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COVER SHEETfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

C S 2 0 1 0 0 0 9 8 5

Company NameP H O E N I X S E M I C O N D U C T O R P H I L I P P I

N E S C O R P .

Principal Office ( No./Street/Barangay/City/Town)Province)P a n d a y P i r a A v e n u e , c o r n e r C r e

e k s i d e R o a d , C l a r k F r e e p o r t Z o

n e , P a m p a n g a

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

A A F S M S R D

COMPANY INFORMATIONCompany's Email Address Company's Telephone Number/s Mobile Number

carolssicat@bokwang.com 045-499-1742 0917-550-9041

No. of Stockholders Annual Meeting Fiscal YearMonth/Day Month/Day

8 04/01 12/31

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

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

Dongjoo Kim djkim@bokwang.com 045-499-1822 0917-539-1733

Contact Person's AddressPanday Pira Avenue, corner Creekside Road, Clark Freeport Zone, Pampanga, Philippines

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

person designated.

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INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsPhoenix Semiconductor Philippines Corp.Panday Pira Avenue, Corner CreeksideClark Freeport Zone, Pampanga

Report on the Financial Statements

We have audited the accompanying financial statements of Phoenix Semiconductor Philippines Corp.,which comprise the statements of financial position as at December 31, 2014, and 2013, and thestatements of comprehensive income, statements of changes in equity and statements of cash flows foreach of the three years in the period ended December 31, 2014, and a summary of significantaccounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements inaccordance with Philippine Financial Reporting Standards, and for such internal control asmanagement determines is necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits in accordance with Philippine Standards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the financial statements.

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

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

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

BOA/PRC Reg. No. 0001, December 28, 2012, valid until December 31, 2015SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited

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Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position ofPhoenix Semiconductor Philippines Corp., as at December 31, 2014, and 2013, and its financialperformance and its cash flows for each of the three years in the period ended December 31, 2014 inaccordance with Philippine Financial Reporting Standards.

Report on the Supplementary Information Required Under Revenue Regulation 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statementstaken as a whole. The supplementary information required under Revenue Regulation 15-2010 inNote 26 to the financial statements, respectively, is presented for purposes of filing with the Bureau ofInternal Revenue and is not a required part of the basic financial statements. Such information is theresponsibility of the management of Phoenix Semiconductor Philippines Corp. The information hasbeen subjected to the auditing procedures applied in our audit of the basic financial statements. In ouropinion, the information is fairly stated, in all material respects, in relation to the basic financialstatements taken as a whole.

SYCIP GORRES VELAYO & CO.

Janet A. ParaisoPartnerCPA Certificate No. 92305SEC Accreditation No. 0778-AR-1 (Group A), February 2, 2012, valid until March 31, 2015Tax Identification No. 193-975-241BIR Accreditation No. 08-001998-62-2012, April 11, 2012, valid until April 10, 2015PTR No. 4751252, January 5, 2015, Makati City

March 3, 2015

A member firm of Ernst & Young Global Limited

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PHOENIX SEMICONDUCTOR PHILIPPINES CORP.STATEMENTS OF FINANCIAL POSITION(In U.S. Dollars)

December 312014 2013

ASSETS

Current AssetsCash and cash equivalents (Notes 4 and 20) $36,793,758 $23,105,776Trade and other receivables (Notes 5 and 20) 21,713,531 21,141,915Inventories (Note 6) 10,228,542 11,587,418Prepayments and other current assets (Note 7) 571,938 985,483 Total Current Assets 69,307,769 56,820,592

Noncurrent AssetsProperty, plant and equipment (Note 8) 108,541,291 114,954,193Other noncurrent assets (Note 7) 21,675,793 17,412,155 Total Noncurrent Assets 130,217,084 132,366,348

$199,524,853 $189,186,940

LIABILITIES AND EQUITY

Current LiabilitiesAccounts payable and accrued expenses (Notes 9, 12, and 20) $19,342,296 $16,016,239Interest payable (Note 10) 724,429 901,566Income tax payable 438,208 447,406Current portion of loans payable (Notes 10, 19 and 20) 24,375,000 20,750,000 Total Current Liabilities 44,879,933 38,115,211

