item 8 Information on Independent Accountant and Other Related Matters

(1) External Audit Fees and Services

The aggregate fees billed for each of the last fiscal year for professional services rendered by the Group’s

external auditors are summarized as follows:

NATURE OF AUDIT FIRM CIC CCAC CDI COPI CMIP TOTAL

Dec. 31, 2014 External Audit PWC 620 880 720 700 300

3,220 Due diligence audit for acquisition of

Concepcion-OTIS Philippines, Inc. (COPI) shares

P&A 2,026

2,026

Internal Audit Planning and Scoping P&A 175

175

TOTAL 2,821

880

720

700

300

5,421

Audit Committee’s Approval Policies and Procedures for the Above Services

The Company’s Audit Committee reviews the eligibility of the incumbent external auditor for retention,

considering certain criteria, during the third quarter of each year. Failing so, the Audit Committee then follows

the selection process.

Before the start of each year’s audit, the external auditor presents to the Audit Committee for approval its

proposed audit plan, describing the areas of focus for the audit, as well as any new accounting standards,

laws and new regulatory rules that need to be taken into account in the course of the audit. The audit

schedule is also presented. The audit fees are agreed with the external auditor by management. When the

audit is completed and before the Company’s Board meeting in March of the following year, the external

auditor presents the audited financial statements and accompanying notes to the Board for notation in its

March meeting, in time for tax filing in April.

(2) Changes in the Disagreements With Accountants on Accounting and Financial Disclosure

There were no changes in and disagreements with Isla Lipana & Co., the Company’s external auditor, on

accounting and financial disclosure.

Part III - CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Issuer

The overall management and supervision of the Company is undertaken by the Board. The executive officers

and management team cooperate with the Board by preparing appropriate information and documents

concerning the Company’s business operations, financial condition and results of operations for its review.

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(a) Directors

Board of Directors and Senior Management

Currently, the Board consists of eight members, of which two are independent directors. The independent

directors have been nominated by the Board but shall hold office upon the effectivity of the registration of the

Offer Shares. Members of the Board are elected annually, with the most recent election of Board members

conducted on July 23, 2014. The table below sets forth certain information regarding the members of the

Board as of the date of this Report.

Name Age Position Citizenship

Raul Joseph A. Concepcion 53 Chairman Filipino

Renna C. Hechanova- Angeles 59 Vice Chairman and Treasurer Filipino

Raul Anthony A. Concepcion 45 Director Filipino

Jose Ma. A. Concepcion III 56 Director Filipino

Ma. Victoria Herminia C. Young 55 Director Filipino

Raissa C. Hechanova-Posadas 55 Director Filipino

Cesar A. Buenaventura 85 Independent Director Filipino

Melito S. Salazar, Jr. 65 Independent Director Filipino

The business experience of each of the directors is set forth below.

Raul Joseph A. Concepcion Chairman

Mr. Raul Joseph A. Concepcion is the Chairman of the Board and Chief Executive Officer of the Company since 2008. He is also the president of CCAC and of Concepcion Industries, Inc. as well as the chairman emeritus of the Philippine Appliance Industry Association (“PAIA”). He holds a business administration degree from Simon Fraser University.

Renna C. Hechanova-Angeles Vice-Chairman and Treasurer

Ms. Renna C. Hechanova-Angeles is the Vice Chairman of the Board and the Treasurer of the Company. She is concurrently the vice-chairman and corporate secretary of CDI, director of CCAC, corporate secretary of Contel Communications, director of the joint venture company between Ayala Land, Inc. and Concepcion Industries, Inc., corporate secretary of Republic Commodities Corporation (“RCC”), and executive vice president and corporate secretary of Concepcion Industries, Inc. (“CII”). She is also the corporate secretary of Hy-land. Ms. Angeles holds a B.S. Commerce, Major in Management degree from the Assumption College.

Raul Anthony Concepcion Director

Mr. Raul Anthony A. Concepcion is a Director of the Board of the Company. He is also the president and chief operations officer of Contel Communications, vice president of the joint venture company between Ayala Land, Inc. and Concepcion Industries, Inc., and president and chief operations officer of CDI. Mr. Concepcion is also the founder and chief event officer of Condura Run, one of the premier running events in the Philippines. He is finalist in the Ernst and Young Entrepreneur of the Year Awards in 2011 and received the Business Excellence Award for showing exceptional, consistent and systematic application of total quality management principles. He holds a B.A. Political Science degree from the University of the Philippines-Diliman and an Executive Master of Business Administration degree from the Asian Institute of Management.

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Jose Ma. A. Concepcion III Director

Mr. Jose Ma. A. Concepcion III is a Director of the Board of the Company. He concurrently serves as the president and CEO of RFM Corporation and chairman of the board of directors of RFM Unilever Ice Cream, Inc. Mr. Concepcion is also the co-chairman of the agri-business and food committee of PCCI. He is likewise a member of various industry associations such as PCCI, Philippine Association of Feed Millers (“PAFMI”), Philippine Association of Flour Millers (“PAFMIL”), Philippine Chamber of Food Manufacturers, Inc. (“PCFM”), Makati Business Club, and Management Association of the Philippines (“MAP”). Mr. Concepcion is active in various socio-civic associations such as the Philippine Center for Entrepreneurship Foundation which he founded, The Search for the Ten Outstanding Students of the Philippines (“TOSP”) and Rotary Club of Makati Central. From 2005 to 2010, he was the presidential consultant for entrepreneurship. Presently, Mr. Concepcion holds the following positions in socio-civic associations: vice chairman and trustee of RFM Foundation, Inc., director of the Laura Vicuna Foundation for Street Children, and vice chairman of the Micro Small and Medium Enterprise Development Council (“MSMED”). He holds a B.S. Business Management degree from the De La Salle University.

Ma. Victoria Herminia C. Young Director

Ms. Ma. Victoria Herminia C. Young is a Director of the Board of the Company. She is a director as well as the vice-president and general manager of the White King Division of RFM Corporation since 2006. She is also a director and general manager of Interbake Commissary Corporation and president of RFM Foundation, Inc. Ms. Young is likewise a trustee of several charitable organizations such as Soul Mission Organization and Ronald McDonald House of Charities. From 2000-2003, she served as a director of the Assumption Alumnae Association. Ms. Young holds a B.S. Management and Marketing degree from the Assumption College.

Raissa C. Hechanova-Posadas Director

Ms. Raissa C. Hechanova-Posadas is a Director of the Board of the Company. She is concurrently a director of RFM Foundation, Inc., advisor to the board of directors of BDO Private Bank, and member of the board of trustees of Knowledge Channel Foundation, Inc. and Nth Millennium Foundation. Prior to joining the Company, Ms. Hechanova-Posadas had 25 years of experience in corporate and investment banking at Citigroup where she held the positions of managing director, head of corporate finance unit, and designated business senior credit officer. In addition, she was a member of the Citi Philippines senior management team for ten years, and of the board of directors of several Citigroup legal vehicles in the country. Ms. Hechanova-Posadas holds a B.A. Applied Economics degree from De La Salle University and a Master of Business Administration degree from IMD International Institute for Management Development (formerly IMEDE).

Cesar A. Buenaventura Independent Director

Mr. Cesar A. Buenaventura is an Independent Director of the Board of the Company. He is also the vice chairman of the board of directors of DMCI Holdings, Inc, AG&P Company of Manila and Montecito Properties, Inc. Mr. Buenaventura likewise holds a directorship position in the boards of Semirara Coal Company, iPeople, Inc., Petronenergy Resources Corp., and Pilipinas Shell Petroleum Corporation. The notable positions he previously held include first Filipino CEO and chairman of the Shell Group of

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Companies, member of the Monetary Board of the Central Bank of the Philippines, member of the board of regents of the University of the Philippines from 1987 to 1994, member of the board of trustees of the Asian Institute of Management from 1994 to 2007, and president of the Benigno Aquino S. Foundation from 1985 to 2000. Mr. Buenaventura holds a B.S. Civil Engineering from the University of the Philippines and a Master’s degree in Civil Engineering, major in Structures from Lehigh University.

Melito S. Salazar, Jr. Independent Director

Mr. Melito S. Salazar is an Independent Director of the Board of the Company. He concurrently serves as the chairman of INCITE.Gov, director of the University of St. La Salle Bacolod, director of the Chamber of Commerce of the Philippine Islands, chairman and president of Quickminds Corporation, Regent, of the Philippine Normal University, independent director of Frontier Oil Corporation, vice chairman and independent director of Omnipay, Inc. chairman and independent director of InterAsia Development Bank, vice president of Manila Bulletin Publishing, and independent director of PhilsFirst Insurance Corporation. Mr. Salazar previously served the government as the governor of the Board of Investments from 1988 to 1995 and its vice chairman and managing head from 1995 to 1999, undersecretary of the DTI, director of the National Power Corporation and of the University of the Philippines Institute of Small Scale Industries, and member of the Monetary Board of the Central Bank of the Philippines. He holds a B.S. Accounting degree and a Masters in Business Administration degree both from the University of the Philippines.

The Board has conferred the title of Director Emeritus to three key personalities who have made significant

contributions to the growth of the Company’s air conditioning and refrigeration businesses over the years.

These honorary directors essentially function as senior executive advisers to the Board, drawing from their

vast experience in holding leadership roles in Philippine business and industry and socio-civic organizations.

Raul T. Concepcion Chairman Emeritus

Mr. Raul T. Concepcion is Chairman Emeritus of the Board of

the Company. He concurrently serves as the chairman and CEO

of both CCAC and CDI as well as chairman of Contel

Communications, GOV’T WATCH, an independent oversight on

the concerns of the Filipino consumer, and Buy Philippine Made

Movement. Mr. Concepcion is also the chairman emeritus of the

Federation of Philippine Industries, vice president for trade of the

Philippine Chamber of Commerce and Industry (“PCCI”) and a

trustee of the Carlos P. Romulo Foundation. He is a member of

various distinguished organizations such as the Makati Business

Club, Manila Overseas Press Club, Rotary Club of Makati, Hero

Foundation and Management Association of the Philippines. Mr.

Concepcion holds a B.S. Accountancy degree from the De La

Salle University and an Executive Master of Business

Administration degree from the University of California at Los

Angeles. The degree of Doctor of Management Science (Honoris

Causa) has also been conferred on him by the Technological

Institute of the Philippines.

Rafael G. Hechanova Director Emeritus

Mr. Rafael G. Hechanova, Sr. is a Director Emeritus of the Board

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of the Company. He is also the chief executive officer and

president of Hy-land. Mr. Hechanova served as the chairman of

the board of directors of RFM Corporation from 1996 to 1998,

and served in various positions in the credit and collection,

treasury department of Concepcion Industries. Other notable

positions previously held by Mr. Hechanova include member

(1967), president (1972-1973), district governor of D-3820

(1979-1980), and director (1996-1998) of Rotary International as

well as president of the Manila Golf and Country Club in 1971,

the Manila Polo Club in 1991, and the Manila International and

Commercial Athletic Association from 1974 to 1977. Mr.

Hechanova holds a B.S. Architecture degree from the University

of Santo Tomas.

Jose S. Concepcion, Jr. Director Emeritus

Mr. Jose S. Concepcion, Jr. is a Director Emeritus of the Board

of the Company. He concurrently serves as chairman of the

board of RFM Corporation, chairman and president of RFM

Foundation, Inc., chairman and CEO of SWIFT Foods Inc., vice

chairman for Asia of the Non-Aligned Movement (“NAM”)

Business Council, president for ASEAN Affairs of PCCI,

barangay chairman of Barangay Forbes Park (since 1997),

founding chairman of the National Citizens’ Movement for Free

Elections (“NAMFREL”), chairman of the Foundation for Lay

Education on Heart Disease, special resource person of the

United Coconut Planters Bank Finance Development (“UCPB

CIIF”) on the utilization of the coco levy fund, president of the

Gusi Peace Prize Awards Foundation, and a member of the

steering committee of the Coalition Against Corruption, board of

trustees of the CARITAS, Philippine Jaycees Senate,

Preparatory Committee on Association of Southeast Asian

Nations Chambers of Commerce and Industry (“ASEAN-CCI”)

Re-engineering and ASEAN-CCI executive committee. Mr.

Concepcion also held previously the following notable positions:

founding organizer in 1975 and president of the ASEAN-CCI in

from 2000 to 2001, chairman of ASEAN Business Advisory

Council (“ABAC”) from 2005 to 2006, chairman of the East Asia

Business Council (“EABC”) from 2006 to 2007, chairman of

Philippine Township, Inc. from 2005-2009, delegate to the 1971

Constitutional Convention of the first district of Rizal,

commissioner of the EDSA People Power Commission from

1998 to 2000, member of the task force for the World Trade

Organization (“WTO”) agriculture re-negotiation, and national

chairman of the Bishops-Businessmen’s Conference for Human

Development (“BBC”) from 1992 to 2002. From 1986 to 1991, he

concurrently held various positions in the government such as

minister of the Department of Trade and Industry, chairman of

the Board of Investments, and member of the Monetary Board of

the Central Bank of the Philippines. He holds a B.S. Agriculture

degree from Araneta Institute. Mr. Concepcion has also been

conferred with the degrees of Doctor of Humane Letters (Honoris

Causa) by De La Salle University, Doctor of Humane Letters

(Honoris Causa) by Xavier University, and Doctor of Philosophy

in Management by the Gregorio Araneta University Foundation.

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(b) Executive Officers

The table below sets forth certain information regarding the executive officers of the Company as of the date

of this Report.

Name Age Position Citizenship

Raul Joseph A. Concepcion ........................... 53 Chief Executive Officer of CIC and

President of CCAC .............................. Filipino

Renna C. Hechanova-Angeles ....................... 59 Treasurer of CIC; Vice Chairman of

CDI ....................................................... Filipino

Raul Anthony A. Concepcion ......................... 45 President of CDI .................................. Filipino

Rafael C. Hechanova, Jr. ............................... 56 Vice President, Business

Development and Corporate

Marketing, of CIC and CCAC .............. Filipino

Ma. Victoria A. Betita ...................................... 47 Chief Finance and Information Officer

of CIC ................................................... Filipino

Rajan Komarasu ............................................. 49 Director, Business Solutions Group,

CCAC ................................................... Singaporean

Harold Thomas Pernikar, Jr. .......................... 38 Director, Consumer Solutions Group,

CCAC ................................................... American

Phillip F. Trapaga ……………………………. 53 Director and General Manager, CMIP Filipino

Alexander T. Villanueva.................................. 43 Director and General Manager,

Manufacturing and Supply Chain

Management, CCAC ........................... Filipino

Jayson L. Fernandez…………………………. 45 Corporate Secretary………………….. Filipino

The business experience of each of the executive officers is set forth below. Raul Joseph A. Concepcion Chief Executive Officer and President

Please refer to the table of Directors above.

Renna C. Hechanova-Angeles Treasurer, CIC and Vice Chairman of CDI


Raul Anthony A. Concepcion President, CDI


Rafael C. Hechanova, Jr. Vice President, Business Development and Marketing, CIC and CCAC

Mr. Rafael Concepcion Hechanova, Jr. is CCAC’s Vice

President for Business Development and Corporate Marketing.

He plays a key role in ensuring that the Company continues to

do good business across all its markets. He oversees both the

Consumer and Business Solutions Groups, including new

business units for corporate marketing and business

development. Prior to his tenure in CCAC, Mr. Hechanova

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served as a Director of the Pacific Basin Development

Company in Vancouver, Canada. Upon returning to the

Philippines and joining Concepcion Industries in 1994, he

became responsible for managing the sales and aftermarket

service of chillers and AHUs to institutional and commercial

customers. In 1998, Mr. Hechanova joined the CCAC

leadership as an operating partner managing retail sales and

marketing for RLC air conditioning products ensuring that both

product and brand development initiatives were based on

unique and demanding Filipino insights. This enabled CCAC to

launch highly relevant branded communication messages for

Carrier, Condura and Kelvinator as well as product innovations

including the patented energy saving plug. Mr. Hechanova is

also currently a director of Concepcion-Carrier Realty Holdings,

Inc. and of Hy-land. He was a director of CAC from 1998 to

2013 and of CCAC from 2006 to 2009. He took up Mechanical

Engineering at the De La Salle University and graduated at the

British Columbia Institute of Technology.

Ma. Victoria A. Betita Chief Finance and Information Officer

Ma. Victoria A. Betita is the Chief Finance and Information Officer of the Company. Ms. Betita was the finance director and country controller for Asea Brown Boveri Group from 1996 to 2001. From 2001 to 2005, she was the chief financial officer of CCAC as well as the treasurer and CFO of several Carrier subsidiaries. Prior to re-joining CIC and CCAC in 2011, Ms. Betita held several positions at Deutsche Knowledge Services, Pte. Ltd. She holds a B.S. Management Engineering degree from the Ateneo de Manila University and a Masters in Business Management from the Asian Institute of Management.

Rajan Komarasu Director, Business Solutions Group, CCAC

Mr. Rajan Komarasu is the Director and Head of the Business

Solutions Group at CCAC. He was the Chief Financial Officer of

CCAC from 2007 to 2011. Mr. Komarasu held several positions

with UTC primarily in the HVACR segment. Prior to joining the

Company, his last role at UTC was Asia director for financial

planning and analysis at the climate control and security

department in Shanghai. Mr. Komarasu holds a B.S. Business

degree from Curtin University. He is also a certified public

accountant of Singapore.

Harold Thomas Pernikar, Jr. Director, Consumer Solutions Group, CCAC

Mr. Harold Perkinar is the Director and Head of the Consumer

Solutions Group at CCAC. Prior to joining CCAC, he worked at

the various offices of AkzoNobel Car Refinishes and AkzoNobel

Automative & Aerospace Coatings in Asia from 2002 to 2012.

He served as a product manager, marketing & logistics

manager, global product manager and business development

manager at AzkoNobel Car Refinishes, and as a commercial

manager at AzkoNobel Automotive & Aerospace Coatings. He

holds a B.S. International Business and Finance degree from

Northeastern University.

Phillip F. Trapaga Director and General Manager, CMIP

Phillip F. Trapaga is the General Manager of Concepcion Midea Inc. Philippines since 15 July 2013. He was formerly the Country Manager for ASEAN for Belkin International from 2011-2013. Previously he was the Director for Channel Sales for

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CCAC from 2008-2011 handling all HVAC sales for both retail and package equipment dealers. Mr. Trapaga also held several regional, general management and sales roles with Philips Consumer Electronics covering the Philippines and the Asian market from 2002 - 2007. Mr. Trapaga holds a B.S. Commerce Degree, Major in Finance from De La Salle University.

Alexander T. Villanueva Director, Manufacturing and Supply Chain Management, CCAC

Mr. Alexander T. Villanueva is the Director and General

Manager for Manufacturing and Supply Chain Management at

CCAC since 2009. From 2006 to 2009, he served as the quality

director of CCAC. Previously, he performed roles ranging from

quality engineer to head of quality at Ford Motor Company, both

in the Philippines and in the U.S., and at Nissan Motor

Philippines. Mr. Villanueva holds a B.S. Mechanical Engineering

degree from the Mapua Institute of Technology.

Jayson L. Fernandez Corporate Secretary

Atty. Jayson L. Fernandez is the Corporate Secretary of the Company. Atty. Fernandez is a Partner in Romulo Mabanta Buenaventura Sayoc & de los Angeles and currently co-chairs its tax department. He obtained his A.B. Management Economics and Juris Doctor degrees from the Ateneo de Manila University and was admitted to the Philippine Bar in 1996.

(c) Involvement in Certain Legal Proceedings

The above named directors and executive officers have not been involved in any material legal proceedings

involving bankruptcy petitions, criminal convictions, court orders and judgments, including violations of

securities regulations during the past five years.

Item 10 Executive Compensation

The following are the Company's CEO and four most highly compensated executive officers for the year

.ended December 31, 2014:

Name Position

Raul Joseph A. Concepcion. ....................................... Chief Executive Officer

Raul Anthony A. Concepcion. ..................................... President, CDI

Rafael C. Hechanova, Jr. ............................................ Vice President, Business Development and

Marketing, CIC and CCAC

Rajan Komarasu …………………………………... Director, Business Solutions Group, CCAC

Ma. Victoria A. Betita. .................................................. Chief Finance and Information Officer, CIC and

CCAC

The following table identifies and summarizes the aggregate compensation of the Company's CEO and the

four most highly compensated executive officers of the Company in 2012, 2013, 2014 and 2015 (forecast):

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Year Total(1)

(P in millions)

CEO and the most highly compensated officers named above .................. 2012 69.7

2013 93.7

2014 94.3

2015 (est.) 117.1

Aggregate compensation paid to all officers and Directors as a group

unnamed ................................................................................................... 2012 78.1

2013 106.7

2014 116.6

____________

Note: (1)

includes salary, bonuses and other income.

Standard Arrangements

Other than payment of reasonable per diem as may be determined by the Board for every meeting, there are

no standard arrangements pursuant to which directors of the Company are compensated, or were

compensated, directly or indirectly, for any services provided as a director and for their committee

participation or special assignments for 2010 up to the present.

Other Arrangements

There are no other arrangements pursuant to which any director of the Company was compensated, or to be

compensated, directly or indirectly, during 2013 for any service provided as a director.

Employment Contracts

As of the date of this Report, the Company has no special employment contracts with the named executive

officers.

Warrants and Options Outstanding

As of the date of this Report, there are no outstanding warrants or options held by the President and CEO,

the named executive officers, and all officers and directors as a group.

Item 11 Security Ownership of Certain Beneficial Owners and Management

(a) Security Ownership of Certain Record and Beneficial Owners

The following table presents a list of persons/groups known to the Company to be directly or indirectly the

record or beneficial owner of more than 5% of any class of Concepcion Industrial Corporation voting shares

as at March 31, 2015.

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Other than the abovementioned, the Company has no knowledge of any person who, as of 31 March 2015, was directly or indirectly the beneficial owner of, or who has voting power or investment power (pursuant to a voting trust or other similar agreement) with respect to, shares comprising more than five percent (5%) of the Company’s outstanding common shares of stock.

(b) Security Ownership of Management

The following are the number of shares of the Company’s capital stock (all of which are voting shares) owned

of record by the Chairman, key officers of the Company, and nominees for election as director, as of March

31, 2015 held through various brokerage accounts and PDC Nominees.

Title of Class

Name of Beneficial

Owner Position Citizenship

Number of

Shares

Nature of Ownership

% of Class

Common Raul Joseph A.

Concepcion Chairman/CEO Filipino 814,310

Direct & Indirect

0%

Common Renna C.

Hechanova-Angeles

Vice Chairman/Treasurer

Filipino 2,416,438 Direct 1%

Common Raul Anthony A.

Concepcion Director Filipino 1,892,151

Direct & Indirect

1%

Common Ma. Victoria Herminia C.