Noncurrent LiabilitiesLoans payable - net of current portion (Notes 10, 19 and 20) 56,128,981 80,291,487Retirement liability (Note 11) 200,593 106,014Deferred income tax liability - net (Note 22) 13,393 39,523Other noncurrent liability 185,770 −

Total Noncurrent Liabilities 56,528,737 80,437,024Total Liabilities 101,408,670 118,552,235

EquityCapital stock (Notes 13 and 20) 48,637,525 44,999,980Additional paid-in capital (Notes 13 and 20) 7,432,715 −Retained earnings (Note 20) 42,088,536 25,634,725Remeasurement loss on retirement plan (Note 11) (42,593) − Total Equity 98,116,183 70,634,705

$199,524,853 $189,186,940

See accompanying Notes to Financial Statements.

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PHOENIX SEMICONDUCTOR PHILIPPINES CORP.STATEMENTS OF COMPREHENSIVE INCOME(In U.S. Dollars)

Years Ended December 312014 2013 2012

REVENUESales $233,331,369 $208,736,564 $195,143,042Warehousing 768,290 746,968 693,784Others 262,151 191,529 332,412

234,361,810 209,675,061 196,169,238

COST OF GOODS SOLDRaw materials used (Notes 6 and 12) 152,002,922 136,463,909 126,693,029Depreciation (Note 8) 17,815,182 17,829,616 14,253,332Direct labor (Notes 12 and 17) 4,568,097 4,556,013 4,570,641Changes in work-in-process and finished

goods inventories (Note 6) 22,015 (223,198) (565,945)Other manufacturing costs (Notes 12, 14 and 17) 30,725,642 23,390,518 29,112,435

205,133,858 182,016,858 174,063,492

GROSS PROFIT 29,227,952 27,658,203 22,105,746General and Administrative Expenses (Notes 12 and 15) 4,277,377 3,757,641 3,636,825

OPERATING INCOME 24,950,575 23,900,562 18,468,921

Finance Cost (Note 16) (5,145,737) (7,940,614) (5,190,393)

Other Income (Note 16) 1,066,675 321,539 159,494

Other Expense (Note 16) (1,912,409) (812,445) (370,653)

INCOME BEFORE INCOME TAX 18,959,104 15,469,042 13,067,369

PROVISION FOR INCOME TAX (Note 22) 1,505,293 1,875,627 585,329

NET INCOME 17,453,811 13,593,415 12,482,040

OTHER COMPREHENSIVE LOSSNot to be reclassified to profit or loss insubsequent periods: Remeasurement loss on retirement

plan (Note 11) (44,835) − − Income tax effect 2,242 − −

(42,593) − −

TOTAL COMPREHENSIVE INCOME $17,411,218 $13,593,415 $12,482,040

EARNINGS PER SHARE (Note 24)Basic/diluted $0.0087 $0.0068 $0.0063

See accompanying Notes to Financial Statements.

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PHOENIX SEMICONDUCTOR PHILIPPINES CORP.STATEMENTS OF CHANGES IN EQUITY(In U.S. Dollars)

Capital Stock (Notes 13 and 20)

Deposits forFuture StockSubscription

(Notes 13and 20)

AdditionalPaid-InCapital

(Notes 13and 20)

RetainedEarnings

Remeasure-ment Loss on

RetirementPlan (Note 11) Total

Shares AmountBalances as at January 1, 2014 2,002,644,109 $44,999,980 $– $– $25,634,725 $– $70,634,705Issuance of capital stock 162,380,002 3,637,545 – 7,432,715 – – 11,070,260Cash dividends (Note 13) − – – – (1,000,000) – (1,000,000)Net income − – – – 17,453,811 – 17,453,811Other comprehensive loss − – – – – (42,593) (42,593)Balances as at December 31, 2014 2,165,024,111 $48,637,525 $– $7,432,715 $42,088,536 ($42,593) $98,116,183

Balances as at January 1, 2013 2,002,644,109 $44,999,980 $– $− $12,041,310 $– $57,041,290Net income/total comprehensive income – – – − 13,593,415 – 13,593,415Balances as at December 31, 2013 2,002,644,109 $44,999,980 $– $− $25,634,725 $– $70,634,705

Balances as at January 1, 2012 1,786,394,109 $39,999,980 $5,000,000 $− ($440,730) $– $44,559,250Issuance of capital stock 216,250,000 5,000,000 (5,000,000) – – – –Net income/total comprehensive income – – – − 12,482,040 – 12,482,040Balances as at December 31, 2012 2,002,644,109 $44,999,980 $– $− $12,041,310 $– $57,041,290

See accompanying Notes to Financial Statements.

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PHOENIX SEMICONDUCTOR PHILIPPINES CORP.STATEMENTS OF CASH FLOWS(In U.S. Dollars)

Years Ended December 312014 2013 2012

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax $18,959,104 $15,469,042 $13,067,369Adjustments for: Depreciation (Note 8) 18,701,023 18,375,283 14,721,645

Interest expense (Note 16) 4,294,115 5,256,137 4,433,675 Unrealized foreign currency exchange

loss - net (Note 16) 209,962 812,397 74,500Amortization of intangible assets (Note 7) 120,960 121,492 66,802Loss (gain) on disposal of property, plant

and equipment (33,775) 2,144 80Interest income (Note 16) (459,694) (162,952) (65,742)

Provision for valuation loss on nontrade receivable from CDC (Notes 3 and 7) 1,044,972 − −

Fair value loss (gain) on derivative (Note 16) 244,756 1,772,028 (644,912)Operating income before changes in operating assets and

liabilities 43,081,423 41,645,571 31,653,417Changes in operating assets and liabilities:

Decrease (increase) in:Trade and other receivables (517,313) (2,510,551) (2,036,651)

Inventories 1,358,876 2,870,117 (1,942,956) Prepayments and other current assets 365,405 413,965 91,121Increase (decrease) in: Accounts payable and accrued expenses (344,493) (6,488,312) (2,012,046)

Retirement liability 50,866 106,014 −Other noncurrent liability 185,770 − −

Net cash generated from operations 44,180,534 36,036,804 25,752,885Interest paid (4,258,757) (5,031,302) (4,444,314)Income taxes paid (1,543,115) (1,162,958) (903,006)Interest received 128,414 162,952 65,742Net cash provided by operating activities 38,507,076 30,005,496 20,471,307CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of property, plant and

equipment (Notes 8 and 23) (9,174,136) (4,308,652) (32,837,501)Proceeds from sale of property, plant and equipment 468,191 – –Decrease (increase) in other noncurrent assets (5,423,877) (17,446,262) 90,956Net cash used in investing activities (14,129,822) (21,754,914) (32,746,545)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from:

Issuance of capital stock - net of direct costs relatedto issuance (Note 13) 11,070,260 – –

Bank loans (Note 10) – 28,525,074 29,999,743Payments of bank loans (Note 10) (20,750,000) (39,375,000) –Payment of dividends (Note 13) (1,000,000) − −Net cash provided by (used in) financing activities (10,679,740) (10,849,926) 29,999,743EFFECT OF EXCHANGE RATE CHANGES ON

CASH AND CASH EQUIVALENTS (9,532) (30,994) 14,288NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 13,687,982 (2,630,338) 17,738,793CASH AND CASH EQUIVALENTS AT JANUARY 1 23,105,776 25,736,114 7,997,321CASH AND CASH EQUIVALENTS AT

DECEMBER 31 (Note 4) $36,793,758 $23,105,776 $25,736,114

See accompanying Notes to Financial Statements.

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PHOENIX SEMICONDUCTOR PHILIPPINES CORP.NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

Phoenix Semiconductor Philippines Corp. (the Company), a subsidiary of STS Semiconductor &Telecommunications Co., Ltd. (the Parent Company), was incorporated in the Philippines onJanuary 27, 2010.