Young Director Filipino 1,044,469

Direct & Indirect

0%

Common Jose Ma. A. Concepcion

Director Filipino 288,557 Direct & Indirect

0%

Common Raissa C.

Hechanova-Posadas

Director Filipino 2,138,858 Direct 1%

Common Melito S. Salazar Director Filipino 2 Direct 0%

Common Cesar A.

Buenaventura Director Filipino 2 Direct 0%

Common Rafael C.

Hechanova, Jr. VP for Business

Development Filipino 2,472,338

Direct & Indirect

1%

Common Ma. Victoria A.

Betita Chief Finance and Information officer

Filipino 26,000 Direct 0%

Title of Class Name and Address of Record Owner Citizenship No. of shares Held % of class

Foresight Realty & Development Corp. (Formerly

Concepcion Holdings, Inc)

Sen. Gil Puyat Ave. Extension, Makati City.

Extension Makati City

Horizons Realty, Inc.

Pioneer cor. Sheridan St., Mandaluyong City

Hy-land Realty and Development

308 Sen. Gil Puyat Ave., Makati City

Equinox Partners LLP

623 Fifth Avenue, NY NY

Common PCD Nominee Corporation Foreign 70,741,921 20.83%

Common PCD Nominee Corporation Filipino 21,091,313 6.21%

Common FILIPINO 76,500,064 22.53%

Common FOREIGN 17,042,088 5.02%



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Common Rajan Komarasu

Director, Business Solutions Group,

CCAC


Common Harold T. Pernikar

Director, Consumer Solutions Group,

CCAC


Common Phillip Trapaga GM, Concepcion

Midea Filipino 4,550 Direct 0%

Common Alexander Villanueva

Director, Manufacturing and

Supply Chain Management, CCAC


The aggregate number of shares owned of record by all or key officers and directors as a group as of March

31, 201 is 11,150,975 shares or approximately 3 % of the Company’s outstanding capital stock.

(c) Voting Trust Holders of __% or more

The Company has no existing voting trust or similar agreements.

(d) Changes in Control

There are no existing arrangements, which may result in a change in control of the Company.

Item 12 Certain Relationships and Related Transactions

In the normal course of business, the Company transacts with related parties. The following are the

balances and significant transactions with these entities as at and for the years ended December 31:

2014

Related party Notes Transactions

Outstanding balances receivable (payable)

Terms and conditions

Receivables from entities under common control:

Receivables are collectible in cash within 30 to 60 days from billing date. These receivables are unsecured, unguaranteed and non-interest bearing. Balances are fully recoverable with no impairment loss recognized. Advances are primarily cost reimbursements paid on behalf of related parties.

Shared administrative cost (a)

347 186

Commission income 19 72,145 43,143 Sale of goods 6 5,588 7,946 Shareholder

Advances

- -

78,080 51,275

Dividend Declaration

22 (164,000)

Payable to entities under common control:

Purchases are made at market prices. Outstanding Purchases

(1,016,829) (145,764)

http://cic.ph/about/em_3.asp










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Purchase of shares

- - payables are due within 30 to 60 days from transaction date. These are payable in cash, non-interest bearing and unsecured in nature.

Rent and utilities

- -

Royalty/Technical fee (b) 20 (36,549) (6,245)

Collections (Payments) in behalf of a related party

34,368 (4,616)

Payable to directors

Commission

- -

Shareholders

Advances - -

(1,019,010) (156,625)

Key management personnel Salaries and wages

are paid in cash in the period incurred and are non-interest bearing. These are unsecured in nature. There were no other long-term benefits.

Salaries, allowances and 21

(176,876) (60,127)

other short-term benefits 115,650 -7,748

Retirement benefits 21 -114,276 -32,234

-175,502 -100,109

2013

Related party Notes Transactions

Outstanding balances receivable (payable) Terms and conditions

Receivables from entities under common control: Receivables are collectible in cash within 30 to 60 days from billing date. These receivables are unsecured, unguaranteed and non-interest bearing. Balances are fully recoverable with no impairment loss recognized. Advances are primarily cost reimbursements paid on behalf of related parties.

Shared administrative cost (a)

11,151 10,050

Commission income 18 26,374 4,135 Sale of goods 345 345 Shareholder Advances 1,175 1,175

15,705


Purchases are made at market prices. Outstanding payables are due within 30 to 60 days from transaction date. These are payable in cash, non-interest bearing and unsecured in nature.

Purchases 470,059 (46,465) Purchase of shares 1 192,864 - Rent and utilities 65,595 (3,350) Royalty/Technical fee (b) 19,553 (2,764) Lease of warehouse 19 11,680 (768) Payable to directors Commission 25,412 - Shareholders Advances 7,554 (7,554)

10 (60,901)

Key management personnel Salaries and wages are paid in cash in the period incurred and are non-interest bearing. These are unsecured in nature. There were no other long-term benefits.

Salaries, allowances and other short-term benefits

115,650

(7,748)

Retirement benefits 23,769 (34,251)

139,419 (41,999)

2012

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Receivables from entities under common control: Receivables are collectible in cash within 30 to 60 days from billing date. These receivables are unsecured, unguaranteed and non-interest bearing. Balances are fully recoverable with no impairment loss recognized.

Dividend income 106,000 - Shared administrative cost (a)

29,262 4,078

Commission income 18 16,916 12,347 Sale of goods 1,094 271 Advances - 12,001

6 28,697


Purchases are made at market prices. Outstanding payables are due within 30 to 60 days from transaction date. These are payable in cash, non-interest bearing and unsecured in nature. Subscription of CII for additional shares of CDI was cancelled in 2012. The balance became an advance, payable on demand in cash.

Advance 515,580 (515,580) Purchases 366,866 (28,863) Rent and utilities 83,348 (3,303) Royalty/Technical fee (b) 14,247 (4,007) Lease of warehouse 19 4,512 (2,208)

(553,961)

Immediate parent company Dividends 10 690,776 (540,776)

Payable to directors Commission 10,500 -

Key management personnel Salaries and wages are paid in cash in the period incurred and are non-interest bearing. These are unsecured in nature. There were no other long-term benefits.

Salaries, allowances and other short-term benefits

73,415

-

Retirement benefits 22,482 (12,754)

95,897 (12,754)

(a) Shared administrative cost

This pertains to administrative costs charged to entities under common control for the accounting services rendered. (b) Royalty/Technical service agreement with Carrier Corporation The Group has an existing technical service agreement with Carrier Corporation (Carrier), a related party of one of the owners of CCAC, which is co-terminus with the joint venture agreement between Carrier. The agreement provides that the Group will pay royalty fees equivalent to a specified percentage of the net sales depending on the product type, in exchange for non-exclusive and non-transferable rights to make use of technical data, process and assistance to be provided by Carrier Corporation in the manufacture of its products. The agreement remains effective unless terminated by both parties.

Part IV - CORPORATE GOVERNANCE

Item 13 Corporate Governance

The Board approved the Company's Corporate Governance Manual (the "Manual") on July 18, 2013 in order

to monitor and assess the level of the Company's compliance with leading practices on good corporate

governance as specified in pertinent Philippine SEC circulars. Aside from establishing specialized

committees to aid in complying with the principles of good corporate governance, the Manual also outlines

specific investor's rights and protections and enumerates particular duties expected from the Board

members, officers and employees. It also features a disclosure system which highlights adherence to the

principles of transparency, accountability and fairness. A compliance officer is tasked with the formulation of

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specific measures to determine the level of compliance with the Manual by the Board members, officers and

employees. There has been no deviation from the Manual's standards as of the date of this Report.

Committees of the Board

The Board created each of the following committees and appointed Board members thereto. Except for the

independent directors who have been nominated by the Board but who shall hold office upon the effectivity of

the registration of the Offer Shares, each member of the respective committees named below has been

holding office as of the date of this Report and will serve until his successor shall have been elected and

qualified.

Executive Committee

The Executive Committee, which consists of not less than three members, including the Chief Executive

Officer/President, is empowered, when the Board is not in session, to exercise the powers of the Board in the

management of the business and affairs of the Company except with respect to the approval of any action for

which stockholders’ approval is also required; the filling of vacancies in the Board; the amendment or repeal

of the Company’s constitutional documents or the adoption of new by-laws, the amendment or repeal of any

resolution of the Board which by its express terms cannot be so amended or repealed; the distribution of

dividends to stockholders; and such other acts which are specifically excluded or limited by the Board or

which are expressly reserved by the Philippine Corporation Code to the Board.

The Executive Committee meets as often as it may be necessary to address all matters referred to it.

Company-level executive committees meet at least once a month to discuss performance, forecasts, and key

issues. A group-wide executive committee is convened at least once a year to review overall Company plans

and strategies.

Corporate Governance and Audit Committee

The Corporate Governance and Audit Committee plays a dual role. It leads the Company in defining

corporate governance policies and attaining best practices while overseeing the implementation of the

Company's compliance program, money laundering prevention program and ensuring that regulatory

compliance issues are resolved expeditiously. Added to its strategic governance role is the nomination

function where it reviews and evaluates the qualification of individuals nominated to the Board as well as

those nominated to other positions requiring appointment by the Board. The Committee is responsible for the

periodic administration of performance evaluation of the Board and its committees. It conducts an annual

self-evaluation of its performance in accordance with the criteria provided in the 2009 SEC Code of

Corporate Governance.

The Corporate Governance and Audit Committee also oversees the Company's financial reporting and

internal and external audit functions. The Corporate Governance and Audit Committee is tasked with

checking all financial reports against compliance with the internal policies, pertinent accounting standards

and regulatory requirements; performing oversight financial management functions, specifically in the areas

of managing credit, market, liquidity, operational, legal and other risks of the Company, and crisis

management; pre-approves all audit plans including the scope and frequency of such audit at least one

month before the conduct of an external audit; performs direct interface functions with the internal and

external auditors of the Company; elevating to international standards the accounting and audit processes,

practices and methodologies of the Company; and developing a transparent financial management system

that will ensure the integrity of internal control activities throughout the Company.

The Corporate Governance and Audit Committee consists of three members, including one independent

director. The committee meets at a minimum of two times a year.

Compensation and Remuneration Committee

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The Compensation and Remuneration Committee is comprised of three members, including an independent

director. Its functions are to establish a formal and transparent procedure for developing policies on

executive remuneration and for fixing the remuneration packages of corporate officers and directors; provide

oversight over remuneration of senior management and other key personnel, ensuring that compensation is

consistent with the Company’s culture, strategy and control environment; designate the amount of

remuneration of directors and officers, which shall be in a sufficient level to attract and retain directors and

officers, who are needed to run the Company successfully; develop a form on full business interest

disclosure as part of the pre-employment requirements for all incoming officers, which among others,

compels all officers to declare, under the penalty of perjury, all their existing business interests or

shareholdings that may directly or indirectly conflict in the performance of their duties once hired; disallow

any director to decide his or her own remuneration; provide in the Company’s annual reports information and

proxy statement, a clear, concise, and understandable disclosure of compensation of its executive officers for

the previous fiscal year and the ensuing year; and cause the development of a human resources

development or personnel handbook to strengthen provisions dealing with conflict of interest, salaries and

benefit policies, promotion and career advancement directives, and compliance of personnel concerned with

all statutory requirements that must be periodically met in their respective posts.

The Compensation and Remuneration Committee meets at least once a year and provides overall direction

on the compensation and benefits strategy of the Company.

The company is in full compliance of all required disclosures related to the company’s Manual of Corporate

Governance.

Areas for improvement noted during the accomplishment of the CG Scorecard to match best practices will be

addressed with positive action. The Company’s Manual on Corporate Governance will be reviewed annually

or as the need arises for possible revision, to conform with best market practices on corporate governance or

comply with new rules and regulations issued by any regulatory body.

Part V - EXHIBITS AND SCHEDULES

Item 14 Exhibits and Reports on SEC Form 17-C

(a) Exhibits -- Please refer to the Index to Exhibits on page __.

The other exhibits as indicated in the Exhibit Table of Revised Securities Act Forms are either not applicable

to the Company or require no answer.

(b) Reports on SEC Form 17-C

The following reports on SEC Form 17-C were filed during the last six months of 2014 and 1st quarter of

2015.

Date of Report

Items Reported

18-Jul-14 Subject to the approval and ratification of the stockholders at the annual meeting thereof on July 23, 2014, the board of directors approved during their regular meeting today the declaration of 30% stock dividends amounting to Php 78,373,201, divided into 78,373,201 common shares with a par value of Php1.00 per share, from the unrestricted retained earnings of the Corporation as of December 31, 2013, which will be issued from the unissued portion of the authorized capital stock of the Corporation.

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23-Jul-14 Election of the Members of the Board of Directors and Appointment of Officers at the Annual Stockholders' Meeting of Concepcion Industrial Corporation (the "Corporation") held today, 23 July 2014.

At the Annual Stockholders' Meeting of the Corporation, the stockholders representing at least two-thirds of the Corporation's outstanding capital stock approved the following: a. Appointment of Isla Lipana & Co. as the Corporation's external auditor; b. Ratification of all acts of the Board of Directors and officers from 1 January 2013 up to date of the Annual Stockholders' Meeting; c. Minutes of the Joint Meeting of the Stockholders and Board of Directors held on 23 August 2013; d. 2013 Financial Statements and Chairman's Report; e. Declaration of 30% stock dividends amounting to Php78,373,201.00, divided into 78,373,201 common shares with a par value of Php1.00 per share, from the unrestricted retained earnings of the Corporation as of 31 December 2013, which will be issued from the unissued portion of the authorized capital stock of the Corporation. Any fractional shares resulting from the stock dividend shall be rounded up to one share. Further, the record date and payment date for the stock dividends shall be 22 August 2014 and 8 September 2014, respectively.

(34)

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

COVER SHEETfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

A 1 9 9 7 - 1 3 4 5 6

Company Name

C O N C E P C I O N I N D U S T R I A L

C O R P O R A T I O N A N D S U B S I D I A R I E S

( F O R M E R L Y C O N C E P C I O N

A I R C O N D I T I O N I N G C O R P O R A T I O N )

Principal Office (No./Street/Barangay/City/Town/Province)

3 0 8 G I L P U Y A T A V E N U E ,

M A K A T I C I T Y

Form Type Department requiring the report Secondary License Type, if applicable

A F S S E C

COMPANY INFORMATION

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

850-1367

No. of StockholdersAnnual Meeting

Month/DayFiscal YearMonth/Day

642 April 8 December 31

CONTACT PERSON INFORMATIONThe designated contact person MUST be an Officer of the Corporation

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

Ma. Victoria Betita [email protected] 850-1367

Contact Person’s Address

Km. 20 East Service Road, Alabang Muntinlupa

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

Concepcion Industrial Corporation(formerly Concepcion Airconditioning Corporation)

Consolidated Financial Statements with Supplementary Schedulesfor the Securities and Exchange CommissionDecember 31, 2014

Table of Contents

First Section

Statement of Management’s Responsibility for the Consolidated Financial StatementsIndependent Auditor’s ReportConsolidated Statement of Financial PositionConsolidated Statement of Total Comprehensive IncomeConsolidated Statement of Changes in EquityConsolidated Statement of Cash FlowsNotes to Consolidated Financial Statements

Second Section

Supplementary Schedules Schedule of Reference

Financial Assets AAmounts Receivable from Directors, Officers, Employees,

Related Parties and Principal Shareholders (Other than Related Parties) BAmounts Receivable from Related Parties which are Eliminated during the

Consolidation of Financial Statements CIntangible Assets - Other Assets DLong-Term Debt EIndebtedness to Related Parties FGuarantees of Securities of Other Issuers GShare Capital H

Additional Components of Financial Statements

Schedule of Financial Soundness IndicatorsUse of IPO proceeds per prospectusOwnership StructureSchedule of Reconciliation of the Parent Company’s Retained Earnings Available for Dividend DeclarationSchedule of Effective Standards and Interpretations as at December 31, 2014


Consolidated Statements of Financial PositionDecember 31, 2014 and 2013

(All amounts in thousand Philippine Peso)

Notes 2014 2013

A S S E T S

Current assets

Cash and cash equivalents 5 1,807,311 1,354,747

Trade and other receivables, net 6 2,608,285 1,900,283

Inventories, net 7 1,499,075 1,074,755

Prepayments and other current assets 77,111 52,151

Total current assets 5,991,782 4,381,936

Non-current assets

Property and equipment, net 8 183,301 179,070

Investment in associate 9 179,884 -

Intangible assets 27 191,152 -

Goodwill 27 783,983 -

Deferred income tax assets, net 10 171,536 236,836

Other non-current assets 18,490 14,661

Total non-current assets 1,528,346 430,567

Total assets 7,520,128 4,812,503

LIABILITIES AND EQUITY

Current liabilities

Trade payables and other liabilities 11 2,239,433 1,449,475

Short-term borrowings 14 1,078,500 -

Provision for warranty 12 56,640 40,773

Other provisions 13 62,671 77,975

Income tax payable 63,204 67,423

Total current liabilities 3,500,448 1,635,646

Non-current liabilities

Retirement benefit obligation 21 108,389 62,341

Provision for warranty 12 43,461 45,048

Total non-current liabilities 151,850 107,389

Total liabilities 3,652,298 1,743,035

Equity

Attributable to owners of the Parent Company

Share capital 22 339,617 261,244

Share premium 22 993,243 993,243

Retained earnings 22 1,453,708 1,049,061

Other comprehensive loss (23,903) (16,735)

2,762,665 2,286,813

Non-controlling interest 1,105,165 782,655

Total equity 3,867,830 3,069,468

Total liabilities and equity 7,520,128 4,812,503

(The notes on pages 1 to 60 are integral part of these consolidated financial statements.)


Consolidated Statements of Total Comprehensive IncomeFor the years ended December 31, 2014 and 2013

(With comparative figures for the year ended December 31, 2012)(All amounts in thousand Philippine Peso, except earnings per share)

Notes 2014 2013 2012

Net sales and services 16 9,175,388 7,588,209 6,939,780

Cost of sales and services 17 (6,115,563) (5,128,086) (4,718,796)

Gross profit 3,059,825 2,460,123 2,220,984

Operating expenses 18 (1,542,644) (1,265,991) (1,309,196)

Other operating income, net 19 102,370 33,493 62,812

Operating income 1,619,551 1,227,625 974,600

Interest expense 14 (23,084) (9,955) (1,392)

Income before share in net loss of associate andincome tax 1,596,467 1,217,670 973,208

Share in net loss of associate 9 (27,736) - -

Income before provision for tax 1,568,731 1,217,670 973,208

Provision for income tax 10 (512,590) (377,112) (288,770)

Net income for the year 1,056,141 840,558 684,438

Other comprehensive loss that will not besubsequently reclassified to profit or loss

Remeasurement loss on retirement benefits,net of tax 9, 21 (9,947) (10,688) (15,292)

Total comprehensive income for the year 1,046,194 829,870 669,146

Net income attributable to:

Owners of the Parent Company 637,154 510,586 426,135

Non-controlling interest 418,987 329,972 258,303

1,056,141 840,558 684,438

Total comprehensive income attributable to:

Owners of the Parent Company 629,986 505,336 416,646

Non-controlling interest 416,208 324,534 252,500

1,046,194 829,870 669,146

Earnings per share - basic and diluted 23 1.88 2.21 3.28



Consolidated Statements of Changes in EquityFor the years ended December 31, 2014 and 2013

(With comparative figures for the year ended December 31, 2012)(All amounts in thousand Philippine Peso)

Attributable to owners of the Parent Company

Sharecapital

Sharepremium

Retainedearnings

Otherreserves

Othercomprehensive

loss

Non-controlling

interest TotalNotes 22 22 22 2Balances as at January 1, 2012 100,000 368,546 922,439 178,541 (1,996) 665,621 2,233,151Comprehensive income

Net income for the year - - 426,135 - - 258,303 684,438Remeasurement loss on retirement benefit obligation of

subsidiaries, net of tax of P6,553 - - - - (9,489) (5,803) (15,292)Total comprehensive income (loss) for the year - - 426,135 (9,489) 252,500 669,146

Transactions with ownersCash dividends declared - - (690,776) - - (140,000) (830,776)Consolidation adjustment to other reserves - - (14,323) 14,323 - - -

Total transactions with owners - - (705,099) 14,323 - (140,000) (830,776)Balances as at December 31, 2012 100,000 368,546 643,475 192,864 (11,485) 778,121 2,071,521Comprehensive income

Net income for the year - - 510,586 - - 329,972 840,558Remeasurement loss on retirement benefit obligation of

subsidiaries, net of tax of P4,581 - - - - (5,250) (5,438) (10,688)Total comprehensive income (loss) for the year - - 510,586 - (5,250) 324,534 829,870

Transactions with ownersIssuance of shares - pre IPO 150,000 365,580 - - - - 515,580Issuance of shares - post IPO 11,244 259,117 - - - - 270,361Cash dividends declared - - (105,000) - - (320,000) (425,000)Charges to reserve as a result of acquisition of subsidiary - - - (192,864) - - (192,864)

Total transactions with owners 161,244 624,697 (105,000) (192,864) - (320,000) 168,077Balances as at December 31, 2013 261,244 993,243 1,049,061 - (16,735) 782,655 3,069,468Comprehensive income

Net income for the year - - 637,154 - - 418,987 1,056,141Remeasurement loss on retirement benefit obligation of

subsidiaries and associate, net of tax of P4,102 - - - - (7,168) (2,779) (9,947)Total comprehensive income (loss) for the year - - 637,154 - (7,168) 416,208 1,046,194

Transactions with ownersBusiness acquisition (Note 27) - - - - - 70,302 70,302Cash dividends declared - - (154,134) - - (164,000) (318,134)Stock dividends 78,373 - (78,373) - - - -

Total transactions with owners 78,373 - (232,507) - - (93,698) (247,832)Balances as at December 31, 2014 339,617 993,243 1,453,708 - (23,903) 1,105,165 3,867,830



Consolidated Statements of Cash FlowsFor the years ended December 31, 2014 and 2013

(With comparative figures for the year ended December 31, 2012)(All amounts in thousand Philippine Peso)

Notes 2014 2013 2012Cash flows from operating activities

Income before provision for income tax 1,568,731 1,217,670 973,208Adjustments for:

Depreciation of property and equipment 8 56,479 55,070 56,732Amortization of intangible assets 27 9,844 - -Unrealized foreign exchange (gains) losses 26 (5,851) (8,105) 3,406Provisions for (reversals of):

Volume rebates, trade discounts and other incentives 6 603,582 581,539 366,679Legal disputes and assessments 13 - (13,696) 3,959Commission 13 32,887 26,374 17,851Warranty cost 12 73,985 98,476 91,146Impairment of receivables 6 1,046 11,362 38,343Inventory obsolescence, net of reversals 7 20,737 21,113 21,998

Retirement benefit expense 21 32,148 17,818 13,158Interest expense 14 23,084 9,955 1,392Share in net loss of associate 9 27,736 - -Gain on disposal of property and equipment 19 - (71) (85)Interest income on bank deposits and short-term placements 19 (4,930) (10,824) (23,129)