The primary purpose of the Company is the construction, ownership and operation of a plant forthe manufacture, assembly, test and warehousing of semiconductor and memory devices andapplications and related products, as well as the performance of related or incidental activitiesthereto. The Company started its commercial operation in February 2011.

The registered office address of the Company is Panday Pira Avenue, Corner Creekside, ClarkFreeport Zone, Pampanga.

The accompanying financial statements were approved and authorized for issue by the Board ofDirectors (BOD) on March 3, 2015.

2. Summary of Significant Accounting Policies

Basis of PreparationThe accompanying financial statements have been prepared on a historical cost basis, except forthe derivative financial instrument that is measured at fair value. The financial statements arepresented in United States (U.S.) Dollars ($), which is also the Company’s functional currency.

Statement of ComplianceThe accompanying financial statements of the Company have been prepared in accordance withPhilippine Financial Reporting Standards (PFRS).

Changes in Accounting Policies and DisclosuresThe Company adopted the following new and amended PFRS, Philippines Accounting Standards(PAS) and Philippine Interpretations effective for financial year beginning January 1, 2014.Except as otherwise indicated, these new, revised and amended standards, interpretations andimprovements to PFRS did not have any impact on the financial position or performance of theCompany.

Investment Entities (Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12,Disclosure of Interests in Other Entities, and PAS 27, Separate Financial Statements)These amendments provide an exception to the consolidation requirement for entities that meet thedefinition of an investment entity under PFRS 10. The exception to consolidation requiresinvestment entities to account for subsidiaries at fair value through profit or loss. The amendmentsmust be applied retrospectively, subject to certain transition relief.

PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and FinancialLiabilities (Amendments)These amendments clarify the meaning of ‘currently has a legally enforceable right to set-off’ andthe criteria for non-simultaneous settlement mechanisms of clearing houses to qualify foroffsetting and are applied retrospectively.

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PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives andContinuation of Hedge Accounting (Amendments)These amendments provide relief from discontinuing hedge accounting when novation of aderivative designated as a hedging instrument meets certain criteria and retrospective application isrequired.

PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets(Amendments)These amendments remove the unintended consequences of PFRS 13, Fair Value Measurement,on the disclosures required under PAS 36. In addition, these amendments require disclosure of therecoverable amounts for assets or cash-generating units (CGUs) for which impairment loss hasbeen recognized or reversed during the period.

Philippine Interpretation IFRIC 21, Levies (IFRIC 21)IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggerspayment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reachinga minimum threshold, the interpretation clarifies that no liability should be anticipated before thespecified minimum threshold is reached. Retrospective application is required for IFRIC 21. Thisinterpretation has no impact on the Company as it has applied the recognition principles underPAS 37, Provisions, Contingent Liabilities and Contingent Assets, consistent with therequirements of IFRIC 21 in prior years.

New standards and interpretations that have been issued but are not yet effectiveStandards or interpretations issued but are not effective as of December 31, 2014 are listed below.This is a listing of standards and interpretations issued, which the Company reasonably expects tobe applicable at a future date. The Company intends to adopt these standards and interpretationwhen they become effective. Except as otherwise stated, the Company does not expect theadoption of these new standards and interpretations to have a significant impact on the company’sfinancial statements.

PFRS 9, Financial Instruments - Classification and Measurement (2010 version)PFRS 9 (2010 version) reflects the first phase on the replacement of PAS 39 and applies to theclassification and measurement of financial assets and liabilities as defined in PAS 39, FinancialInstruments: Recognition and Measurement. PFRS 9 requires all financial assets to be measuredat fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is notinvoked, be subsequently measured at amortized cost if it is held within a business model that hasthe objective to hold the assets to collect the contractual cash flows and its contractual terms giverise, on specified dates, to cash flows that are solely payments of principal and interest on theprincipal outstanding. All other debt instruments are subsequently measured at fair value throughprofit or loss. All equity financial assets are measured at fair value either through othercomprehensive income (OCI) or profit or loss. Equity financial assets held for trading must bemeasured at fair value through profit or loss. For FVO liabilities, the amount of change in the fairvalue of a liability that is attributable to changes in credit risk must be presented in OCI. Theremainder of the change in fair value is presented in profit or loss, unless presentation of the fairvalue change in respect of the liability’s credit risk in OCI would create or enlarge an accountingmismatch in profit or loss. All other PAS 39 classification and measurement requirements forfinancial liabilities have been carried forward into PFRS 9, including the embedded derivativeseparation rules and the criteria for using the FVO. The adoption of the first phase of PFRS 9 willhave an effect on the classification and measurement of the Company’s financial assets, but willpotentially have no impact on the classification and measurement of financial liabilities.

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PFRS 9 (2010 version) is effective for annual periods beginning on or after January 1, 2015. Thismandatory adoption date was moved to January 1, 2018 when the final version of PFRS 9 wasadopted by the Philippine Financial Reporting Standards Council (FRSC). Such adoption,however, is still for approval by the Board of Accountancy (BOA).

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real EstateThis interpretation covers accounting for revenue and associated expenses by entities thatundertake the construction of real estate directly or through subcontractors. The interpretationrequires that revenue on construction of real estate be recognized only upon completion, exceptwhen such contract qualifies as construction contract to be accounted for under PAS 11 orinvolves rendering of services in which case revenue is recognized based on stage of completion.Contracts involving provision of services with the construction materials and where the risks andreward of ownership are transferred to the buyer on a continuous basis will also be accounted forbased on stage of completion. The Securities and Exchange Commission (SEC) and the FinancialReporting Standards Council (FRSC) have deferred the effectivity of this interpretation until thefinal Revenue standard is issued by the International Accounting Standards Board (IASB) and anevaluation of the requirements of the final Revenue standard against the practices of the Philippinereal estate industry is completed.

The following new standards and amendments issued by the IASB were already adopted by theFRSC but are still for approval by Board of Accountancy:

PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)PAS 19 requires an entity to consider contributions from employees or third parties whenaccounting for defined benefit plans. Where the contributions are linked to service, they should beattributed to periods of service as a negative benefit. These amendments clarify that, if the amountof the contributions is independent of the number of years of service, an entity is permitted torecognize such contributions as a reduction in the service cost in the period in which the service isrendered, instead of allocating the contributions to the periods of service. This amendment iseffective for annual periods beginning on or after January 1, 2015. It is not expected that thisamendment would be relevant to the Company, since none of the entities within the Company hasdefined benefit plans with contributions from employees or third parties.

Annual Improvements to PFRSs (2010-2012 cycle)Effective January 1, 2015:PFRS 2, Share-based Payment - Definition of Vesting ConditionThis improvement is applied prospectively and clarifies various issues relating to the definitions ofperformance and service conditions which are vesting conditions, including:· A performance condition must contain a service condition· A performance target must be met while the counterparty is rendering service· A performance target may relate to the operations or activities of an entity, or to those of

another entity in the same group· A performance condition may be a market or non-market condition· If the counterparty, regardless of the reason, ceases to provide service during the vesting

period, the service condition is not satisfied.

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PFRS 3, Business Combinations - Accounting for Contingent Consideration in a BusinessCombinationThe amendment is applied prospectively for business combinations for which the acquisition dateis on or after July 1, 2014. It clarifies that a contingent consideration that is not classified as equityis subsequently measured at fair value through profit or loss whether or not it falls within thescope of PAS 39, Financial Instruments: Recognition and Measurement .

PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of theTotal of the Reportable Segments’ Assets to the Entity’s AssetsThe amendments are applied retrospectively and clarify that:· An entity must disclose the judgments made by management in applying the aggregation

criteria in the standard, including a brief description of operating segments that have beenaggregated and the economic characteristics (e.g., sales and gross margins) used to assesswhether the segments are ‘similar’.

· The reconciliation of segment assets to total assets is only required to be disclosed if thereconciliation is reported to the chief operating decision maker, similar to the requireddisclosure for segment liabilities.

PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Revaluation Method -Proportionate Restatement of Accumulated Depreciation and AmortizationThe amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the asset maybe revalued by reference to the observable data on either the gross or the net carrying amount. Inaddition, the accumulated depreciation or amortization is the difference between the gross andcarrying amounts of the asset.

PAS 24, Related Party Disclosures - Key Management PersonnelThe amendment is applied retrospectively and clarifies that a management entity, which is anentity that provides key management personnel services, is a related party subject to the relatedparty disclosures. In addition, an entity that uses a management entity is required to disclose theexpenses incurred for management services.

Annual Improvements to PFRSs (2011-2013 cycle)Effective January 1, 2015:PFRS 3, Business Combinations - Scope Exceptions for Joint ArrangementsThe amendment is applied prospectively and clarifies the following regarding the scope exceptionswithin PFRS 3:· Joint arrangements, not just joint ventures, are outside the scope of PFRS 3.· This scope exception applies only to the accounting in the financial statements of the joint

arrangement itself.

PFRS 13, Fair Value Measurement - Portfolio ExceptionThe amendment is applied prospectively and clarifies that the portfolio exception in PFRS 13 canbe applied not only to financial assets and financial liabilities, but also to other contracts within thescope of PAS 39.

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

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Effective January 1, 2016:PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification ofAcceptable Methods of Depreciation and Amortization (Amendments)The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern ofeconomic benefits that are generated from operating a business (of which the asset is part) ratherthan the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used invery limited circumstances to amortize intangible assets. The amendments are effectiveprospectively for annual periods beginning on or after January 1, 2016, with early adoptionpermitted. These amendments are not expected to have any impact to the Company given that theCompany has not used a revenue-based method to depreciate its non-current assets.

PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants (Amendments)The amendments change the accounting requirements for biological assets that meet the definitionof bearer plants. Under the amendments, biological assets that meet the definition of bearer plantswill no longer be within the scope of PAS 41. Instead, PAS 16 will apply. After initial recognition,bearer plants will be measured under PAS 16 at accumulated cost (before maturity) and usingeither the cost model or revaluation model (after maturity). The amendments also require thatproduce that grows on bearer plants will remain in the scope of PAS 41 measured at fair value lesscosts to sell. For government grants related to bearer plants, PAS 20, Accounting for GovernmentGrants and Disclosure of Government Assistance, will apply. The amendments are retrospectivelyeffective for annual periods beginning on or after January 1, 2016, with early adoption permitted.These amendments are not expected to have any impact to the Company as the Company does nothave any bearer plants.

PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements(Amendments)The amendments will allow entities to use the equity method to account for investments insubsidiaries, joint ventures and associates in their separate financial statements. Entities alreadyapplying PFRS and electing to change to the equity method in its separate financial statements willhave to apply that change retrospectively. For first-time adopters of PFRS electing to use theequity method in its separate financial statements, they will be required to apply this method fromthe date of transition to PFRS. The amendments are effective for annual periods beginning on orafter January 1, 2016, with early adoption permitted.

PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and JointVentures - Sale or Contribution of Assets between an Investor and its Associate or Joint VentureThese amendments address an acknowledged inconsistency between the requirements in PFRS 10and those in PAS 28 (2011) in dealing with the sale or contribution of assets between an investorand its associate or joint venture. The amendments require that a full gain or loss is recognizedwhen a transaction involves a business (whether it is housed in a subsidiary or not). A partial gainor loss is recognized when a transaction involves assets that do not constitute a business, even ifthese assets are housed in a subsidiary. These amendments are effective from annual periodsbeginning on or after 1 January 2016.

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PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations(Amendments)The amendments to PFRS 11 require that a joint operator accounting for the acquisition of aninterest in a joint operation, in which the activity of the joint operation constitutes a business mustapply the relevant PFRS 3 principles for business combinations accounting. The amendments alsoclarify that a previously held interest in a joint operation is not remeasured on the acquisition of anadditional interest in the same joint operation while joint control is retained. In addition, a scopeexclusion has been added to PFRS 11 to specify that the amendments do not apply when theparties sharing joint control, including the reporting entity, are under common control of the sameultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and theacquisition of any additional interests in the same joint operation and are prospectively effectivefor annual periods beginning on or after January 1, 2016, with early adoption permitted.