Operating income before working capital changes 2,439,478 2,006,681 1,564,658Changes in:

Trade and other receivables (817,964) (334,362) (793,688)Inventories (388,182) (153,318) (174,247)Prepayments and other current assets 11,187 (76,252) (10,192)Deposits and other non-current assets (1,921) (9,554) 28Trade payables and other liabilities (53,996) 59,939 262,049

Cash generated from operations 1,188,602 1,493,134 848,608Interest received on bank deposits 19 2,191 4,405 13,489Payment of provision for warranty cost 12 (67,634) (61,264) (54,167)Payment of other provisions 13 (48,841) (66,482) (7,689)Retirement benefits paid/contributions 21 (11,043) (2,708) (4,555)Income tax paid (385,186) (343,653) (255,756)Net cash provided by operating activities 678,089 1,023,432 539,930

Cash flows from investing activitiesAcquisition of subsidiary, net of cash acquired 27 (716,138) - -Additions to property and equipment 8 (52,597) (59,651) (66,529)Acquisition of associate 1 (104,000) - -Deposit for future share subscription of associate 6, 9 - (104,000) -Payment to CII for shares of CDI 15 - (192,864) -Interest received on short-term placements 19 2,739 6,419 9,640Proceeds from disposal of property and equipment 19 - 71 85Net cash used in investing activities (869,996) (350,025) (56,804)

Cash flows from financing activitiesProceeds from short-term borrowings 14 2,078,500 - 282,250Payment of short-term borrowings 14 (1,000,000) (282,250) -Interest paid on short-term borrowings 14 (22,434) (9,816) (1,392)Distribution of profits 22 (318,134) (965,776) (290,000)Dividends paid to the previous parent of COPI (93,500) - -Issuance of shares - post IPO 22 - 270,361 -Issuance of shares - pre IPO 22 - 515,580 -Cash paid to a related party 15 - (515,580) -Net cash provided by (used in) financing activities 644,432 (987,481) (9,142)

Net increase (decrease) in cash and cash equivalents 446,206 (314,074) 473,984Cash and cash equivalents at beginning of year 5 1,354,747 1,668,802 1,194,768Effects of foreign exchange rate changes on cash

and cash equivalents 6,358 19 50Cash and cash equivalents at end of year 5 1,807,311 1,354,747 1,668,802


Concepcion Industrial Corporation(Formerly Concepcion Airconditioning Corporation)

Notes to Consolidated Financial StatementsAs at and for the years ended December 31, 2014 and 2013(With comparative figures and notes for the year ended December 31, 2012)(All amounts are shown in thousand Philippine Peso except number of shares, per share amounts andunless otherwise stated)

Note 1 - General information

Registration and business

Concepcion Industrial Corporation (the Parent Company or CIC), formerly Concepcion AirconditioningCorporation, was incorporated and registered with the Philippine Securities and Exchange Commission(SEC) on July 17, 1997 primarily to carry on business as a holding company, including but not limited tothe acquisition by purchase, exchange, assignment, gift, importation or otherwise, and to hold, own anduse for investment or otherwise, and to sell, assign, transfer, exchange, mortgage, pledge, traffic orotherwise to enjoy and dispose of real and personal property of every kind and description, includingland, condominium units, buildings, machineries, equipment, bonds, debentures, promissory notes,shares of capital stock or other securities or obligations, created, negotiated or issued by any corporation,association. or other entity, foreign or domestic, and while the owner thereof, to exercise all the rights,powers and privileges of ownership, including the right to receive, collect, and dispose of, any and alldividends, rentals, interest and income derived therefrom and generally perform acts or things designedto promote, protect, preserve, improve or enhance the value of any such land, condominium units,buildings, machineries, equipment, bonds, debentures, promissory notes, shares of capital stock,securities or obligations to the extent permitted by law without however engaging in dealership insecurities, in the stock brokerage business or in the business of an investment company. The ParentCompany’s subsidiaries (Note 2.2.1) are engaged in the manufacture, sales (except retail), distribution,installation and service of heating, ventilating and air conditioning (HVAC) products and HVACservices; manufacture, assembly, wholesale, retail, purchase and trade of refrigeration equipment aswell as to import, buy and sell, at wholesale, distribute, maintain and repair, elevators, escalators,moving walkways, and shuttle systems and all supplies, material, tools, machinery andpart/components thereof.

The change in corporate name of the Parent Company was approved by the Board of Directors andshareholders on April 5, 2013, and subsequently authorized by the SEC on June 20, 2013. The ParentCompany and its subsidiaries are herein collectively referred as the “Group.”

As at December 31, 2012, the Parent Company is a wholly-owned subsidiary of Concepcion Industries,Inc. (CII), an entity incorporated and doing business in the Philippines. On May 8, 2013, CII sold all itsshareholdings to Foresight Realty & Development Corp. (formerly Concepcion Holdings, Inc.), HylandRealty & Development Corp, and Horizons Realty Inc., entities registered and doing business in thePhilippines, which have equally divided equity over the Parent Company. These new shareholders areowned by Filipino individuals.

The Parent Company’s registered office address, which is also its principal place of business, is locatedat 308 Gil Puyat Avenue, Makati City. The Parent Company has 7 regular employees as at December31, 2014 (2013 - nil).

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Significant business developments

On February 4, 2013, the Parent Company assumed control of Concepcion-Carrier AirconditioningCompany (CCAC), an entity organized primarily to engage in the manufacture, sales (except retail),distribution, installation and service of HVAC products and HVAC services, that was previously anassociate of the Parent Company.

On May 8, 2013, the Parent Company acquired 1.25 million common shares of Concepcion Durables,Inc. (CDI) for P192.8 million, and subsequently, on May 30, 2013, subscribed to additional 3.75 millioncommon shares for P515.6 million. Correspondingly, the Parent Company effectively obtained 100%controlling interest over CDI, an entity organized primarily to make, manufacture, assemble, export,wholesale, retail, buy, trade and/or otherwise deal in various appliances, as well as all kinds ofmachineries, equipment and/or appliances of any kind or description and related parts thereof.

On October 9, 2013, the Parent Company’s application for listing of its entire 700 million shares wasapproved by the Philippine Stock Exchange (PSE) that was followed by its formal listing andcommencement of trading on November 27, 2013. In line with its registration, the Parent Companyissued 11.2 million shares at P26 per share (Note 22). Accordingly, the Parent Company is considered apublic company under the Implementing Rules and Regulations of the Securities Regulation Code(SRC), which, among others, defines a public corporation as any corporation with a class of equitysecurities listed on an exchange, or with assets in excess of P50 million and having 200 or moreshareholders, each of which holds at least 100 shares of its equity securities. As at December 31, 2014,the Parent Company has at least 642 shareholders (2013 - 619) each holding 100 or more shares withcertain securities still held by nominees and brokers and have not been dislodged as at report date.

On November 20, 2013, the Parent Company and CCAC entered into a subscription agreement and paidP44 million and P60 million, respectively as initial subscription fee to Concepcion Midea, Inc. (CMI), aPhilippine entity engaged in the business of the manufacture, sale, distribution, marketing, installationand service of electronic appliance products, whereby the former subscribes from the increase in theauthorized share capital of the latter. These payments were taken up as deposit for future sharesubscription as at December 31, 2013 and were applied as payment for the issuance of these subscribedshares in 2014. On July 3, 2014, after the SEC approved CMI’s application for increase in authorizedshare capital, the Parent Company and CCAC paid additional P44 million and P60 million respectively,for the issuance of additional 44 million and 60 million shares of CMI. As at December 31, 2014, theParent Company and CCAC had a total of 88 million and 120 million shares equivalent to 22% and 30%,respectively and the Group 40% interest over CMI (Note 9).

On March 28, 2014, CCAC purchased 123,250 shares of Otis E&M Company Philippines, Inc.(OEMCPI) a corporation duly organized and existing under the laws of the Philippines, from UnitedTechnologies International Corporation - Asia Private Limited (UTICA). The acquisition gave CCAC85% interest in OEMCPI. Consequently, the Group obtained an effective interest of 51% in OEMCPI(Note 27). On July 17, 2014, the SEC approved the change of corporate name of OEMCPI toConcepcion-Otis Philippines, Inc. (COPI).

Approval of financial statements

These consolidated financial statements have been approved for issuance by the Parent Company’sBoard of Directors on April 8, 2015.

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Note 2 - Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statementsare set out below. The accounting policies used have been consistently applied to all the yearspresented including the comparative information for the year ended December 31, 2012.

2.1 Basis of preparation

These consolidated financial statements of the Group have been prepared in accordance with PhilippineFinancial Reporting Standards (PFRS). The term PFRS in general includes all applicable PFRS,Philippine Accounting Standards (PAS), and interpretations of the Philippine InterpretationsCommittee (PIC)/Standing Interpretations Committee (SIC)/International Financial ReportingInterpretations Committee (IFRIC), which have been approved by the Financial Reporting StandardsCouncil (FRSC) and adopted by the SEC.

These consolidated financial statements have been prepared under the historical cost convention, unlessotherwise stated.

The preparation of these consolidated financial statements in conformity with PFRS requires the use ofcertain critical accounting estimates. It also requires management to exercise its judgment in theprocess of applying the Group’s accounting policies. The areas involving higher degree of judgment orcomplexity, or areas where assumptions and estimates are significant to the consolidated financialstatements are disclosed in Note 4.

The Parent Company’s acquisition of control over CCAC and CDI during the year ended December 31,2013 was considered a business combination under common control and has been accounted for usingthe predecessor cost method, which is similar to merger accounting/pooling of interest method. Thisinvolved the consolidation of the subsidiaries’ assets and liabilities including results of operations as atand for the year ended December 31, 2013 to reflect the combined financial statements of the threepreviously separate companies as if the three companies had always been combined as at the earliestperiod presented (Note 2.2). In 2013, the Parent Company prepared its first consolidated financialstatements.

Changes in accounting policy and disclosures

(a) New and amended standards adopted by the Group

The following standards have been adopted by the Group effective January 1, 2014:

Amendment to PAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets andfinancial liabilities. This amendment clarifies that the right of set-off must not be contingent on afuture event. It must also be legally enforceable for all counterparties in the normal course ofbusiness, as well as in the event of default, insolvency or bankruptcy. The amendment alsoconsiders settlement mechanisms. The amendment did not have a significant effect on the Group’sconsolidated financial statements.

Amendment to PAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUswhich had been included in PAS 36 by the issue of PFRS 13. The amendment did not have asignificant effect in the Group’s consolidated financial statements.

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Amendment to PAS 39, ‘Financial instruments: Recognition and measurement’ on the novation ofderivatives and the continuation of hedge accounting. This amendment considers legislativechanges to ‘over-the-counter’ derivatives and the establishment of central counterparties. UnderPAS 39 novation of derivatives to central counterparties would result in discontinuance of hedgeaccounting. The amendment provides relief from discontinuing hedge accounting when novation ofa hedging instrument meets specified criteria. The Group has applied the amendment and therehas been no significant impact on the Group’s consolidated financial statements since the Groupdoes not have derivatives and is not engaged into hedge accounting.

Philippine Interpretation IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levyif that liability is within the scope of PAS 37, ‘Provisions’. The interpretation addresses what theobligating event is that gives rise to pay a levy and when a liability should be recognized. Theinterpretation did not have a significant effect on the Group’s consolidated financial statements.

(b) New standards, amendments and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annualperiods beginning after January 1, 2014, and have not been applied in preparing these consolidatedfinancial statements. The standards relevant to the Group are as follows:

PFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition offinancial assets and financial liabilities. The complete version of PFRS 9 was issued in July 2014. Itreplaces the guidance in PAS 39 that relates to the classification and measurement of financialinstruments. PFRS 9 retains but simplifies the mixed measurement model and establishes threeprimary measurement categories for financial assets: amortized cost, fair value through othercomprehensive income (OCI) and fair value through profit or loss. The basis of classificationdepends on the entity’s business model and the contractual cash flow characteristics of thefinancial asset. Investments in equity instruments are required to be measured at fair valuethrough profit or loss with the irrevocable option at inception to present changes in fair value inOCI not recycling. There is now a new expected credit losses model that replaces the incurred lossimpairment model used in PAS 39. For financial liabilities there were no changes to classificationand measurement except for the recognition of changes in own credit risk in other comprehensiveincome, for liabilities designated at fair value through profit or loss. PFRS 9 relaxes therequirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. Itrequires an economic relationship between the hedged item and hedging instrument and for the‘hedged ratio’ to be the same as the one management actually use for risk management purposes.Contemporaneous documentation is still required but is different to that currently prepared underPAS 39. The standard is effective for accounting periods beginning on or after January 1, 2018.Early adoption is permitted. The Group’s initial assessment of PFRS 9’s potential impact to itsfinancial statements provides that it would not significantly change the classification andmeasurement of its existing financial assets which are limited to those measured at amortized cost.The Group will continue its assessment and finalize the same upon effective date of the newstandard.

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PFRS 15, ‘Revenue from contracts with customers’, deals with revenue recognition and establishesprinciples for reporting useful information to users of financial statements about the nature,amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts withcustomers. Revenue is recognized when a customer obtains control of a good or service and thushas the ability to direct the use and obtain the benefits from the good or service. The standardreplaces PAS 18 ‘Revenue’ and PAS 11 ‘Construction contracts’ and related interpretations. Thestandard is effective for annual periods beginning on or after January 1, 2017 and earlierapplication is permitted. The Group’s initial assessment of PFRS 15’s potential impact to itsconsolidated financial statements provides that its current revenue recognition will not besignificantly affected. The Group will continue its assessment and finalize the same upon effectivedate of the new standard.

There are no other standards, amendments or interpretations that are effective beginning on or afterJanuary 1, 2014 that are expected to be relevant or have a material impact on the Group.

2.2 Consolidation

The financial statements of the subsidiaries are prepared for the same reporting period as the ParentCompany. The Group uses uniform accounting policies and any difference is adjusted properly.

2.2.1 Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has control. TheGroup controls an entity when the Group is exposed to, or has rights to, variable returns from itsinvolvement with the entity and has the ability to affect those returns through its power over the entity.Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They arede-consolidated from the date on which control ceases.

The details of the Parent Company’s subsidiaries are as follows:

Percentage of ownership2014 2013

Entity Direct Indirect Direct IndirectCOPI - 51 - -CCAC 60 - 60 -CDI 100 - 100 -

Percentage of ownership held by non-controlling interest in COPI is 49% (2013 - nil), and in CCAC is40% (2013 - 40%). The summarized financial information of subsidiaries with material non-controlling interest are presented in Note 9.

Non-controlling interest is the residual equity in the subsidiary (i.e., CCAC and COPI) not attributable,directly or indirectly, to the Parent Company as shown in the table above.

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(a) Business combination through acquisition of business

The Group applies the acquisition method to account for business combinations that are not undercommon control. The consideration transferred for the acquisition of a subsidiary is the fair values of theassets transferred, the liabilities incurred to the former owners of the acquiree and the equity interestsissued by the Group. The consideration transferred includes the fair value of any asset or liabilityresulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities andcontingent liabilities assumed in a business combination are measured initially at their fair values at theacquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controllinginterest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of therecognized amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’spreviously held equity interest in the acquiree is remeasured to fair value at the acquisition date throughprofit or loss.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisitiondate. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset orliability is recognized in accordance with PAS 39 either in profit or loss or as a change to othercomprehensive income. Contingent consideration that is classified as equity is not re-measured, and itssubsequent settlement is not accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquireeand the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of theidentifiable net assets acquired is recorded as goodwill. If the total of consideration transferred,non-controlling interest recognized and previously held interest measured is less than the fair value of thenet assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directlyin profit or loss.

Intercompany transactions, balances and unrealized gains on transactions between group companies areeliminated. Unrealized losses are also eliminated (Note 15).

Investment in subsidiary is derecognized upon disposal or loss of control over a subsidiary. Any gainsand losses on disposals are determined by comparing proceeds with carrying amount and are recognizedin profit or loss. Upon loss of control, the investment account is measured at fair value, any differencebetween carrying amount and the fair value of investment is recognized in profit or loss.

(b) Business combinations under common control

Business combinations under common control, which include those entities under commonshareholding, are accounted for using the predecessor cost method (similar to merger accounting/poolingof interest method). Under this method, the Company does not restate the acquired businesses or assetsand liabilities to their fair values. The net assets of the combining entities or businesses are combinedusing the carrying amounts of assets and liabilities of the acquired entity from the consolidated financialstatements of the highest entity that has common control for which financial statements are prepared. Noamount is recognized in consideration for goodwill or the excess of acquirer’s interest in the net fair valueof acquiree’s identifiable assets, liabilities and contingent liabilities over their cost at the time of thecommon control combination.

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The consolidated financial statements incorporate the assets, liabilities and results of operations of thecombining entities or businesses as if they had always been combined or from the date when thecombining entities or businesses first became under common control, whichever period is shorter. Thedifference between the consideration given and the aggregate book value of the assets and liabilitiesacquired as at the date of the transaction are offset against other reserves, which is presented as aseparate line item under equity in the consolidated statement of financial position. Comparative financialinformation for the year ended December 31, 2012 was prepared and presented as though the transfer ofcontrol in 2013 had occurred at the beginning of the earliest period presented. The effect of the ParentCompany’s equity in the subsidiaries, and intercompany transactions and balances were eliminated in theconsolidated financial position and results of operations.

Details of the consolidated results of operations for the year ended December 31, 2012, as adjustedbased on the restatements described in Note 28 on retirement benefit obligation, are as follows:

CIC CCAC CDI Adjustments ConsolidatedNet sales and services - 4,645,472 2,294,308 - 6,939,780Cost of sales and services - (2,823,496) (1,895,300) - (4,718,796)Gross profit - 1,821,976 399,008 - 2,220,984Operating expenses (12,035) (950,504) (346,657) - (1,309,196)Other operating income, net 8,008 45,104 9,874 (174) 62,812Operating income (loss) (4,027) 916,576 62,225 (174) 974,600Finance costs - - (1,392) - (1,392)Share in net income of associate 378,752 - - (378,752) -Income before provision for income tax 374,725 916,576 60,833 (378,926) 973,208Provision for income tax - (270,813) (18,132) 175 (288,770)Net income 374,725 645,763 42,701 (378,751) 684,438Other comprehensive loss - (14,511) (781) - (15,292)Total comprehensive income 374,725 631,252 41,920 (378,751) 669,146

2.2.2 Associate

An associate is an entity over which the Group has significant influence but not control, accompanyinga shareholding of between 20% and 50% of the voting rights. An investment in associate is accountedfor using the equity method of accounting. Under the equity method, the investment is initiallyrecognized at cost, and the carrying amount is increased or decreased to recognize the investor’s shareof the profit or loss and other comprehensive income of the investee after the date of acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only aproportionate share of the amounts previously recognized in other comprehensive income isreclassified to profit or loss where appropriate.

The Group’s share of an associate’s post-acquisition profits or losses is recognized in profit or loss, andits share of post-acquisition movements in other comprehensive income is recognized in othercomprehensive income. The cumulative post-acquisition movements are adjusted against the carryingamount of the investment. When the Group’s share of losses in an associate equals or exceeds itsinterest in the associate, including any other unsecured receivables, the Group does not recognizefurther losses, unless it has incurred legal or constructive obligations or made payments on behalf ofthe associate.

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The Group determines at each reporting date whether there is any objective evidence that theinvestment in the associate is impaired. If this is the case, the Group calculates the amount ofimpairment as the difference between the recoverable amount of the associate and its carrying valueand recognizes the amount adjacent to ‘share in net profit (loss) of associate’ in profit or loss.

Profits and losses resulting from upstream and downstream transactions between the Group and itsassociate are recognised in the Group’s consolidated financial statements only to the extent ofunrelated investor’s interest in the associate. Unrealized losses are also eliminated unless thetransaction provides evidence of an impairment of the asset transferred. Accounting policies ofassociates have been changed where necessary to ensure consistency with the policies adopted by theGroup.

Dilution gains and losses arising in investment in associate are recognized in profit or loss.

2.3 Cash and cash equivalents

Cash and cash equivalents, which are carried at face amount or nominal amount, include deposits heldat call with banks and other short-term highly liquid investments with original maturities of three (3)months or less from the date of acquisition.

2.4 Receivables

Receivables are amounts due from customers for merchandise sold or services performed and amountsdue from other debtors in the ordinary course of business. If collection is expected in one year or less(or in the normal operating cycle of the business if longer), they are classified as current assets. If not,they are presented as non-current assets.

Trade receivables arising from regular sales with average credit term of 30 to 60 days and otherreceivables are recognized initially at fair value and subsequently measured at amortized cost lessprovision for impairment, if any. The original invoice amount of receivables approximates its fair value.

A provision for impairment of receivables is established when there is objective evidence that theGroup will not be able to collect all amounts due according to the original terms of the receivables.Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy orfinancial reorganization, and default or delinquency in payments are considered indicators that thereceivable is impaired. The amount of the provision is the difference between the asset’s carryingamount and the present value of estimated future cash flows, discounted at the effective interest rate.The carrying amount of the asset is reduced through the use of an allowance account, and the amount ofloss is recognized in profit or loss. When a receivable remains uncollectible after the Group has exertedall legal remedies, it is written-off against the allowance account for receivables.

The Group first assesses whether there is objective evidence of impairment exists individually forreceivables that are individually significant, and collectively for receivables that are not individuallysignificant. If the Group determines that no objective evidence of impairment exists for an individuallyassessed receivable, whether significant of not, it includes the asset in a group of financial assets withsimilar credit risk characteristics and collectively assesses those for impairment. Receivables that areindividually assessed for impairment and for which an impairment loss is or continues to be recognizedare not included in a collective assessment of impairment.

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If in a subsequent period, the amount of impairment loss decreases and the decrease can be relatedobjectively to an event occurring after the impairment was recognized (such as an improvement in thedebtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in profitor loss. Reversal of previously recorded impairment provision are based on the result of management’supdate assessment, considering the available facts and changes in circumstances, including but notlimited to results of recent discussions and arrangements entered into with customers as to therecoverability of receivables at the end of the reporting period. Subsequent recoveries of amountspreviously written-off are credited to operating expenses in profit or loss.

A provision for incentives on trade receivables (volume rebates, discounts and other incentives) isrecognized once pre-determined conditions such as realization of volume targets and early paymentdates have been reliably estimated. The amount of provision is estimated based on agreed ratesstipulated in contracts with dealers as applied to total sales for volume rebates as approved by the ChiefFinance Officer or Chief Operating Officer or the head of the Strategic Unit. These are deducted fromrevenues in profit or loss and from trade receivables in the consolidated statement of financial position.

Other relevant policies on receivables are disclosed in Note 2.5.1.

2.5 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financialliability or equity of another entity. The Group recognizes a financial instrument in the consolidatedstatement of financial position, when and only when, the Group becomes a party to the contractualprovisions of the instrument.

2.5.1 Financial assets

(a) Classification

The Group classifies its financial assets in the following categories: financial assets at fair value throughprofit or loss, loans and receivables, held-to-maturity investments and available-for-sale. Theclassification depends on the purpose for which the financial assets were acquired. Managementdetermines the classification of its financial assets at initial recognition. As at December 31, 2014 and2013, the Group only holds financial assets classified as loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market. They are included in current assets, except for maturities greater than12 months after the reporting date which are classified as non-current assets. Loans and receivablescomprise cash and cash equivalents and trade and other receivables excluding advances to suppliers,rental deposits and claims from supplier (Notes 2.3 and 2.4).

(b) Initial recognition and derecognition

Regular-way purchases and sale of financial assets are recognized on trade-date, the date on which theGroup commits to purchase or sell the asset. Financial assets are initially recognized at fair value plustransaction costs for all financial assets not carried at fair value through profit or loss. Financial assetsare derecognized when the rights to receive cash flows from the assets have expired or have beentransferred and the Group has transferred substantially all risks and rewards of ownership.

(c) Subsequent measurement

Loans and receivables are carried at amortized cost using the effective interest method.

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(d) Impairment

The Group first assesses at each reporting date whether objective evidence of impairment exists. Loansand receivables are impaired and impairment losses are incurred only if there is objective evidence ofimpairment as a result of one or more events that occurred after the initial recognition of the asset andthat event has an impact on the estimated future cash flows of the financial asset or group of financialassets that can be reliably estimated. The amount of the loss is measured as the difference between theasset’s carrying amount and the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset’s original effective interest rate.Impairment loss is recognized in profit or loss and the carrying amount of the asset is reduced throughthe use of an allowance. Impairment testing of receivables is described in Note 2.4.

2.5.2 Financial liabilities

(a) Classification

The Group classifies its financial liabilities at initial recognition in the following categories: at fair valuethrough profit or loss and other financial liabilities.

(i) Financial liabilities at fair value through profit or loss

This category comprises two sub-categories: financial liabilities classified as held for trading, andfinancial liabilities designated by the Group as at fair value through profit or loss upon initialrecognition.

A financial liability is classified as held for trading if it is acquired or incurred principally for thepurpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financialinstruments that are managed together and for which there is evidence of a recent actual pattern ofshort-term profit-taking. Derivatives are also categorized as held for trading unless they are designatedand effective as hedging instruments. Financial liabilities held for trading also include obligations todeliver financial assets borrowed by a short seller.

A financial liability is classified as financial liability at fair value through profit and loss upon initialrecognition if: such designation eliminates or significantly reduces measurement or recognitioninconsistency that would otherwise arise; the financial liability forms part of group of financial assets orfinancial liabilities or both, which is managed and its performance evaluated on a fair value basis, inaccordance with the Group’s documented risk management or investment strategy, and informationabout grouping is provided internally on that basis; or it forms part of a contract containing one ormore embedded derivatives, and PAS 39 permits the entire combined contract (asset or liability) to bedesignated as fair value through profit or loss.

The Group’s foreign exchange forward contracts included under trade payables and other liabilitiesaccount in the consolidated statement of financial position qualify as a derivative and are accounted forat fair value through profit or loss.

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(ii) Other financial liabilities

Issued financial instruments or their components, which are not designated at fair value through profitor loss, are classified as other financial liabilities, where the substance of the contractual arrangementresults in the Group having an obligation either to deliver cash or another financial asset to the holder.Other financial liabilities include trade payables, accrued expenses (Note 2.13) (excluding balancespayable to government agencies arising from withholding taxes, payroll deductions and provisions) andborrowings (Note 2.14).

(b) Initial recognition and derecognition

Financial liabilities are carried at fair value through profit or loss are initially recognized at fair valueand transaction costs are recognized as expense in profit or loss. Other financial liabilities are initiallyrecognized at fair value of the consideration received plus directly attributable transaction costs. Afinancial liability is derecognized when the obligation under the liability is discharged or cancelled, orhas expired. Where an existing financial liability is replaced by another from the same lender onsubstantially different terms, or the terms of an existing liability are substantially modified, such anexchange or modification is treated as a derecognition of the original liability and the recognition of anew liability, and the difference in the respective carrying amounts is recognized in profit or loss.

(c) Subsequent measurement

Derivatives are subsequently re-measured at their fair values. The method of recognizing the resultinggain or loss depends on whether the derivative is designated as a hedging instrument, and if so, thenature of the item being hedged. Gains or losses arising from changes in the fair value are presented inprofit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest ratemethod. Amortized cost is calculated by taking into account any discount or premium on the issue andfees that are an integral part of the effective interest rate.

2.5.3 Offsetting

Financial assets and liabilities are offset and the net amount reported in the consolidated statement offinancial position when there is a legally enforceable right to offset the recognized amounts and there isan intention to settle on a net basis, or realize the asset and settle the liability simultaneously. Thelegally enforceable right must not be contingent on future events and must be enforceable in thenormal course of business and in the event of default, insolvency or bankruptcy of the Group or thecounter party. As at December 31, 2014 and 2013, there are no financial assets and liabilities that wereoffset.

2.6 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date.

The fair value of a non-financial asset is measured based on its highest and best use. The asset’scurrent use is presumed to be its highest and best use.

The fair value of financial and non-financial liabilities takes into account non-performance risk, whichis the risk that the entity will not fulfill an obligation.

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The Group classifies its fair value measurements using a fair value hierarchy that reflects thesignificance of the inputs used in making the measurements. The fair value hierarchy has the followinglevels:

quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and inputs for the asset or liability that are not based on observable market data (that is, unobservable

inputs) (Level 3).

The appropriate level is determined on the basis of the lowest level input that is significant to the fairvalue measurement.

The fair value of financial instruments traded in active markets is based on quoted market prices at thereporting date. A market is regarded as active if quoted prices are readily and regularly available froman exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those pricesrepresent actual and regularly occurring market transactions on an arm’s length basis. The quotedmarket price used for financial assets held by the Group is the current bid price. Note that underPFRS 13, the use of bid and asking prices is still permitted but not required. These instruments areincluded in Level 1.

The fair value of assets and liabilities that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniquesmaximize the use of observable market data where it is available and rely as little as possible on entityspecific estimates. If all significant inputs required to fair value an instrument are observable, the assetor liability is included in Level 2. If one or more of the significant inputs is not based on observablemarket data, the asset or liability is included in Level 3.

The Group uses valuation techniques that are appropriate in the circumstances and applies thetechnique consistently. Commonly used valuation techniques are as follows:

Market approach - A valuation technique that uses prices and other relevant information generatedby market transactions involving identical or comparable (i.e. similar) assets, liabilities or a groupof assets and liabilities, such as a business.

Income approach - Valuation techniques that convert future amounts (e.g., cash flows or incomeand expenses) to a single current (i.e., discounted) amount. The fair value measurement isdetermined on the basis of the value indicated by the current market expectations about those futureamounts.

Cost approach - A valuation technique that reflects the amount that would be required currently toreplace the service capacity of an asset (often referred to as current replacement cost).

As at December 31, 2014 and 2013, the Group does not hold financial and non-financial assets andliabilities at fair value other than foreign exchange forward contracts (Note 2.5).

2.7 Prepayments and other current assets

Prepayments, which are carried at cost, are expenses paid in cash and recorded as assets before theyare used or consumed, as the service or benefit will be received in the future. Prepayments expire andare recognized as expense either with the passage of time or through use or consumption.

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Prepayments and other current assets include input value-added tax and creditable withholding taxeswhich are recognized as assets in the period such input value-added tax and income tax paymentsbecome available as tax credits to the Group and carried over to the extent that it is probable that thebenefit will flow to the Group.

2.8 Inventories

Inventories are stated at the lower of cost and net realizable value. The cost of raw materials, finishedgoods and work-in-process is determined using the standard cost method adjusted on a regular basis toapproximate actual cost using the moving average cost method. Cost of finished goods and work-in-process includes raw materials, direct labor, other direct costs and related production overheads (basedon normal operating capacity), but excludes borrowing costs. Inventories-in-transit are valued at invoicecost plus incidental charges. Net realizable value is the estimated selling price in the ordinary course ofbusiness, less the costs of completion and selling expenses.

Inventories are derecognized either when sold or written-off. When inventories are sold, the carryingamount of those inventories is recognized as an expense (under cost of sales and services) in the period inwhich the related revenue is recognized.

Provisions for inventory obsolescence and losses are set-up, if necessary, based on a review of themovements and current condition of each inventory item. Inventories are periodically reviewed andevaluated for obsolescence. Provisions for inventory obsolescence are made to reduce all slow-moving,obsolete, or unusable inventories to their estimated useful or scrap values. The amount of any write-down of inventories to net realizable value and all losses of inventories is recognized as an expense in theperiod the write-down or loss occurs. The amount of any reversal of any write-down of inventories,arising from an increase in net realizable value is recognized as income in the period in which the reversaloccurs.

2.9 Property and equipment

Property and equipment are carried at historical cost less accumulated depreciation and amortizationand impairment losses, if any. Historical cost includes expenditure that is directly attributable to theacquisition of the items, which comprises its purchase price and any directly attributable costs ofbringing the asset to its working condition and location for its intended use. Costs of assets underconstruction are accumulated in Construction in Progress account until these projects are completedupon which they are transferred to appropriate property and equipment accounts.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow tothe Group and the cost of the item can be measured reliably. The carrying amount of the replaced partis derecognized. All other repairs and maintenance are charged to profit or loss during the financialperiod in which they are incurred.

Depreciation is calculated on the straight-line method to allocate their cost to their residual values overtheir estimated useful lives (in years), as follows:

Machinery and equipment 3 to 10Transportation equipment 3 to 10Furniture, fixtures and office equipment 2 to 5Tools and equipment 3 to 5

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Building and leasehold improvements are amortized over term of the lease or estimated useful life offive (5) years, whichever is shorter. Major renovations are depreciated over the remaining useful life ofthe related asset.

Construction in progress is not depreciated until they are classified to appropriate asset category andused in operation.

The assets’ residual values, useful lives and depreciation and amortization method are reviewed andadjusted, as appropriate, at each reporting date to ensure that the method and period of depreciationare consistent with the expected pattern of economic benefits from items of property and equipment.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’scarrying amount is greater than the estimated recoverable amount (see Note 2.11).

The carrying amount of an item of property and equipment is derecognized on disposal; or when nofuture economic benefits are expected from its disposal at which time the cost and related accumulateddepreciation are removed from the accounts. Gains and losses on disposals are determined bycomparing proceeds with the carrying amount and are included in profit or loss under other operatingincome (expense).

2.10 Intangible assets

2.10.1 Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the considerationtransferred, the amount of any non-controlling interest in the acquired company and the acquisition-date fair value of any previously-held interest in the acquired company over the fair value of theidentifiable net assets acquired.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to eachof the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Eachunit or group of units to which the goodwill is allocated represents the lowest level within the entity atwhich the goodwill is monitored for internal management purposes. Goodwill is monitored at theoperating segment level. Gains and losses on the disposal of a subsidiary include the carrying amountof goodwill relating to the entity sold.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes incircumstances indicate a potential impairment. The carrying value of goodwill is compared to therecoverable amount, which is the higher of value in use and the fair value less costs to sell. Anyimpairment is recognized immediately as an expense and is not subsequently reversed.

2.10.2 Customer relationships

Customer relationships acquired in a business combination are recognized at the fair value at theacquisition date. The contractual customer relations have a finite useful life and are carried at cost lessaccumulated amortization. Amortization is calculated using the straight-line method over 25 years,which is the expected life of the customer relationship.

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2.11 Impairment of non-financial assets

Non-financial assets that have an indefinite useful life are not subject to amortization and are testedannually for impairment. Assets that have definite useful life are subject to amortization and arereviewed for impairment whenever events or changes in circumstances indicate that the carryingamount may not be recoverable. An impairment loss is recognized for the amount by which the asset’scarrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’sfair value less costs to sell and value in use. Value in use requires the Company to make estimates offuture cash flows to be derived from the particular asset, and to discount them using a pre-tax marketrate that reflect current assessments of the time value of money and the risks specific to the asset. Forpurposes of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiable cash flows (cash-generating units).

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generatingunit is increased to the revised estimate of its recoverable amount, but the increase should not exceedthe carrying amount that would have been determined had not the impairment loss been recognized forthe asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized asincome immediately.

2.12 Current and deferred income tax

The provision for income tax for the period comprises current and deferred tax. The current incometax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reportingdate.

Management periodically evaluates positions taken in tax returns with respect to situations in whichapplicable tax regulation is subject to interpretation and establishes provisions, where appropriate, onthe basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized on all temporary differences arising between the tax bases of assetsand liabilities and their carrying amounts in the consolidated financial statements. However, thedeferred income tax is not accounted for if it arises from initial recognition of an asset or liability in atransaction other than a business combination that at the time of the transaction affects neitheraccounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) thathave been enacted or substantively enacted by the reporting date and are expected to apply when therelated deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward ofunused tax losses (net operating loss carryover or NOLCO) and unused tax credits (excess minimumcorporate income tax or MCIT) to the extent that it is probable that future taxable profits will beavailable against which the temporary differences can be utilized. Deferred income tax liabilities arerecognized in full for all taxable temporary differences, except that the deferred income tax liabilityarises from initial recognition of goodwill.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offsetcurrent tax assets against current tax liabilities and when the deferred income tax assets and liabilitiesrelate to income taxes levied by the same taxation authority on either the taxable entity or differenttaxable entities where there is an intention to settle the balances on a net basis.

The Group reassesses at each reporting date the need to recognize a previously unrecognized deferredincome tax asset.

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Deferred income tax assets and liabilities are derecognized when the relevant temporary differences arerealized/settled or recoverability is no longer probable.

2.13 Trade payables and other liabilities

Trade payables and other liabilities are recognized in the period in which the related money, goods orservices are received or when a legally enforceable claim against the Group is established. Tradepayables and other liabilities are classified as current liabilities if payment is due within one (1) year orless. If not, they are presented as non-current liabilities. These are unsecured, non-interest bearingand are recognized initially at fair value and subsequently measured at amortized cost which isnormally equal to their nominal value. Derecognition policy is discussed in Note 2.5.2.

2.14 Borrowings and borrowing costs

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings aresubsequently stated at amortized cost; any difference between the proceeds (net of transaction costs)and the redemption value is recognized in the profit or loss within finance costs over the period of theborrowings using the effective interest method. Borrowings are classified as current liabilities unlessthe Group has an unconditional right to defer settlement of the liability for at least 12 months after thereporting date.

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying assetare capitalized during the period of time that is required to complete and prepare the asset for itsintended use when it is probable that they will result in future economic benefits to the Group and costscan be measured reliably. Other borrowing costs are expensed as incurred.

Borrowings are derecognized upon payment, cancellation or expiration of the obligation.

2.15 Provisions

Provisions are recognized when: (a) the Group has a present legal or constructive obligation as a resultof past events; (b) it is more likely than not that an outflow of resources will be required to settle theobligation; and (c) the amount has been reliably estimated. Provisions are derecognized when theobligation is settled, cancelled or has expired. Provisions are not recognized for future operating losses.Provisions include those for legal disputes and assessments and commissions.

Where there are a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. A provision is recognizedeven if the likelihood of an outflow with respect to any one item included in the same class ofobligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle theobligation using a pre-tax rate that reflects current market assessments of the time value of money andthe risks specific to the obligation. The increase in the provision due to passage of time is recognized asinterest expense.

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The Group recognizes warranty provision, which represents estimated costs including replacementparts and labor that will be incurred in relation to requested service for reported damages and requiredrework of defective finished goods within the allowable period. The provision is evaluated on an annualbasis; and adjusted accordingly which includes actual utilization of warranty provisions. Any increaseor decrease in the amount based on reassessment of existing trends and circumstances are chargedagainst or credited to operating expenses in profit or loss. Warranty provisions are classified as currentliabilities if the warranty period is due within one (1) year. If not, they are presented as non-currentliabilities.

2.16 Equity

Common shares are stated at par value and are classified as equity. Incremental costs directlyattributable to the issue of new shares or options are shown in equity as a deduction from the proceeds,net of tax. The excess of proceeds from issuance of shares over the par value of shares are credited toshare premium.

Retained earnings include current and prior years’ results of operations, and dividends declared, if any.Dividends are recorded in the consolidated financial statements in the period in which they are approvedby the Board of Directors.

Additional capital received from shareholders for which no share capital is issued is recorded asdeposits for future share subscription. These are classified as part of equity if and only if all of thefollowing elements are present. Otherwise, the deposits are presented as liability.

The unissued authorized share capital of the Parent Company is insufficient to cover the amount ofshares indicated in the contract;

There is Board of Directors’ approval on the proposed increase in authorized share capital (forwhich a deposit was received by the Parent Company);

There is shareholders’ approval of said proposed increase; and The application for the approval of the proposed increase has been filed with the SEC.

2.17 Earnings per share

2.17.1 Basic

Basic earnings per share is calculated by dividing the profit attributable to shareholders of the ParentCompany by the weighted average number of common shares in issue during the year, excludingcommon shares purchased by the Parent Company and held as treasury shares. In a capitalisation orbonus issue or a share split, common shares are issued to existing shareholders for no additionalconsideration. Therefore, the number of common shares outstanding is increased without an increasein resources. The number of common shares outstanding before the event is adjusted for theproportionate change in the number of common shares outstanding as if the event had occurred at thebeginning of the earliest period presented.

2.17.2 Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of common sharesoutstanding to assume conversion of all dilutive potential common shares. As at report date, theParent Company has no dilutive potential common shares including convertible debt and shareoptions.

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2.18 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to thechief operating decision-maker. The chief operating decision-maker, who is responsible for allocatingresources and assessing performance of the operating segments, has been identified as the ExecutiveManagement Committee that makes strategic decisions.

The accounting policies used to recognize and measure the segment’s assets, liabilities and profit orloss is consistent with those of the consolidated financial statements.

2.19 Revenue, cost and expense recognition

2.19.1 Revenues

Revenue comprises the fair value of the consideration received or receivable for the sale of goods andservices in the ordinary course of the Group’s activities.

The Group recognizes revenue when the amount of revenue can be reliably measured and it is possiblethat future economic benefits will flow into the entity and specific criteria have been met. The amountof revenue is not considered to be reliably measured until all contingencies relating to the sale havebeen resolved. The Group bases its estimates on historical results, taking into consideration the type ofcustomer, the type of transaction and the specifics of each arrangement. Revenue comprises theinvoiced value for the sale of goods and services net of value-added tax, trade volume discounts, returnsand other incentives.

(a) Sale of goods

Sale of goods are recognized when the Group has delivered products to the customer, the customer hasfull discretion over the channel and price to sell the products, and there is no unfulfilled obligationsthat could affect the customer’s acceptance of the products. Delivery does not occur until the productshave been shipped to the specific location, the risk of obsolescence and loss have been transferred tothe customer, and either the customer has accepted the products in accordance with the sale contract,the acceptance provisions have lapsed, or the Group has objective evidence that all criteria foracceptance have been satisfied.

Volume-based incentives offered are based on the estimated cost of the program as agreed with thedealers and are recognized once volume targets have been achieved by trade customers. Otherincentives are deducted from revenue upon fulfillment of respective conditions such as compliancewith required documentary requirements for claims on marketing costs incurred by dealers andapproval by authorized officials.

The Group grants price discounts in the normal course of business. Allocations to provisions fordiscounts and rebates to customers are recognized in the same period in which the related sales arerecorded based on contract terms. Sales returns arising from manufacturing defects, replacement andchange in product specification are recognized upon actual receipt of inventory items within specifiedtime.

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(b) Sale of services

The Group provides installation services and preventive maintenance services of products purchased byits customers. These services are provided on a time-basis or as a fixed-price contract. Contract termsof preventive maintenance services of equipment generally range from less than a year to three (3)years, subject to renewal. Revenue from time contracts is recognized at the contractual rates as laborhours. Revenue from fixed-price contracts is recognized on a straight-line basis over the specifiedperiod the service is provided. This approximates the timing of the Group’s service delivery andrealization of economic benefits of the transaction.

For installation contract specifically negotiated for the installation of elevator or escalator. Revenuesof installation contracts are recognized under the percentage of completion method. The stage ofcompletion is measured by reference to the contract costs incurred up to the reporting date as apercentage of total estimated costs of each contract. Costs incurred in the year in connection withfuture activity on a contract are excluded from contract costs in determining the stage of completion.They are presented as inventories, prepayments or other current assets, depending on their nature.

The Group presents as an asset the gross amount due from customers for contract work for all contractsin progress for which costs incurred plus recognized profits (or less recognized losses) exceed progressbillings. Progress billings not yet paid by customers and retention are included within the receivablesaccount in the statement of financial position.

The Group presents as a liability the gross amount due to customers for contract work for all contractsin progress for which progress billings exceed costs incurred plus recognized profits (or less recognizedlosses).

When the outcome of an installation contract cannot be estimated reliably, contract revenue isrecognized only to the extent of contract costs incurred that are likely to be recoverable.

When the outcome of an installation contract can be estimated reliably and it is probable that thecontract will be profitable, contract revenue is recognized over the period of the contract. When it isprobable that the total contract costs will exceed total contract revenue, the expected loss is recognizedas an expense immediately.

Variations in contract work, claims and incentive payments are included in contract revenue to theextent that they have been agreed with the customer and are capable of being reliably measured.

(c) Multiple deliverables

The Group also enters into arrangement combining multiple deliverables such as sale of goods and saleof services (installation and maintenance). Revenue for multiple-element arrangements is allocated toeach element of the arrangement based upon its relative fair value as determined by the contract terms.

(d) Commission, interest and other operating income

The Group recognizes commission income upon actual receipt of inventory deliveries made to bothdomestic and offshore customers on behalf of a counterparty, which normally is a related party, basedon pre-agreed rates.

Interest income is recognized on a time proportion basis, taking account of the principal outstandingand the effective rate over the period to maturity, when it is determined that such income will accrue tothe Group.

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Other operating income is recognized in profit or loss when earned.

2.19.2 Cost and expenses

Cost and expenses are recognized in profit or loss when incurred. Interest expense is recognized on atime-proportion basis using the effective interest method.

2.20 Leases - Group as lessee

Leases where a significant portion of the risks and rewards of ownership is retained by the lessor areclassified as operating leases. Payments made under operating leases are charged to profit or loss on astraight-line basis over the period of the lease.

2.21 Employee benefits

2.21.1 Retirement benefit obligation

CIC, CCAC and COPI maintains a non-contributory defined benefit retirement plan which is aretirement plan that defines an amount of pension benefit that an employee will receive uponretirement, dependent on certain factors such as age, years of credited service, and compensation. CDIrecognizes retirement benefit cost in accordance with Republic Act 7641 (Retirement Law) which is alsoclassified as a defined benefit plan.

The liability recognized in the consolidated statement of financial position in respect of the definedbenefit retirement plan is the present value of the defined benefit obligations at the reporting date lessthe fair value of plan assets. In cases when the amount determined results in a surplus (being an excessof the fair value of the plan assets over the present value of the defined benefit obligation), eachsubsidiary measures the resulting asset at the lower of (a) such amount determined, and (b) the presentvalue of any economic benefits available to each subsidiary in the form of refunds or reduction in futurecontributions to the plan. The defined benefit obligation is calculated on a regular periodic basis by anindependent actuary using the “projected unit credit cost” method. The present value of the definedbenefit obligation is determined by discounting the estimated future cash outflows using interest ratesof government bonds that are denominated in the currency in which the benefits will be paid, and thathave terms to maturity which approximate the terms of the related retirement liability.

Remeasurement gains and losses arising from experience adjustments and changes in actuarialassumptions are recognized in other comprehensive income during the period in which they arise.

Past service costs are recognized immediately in profit or loss.

2.21.2 Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normalretirement date, or whenever an employee accepts voluntary redundancy in exchange for thesebenefits. The Group recognizes termination benefits at the earlier of the following dates: (a) when theGroup can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for arestructuring that is within the scope of PAS 37 and involves the payment of termination benefits. Inthe case of an offer made to encourage voluntary redundancy, the termination benefits are measuredbased on the number of employees expected to accept the offer. Benefits falling due more than 12months after the end of the reporting period are discounted to their present value.

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2.21.3 Bonus incentives

The Group recognizes a liability and an expense for performance-related bonuses, based on a formulathat takes into consideration the profit attributable to the Group after certain adjustments andemployee’s performance. The Group recognizes a provision where contractually obliged or where thereis a past practice that has created a constructive obligation.

2.21.4 Other short-term benefits

Wages, salaries, paid annual vacation and sick leave credits and other non-monetary benefits areaccrued during the period in which the related services are rendered by employees of the Group. Short-term employee benefit obligations are measured on an undiscounted basis.

2.22 Foreign currency transactions and translation

2.22.1 Functional and presentation currency

Items included in the financial statements of each of the Group’s subsidiaries are measured using thecurrency of the primary economic environment in which the Group’s subsidiaries operate(the “functional currency”). The consolidated financial statements are presented in Philippine Peso(Peso), which is the Parent Company and subsidiaries’ functional and presentation currency.

2.22.2 Transactions and balances

Foreign currency transactions are translated into Philippine Peso using the exchange rates prevailing atthe dates of the transaction or valuation where items are remeasured. Foreign exchange gains andlosses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognizedin profit or loss.

For income tax purposes, foreign exchange gains or losses are treated as taxable income or deductibleexpense in the period such are realized/sustained.

2.23 Related party relationships and transactions

Related party relationship exists when one party has the ability to control, directly or indirectly throughone or more intermediaries, the other party or exercise significant influence over the other party inmaking financial and operating decisions. Such relationship also exists between and/or among entitieswhich are under common control with the reporting enterprise, or between and/or among thereporting enterprise and its key management personnel, directors, or its shareholders. In consideringeach possible related party relationship, attention is directed to the substance of the relationship, andnot merely the legal form.

2.24 Contingencies

Contingent liabilities are not recognized in the consolidated financial statements. These are disclosedunless the possibility of an outflow of resources embodying economic benefits is remote. Contingentassets are not recognized in the consolidated financial statements but disclosed when an economicbenefit is probable.

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2.25 Subsequent events

Post year-end events that provide additional information about the Group’s position at the reportingdate (adjusting events) are reflected in the consolidated financial statements. Post year-end events thatare not adjusting events are disclosed in the notes to consolidated financial statements when material.

Note 3 - Financial risk and capital management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, pricerisk and cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall riskmanagement program focuses on the unpredictability of financial markets and seeks to minimizepotential adverse effects on the Group’s financial performance.

Risk management is carried out by the Group’s Chief Finance Officer under policies approved by theGroup’s Board of Directors. These policies provide written principles for overall risk management.

3.1.1 Market risk

(a) Foreign exchange risk

Currency risk arises when future commercial transactions, and recognized assets and liabilities aredenominated in a currency that is not the Group’s functional currency. In the normal course ofbusiness, the Group transacts with certain entities based outside the Philippines particularly for exportdeliveries, and purchases of raw materials and supplies, and these transactions are being settled in U.S.Dollar and/or other currencies.

However, the foreign exchange risk exposure is brought down to an acceptable level since average tradepayment terms approximate each other, which range between 45 and 60 days upon which the riskassociated with foreign exchange rates are deemed negligible. The Group enters into foreign exchangeforward contracts with average term of a month in order to reduce losses on possible significantfluctuations in the exchange rates. As at December 31, 2014, foreign exchange forward contractsamount is nil (2013 - P279) included as other accrued expenses in Note 11.

Sensitivity analysis is only performed for the U.S. Dollar and Euro with exposure to other currenciesdetermined to be minimal. As at December 31, 2014, if the Philippine Peso had weakened/strengthened by 1% (2013 - 8%) against the U.S. Dollar with all other variables held constant, equityand income before tax for the year would have been lower/higher by P18,065 (2013 - P7,464) as aresult of foreign exchange loss/gain on translation of US Dollar-denominated net liabilities.

As at December 31, 2014, if the Philippine Peso had weakened/strengthened by 11% (2013 - 12.00%)against the Euro with all other variables held constant, equity and income before tax for the year wouldhave been lower/higher by P66 (2013 - P98) as a result of foreign exchange loss/gain on translation ofEuro-denominated net liabilities.

The rates are based on annual average actual exchange by leading international financial institutions asat December 31, 2014 and 2013.

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(b) Commodity price risk

The Group is exposed to the risk that the prices for certain primary raw materials (e.g. copper andaluminum) will increase or fluctuate significantly. Most of these raw materials are global commoditieswhose prices are cyclical in nature and increase or decrease in line with global market conditions. TheGroup is exposed to these price changes to the extent that it cannot readily pass on these changes to thecustomers of its respective businesses, which could adversely affect the Group’s margins.

As at December 31, 2014, if the market prices of the Group's purchases increase/decrease by 3% (2013 -3%) (based on average price inflation), equity and profit before tax for the year would have beenlower/higher by P154,847 (2013 - P102,018). The Group does not engage in commodities hedging.

(c) Cash flow and fair value interest rate risk

The Group is not significantly exposed to cash flow and fair value interest rate risk since short-termborrowings are made at fixed interest rates and are settled within 12 months.

3.1.2 Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in afinancial loss to the Group. Credit risk arises from deposits and short-term placements with banks andfinancial institutions, as well as credit exposure to trade customers, including other outstandingreceivables. For banks, the Group only has existing deposit arrangements with either universal orcommercial banks, which are considered top tier banks in terms of capitalization as categorized by theBangko Sentral ng Pilipinas.

The Group has no significant concentrations of credit risk due to the large number of customerscomprising the customer base and it has policies in place to ensure that the sale of goods is made only tocustomers with an appropriate credit history. If customers are independently rated, these ratings areused. Otherwise, if there is no independent rating, Credit and Collection (C&C) group of each subsidiaryassesses the credit quality of each customer, taking into account its financial position, past experience andother factors.

Individual risk limits are set based on internal and external ratings in accordance with the credit policylimits. The utilization of credit limits are regularly monitored by the C&C group of each subsidiary.Nonetheless, the Group is still exposed to risk of non-collection arising from disputes anddisagreements on billings which may deter the collection of outstanding accounts on a timely basis.

The Group’s assessment of its credit risk on cash and cash equivalents and receivables are disclosed inNotes 5 and 6, respectively.

3.1.3 Liquidity risk

The Group observes prudent liquidity risk management through available credit lines and efficientcollection of its receivables, which enables the Group to maintain sufficient cash to meet workingcapital requirements, planned capital expenditures, and any short-term debt financing requirements.On top of liquidity risk management above, the Group also performs a monthly review of its financingrequirements for working capital and loan capital expenditures and where deemed necessary, theGroup obtains short-term bank borrowings to cover for immediate expenses and maturing obligations.Results of management’s review are reported to the Board of Directors on a regular basis.

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As at December 31, the Group has available letters of credit and loan credit facilities from variousfinancial institutions as follow:

2014 2013Type of credit facility Currency Amount Currency Amount

Bank of Philippine IslandsRevolving promissory note line Philippine Peso 800,000 Philippine Peso 600,000Short-term loan line Philippine Peso 500,000Import letters of credit and trust receipt line Philippine Peso 600,000 Philippine Peso 180,000Bills purchased line Philippine Peso 100,000 Philippine Peso 80,000Foreign exchange settlement line Philippine Peso 500,000 U.S. Dollar 1,000

CitibankBills purchased line Philippine Peso 45,000 Philippine Peso 45,000Letters of credit U.S. Dollar 5,200 U.S. Dollar 5,300Foreign exchange settlement risk line U.S. Dollar 1,000 U.S. Dollar 1,000Foreign exchange pre-settlement risk line U.S. Dollar 200 U.S. Dollar 200

Banco De OroShort-term loan line Philippine Peso 1,000,000 Philippine Peso 300,000Bills purchased line Philippine Peso 50,000 Philippine Peso 50,000Foreign exchange settlement line Philippine Peso 20,000 Philippine Peso 20,000

Trade and other payables, and amounts due to related parties are unsecured, non-interest bearing andare normally settled within 30 to 60 days from transaction date. As at December 31, 2014 and 2013, allof the Group’s financial liabilities are due and demandable within 12 months. The Group expects tosettle these obligations in accordance with their respective maturity dates. These balances equal theircarrying amounts as the impact of discounting is not significant. Based on management’s assessment, theGroup has sufficient level of readily available funds, which do not yet consider expected receipts fromcollection of current trade receivables, to settle maturing obligations as they fall due.

3.2 Capital management

The Group’s objectives when managing capital, which is equivalent to the total equity shown in theconsolidated statement of financial position, less charges to other comprehensive loss are to safeguard theGroup’s ability to continue as a going concern, so that it can continue to provide returns for partners andbenefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capitalwhich will reduce the need to obtain long-term borrowings and incur higher cost of capital such asinterest expense.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends,increase capital through additional contributions or sell assets in lieu of third party financing. No changeswere made in the objectives, policies and processes as at December 31, 2014 and 2013.

The Group has no significant capital risk exposure given the level of financial assets available to financeits current liabilities. Also, the Group is not subject to externally imposed capital requirements arisingfrom debt covenants and other similar instruments since it has no long-term borrowings from banksand financial institutions. Moreover, the Group is not subject to specific regulatory restrictions on itscapital other than required public float of at least 10% of issued and outstanding shares, exclusive ofany treasury shares. The Parent Company is compliant to this requirement.

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3.3 Fair value estimation of financial assets and liabilities

The Group’s foreign exchange forward contracts, which are measured at fair value, qualify underLevel 2. Accordingly, the fair values of these financial liabilities are based on published closing ratewith any resulting value no longer subject to discounting due to the relative short-term maturity ofthese instruments. The Group does not account these contracts under hedge accounting; andaccordingly recognizes fluctuations in fair value directly to profit or loss. As at December 31, 2014 and2013, the Group has no other financial assets or liabilities measured and carried at fair value that wouldqualify as either Level 1 or 3 (Note 2.6).

Note 4 - Critical accounting estimates, assumptions and judgments

Estimates, assumptions and judgments are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to be reasonableunder the circumstances.

The Group makes estimates, assumptions and judgments concerning the future. The resultingaccounting estimates will, by definition, seldom equal the related actual results. The estimates,assumptions, and judgments that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year are discussed as follows:

4.1 Critical accounting estimates and assumptions

4.1.1 Useful lives of property and equipment

The useful life of each of the Group’s property and equipment is estimated based on the period overwhich these assets are expected to be available for use. Such estimation is based on a collectiveassessment of industry practice, internal technical evaluation and experience with similar assets. Theestimated useful life of each asset is reviewed periodically and updated if expectations differ fromprevious estimates due to physical wear and tear, technical or commercial obsolescence and legal orother limits on the use of the asset. It is possible, however, that future results of operations could bematerially affected by changes in the amounts and timing of recorded expenses brought by changes inthe factors mentioned above. The amounts and timing of recording of expenses for any reportingperiod would be affected by changes in these factors and circumstances.

If the actual useful lives of these assets is to differ by +/-10% from management’s estimates thecarrying amount of these assets as at December 31, 2014 would be an estimated P105,186 (2013 -P110,196 higher) or P128,560 (2013 - P112,898) lower (Note 8).

4.1.2 Provision for warranty cost

The provision for warranty cost is estimated using a determined weighted average rate applied to actualsales, which is based on the Group’s past actual warranty cost and current year’s reassessment of trendsand cost. An increase in number of incidents of warranty utilization at the current year would increaseprovision recognized at reporting date in anticipation of similar trend in subsequent periods. Thedetails of the provision for warranty are shown in Note 12.

If the estimated weighted average rate applied to determine reasonable level of provision for warrantyincreased/decreased by 20.7% (2013 - 4.5%) income before tax and equity would have been P25,783(2013 - P7,618) lower/higher. This is mainly due to corresponding adjustments on recorded warrantycost. The rate applied is based on average fluctuation from the previous year.

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4.1.3 Provision for retirement benefits

The determination of each subsidiary’s retirement obligation and benefits is dependent on the selectionof certain assumptions used by the actuary in calculating such amounts. These assumptions, asdescribed in Note 21, include among others, discount rate and salary increase rate.

The sensitivity analysis on the significant actuarial assumptions was prepared by remeasuring theretirement benefit obligation at the reporting date after first adjusting one of the current assumptionsaccording to the applicable sensitivity increment or decrement (based on changes in the relevantassumption that were reasonably possible at the valuation date) while all other assumptions remainedunchanged. The corresponding change in the retirement benefit obligation was expressed as apercentage change from the base retirement benefit obligation.

It should be noted that the changes assumed to be reasonably possible at the valuation date are open tosubjectivity, and do not consider more complex scenarios in which changes other than those assumedmay be deemed the base retirement benefit obligation. Moreover, separate sensitivity was performedfor each subsidiary in consideration of varying terms, scope, employee profile, and others.

The impact on equity and pre-tax profit of potential changes in the discount rate and salary increaserate in the amount of defined benefit obligation for the years ended December 31 are presented below:

2014 2013% Impact % Impact

Average decrease due to 100 basis point (bps) increase indiscount rate -1.93% (12,590) -2.62% (7,743)

Average increase due to 100 bps decrease in discount rate 2.29% 14,952 3.00% 8,877Average increase due to 100 bps increase insalary increase rate 2.06% 13,446 2.64% 7,814

Average decrease due to 100 bps decrease insalary increase rate -1.78% (11,617) -2.36% (6,982)

4.1.4 Provision for volume rebates, trade discounts and other incentives

Revenue is recognized when title and risk of loss is passed to the customer and reliable estimates can bemade of relevant deductions. Gross sale is reduced by rebates, discounts, and other incentives given orexpected to be given, which vary by product arrangements and buying groups. These arrangements withpurchasing organizations are dependent upon the submission of claims sometime after the initialrecognition of the sale. Accruals are made at the time of sale for the estimated rebates, discounts orincentives to be made, based on available market information and historical experience. Because theamounts are estimated, they may not fully reflect the final outcome, and the amounts are subject tochange dependent upon, amongst other things, the types of buying group and product sales mix.

The level of provision is reviewed and adjusted regularly in the light of contractual and legal obligations,historical trends, past experience and projected market conditions. Market conditions are evaluatedusing wholesaler and other third-party analyses, market research data and internally generatedinformation. Future events could cause the assumptions on which the accruals are based to change,which could affect the future results of the Group. The details of the provision for volume rebates, tradediscounts, and other incentives are shown in Note 6.

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If the estimated weighted average rate applied to determine reasonable level of provision for volumerebates, trade discounts and other incentives increased/decreased by 18.0% (2013 - 21.5%), profit beforetax and equity would have been P76,120 (2013 - P101,147) lower/higher. This is mainly due tocorresponding adjustments on recorded trade and volume discounts. The rate applied is based onaverage fluctuation from the previous year.

4.1.5 Provision for legal disputes and assessments

Provision for legal disputes and assessments is estimated based on consultation with third partycounsels with reference to probability of winning the case. A higher probability of winning woulddecrease provision. The Group considers it impracticable to disclose with sufficient reliability thepossible effects of sensitivities surrounding the provision for legal disputes and assessments at thereporting date. The details of the provision for legal disputes and assessments are shown in Note 13.

4.2 Critical judgments in applying the Group’s accounting policies

4.2.1 Determining control over a subsidiary

In 2009, the Parent Company acquired additional shares in CCAC increasing its ownership from 49%to 60%. Based on management’s assessment, there was effectively no change in involvement as seniormanagement personnel, as well as operating and financial policies were substantially retained.Accordingly, the Parent Company did not have control, notwithstanding the increase in equitypercentage, and still treated its investment share in CCAC as an associate and correspondingly appliedthe equity method until 2012.

Starting 2013, upon consent of CCAC owners, the SEC approved the Amendment of Articles ofPartnership specifying the change in Board membership representation in favor of the Parent Companyand likewise outlining decisions to be allowed by simple majority. This power has granted the ParentCompany with rights to direct the relevant activities of CCAC affecting its returns. On the same date,management assessed that control was transferred to the Parent Company and accounted for CCAC asa subsidiary.

4.2.2 Recognizing business combination using the predecessor cost method

Management has determined that the acquisition of a subsidiary (i.e., CDI), as well as gaining controlover another entity (i.e., CCAC) during in 2013 can be accounted for under the predecessor cost methodor pooling of interest as the parties to the transactions are essentially under common control, andessentially does not result in any economic value. Business combinations between entities undercommon control are out of scope in PFRS 3. Accordingly, the consolidated financial statementsincorporated the net assets and results of operations of the combining entities or businesses as if they hadalways been combined or from the date when the combining entities or businesses first became undercommon control, whichever period is shorter (Note 2.2.1.b).

4.2.3 Impairment of goodwill

The Group reviews the goodwill annually for impairment whenever events or changes in circumstancesindicate that the carrying amounts may not be recoverable, and at the end of the first full year followingacquisition.

As at December 31, 2014, based on management’s assessment and judgment, there are no indication ofimpairment of goodwill since management believes that the value of the business of COPI has notchanged significantly from the date of acquisition (Note 27).

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4.2.4 Impairment of intangibles - customer relationships

The Group’s intangibles are composed of customer relationships and customer contact backlogs fromacquisition of COPI (Note 27). The intangibles are carried at cost. The carrying value is reviewed andassessed for impairment whenever events or changes in circumstances indicate that the carryingamount may not be recoverable. Changes in those judgments could have a significant effect on thecarrying value of intangible assets and the amount and timing of recorded impairment provision forany period.

As at December 31, 2014, management believes, based on its assessment and judgment, that there areno indications of impairment or changes in circumstances that the carrying value of its intangibles maynot be recoverable.

4.2.5 Impairment of investment in associate

The Group’s investment in associate is carried using the equity method. The carrying value is reviewedand assessed for impairment whenever events or changes in circumstances indicate that the carryingamount may not be recoverable. Changes in those management judgments and assessments couldhave a significant effect on the carrying value of investment in associate and the amount and timing ofrecorded provision for impairment for any period.

As at December 31, 2014, based on management’s assessment and judgment, there are no indicationsof impairment or changes in circumstances indicating that the carrying value of its investment inassociate may not be recoverable.

4.2.6 Provision for impairment of receivables

The provision for impairment of receivables is based on the Group’s assessment of collectibility ofpayments from its debtors through varying schemes including specific identification. This assessmentrequires judgment based on available facts and circumstances regarding the ability of the debtors topay the amounts owed to the Group such as financial condition, the length of relationship with adebtor, debtors’ current credit status based on known market factors and availability of assets that maybe secured as collateral, and the outcome of any disputes.

Any change in the Group’s assessment of collectibility of receivables that was not previously providedfor due to reassessment made as additional information is received could significantly impact thecalculation of such provision and the results of operations. The amounts and timing of recordedprovision for impairment of receivables for any period would differ if the Group made differentassumptions or utilized different estimates. The details of receivables are disclosed in Note 6.

4.2.7 Provision for inventory obsolescence and losses

The Group recognizes a provision for inventory obsolescence and losses based on a review of themovements and current condition of each inventory item with adequate consideration on identifieddamages, physical deterioration, technological and commercial obsolescence or other causes. Theprovision account is reviewed on a periodic basis to reflect the accurate valuation of the Group’sinventories. Inventory items identified to be obsolete and unusable is written-off and charged asexpense for the period. Management determines on a regular basis the necessity of providing forimpairment. Any change in the Group’s recoverability assessment could significantly impact thedetermination of such provision and the results of operations. The details of inventories are shown inNote 7.

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4.2.8 Impairment of property and equipment

Property and equipment are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. An impairment loss would berecognized whenever evidence exists that the carrying value is not recoverable. Accordingly, results ofmanagement’s most recent assessment disclosed the absence of any conditions such as physicaldamage or significant change in manufacturing operations; rendering certain property and equipmentas obsolete and would warrant assessment for impairment and/or recognition of an impairmentprovision in its carrying amount as at reporting date. The details of property and equipment are shownin Note 8.

4.2.9 Income taxes

A certain degree of judgment is required in determining the provision for income taxes, as there arecertain transactions and calculations for which the ultimate tax determination is uncertain during theordinary course of business. Further, recognition of deferred income tax assets depends onmanagement’s assessment of the probability of available future taxable income against which thetemporary differences can be applied.

The Group assesses the recoverability of outstanding balances of deferred income tax assets up to theextent that is more likely than not will be realized. The Group reviews its deferred income tax assets ateach reporting date and reduces the carrying amount to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the deferred income tax assets to beutilized. Management believes that deferred income tax assets are fully recoverable at the reportingdate. The details of deferred income tax assets are shown in Note 10.

4.2.10 Contingencies

The Group has legal cases still pending with the courts. Management and in consultation with thirdparty counsels believes, however, that its position on each case has legal merits and for certain losspositions, if any, corresponding provisions were recognized based on existing conditions and availableinformation as at reporting date (Note 24). Annual assessment is made and actual results may differsignificantly from the amount recorded. The details of provision are shown in Note 13.

Note 5 - Cash and cash equivalents

Cash and cash equivalents as at December 31 consist of:

2014 2013Cash on hand 173 124Cash in banks 1,171,359 1,071,797Short-term placements 635,779 282,826

1,807,311 1,354,747

Cash in banks and short-term placements are made with universal and commercial banks amounting toP1,362,777 and P444,361 (2013 - P1,209,019 and P145,604), respectively, which earn interest at theprevailing bank deposit rates.

Short-term placements are made for varying periods of up to three (3) months, depending on theimmediate cash requirements of the Group, and earn interest at rates ranging from 0.35% to 5.00%.All short-term placements are invested in universal banks.

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The carrying values of cash and cash equivalents which represent the maximum exposure to credit riskother than cash on hand. As at December 31, 2014, the consolidated cash and cash equivalents includesCOPI balance of P398,548.

Note 6 - Trade and other receivables, net

Trade and other receivables as at December 31 consist of:

Notes 2014 2013Trade receivables 2,676,149 2,013,695Provision for volume rebates, trade discounts and other incentives (122,599) (164,840)Provision for impairment of receivables (115,064) (129,585)Net trade receivables 2,438,486 1,719,270Deposit for future share subscription 1 - 104,000Advances to suppliers 72,743 34,186Advances to employees 12,098 16,218Related parties 15 65,514 15,705Rental deposits 4,823 5,571Claims from suppliers 1,212 -Others 13,409 5,333

2,608,285 1,900,283

As at December 31, 2013, deposit for future share subscription represents the Parent Company andCCAC’s separate subscription to 44 million and 60 million shares, respectively, of CMI (Note 1). During2014, these deposits were applied as payment for the issuance of the subscribed shares to give the Group40% interest over CMI (Note 9). This transaction is considered a non-cash activity for purposes ofstatement of cash flow preparation.

The aging of trade receivables as at December 31 including data on past due but not impaired or

provided with allowance are as follows:

Age classification Total

Currentand notpast due

Past duebut not

impaired Impaired2014

Current 2,045,762 2,045,762 - -Past due:

Up to 6 months 507,288 - 501,871 5,4176 to 12 months 21,458 - 13,452 8,006Over 12 months 101,641 - - 101,641

2,676,149 2,045,762 515,323 115,064

2013Current 1,450,747 1,450,747 - -Past due:

Up to 6 months 422,576 - 422,576 -6 to 12 months 17,212 - 10,731 6,481Over 12 months 123,160 - 56 123,104

2,013,695 1,450,747 433,363 129,585

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As at December 31, 2014, trade receivables amounting to P115,064 (2013 - P129,585) were determinedto be impaired and fully provided through a valuation account. These receivables have collaterals suchas land and buildings amounting to P1,400.

As at December 31, 2014, trade receivables amounting to P515,323 (2013 - P433,363), were past duebut considered not impaired, because they relate to a number of independent customers for whomthere is no recent history of default and collection is highly probable based on cumulative experience.The individually impaired receivables relate to customers that are in unexpectedly difficult economicsituations.

As at December 31, 2014, trade receivables that are neither past due nor impaired amounted toP2,045,762 (2013 - P1,450,747), mainly pertain to customers who have high credit rating based ondetermined financial position and collection history.

The Group has not experienced any defaults with respect to the outstanding balance of due fromrelated parties and other classes of receivables, hence, no allowance was provided.

Advances to suppliers and employees are realized through receipt of material purchases and salarydeductions, respectively. Rental deposits are expected to be applied to future lease obligations. Allthese accounts and other receivables do not contain impaired assets and are not past due.

The maximum exposure to credit risk at the reporting date are the respective carrying values of tradereceivables, other receivables and due from related parties as at reporting date. As at December 31,2014, the consolidated trade and other receivables, net includes COPI balance of P109,589.

Movements in the provision for impairment of receivables for the years ended December 31 follow:

Note 2014 2013Beginning 129,585 119,822Acquisition of COPI 38,982 -Provisions 18 1,046 11,362Reversals/write-offs (54,549) (1,599)Ending 115,064 129,585

Receivables written-off relate to customers with difficult economic situations which are not collectibledespite collection efforts.

Movements in the provision for volume rebates, trade discounts and other incentives for the years endedDecember 31 follow:

Note 2014 2013Beginning 164,840 180,263Provisions 16 603,582 581,539Charges (645,823) (596,962)Ending 122,599 164,840

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Note 7 - Inventories, net

Inventories as at December 31 consist of:

2014 2013At cost

Raw materials 622,787 613,545Finished goods 689,324 356,229Work in process 167,890 108,886Inventories-in-transit 63,147 75,798Spare-parts and supplies used in business 57,395 -

1,600,543 1,154,458Provision for inventory obsolescence (101,468) (79,703)

1,499,075 1,074,755

For the year ended December 31, 2013, the cost of inventory recognized as expense and included in costof sales and services amounted to P5,885,584 (2013 - P5,128,086; 2012 - P4,718,796) (Note 17). As atDecember 31, 2014, the consolidated inventories, net includes COPI balance of P42,407.

Movements in the provision for inventory obsolescence on raw materials and finished goods as atDecember 31 are as follows:

Note 2014 2013Beginning 79,703 74,903Acquisition of COPI 14,988 -Provisions 18 25,585 21,113Reversals 18 (4,848) -Write-off (13,960) (16,313)Ending 101,468 79,703

Inventories written-off pertain to obsolete raw materials that can no longer be processed throughproduction or finished goods that cannot be sold at its present condition.

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Note 8 - Property and equipment, net

Details of property and equipment and their movements during the periods follow:

Machinery andequipment

Transportationequipment

Furniture,fixtures and

office equipmentTools andequipment

Leaseholdimprovements

Buildingimprovements

Constructionin progress Total

CostAt January 1, 2014 912,748 16,923 103,066 190,715 43,526 4,362 12,046 1,283,386Acquisition of COPI - 14,158 3,109 15,915 9,304 - - 42,486Additions 874 5,653 7,998 8,375 300 - 29,397 52,597Disposal (116) (6,091) (80) - - (70) - (6,357)Transfers 4,923 - 268 - - 704 (5,895) -

At December 31, 2014 918,429 30,643 114,361 215,005 53,130 4,996 35,548 1,372,112

Accumulated depreciationAt January 1, 2014 804,465 12,466 90,117 180,632 14,992 1,644 - 1,104,316Acquisition of COPI - 12,931 1,085 12,570 7,541 - - 34,127Depreciation 30,025 5,290 6,439 7,340 6,593 792 - 56,479Disposals - (6,091) (20) - - - - (6,111)At December 31, 2014 834,490 24,596 97,621 200,542 29,126 2,436 - 1,188,811

Net book values as at December 31, 2014 83,939 6,047 16,740 14,463 24,004 2,560 35,548 183,301

CostAt January 1, 2013 899,777 17,031 94,879 187,461 13,668 3,739 8,002 1,224,557Additions 10,751 714 5,612 3,254 29,858 - 9,462 59,651Disposal - (822) - - - - - (822)Transfers 2,220 - 2,575 - - 623 (5,418) -

At December 31, 2013 912,748 16,923 103,066 190,715 43,526 4,362 12,046 1,283,386

Accumulated depreciationAt January 1, 2013 770,495 10,554 82,736 172,296 13,120 867 - 1,050,068Depreciation 33,970 2,734 7,381 8,336 1,872 777 - 55,070Disposals - (822) - - - - - (822)

At December 31, 2013 804,465 12,466 90,117 180,632 14,992 1,644 - 1,104,316

Net book values as at December 31, 2013 108,283 4,457 12,949 10,083 28,534 2,718 12,046 179,070

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Depreciation and amortization for the years ended December 31 were charged to:

Notes 2014 2013 2012Cost of sales and services 17 42,194 45,688 45,033Operating expenses 18 14,285 9,382 11,699

56,479 55,070 56,732

The cost of fully depreciated property and equipment still being used by the Group as at December 31,2014 amounted to P1,007,424 (2013 - P967,985).

As at December 31, 2014, the consolidated property and equipment, net includes COPI balance of P9,904.

Note 9 - Investments in shares of stock

9.1 Associate

In 2014, the Group obtained significant influence over CMI and the investment was classified as anassociate (Note 1).

Details of movement in investment in associate for the year ended December 31, 2014 follow:

At cost 208,000Share in net loss of associate (27,736)Share in other comprehensive loss of associate (380)

179,884

The following are the summarized financial information of the associate as reported in its financialstatements as at and for the year ended December 31, 2014:

Current assets 403,044Non-current assets 47,595Current liabilities 145,262Non-current liabilities 8,759Equity 296,618Revenue 207,586Net loss for the year 69,339Other comprehensive loss 952Total comprehensive loss 70,291

In accordance with the shareholders agreement, the Parent Company, CCAC and the other shareholdersof CMI has committed to purchase the remaining 100 million unissued and unsubscribed shares of CMIuntil 2015. Of the 100 million shares, 22 million and 30 million shares will be subscribed and paid by theParent Company and CCAC to retain a 22% and 30% ownership of CMI, respectively (Note 1).

On January 13, 2015, the Parent Company extended a loan of P22 million to CMI. The principal amountof the loan is due on December 31, 2015 and subject to an annual interest of 2%.

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9.2 Subsidiaries

The summarized financial information of subsidiaries with material non-controlling interests as at andfor the years ended December 31 are as follows:

9.2.1 CCAC

2014 2013Current assets 3,729,791 2,940,088Non-current assets 1,571,056 310,276Current liabilities 2,666,342 1,198,759Non-current liabilities 109,114 94,963Total equity 2,525,391 1,956,642Revenue 6,179,435 5,299,687Net income for the year 986,883 824,932Other comprehensive loss (8,134) (13,594)Total comprehensive income 978,749 811,338Cash provided by operating activities 668,384 890,893Cash used in investing activities (1,276,549) (100,637)Cash provided by (used in) financing activities 567,034 (800,000)

9.2.2 COPI

2014Current assets 584,352Non-current assets 36,999Current liabilities 227,669Non-current liabilities 2,565Total equity 391,117Revenue 380,847Net income for the year 56,348Other comprehensive loss 990Total comprehensive income 57,338Cash provided by operating activities 69,802Cash used in investing activities (6,226)Cash used in financing activities (110,000)

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Note 10 - Deferred income tax/Provision for income tax

The components of the Group’s deferred income tax assets and liabilities as at December 31 are asfollows:

2014 2013Deferred tax assets to be recovered within 12 months

Provision for volume rebates and trade discounts and other incentives 36,780 49,452Provision for impairment of receivables 31,922 38,876Provision for inventory obsolescence 27,238 23,911Accrued employee-related costs 23,424 22,488Accrual for advertising and promotion expenses 20,423 33,051Provision for warranty costs 16,992 12,232Provision for legal disputes and assessments 15,142 16,611Accrued construction costs and other liabilities 5,108 -Provision for commission 3,465 3,821Unamortized contribution for past service cost 1,157 1,157Accrued customer penalties 711 -Unrealized foreign exchange losses 282 96

182,644 201,695Deferred tax assets to be recovered after 12 months

Remeasurement loss on retirement benefits charged directly to equity 14,999 11,512Retirement benefit obligation 13,970 7,191Provision for warranty costs 13,038 13,514Unamortized contribution for past service cost 4,294 5,451

46,301 37,668Total deferred tax assets 228,945 239,363Deferred income tax liabilities to be settled within 12 months

Unrealized foreign exchange gains (2,545) (2,527)Deferred income tax liabilities to be settled after 12 months

Intangible assets (54,864) -Total deferred tax liabilities (57,409) (2,527)Net deferred tax assets 171,536 236,836

Details of NOLCO of the Parent Company as at December 31 which can be applied as deduction fromtaxable income over the next three years immediately following the year of such loss are as follows:

Year of Incurrence Year of Expiration 2014 20132010 2013 - 20,9962011 2014 11,471 11,4712012 2015 10,718 10,7182013 2016 32,681 32,6812014 2017 43,826 -

98,696 75,866Amount expired/applied as deductible expense (11,471) (20,996)Unrecognized NOLCO 87,225 54,870

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Realization of future tax benefits related to the deferred income tax assets is dependent on manyfactors including the ability of each entity to generate taxable income in the future. Correspondingly,the Group’s management believes that related future tax benefit will be realized except for NOLCOattributed to the Parent Company amounting to P87,225 as at December 31, 2014 (2013 - P54,870).

The MCIT can be applied against the Group’s regular income tax within the next three yearsimmediately following the taxable year in which the MCIT was incurred. During the year, the Group’sunrecognized MCIT amounted to P30 thousand which will expire in 2017.

Movements of net deferred income tax assets as at December 31 are as follows:

2014 2013Beginning 236,836 199,412Deferred income tax of acquired subsidiary (34,850) -Charged to other comprehensive income 4,102 4,581Charged (credited) to profit or loss (34,582) 32,843Unrecognized MCIT 30 -Ending 171,536 236,836

Details of provision for income tax for the years ended December 31 follow:

2014 2013 2012Current 478,008 409,955 321,470Deferred 34,582 (32,843) (32,700)

512,590 377,112 288,770

The reconciliation of the provision for income tax computed at the statutory tax rate to actual provisionfor income tax shown in the consolidated statements of total comprehensive income for the yearsended December 31 follow:

2014 2013 2012Statutory income tax at 30% 565,299 365,301 291,962Add (Deduct) reconciling items:

Unrecognized deferred income tax assets on NOLCO 26,968 9,804 3,215Non-deductible expenses 3,356 5,254 532Interest income subject to final tax (1,571) (3,247) (6,939)Amortization of intangible assets (2,952) - -Dividend income subject to final tax (78,510) - -

Actual provision for income tax 512,590 377,112 288,770

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Note 11 - Trade payables and other liabilities

Trade payables and other liabilities as at December 31 consist of:

Notes 2014 2013Trade payables

Third parties 802,715 608,049Related parties 15 171,263 60,901

973,978 668,950Accrued expenses

Project costs 205,065 207,187Benefits of directors, officers and employees 169,044 99,019Advertising and promotion 76,914 110,170Outside services 40,739 36,731Freight 32,369 44,290Rental and utilities 25,282 8,880Installation and cleaning costs 20,383 23,099Social Projects 17,491 -Production costs 8,995 4,566Professional fees 6,964 4,878Importation costs 6,013 12,342Repairs and maintenance 3,415 5,446Transportation and travel 2,802 3,413Customer penalties 2,371 -Research 1,700 1,009Communication 337 201Others 16,052 13,464

635,936 574,695Other liabilities

Advances on sales contract 406,212 103,525Billings in excess of costs incurred and estimated earnings on

uncompleted contracts 106,903 -Output VAT, net of input 63,739 59,821Withholding taxes and other mandatory government remittances 46,361 35,281Other payables 6,304 7,203

629,519 205,8302,239,433 1,449,475

Billings in excess of costs incurred and estimated earnings on uncompleted contracts represent theexcess of contract billings amounting to P320,490 over the cumulative costs incurred and marginamounting to P213,587 as at December 31, 2014.

As at December 31, 2014, the consolidated trade payables and other liabilities includes COPI balance ofP219,224.

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Note 12 - Provision for warranty

Movements of the provision for warranty as at December 31 follow:

12.1 Current

Note 2014 2013Beginning 40,773 30,463Provision for warranty of acquired subsidiary 7,929 -Provisions 18 50,947 58,155Utilization (43,009) (47,845)Ending 56,640 40,773

12.2 Non-current

Note 2014 2013Beginning 45,048 33,473Provisions 18 23,038 40,321Utilization (24,625) (28,746)Ending 43,461 45,048

Note 13 - Other provisions

Details of other provisions as at December 31 consist of:

2014 2013Legal disputes and assessments 51,123 55,371Commission 11,548 22,604

62,671 77,975

Movements in provision for legal disputes and assessments as at December 31 follow:

Note 2014 2013Beginning 55,371 89,116Provision for legal disputes of acquired subsidiary 650 -Provision (reversal) 19 - (13,696)Payments (4,898) (20,049)Ending 51,123 55,371

Movements in provision for commission at December 31 follow:

Note 2014 2013Beginning 22,604 42,663Provision 18 32,887 26,374Payments (43,943) (46,433)Ending 11,548 22,604

Provision for commission is expected to be settled within twelve (12) months after the reporting dateand payment is dependent on whether sales targets are met or exceeded.

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Note 14 - Short-term borrowings

On March 21, 2014, CCAC availed of unsecured fixed interest-bearing loan at 2.63% from BPIamounting to P1 billion in relation to its investment in COPI. The same loan was paid last August 1,2014 through availment of new loan with BPI and BDO. On August 1, 2014, CCAC availed of unsecuredfixed interest-bearing loan from BPI amounting to P500 million subject to the same interest rate of theinitial loan acquired. The term of the loan is 358 days from the acquisition date and will mature onJuly 24, 2015. On August 8, 2014, CCAC availed another unsecured fixed interest-bearing loan fromBDO amounting to P500 million. These loans will mature on July 24 and August 12, 2015, respectively.

On December 11, 2014 and December 18, 2014, CDI availed of unsecured 3.25% fixed interest-bearingloan from BPI amounting to P47.0 million and P31.5 million, respectively to finance its working capitalrequirements. These loans will mature on February 9 and 16, 2015, respectively. CDI applied to roll-forward the P47.0 million loan, which will now mature in April 2015, while the P31.5 million loan wassettled on March 8, 2015.

No assets of the Group have been pledged against these short-term borrowings.

Total interest expense charged to operations for the year ended December 31, 2014 arising from short-term loans amounted to P23,084 (2013 - P9,955; 2012 - P1,392).

On April 6, 2015, CCAC executed a loan agreement to borrow P250 million from COPI. The principalamount of the loan is due on December 15, 2015 and is subject to an annual interest of P2.65% payablemonthly, in arrears.

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Note 15 - Related party transactions

In the normal course of business, the Group transacts with related parties. The following are the balances and significant transactions with theseentities as at and for the years ended December 31:

2014 2013 2012

Transactions

Outstandingreceivable(payable) Transactions


Outstandingreceivable(payable) Terms and conditions

Immediate parentRent and utilities (32,985) (3,377) - - (83,348) (3,303) Purchases are made at market prices. Outstanding

payables are due within 30 to 60 days from transactiondate. These are payable in cash, non-interest bearingand unsecured in nature.

Lease of warehouse (9,464) - (11,680) (768) (4,512) (2,208)

Dividend declaration (154,134) - (105,000) - (690,776) (540,776) Refer to Note 22.Associate

Subscription of shares 104,000 - - - - - Refer to Note 1 and Note 9.Administrative services 11,070 14,239 - - - - Purchases are made at market prices. Outstanding


Transfer of employees - (5,231) - - - - Benefits due to the employee transferred up to date oftransfer will be paid by the former employer.Outstanding balance is due within one year fromtransaction date. The balance is payable in cash, non-interest bearing and unsecured in nature.

Entities under common controlRent and utilities (26,512) - 65,595 (3,350) - - Receivables are collectible in cash within 30 to 60 days

from billing date. These receivables are unsecured,unguaranteed and non-interest bearing. Balances arefully recoverable with no impairment loss recognized.

Dividend income - - - - 106,000 -

ShareholdersAdvances to shareholders (298) - - - Outstanding payables are due within 30 to 60 days

from transaction date. These are payable in cash, non-interest bearing and unsecured in nature.

Advances from shareholders (4,404) (6,030) (7,554) (7,554) - -

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2014 2013 2012

Transactions



Outstandingreceivable(payable) Terms and conditions

Entities with common shareholdersSale of goods 5,588 7,946 345 345 1,094 271 The outstanding balance (Note 6) is unsecured in

nature and bears no interest and is settled within 60days after the date of sale

Commission income 72,145 43,143 26,746 4,135 16,916 12,347 Shared administrative costs charged to entities undercommon shareholders are for the accounting servicesrendered. Receivables are collectible in cash within 30to 60 days from billing date These receivables areunsecured, unguaranteed and non-interest bearing.Balances are fully recoverable with no impairment lossrecognized. Advances are primarily costreimbursements paid on behalf of related parties.

Shared administrative cost 947 186 11,151 10,050 29,262 4,078Advances - - 1,175 1,175 - 12,001

Dividend declaration (164,000) - - - - - Refer to Note 22.Purchases (1,016,829) (145,764) 470,059 (46,465) 366,866 (28,863) Purchases are made at market prices. Outstanding


Advance - - - - 515,580 (515,580)Collections (Payments) in behalf

of a related party 34,368 (4,616)Purchase of shares - - 192,864 - - - Subscription of CII for additional shares of CDI was

cancelled in 2012. The balance became an advance,payable on demand in cash.

Royalty/Technical fee (36,549) (6,245) 19,553 (2,764) 14,247 (4,007) Payable in cash within 60 days unsecured and bearsno interest. Refer to Note 20.

Key management personnelCommission (13,520) - (25,412) - (10,500) - Payable to employees in cash within 30 days from date

of each transaction. Non-interest bearing and notcovered by any guarantee.

Salaries and wages (176,876) (60,127) (115,650) (7,748) 73,415 -

Retirement benefit (54,932) (75,457) (23,769) (34,251) 22,482 (12,754) Refer to Note 21.

There were no provisions recognized in relation to receivables from related parties. Balance due are settled/collected at gross (Note 2.5.3). Further,transactions with the retirement fund are limited to contributions made by COPI during the year (Note 21).

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The following related party transactions and balances were eliminated for the purpose of preparing theconsolidated financial statements:

2014 2013 2012As at December 31

Investment in subsidiaries 1,182,363 2,154,324 1,445,880Trade and other receivables 120,240 178,882 -Trade payables and other liabilities 120,240 178,882 -

For the year ended December 31Dividend income 261,700 480,000 -Interest income 1,509 - -Interest expense 1,509 - -Share in net income - - 387,458

Note 16 - Sales and services

Details of net sales and services for the years ended December 31 are as follows:

Note 2014 2013 2012Sale of goods 9,204,937 8,187,300 7,746,916Sale of services 741,867 304,943 135,342

9,946,804 8,492,243 7,882,258Deductions

Trade and volume discounts 6 (603,582) (581,539) (413,898)Sales returns (167,834) (322,495) (528,580)

(771,416) (904,034) (942,478)Net sales and services 9,175,388 7,588,209 6,939,780

Note 17 - Cost of sales and services

Details of cost of sales and services for the years ended December 31 are as follows:

Note 2014 2013 2012Raw materials used 3,765,739 3,349,695 3,512,806Labor 147,868 147,817 143,551Overhead 488,381 446,578 426,036Total manufacturing cost 4,401,988 3,944,090 4,082,393Work-in-process, beginning 108,886 110,923 29,969Work-in-process, ending 7 (167,890) (108,886) (110,923)Cost of goods manufactured 4,342,984 3,946,127 4,001,439Finished goods inventory, beginning 356,229 293,699 275,737Gross purchases – trading 1,875,695 1,244,489 735,319Finished goods available for sale 6,574,908 5,484,315 5,012,495Finished goods inventory, ending 7 (689,324) (356,229) (293,699)Total cost of sales 5,885,584 5,128,086 4,718,796Cost of services 229,979 - -

6,115,563 5,128,086 4,718,796

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Details of overhead for the years ended December 31 are as follows:

Notes 2014 2013 2012Indirect labor 172,176 158,347 133,475Rent and utilities 15, 20 80,326 78,065 74,317Outside services 68,981 43,800 31,341Depreciation 8 39,523 45,688 45,033Indirect materials and supplies 39,366 30,443 64,640Repairs and maintenance 36,726 43,415 34,347Taxes and licenses 28,464 25,228 20,430Travel and transportation 9,456 8,590 9,614Insurance 7,569 5,306 5,724Prototype and imported samples 927 369 2,393Trainings, seminars and meetings 512 926 1,062Others 4,355 6,401 3,660

488,381 446,578 426,036

Details of cost of services for the year ended December 31, 2014 incurred by COPI are as follows:

Notes AmountMaterials and labor 159,422Employee costs 38,680Technical fee 20 13,674Rent and utilities 20 6,952Depreciation and amortization 8 2,671Taxes and licenses 1,452Transportation and travel 1,171Outside services 1,120Insurance 829Supplies 409Repairs and maintenance 62Others 3,537

229,979

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Note 18 - Operating expenses

Details of operating expenses for the years ended December 31 are as follows:

Notes 2014 2013 2012Personnel costs 529,188 421,761 420,258Outside services 339,386 225,276 181,550Delivery and shipping 175,795 154,835 82,656Rent and utilities 15, 20 122,722 72,740 123,179Advertising and promotion 78,041 82,986 141,165Warranty cost 12 73,985 98,476 91,146Provision for commission 13 32,887 26,374 17,851Transportation and travel 31,872 39,192 44,605Royalty/Technical fees 15, 20 28,835 29,768 30,148Repairs and maintenance 27,549 22,519 35,979Provision for inventory obsolescence 7 20,737 21,113 21,998Taxes and licenses 19,370 15,002 23,232Depreciation of property and equipment 8 14,285 9,382 11,699Amortization of intangible assets 27 9,844 - -Professional fees 6,943 1,274 1,552Supplies 5,356 4,675 10,072Insurance 3,110 1,066 5,045Provision for impairment of receivables 6 1,046 11,362 38,343Trainings and seminars 863 1,050 -Registration 649 1,371 -Charitable contributions 86 929 -Others 20,095 24,840 28,718

1,542,644 1,265,991 1,309,196

In 2014, the consolidated charges to operating expenses includes COPI charges of P64,559.

Note 19 - Other operating income, net

Details of other operating income for the years ended December 31 are as follows:

Notes 2014 2013 2012Commission income 15 72,145 26,746 16,916Interest income on bank deposits andshort term placements 5 4,930 10,824 23,129

Foreign exchange gain (loss) 26 2,700 (33,605) 15,574Service income 374 441 262Gain (loss) on foreign exchange forward contracts 3 (125) 2,799 (4,260)Gain on disposal of property and equipment - 71 85Reversal of provision for legal disputes andassessments 13 - 13,696 -

Miscellaneous 22,346 12,521 11,106102,370 33,493 62,812

Miscellaneous income pertains to recharges to related parties for shared services and interest incomefrom employee loans, expired warranties and sale of old model units.

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Note 20 - Leases and other agreements

20.1 Leases

20.1.1 CCAC has existing three-year lease agreement expiring on December 31, 2015, renewable uponmutual agreement of the parties, with CII for the lease of the factory space and warehouseslocated in the Light Industry Science Park, Cabuyao, Laguna, and in Alabang, Muntinlupa City.

20.1.2 CCAC and CDI leases an office space in Muntinlupa City and warehouse spaces in Cabuyaowith Foresight Realty & Development Corp. (formerly Concepcion Holdings, Inc.), a shareholder.The contracts are renewable upon mutual agreement of the parties which will expire in variousdates in 2015 and 2017.

20.1.3 Both CCAC and CDI have agreements with various lessors covering office space for its regionaloffices. Such agreements have terms ranging from one (1) to five (5) years under terms andconditions as agreed with the lessors.

20.1.4 COPI has various lease agreements covering its office premises, parking spaces, vehicles andcondominium units occupied by its expatriate employees, expiring at various dates up to 2019.These agreements are renewable upon mutual concurrence by both parties.

Rental deposits required for these lease agreements are included in either trade and other receivablesand deposits and other non-current assets account in the consolidated statement of financial position.

Total rent expense for the said leases amounted to P79,017 (2013 - P63,259; 2012 - P60,047), whichwere charged to cost of sales and services and operating expenses.

The minimum future annual rental commitments under these operating leases are as follows:

2014 2013 2012Less than 1 year 97,733 82,010 12,335More than 1 year but not more than 5 years 48,379 96,731 96,151

146,112 178,741 108,486

20.2 Trademark and other agreements

20.2.1 Kelvinator trademark

(a) CCAC

On January 1, 2002, the CCAC entered into a trademark agreement with Kelvinator InternationalPartnership, a division of Electrolux Home Products, Inc. (a Partnership incorporated in the U.S.A.) forthe license to use the “Kelvinator” trademark as specified in the agreement for its window type room airconditioners. In consideration thereof, the Partnership is required to pay a trademark fee of 1% of thenet selling price of the trademarked product subject to a minimum annual fee of U.S.$20,000 andinspection fees for the initial model and subsequent models of any product line. The Partnershiprenewed the agreement on January 1, 2012 which requires it to pay a trademark fee of 2% of the netselling price of the trademarked product subject to a minimum annual fee of 1.5% of targeted net salesand actual inspection fees.

Royalty/technical fees for the above agreements charged to operations in 2014 amounted to P2,416(2013 - P2,640; 2012 - P2,116) (Note 18).

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(b) CDI

On January 1, 2002, the CDI entered into a trademark agreement with Kelvinator International Group,a division of Electrolux Home Products, Inc. (a company incorporated in the U.S.A.) for the license touse the “Kelvinator” trademark as specified in the agreement for its window type room air conditioners.In consideration thereof, the CDI is required to pay a trademark fee of 1% of the net selling price of thetrademarked product subject to a minimum annual fee of U.S.$20,000 and inspection fees for theinitial model and subsequent models of any product line. The CDI renewed the agreement on January1, 2012 which requires it to pay a trademark fee of 2% of the net selling price of the trademarkedproduct subject to a minimum annual fee of 1.5% of targeted net sales and actual inspection fees thatremains effective until terminated by both parties.

Royalty/technical fees for the above agreements charged to operations in 2014 amounted to P7,200(2013 - P7,575; 2012 - P12,657) (Note 18).

20.2.2 Royalty/Technical service agreement with Carrier Corporation.

The CCAC has an existing technical service agreement with Carrier Corporation (Carrier), a relatedparty of one of the owners of CCAC, which is co-terminus with the joint venture agreement betweenCarrier. The agreement provides that the CCAC will pay royalty fees equivalent to a specifiedpercentage of the net sales depending on the product type, in exchange for non-exclusive and non-transferable rights to make use of technical data, process and assistance to be provided by CarrierCorporation in the manufacture of its products. The agreement remains effective unless terminated byboth parties.

Royalty/technical fees for the above agreements charged to operations in 2014 amounted to P19,219(2013 - P19,553) (Note 18).

20.2.3 Trademark and Trade Name License Agreement and Technical Assistance Agreements andLicense to Use Technical Data, Know-how and Patents Agreement with Otis U.S.A.

COPI has existing Technical Assistance Agreements and License to Use Technical Data, Know-how andPatents Agreement effective September 15, 2003 with Otis U.S.A., a related party, for the latter toprovide technical data and know-how to improve the technical knowledge of the COPI’s personnel andto further impart and transfer technical data and provide technical service to the Company. Inconsideration thereof, the COPI is required to pay, in addition to the costs incurred by Otis U.S.A. inproviding the training, a royalty fee equivalent to 3.5% of the net billings of the Company.

COPI has also a Trademark and Trade Name License Agreement effective September 15, 2003 with OtisU.S.A. which grants the Company a non-exclusive right and license to market and sell Otis productsand to perform service under the licensed marks. As partial consideration of the rights and licensesgranted, the COPI shall pay Otis U.S.A. a royalty fee as provided in the Technical Assistance Agreementmentioned above.

Technical fees for the above agreements charged to operations in 2014 amounted to P13,674 (Note 17).

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20.2.4 Assignment Agreement with Otis Elevator Company (Philippines), Inc. (OECPI)

On April 21, 2003, an Assignment Agreement was executed by and between Otis Elevator Company(Philippines), Inc. (OECPI), as the assignor, and COPI, as the assignee, for the conveyance, transferassignment and delivery of all the OECPI’s assets, liabilities and contracts to the COPI as set out in theagreement. Under the agreement, COPI acquired from OECPI all its rights, titles, benefits and interestsin, to and under the related assets, liabilities and contracts as indicated in the agreement.Consequently, COPI assumed all the OECPI’s liabilities effective May 5, 2003. Owing to the dormantstatus of OECPI, COPI collected the net proceeds from sale of the former’s remaining investmentproperty in April 2012 amounting to P3,110,704. Outstanding payable of COPI as at December 31,2014 amounted to P4,616 which is included under payable to related parties under trade payables andother liabilities (Notes 11 and 15).

Note 21 - Retirement plan

21.1 CIC

In 2014, CIC established a retirement plan which is a non-contributory and of the defined benefit typewhich provides a retirement benefits ranging from twenty percent (20%) to one hundred twenty-fivepercent (125%) of basic monthly salary times number of years of service. Benefits are paid in a lumpsum upon retirement or separation in accordance with the terms of the Plan. This Plan is in agreementwith CCAC’s retirement plan that was started on July 1, 1999 since most of the employees of CIC wereabsorbed from CCAC.

21.2 CCAC

On July 1, 1999, CCAC established a funded, trusteed and non-contributory retirement plan covering allits regular employees. The Plan provides lump sum benefits upon retirement, death, total andpermanent disability, voluntary separation after completion of ten (10) years of credited service, andinvoluntary separation (except for cause). Normal retirement age is 60 years or 15 years of creditedservice, whichever is earlier and provides for retirement benefit equivalent to 125% of the latestmonthly salary per year of service.

The Retirement Plan Trustee, as appointed by CCAC in the Trust Agreement executed between CCACand the duly appointed Retirement Plan Trustee, is responsible for the general administration of theRetirement Plan and the management of the Retirement Fund. The Retirement Plan Trustee may seekand advice of counsel and appoint an investment manager or managers to manage the RetirementFund, an independent accountant to audit the Fund and an actuary to value the Retirement Fund.

There are no unusual or significant risks to which the Plan exposes CCAC. However, in the event abenefit claim arises under the Retirement Plan and the Retirement Fund is not sufficient to pay thebenefit, the unfunded portion of the claim shall immediately be due and payable from CCAC to theRetirement Fund.

In accordance with the provisions of BIR Regulation No. 1-68, it is required that the Retirement Planbe trusteed; that there must be no discrimination in benefits that forfeitures shall be retained in theRetirement Fund and be used as soon as possible to reduce future contributions; and that no part of thecorpus or income of the Retirement Fund shall be used for, or divided to, any purpose other than forthe exclusive benefit of the Plan members. CCAC is not required to pre-fund the future defined benefitspayable under the Retirement Plan before they become due. For this reason, the amount and timing ofcontributions to the Retirement Fund are at the CCAC’s discretion.

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21.3 CDI

CDI has not yet established a formal retirement plan for its employees but provides for estimatedretirement benefits required under Republic Act No. 7641 (Retirement Law). RA 7641 provides that allemployees between ages 60 to 65 with at least 5 years of service with the Company who may opt toretire are entitled to benefits equivalent to one-half month salary for every year of service, a fraction ofat least six (6) months being considered as one whole year. The term one-half month shall mean fifteen(15) days plus one-twelfth (1/12) of the 13th month and the cash equivalent of not more than five (5)days of service incentive leaves.

21.4 COPI

COPI has a funded, non-contributory defined benefit plan covering the retirement and disabilitybenefits of its qualified employees and it is being administered by a trustee bank. The normalretirement age is 60 and optional retirement date is at age 45 or completion of at least 25 years ofservice.

The retirement obligation of each entity in the Group is determined using the “Projected Unit Credit”(PUC) method. Under the PUC method, the annual normal cost for the portion of the retirement isdetermined using the amount necessary to provide for the portion of the retirement benefit accruingduring the year. Actuarial valuation of the retirement benefits was sought from an independent actuaryas of the reporting date.

The Group’s latest actuarial valuation date is as at December 31, 2014.

The following are the details of the retirement benefit obligation and retirement benefit expense as atDecember 31 and for the years then ended:

CIC CCAC CDI COPI Total2014

Retirement benefit obligation 11,827 65,653 28,344 2,565 108,389Retirement benefit expense 1,293 24,531 3,349 2,975 32,148

2013Retirement benefit obligation - 49,915 12,426 - 62,341Retirement benefit expense - 15,218 2,600 - 17,818

The amounts of retirement benefit obligation recognized in the statements of financial position as atDecember 31 are determined as follows:


Present value of retirement benefit obligation 11,827 163,149 28,344 32,957 236,277Fair value of plan assets - (97,496) - (30,392) (127,888)

11,827 65,653 28,344 2,565 108,389

2013Present value of retirement benefit obligation - 147,776 12,426 - 160,202Fair value of plan assets - (97,861) - - (97,861)

- 49,915 12,426 - 62,341

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Changes in the present value of the retirement benefit obligation for the years ended December 31follow:


Beginning - 147,776 12,426 - 160,202Plan assets from COPI - - - 35,831 35,831Interest cost - 7,610 711 1,561 9,882Current service cost 1,293 21,961 2,638 2,786 28,678Transfer of employees 9,575 (14,806) 11,500 - 6,269Benefits paid directly from book reserve - (5,608) (1,434) (2,724) (9,766)Remeasurement (gain) loss

Changes in financial assumptions - 1,141 2,219 (4,497) (1,137)Changes in demographic assumptions - (734) - - (734)Experience adjustments 959 5,809 284 - 7,052

Ending 11,827 163,149 28,344 32,957 236,277

2013Beginning - 114,390 13,978 - 128,368Interest cost - 7,229 904 - 8,133Current service cost - 14,082 1,696 - 15,778Benefits paid directly from book reserve - (2,708) - - (2,708)Remeasurement (gain) loss

Changes in financial assumptions - 5,032 2,088 - 7,120Changes in demographic assumptions - 11,603 - - 11,603Experience adjustments - (1,852) (6,240) - (8,092)

Ending - 147,776 12,426 - 160,202

The movements of retirement benefit obligation recognized in the statements of financial position as atDecember 31 follow:


Beginning - 49,915 12,426 - 62,341Acquisition of subsidiary - - - 5,005 5,005Retirement benefit expense 1,293 24,531 3,349 2,975 32,148Transfer of employees 9,575 (14,806) 11,500 - 6,269Other comprehensive loss 959 11,621 2,503 (1,414) 13,669Contributions - - - (4,001) (4,001)Benefits paid - (5,608) (1,434) - (7,042)Ending 11,827 65,653 28,344 2,565 108,389

2013Beginning - 17,984 13,978 - 31,962Retirement benefit expense - 15,218 2,600 - 17,818Other comprehensive loss - 19,421 (4,152) - 15,269Benefits paid - (2,708) - - (2,708)Ending - 49,915 12,426 - 62,341

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The amounts of retirement benefit expense recognized under operating expenses in the statements oftotal comprehensive income for the years ended December 31 follow:


Current service cost 1,293 21,961 2,638 2,786 28,678Interest cost - 7,610 711 1,561 9,882Interest income on plan assets - (5,040) - (1,372) (6,412)Ending 1,293 24,531 3,349 2,975 32,148

2013Current service cost - 14,082 1,696 - 15,778Interest cost - 7,229 904 - 8,133Interest income on plan assets - (6,093) - - (6,093)Ending - 15,218 2,600 - 17,818

Retirement benefit expense is included as part of employee costs under operating expenses (Note 18).

Changes in the fair value of the plan assets for the years ended December 31 follow:

CCAC COPI Total2014

Beginning 97,861 - 97,861Acquisition of subsidiary - 30,826 30,826Interest income 5,040 1,372 6,412Contributions - 4,001 4,001Benefits paid - (2,724) (2,724)Remeasurement loss from experience adjustments (5,405) (3,083) (8,488)Ending 97,496 30,392 127,888

2013Beginning 96,406 - 96,406Interest income 6,093 - 6,093Remeasurement loss from experience adjustments (4,638) - (4,638)Ending 97,861 - 97,861

The categories of CCAC and COPI’s plan assets as at December 31 are as follows:

CCAC COPI2014

Unit investment trust fund 100% -Investments in government securities

Fixed rate treasury notes - 47%Retail treasury bonds - 27%

Corporate bonds - 14%Cash and cash equivalents - 12%Receivables - 0%

100% 100%

2013Cash and cash equivalents 100% -

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COPI and a Trustee bank ensure that the investment positions are managed within an asset-liabilitymatching framework that has been developed to achieve long-term investments that are in line with theobligations under the plan. The main objective is to match assets to the defined benefit obligation byinvesting primarily in long-term debt securities with maturities that match the benefit payments asthey fall due. To mitigate concentration and other risks, assets are invested across multiple asset classeswith active investment managers

CCAC’s pension benefit fund is administered by a local trustee bank which is governed by the rules andregulations of the Bangko Sentral ng Pilipinas and the SEC. Based on the trust fund agreement, it isauthorized to invest the fund as it deems proper. Its investment strategy focuses principally onstringent management of downside risks rather than on maximizing absolute returns. It is anticipatedthat this investment policy can generate a return that enables it to meet its long-term commitments.

CCAC and COPI has not yet determined its contribution to the plan assets for the year endingDecember 31, 2015.

The movement of other comprehensive loss (Parent Company and Non-controlling interest) recognizedin the statements of financial position as at December 31 follows:

CCAC CDI CIC COPI Total2014

Beginning 26,859 619 - - 27,478Remeasurement loss (gain) 11,621 2,503 959 (1,414) 13,669Tax effect (3,487) (751) (288) 424 (4,102)Ending 34,993 2,371 671 (990) 37,045

2013Beginning 13,265 3,525 - - 16,790Remeasurement loss (gain) 19,421 (4,152) - - 15,269Tax effect (5,827) 1,246 - - (4,581)Ending 26,859 619 - - 27,478

The principal annual actuarial assumptions used as at and for the years ended December 31 follow:

CIC CCAC CDI COPI2014

Discount rate 5.28% 5.08% 5.09% 4.45%Salary increase rate 6.18% 6.18% 5.00% 7.00%Average expected future service years of plan members 21.9 23.7 22.6 22.0

2013Discount rate - 5.15% 5.09% -Salary increase rate - 6.00% 5.00% -Average expected future service years of plan members - 23.5 22.8 -

Discount rates were based on based on the spot yield curve calculated from the PDEx (PDSI/T-R2)market yields converted to zero-coupon by stripping the coupons from government bonds consideringthe average years of remaining working life of the employees as the estimated term of the benefitobligation. The 2001 CSO Table - Generational (Scale AA, Society of Actuaries) was used in assessingannual mortality rates.

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Expected maturity analysis of undiscounted retirement benefits as at December 31 follow:


Less than a year - 12,854 1,667 2,546 17,067More than 1 year to 5 years 14,727 7,609 4,303 2,771 29,410More than 5 years to 10 years - 138,147 12,640 624,171 774,958

2013Less than a year - 12,854 1,667 - 14,521More than 1 year to 5 years - 7,609 4,303 - 11,912More than 5 years to 10 years - 138,147 12,640 - 150,787

The weighted average duration of the defined benefit obligation as at December 31, 2014 is 3.0 to 5.5years (2013 - 15.8 years).

Note 22 - Equity

22.1 Share capital

As at January 1, 2013, the Parent Company has fully subscribed and issued authorized share capital of 1million with par value of P100 each or equivalent to P100 million.

On July 5, 2013, the SEC approved the Parent Company’s application to increase the authorized sharecapital to P700 million composed of 700 million shares with par value of P1 per share as approved bythe Parent Company’s Board of Directors on April 5, 2013.

The details and movement of share capital as at and for the years ended December 31 follow:

No. ofcommonshares

Sharecapital

Sharepremium

January 1, 2013 1,000,000 100,000 368,546Share issuances during 2013

Change in par value 99,000,000 - -Prior to IPO period 150,000,000 150,000 365,580During IPO period 11,244,002 11,244 259,117

260,244,002 161,244 624,697December 31, 2013 261,244,002 261,244 993,243Share issuance during 2014

Stock dividends 78,373,224 78,373 -Ending 339,617,226 339,617 993,243

For the year ended December 31, 2013, total issuance costs charged against share premium amountedto P22.0 million.

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22.2 Retained earnings

Cash dividends declared for the years ended December 31 are as follows:

Date declared Dates paid Per share 2014 2013 2012March 19, 2014 April 30, 2014 0.59 154,134 - -July 18, 2013 September 15, 2013 0.42 - 105,000 -November 3, 2012 March 1 and June 13, 2013 541 - - 540,776April 30, 2012 April 30 2012 150 - - 150,000

154,134 105,000 690,776

On July 18, 2014, the Parent Company declared stock dividends amounting to P78,373 divided into78,373,224 common shares with a par value of P1 per share. Any fractional shares resulting from thestock dividend was rounded up to one share, and the record and share issuance dates are August 22,2014 and September 8, 2014, separately.

For the year ended December 31, 2014, total share of non-controlling interest from profit distribution byCCAC amounted to P164 million (2013 - P320 million; 2012 - P140 million).

On April 8, 2015, the Company’s Board of Directors declared cash dividends in the amount of P0.59 pershare totaling P200 million for shareholders of record as at April 22, 2015, which will be paid on or beforeMay 15, 2015.

Note 23 - Earnings per share

Basic earnings per share is calculated by dividing the net income attributable to shareholders of theParent Company by the weighted average number of ordinary shares in issue during the period,excluding ordinary shares purchased by the Parent Company and held as treasury shares, if any. Totalissued ordinary shares for the period has been adjusted for impact of stock split and stock dividends, ifany.

Earnings per share for the years ended December 31 is calculated as follows:

2014 2013 2012Net income attributable to owners of the Parent Company 637,154 510,586 426,135Weighted average common shares - basic and diluted (in ‘000) 339,617 230,544 130,000Basic and diluted earnings per share 1.88 2.21 3.28

The basic and diluted earnings per share are the same for the periods presented as there are nopotential dilutive common shares.

Note 24 - Contingencies

The Group is a party to various on-going litigation proceedings, to which respective courts andregulatory bodies have not rendered any final decision as at audit report date. Notwithstanding, theGroup’s management, with the assistance of third party counsels, has determined certain loss positionsthat warranted corresponding provisions to be recorded in the consolidated statements of financialposition (Note 13). These were recognized based on existing conditions and available information as atreporting date. Accordingly, annual evaluation is conducted by management to identify possiblechanges in circumstances that would equally require adjustment in its estimates. The detailedinformation pertaining to these litigations have not been disclosed as this might prejudice the outcomeof the ongoing litigation.

(55)

Note 25 - Segment information

The Group’s operations are being reviewed and analyzed by the chief operating decision-maker intothree (3) principal business segments. The segments are generally determined based on themanagement structure of the businesses, where each management organization has general operatingautonomy over its respective products and services.

25.1 CCAC

The segment’s products and related services include air conditioning (HVAC), heating, ventilation andrefrigeration products. It is supported by a vast network of distributors, dealers, retailers andtechnicians who sell, install and service the Group’s products in the industrial, commercial andresidential property sectors. The chief operating decision-maker performs review of gross profit percomponent, while review of segment operating expenses, income tax, and profit or loss are done intotal.

25.2 CDI

The segment is engaged in manufacturing of refrigerators and freezers for domestic market.

25.3 COPI

The segment is engaged in distribution and service of elevators, escalators, moving walkways andshuttle systems.

(56)

Segment information on reported consolidated profit or loss for the years ended December 31 are as follows:

CCAC CDIAir

conditioningAfter sales

marketCommercialrefrigeration Sub-total

Residentialrefrigeration COPI Others Total

2014Net sales and services 5,794,463 326,474 58,498 6,179,435 2,615,106 380,847 - 9,175,388Cost of sales and services (3,640,705) (193,656) (49,770) (3,884,131) (2,001,453) (229,979) - (6,115,563)Gross profit 2,153,758 132,818 8,728 2,295,304 613,653 150,868 - 3,059,825Operating expenses (956,859) (421,031) (64,559) (100,195) (1,542,644)Provision for income tax (428,599) (53,242) (33,383) 2,634 (512,590)Profit or loss 986,884 137,673 56,348 (124,764) 1,056,141

2013Net sales and services 4,963,182 258,563 77,942 5,299,687 2,288,522 - - 7,588,209Cost of sales and services (3,090,546) (167,464) (27,085) (3,285,095) (1,842,991) - - (5,128,086)Gross profit 1,872,636 91,099 50,857 2,014,592 445,531 - - 2,460,123Operating expenses (875,469) (351,550) - (38,972) (1,265,991)Provision for income tax (354,785) (22,327) - - (377,112)Profit or loss 824,932 52,343 - (36,717) 840,558

2012Net sales and services 4,341,597 246,790 57,085 4,645,472 2,294,308 - - 6,939,780Cost of sales and services (2,651,616) (127,164) (44,716) (2,823,496) (1,895,300) - - (4,718,796)Gross profit 1,689,981 119,626 12,369 1,821,976 399,008 - - 2,220,984Operating expenses (950,504) (346,657) - (12,035) (1,309,196)Provision for income tax (270,638) (18,132) - - (288,770)Profit or loss 645,763 42,701 - (4,026) 684,438

There were no material export sales or transactions made with related parties that require separate disclosure from the above.

(57)

Segment information on consolidated assets and liabilities as at December 31 are as follows:

2014 2013Assets Liabilities Assets Liabilities

CCAC 4,090,329 2,760,221 3,250,364 1,293,722CDI 1,603,304 597,057 1,396,239 440,263COPI 1,533,988 230,877 - -Others 292,507 64,143 165,900 9,050

7,520,128 3,652,298 4,812,503 1,743,035

The balances presented above are net of eliminating entries recognized in the preparation of theconsolidated financial statements.

Note 26 - Foreign currency-denominated monetary assets and liabilities

The Group’s foreign currency-denominated monetary assets and liabilities as at December 31 are asfollows:

CurrencyCurrentassets

Currentliabilities

Net foreigncurrencyliabilities

Exchangerate

Pesoequivalent

2014Yen - (953) (953) 0.37 (353)U.S.Dollar 1,957 (6,811) (4,854) 44.69 (216,925)Hong Kong Dollar - (239) (239) 5.74 (1,372)SGD - (11) (11) 35.11 (386)Euro - (33) (33) 54.47 (1,798)

(220,834)

2013Yen - (9,709) (9,709) 0.42 (4,078)U.S.Dollar 239 (2,434) (2,195) 44.41 (97,480)Euro 26 (887) (861) 60.76 (52,314)

(153,872)

2012Yen - (9,637) (9,637) 0.48 (4,626)U.S.Dollar 892 (3,626) (2,734) 41.13 (112,449)Euro - (781) (781) 54.26 (42,377)

(159,452)

Net foreign exchange gains (loss) credited (charged) to profit or loss for the years ended December 31are as follows:

Note 2014 2013 2012Realized foreign exchange gain (loss), net (3,151) (41,710) 18,980Unrealized foreign exchanges gains (loss), net 5,851 8,105 (3,406)

19 2,700 (33,605) 15,574

(58)

Note 27 - Business acquisition, Goodwill

On March 28, 2014, CCAC acquired 85% of the share capital of Otis E&M Company Philippines, Inc.(OEMCPI) for P1,182,363. The total ownership interest gave CCAC direct control over OEMCPI andthe Group an effective interest of 51% (Note 1).

The SEC approved the change in registered name of OEMCPI to Concepcion-Otis Philippines, Inc.(COPI) during the year.

The acquisition of shares in COPI is in pursuit of the Group’s vision of becoming a leading provider ofBuilding and Industrial Solutions. As a result of the acquisition, the Group is expected to gain access toproducts and expertise in people-moving products, including elevators, escalators and movingwalkways. The Group, through its building and industrial solutions (BIS) group, is moving towards aworldwide trend of providing end-to-end building solutions. The Group has the capabilities to provideengineering design and estimate, supply & install, project management and aftermarket services to itscommercial customers to complement the new partnership. The goodwill of P783,983 arising from theacquisition is attributable to an established brand, customer and product base, as well as growthprospects arising from the synergy with CIC businesses. None of the goodwill recognized is expected tobe deductible for income tax purposes.

The following table summarizes the consideration paid for the acquired business, the fair values ofassets acquired, liabilities assumed, and the non-controlling interest at acquisition date.

Total consideration paid 1,182,363Recognized amounts of identifiable assets acquired and liabilities assumed

Cash and cash equivalents 466,225Trade and other receivables 126,564Inventories 36,138Prepayments and other current assets 36,147Property and equipment 8,359Other assets 1,908Trade payable, provisions and other liabilities (367,800)Retirement benefit obligations (5,005)Deferred income tax liability, net (34,850)Identifiable intangible assets:

Non-contractual customer relationships 187,113Customer backlogs 13,883

Non-controlling interest (NCI) (70,302) (398,380)Total goodwill 783,983

Acquisition-related costs of P1.2 million pertaining to legal and professional services have been chargedto legal and professional fees in consolidated profit or loss.

The fair value of receivables is P126.6 million and includes trade receivables with a carrying value ofP130.6 million. The gross contractual amount for trade receivables is P180.3 million, of whichP49.7 million has allowance for impairment.

A provision for legal expense of P650 has been recognized in relation to the court case of COPI vs. athird party filed on January 1, 2008. The amount of P650 was not booked as part of the liabilities ofCOPI as of date of acquisition.

(59)

The fair values of the acquired identifiable assets and liabilities were finalized based on a purchaseprice allocation report prepared by a third party consultant engaged by CCAC.

The Group recognized NCI amounting to P70.3 million as a result of the acquisition, using theproportionate interest approach or 15% of total identifiable net assets acquired. Total NCI from COPIhas been further adjusted upon consolidation for the effective interest of the Group.

The revenue included in the consolidated statement of total comprehensive income since March 28,2014 contributed by COPI was P380,847. COPI also contributed profit of P56,348 over the sameperiod.

Had COPI been consolidated from January 1, 2014, the consolidated statement of total comprehensiveincome would show revenue of P9,355,683 and profit of P1,080,823.

In relation to intangible asset recognized arising from customer relationships and orders, amortizationexpenses has been recognized by the Group for the nine-months of the year amounting to P9,844(Note 18). Accordingly, the Group recognized reversal of deferred income tax assets from theamortization of these intangible assets amounting to P2,952.

Note 28 - Restatements to the separate financial statements of subsidiaries

As discussed in Note 2.1, the Group applied the amendments of PAS 19 effective January 1, 2013,retrospectively. Under the previous PAS 19, the Group elected to adopt the accounting policy ofrecognizing actuarial gains and losses using the Corridor Approach, in which actuarial gains and lossesthat fell outside the limit of the corridor were amortized over the remaining working lives of theemployees, with the amortizations charged to consolidated profit or loss.

PAS 19 (revised) simplifies the reporting of the defined benefit cost by introducing the Net InterestApproach (Approach), which disaggregates the defined benefit cost into service cost, net interest, andremeasurements. Under the Approach, service cost and net interest on the net defined benefit liabilityare both recognized in consolidated profit or loss, while remeasurements of the net defined benefitliability are recognized in other comprehensive income (OCI). It is further required by PAS 19 (revised)that remeasurements recognized in OCI shall not be reclassified to consolidated profit or loss in asubsequent period. However, the Group may transfer those amounts recognized in OCI within equity.

28.1 CIC

Prior to 2013, the Parent Company recognized its share in accumulated income of CCAC as part of itstotal comprehensive income. Restatements to its financial information are presented below:

Aspreviously

statedEffect of

restatementAs

restatedDecember 31, 2012

Investment in an associate 1,459,163 (13,283) 1,445,880Retained earnings 899,117 (13,283) 885,834Share in net income of associate 387,273 (8,521) 378,752Net income for the year 383,249 (8,524) 374,725

(60)

28.1 CDI

Restatements to the statement of financial position as follows:

Aspreviously

statedEffect of

restatementAs

restatedDecember 31, 2012

AssetsDeferred income tax assets 1,574 4,193 5,767

LiabilitiesRetirement benefit obligation 34,637 (20,659) 13,978

EquityRetained earnings, beginning 23,633 29,908 53,541Retained earnings, ending 67,864 28,378 96,242

Other comprehensive loss - (3,525) (3,525)

The impact of the adoption on CDI’s statement of total comprehensive income for the year endedDecember 31, 2012 is as follows:

Aspreviously

statedEffect of

restatementAs

restatedOperating expenses 344,472 2,185 346,657Provision for income tax 18,787 (655) 18,132Net income 44,231 (1,530) 42,701Other comprehensive loss - (781) (781)Total comprehensive income 44,231 (2,311) 41,920

The impact of the adoption on CDI’s statement of cash flows for the year ended December 31, 2012 is adecrease in cash flows used in operating activities of P4,840.


Schedule A - Financial AssetsAs at December 31, 2014

(All amounts in thousand Philippine Peso)

Name of issuing entity andassociation of each issue

Number of shares orprincipal amount ofbonds and notes

Amount shown inthe balance sheet

Valued based onmarket quotation

at end of reportingperiod

Incomereceived and

accrued

N/A N/A N/A N/A N/A


Schedule B - Amounts Receivable from Directors, Officers,Employees, Related Parties and Principal Stockholders

(Other than Related Parties)As at December 31, 2014

(All Amounts in thousand Philippine Peso)

Name of employee

Balance at

beginning of

period Additions

Amounts

collected

Amounts

written-

off Current

Not

Current

Balance at

end of period

Dauden, Michael Angelo G 787 1,581 1,644 - 724 - 724

Salvador, Mark Lester Baranda 292 - 292 - - - -

Velasco, Mary Grace Feliz Zara 290 - 290 - - - -

Mercado, Leslie Bandoquillo 244 - 244 - - - -

Gonzalez, Rosemarie P 226 537 532 - 231 - 231

Ubanos, Ferdinand Loveria 217 - 217 - - - -

Villanueva, Alexander Tubana 217 - 217 - - - -

Gamatero II, Joseph Bernard delos Santos 173 - 173 - - - -

Golla, Jonathan 171 - 171 - - - -

Ventura, Charina Rose Pantoja 127 - 127 - - - -

Rodriguez, Rowena O 122 357 372 - 107 - 107

Monzon, Oliva Dela Pena 119 - 119 - - - -

Inion, Connie Dizon 111 - 111 - - - -

Mariano, Dante 102 - 102 - - - -

Mico, Shirley Garcia 102 - 102 - - - -

Razonable, Jerome - 331 196 - 135 - 135

Others 6,923 2,269 8,456 - 736 - 736


Schedule C - Amounts Receivable from Related Partieswhich are eliminated during the Consolidation Of Financial Statements

As at December 31, 2014(All amounts in thousand Philippine Peso)

Name and Designation ofDebtor

Balance atbeginning of

period AdditionsAmountscollected

Amountswritten-

off CurrentNot

Current

Balanceat end of

period

Concepcion Durables, Inc. 170,000 - 66,000 - - - 104,000


Schedule D - Intangible Assets - Other AssetsAs at December 31, 2014

DescriptionBeginningbalance

Additions atcost

Charged tocost andexpenses

Chargedto other

accounts

Otherchangesadditions

(deductions)Endingbalance

Non-contractual customerrelationships - 187,113 5,613 - - 181,500

Customer backlogs - 13,883 4,231 - - 9,652

- 200,996 9,844 - - 191,152


Schedule E - Long Term DebtAs at December 31, 2014

Title of issue andType of obligation

Amount authorized byindenture

Amount shown undercaption “current portion

of long-term debt” inrelated balance sheet

Amount shown undercaption “Long-term Debt”in related balance sheet

N/A N/A N/A N/A


Schedule F - Indebtedness to Related Parties(Long-Term Loans from Related Companies)

As at December 31, 2014

Name of related party Balance at beginning of period Balance at end of period

N/A N/A N/A


Schedule G - Guarantees of Securities of Other IssuersAs at December 31, 2014

Name of issuing entityof securities

guaranteed by thecompany for which this

statement is filed

Title of issue of eachclass of securities

guaranteed

Total amountguaranteed and

outstanding

Amount ownedby person for

which statementis filed

Nature ofguarantee

N/A N/A N/A N/A N/A


Schedule H - Capital StockAs at December 31, 2014

Title of IssueNumber of Shares

Authorized

Number ofShares Issued

and Outstandingas shown underrelated balancesheet caption

Numbers ofshares reserved

for options,warrants,

conversion andother rights

Number ofshares held byrelated parties

Directors,officers andemployees Others

Common stock 700,000,000 339,617,226 N/A 3,767,028 7,438,618 N/A


Additional Components of Financial StatementsSchedule of Financial Soundness Indicators

As at and for years ended December 31, 2014 and 2013

2014 2013

Current ratio 1.71 2.68

Debt to equity 0.94 0.57

Debt to asset ratio 0.49 0.36

Return on assets 14.04% 17.47%


Additional Components of Financial StatementsUse of IPO Proceeds per Prospectus

As at December 31, 2014(All amounts in Philippine Peso)

Nature of disbursement Per prospectus Application of proceeds

Expansion 110,000,000 88,000,000

Payment of financial obligations 170,000,000 170,000,000

IPO related costs 12,300,000 12,300,000

292,300,000 270,300,000

60%


Additional Components of Financial StatementsOwnership Structure

As at December 31, 2014

85%

100%60%

Concepcion-Carrier Air

ConditioningCorporation

(CCAC)

ConcepcionDurables Inc.

(CDI)

Concepcion IndustrialCorporation

(CIC)

Foresight Realty &Development Corp.

(formerly Concepcion Holding,Inc.)

(23%)

Hyland Realty &Development Corp

(23%)Horizons Realty Inc.

(23%)

ConcepcionIndustries Inc. (CII)

Concepcion-Carrier

Holdings,Inc.

ConcepcionTelecommunication

Inc.

Ayala-Concepcion

100% 50%

Concepcion-CarrierRealty

Holdings, Inc.

Public

ConcepcionMidea Inc.

(CMI)

22%

Concepcion-Otis

Philippines,Inc. (COPI)

30%

Annex 68-C


Schedule of Reconciliation of Parent Company’s Retained Earnings Available for Dividend DeclarationFor the year ended December 31, 2014

(All amounts in Philippine Peso)

Unappropriated Retained Earnings, based on audited financialstatements, beginning 1,224,119,658Add: Net income actually earned/realized during the year 173,072,591Less: Non-actual/unrealized income net of tax -

Equity in net income of associate/joint venture -Unrealized foreign exchange gain (except those attributable to

cash and cash equivalents) -Unrealized actuarial gain -Fair value adjustment -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 PFRS -Sub-total 173,072,591Add: Non actual losses -

Depreciation on revaluation in revaluation increment (after tax) -Adjustment due to deviation from PFRS/GAAP - loss -Loss on fair value adjustment of investment property (after tax) -

Net income actually earned during the year 173,072,591 1,397,192,249Add (Less):Dividend declarations during the year (232,507,185)Appropriations of retained earnings during the year -Reversals of appropriations -Effects of prior period adjustments -Treasury shares -Accumulated share in income of an associate (153,857,634)

1,010,827,430


Schedule of Philippine Financial Reporting StandardsEffective Standards and Interpretations as at December 31, 2014

The following table summarizes the effective standards and interpretations as at December 31, 2014:

AdoptedNot

AdoptedNot

Applicable

Framework for the Preparation and Presentation of FinancialStatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine Financial ReportingStandards

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly Controlled Entity orAssociate

Amendments to PFRS 1: Additional Exemptions for First-time Adopters

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

Amendments to PFRS 1: Severe Hyperinflation andRemoval of Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions andCancellations

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions

PFRS 3(Revised) Business Combinations

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations

PFRS 6 Exploration for and Evaluation of Mineral Resources

(2)

AdoptedNot

AdoptedNot

Applicable

PFRS 7 Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets - Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures aboutFinancial Instruments

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets

Amendments to PFRS 7: Disclosures – OffsettingFinancial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Date ofPFRS 9 and Transition Disclosures*

Additional hedge accounting disclosures (andconsequential amendments) resulting from theintroduction of the hedge accounting chapter in PFRS 9*

PFRS 8 Operating Segments

PFRS 9 Financial Instruments

Amendments to PFRS 9: Mandatory Effective Date ofPFRS 9 and Transition Disclosures*

Reissue to incorporate a hedge accounting chapter andpermit the early application of the requirements forpresenting in other comprehensive income the ‘owncredit’ gains or losses on financial liabilities designatedunder the fair value option without early applying the otherrequirements of PFRS 9.*

Amendment to PFRS 9, incorporating requirements forclassification and measurement, impairment, generalhedge accounting and derecognition*

PFRS 10 Consolidated Financial Statements

Amendments to PFRS 10, 12 and PAS 27: Consolidationfor investment entities

Amendments regarding the sale or contribution of assetsbetween an investor and its associate or joint venture*

Amendments regarding the application of theconsolidation exception*

PFRS 11 Joint Arrangements

Amendments regarding the accounting for acquisitions ofan interest in a joint operation *

(3)

AdoptedNot

AdoptedNot

Applicable

PFRS 12 Disclosure of Interests in Other Entities


PFRS 13 Fair Value Measurement

PFRS 14 Regulatory Deferral Accounts*

PFRS 15 Revenue from Contracts with Customers*

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

Amendments to PAS 1: Presentation of Items of OtherComprehensive Income

Amendments resulting from the disclosure initiative*

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors

PAS 10 Events after the Reporting Period

PAS 11 Construction Contracts

PAS 12 Income Taxes

Amendment to PAS 12 - Deferred Tax: Recovery ofUnderlying Assets

PAS 16 Property, Plant and Equipment

Amendments regarding the clarification of acceptablemethods of depreciation and amortization*

Amendments bringing bearer plants into the scope ofPAS 16*

PAS 17 Leases

PAS 18 Revenue

PAS 19(Revised)

Employee Benefits

Amendments to clarify the requirements that relate to howcontributions from employees or third parties that arelinked to service should be attributed to periods of service*

PAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance

(4)

AdoptedNot

AdoptedNot

Applicable

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23(Revised) Borrowing Costs

PAS 24(Revised) Related Party Disclosures

PAS 26 Accounting and Reporting by Retirement Benefit Plans

PAS 27(Amended)

Separate Financial Statements

Amendments reinstating the equity method as anaccounting option for investments in subsidiaries, jointventures and associates in an entity’s separate financialstatements*

PAS 28(Amended)

Investments in Associates and Joint Ventures

Amendments regarding the sale or contribution of assetsbetween an investor and its associate or joint venture*


PAS 29 Financial Reporting in Hyperinflationary Economies

PAS 31 Interests in Joint Ventures

PAS 32 Financial Instruments: Disclosure and Presentation

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

Amendment to PAS 32: Classification of Rights Issues

Amendments to PAS 32: Offsetting Financial Assets andFinancial Liabilities

Amendments to PAS 32: Financial Instruments Assetsand Liability Offsetting

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

PAS 36 Impairment of Assets

Amendment to PAS 36: Impairment of assets -Recoverable amount disclosures

PAS 37 Provisions, Contingent Liabilities and Contingent Assets

PAS 38 Intangible Assets

Amendments regarding the clarification of acceptablemethods of depreciation and amortization*

(5)

AdoptedNot

AdoptedNot

Applicable

PAS 39 Financial Instruments: Recognition and Measurement

Amendments to PAS 39: Transition and InitialRecognition of Financial Assets and Financial Liabilities

Amendments to PAS 39: Cash Flow Hedge Accounting ofForecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets - Effective Date and Transition

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Amendment to PAS 39: Financial Instruments:Recognition and Measurement - Novation of Derivativesand Hedge Accounting

Amendments to permit an entity to elect to continue toapply the hedge accounting requirements in PAS 39 for afair value hedge of the interest rate exposure of a portionof a portfolio of financial assets or financial liabilities whenPFRS 9 is applied, and to extend the fair value option tocertain contracts that meet the ‘own use’ scopeexception*

PAS 40 Investment Property

PAS 41 Agriculture

Amendments bringing bearer plants into the scope ofPAS 16*

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration andSimilar Liabilities

IFRIC 2 Members' Share in Co-operative Entities and SimilarInstruments

IFRIC 4 Determining Whether an Arrangement Contains a Lease

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

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

(6)

AdoptedNot

AdoptedNot

Applicable

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

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2- Group and Treasury Share Transactions

IFRIC 12 Service Concession Arrangements

IFRIC 13 Customer Loyalty Programmes

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

Amendments to Philippine Interpretations IFRIC- 14,Prepayments of a Minimum 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

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation toOperating Activities

SIC-12 Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

SIC-13 Jointly Controlled Entities - Non-Monetary Contributionsby Venturers

SIC-15 Operating Leases – Incentives

SIC-25 Income Taxes - Changes in the Tax Status of an Entity orits Shareholders

SIC-27 Evaluating the Substance of Transactions Involving theLegal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures

SIC-31 Revenue - Barter Transactions Involving AdvertisingServices

SIC-32 Intangible Assets - Web Site Costs

(7)

The standards and interpretations marked with an asterisk (*) refer to those standards and interpretationsthat are effective after January 1, 2014.

The standards and interpretations that are labeled as “Not Applicable” are already effective as atDecember 31, 2014 but are currently not relevant to the Group because it has currently no relatedtransactions or will never be relevant/applicable to the Group..

Documents

SECURITIES AND EXCHANGE COMMISSION SEC …admin.cic.ph/uploads/Financial/financial_2015415105053.pdf · securities and exchange commission sec form 17-a annual report pursuant to