PFRS 14, Regulatory Deferral AccountsPFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferralaccount balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 must presentthe regulatory deferral accounts as separate line items on the statement of financial position andpresent movements in these account balances as separate line items in the statement of profit orloss and other comprehensive income. The standard requires disclosures on the nature of, and risksassociated with, the entity’s rate-regulation and the effects of that rate-regulation on its financialstatements. PFRS 14 is effective for annual periods beginning on or after January 1, 2016. Sincethe Company is an existing PFRS preparer, this standard would not apply.

Annual Improvements to PFRSs (2012-2014 cycle)Effective January 1, 2016:PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in Methods ofDisposalThe amendment is applied prospectively and clarifies that changing from a disposal through saleto a disposal through distribution to owners and vice-versa should not be considered to be a newplan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruptionof the application of the requirements in PFRS 5. The amendment also clarifies that changing thedisposal method does not change the date of classification.

PFRS 7, Financial Instruments: Disclosures - Servicing ContractsPFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferredasset that is derecognized in its entirety. The amendment clarifies that a servicing contract thatincludes a fee can constitute continuing involvement in a financial asset. An entity must assess thenature of the fee and arrangement against the guidance in PFRS 7 in order to assess whether thedisclosures are required. The amendment is to be applied such that the assessment of whichservicing contracts constitute continuing involvement will need to be done retrospectively.However, comparative disclosures are not required to be provided for any period beginning beforethe annual period in which the entity first applies the amendments.

PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim Financial StatementThis amendment is applied retrospectively and clarifies that the disclosures on offsetting offinancial assets and financial liabilities are not required in the condensed interim financial reportunless they provide a significant update to the information reported in the most recent annualreport.

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PAS 19, Employee Benefits - regional market issue regarding discount rateThis amendment is applied prospectively and clarifies that market depth of high quality corporatebonds is assessed based on the currency in which the obligation is denominated, rather than thecountry where the obligation is located. When there is no deep market for high quality corporatebonds in that currency, government bond rates must be used.

PAS 34, Interim Financial Reporting - disclosure of information ‘elsewhere in the interimfinancial report’The amendment is applied retrospectively and clarifies that the required interim disclosures musteither be in the interim financial statements or incorporated by cross-reference between the interimfinancial statements and wherever they are included within the greater interim financial report(e.g., in the management commentary or risk report).

Effective January 1, 2018:PFRS 9, Financial Instruments - Hedge Accounting and amendments to PFRS 9, PFRS 7 andPAS 39 (2013 version)PFRS 9 (2013 version) already includes the third phase of the project to replace PAS 39 whichpertains to hedge accounting. This version of PFRS 9 replaces the rules-based hedge accountingmodel of PAS 39 with a more principles-based approach. Changes include replacing the rules-based hedge effectiveness test with an objectives-based test that focuses on the economicrelationship between the hedged item and the hedging instrument, and the effect of credit risk onthat economic relationship; allowing risk components to be designated as the hedged item, notonly for financial items but also for non-financial items, provided that the risk component isseparately identifiable and reliably measurable; and allowing the time value of an option, theforward element of a forward contract and any foreign currency basis spread to be excluded fromthe designation of a derivative instrument as the hedging instrument and accounted for as costs ofhedging. PFRS 9 also requires more extensive disclosures for hedge accounting.

PFRS 9 (2013 version) has no mandatory effective date. The mandatory effective date ofJanuary 1, 2018 was eventually set when the final version of PFRS 9 was adopted by the FRSC.The adoption of the final version of PFRS 9, however, is still for approval by BOA. The Companyis currently assessing the impact of adopting this standard.

PFRS 9, Financial Instruments (2014 or final version)In July 2014, the final version of PFRS 9, Financial Instruments, was issued. PFRS 9 reflects allphases of the financial instruments project and replaces PAS 39, Financial Instruments:Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces newrequirements for classification and measurement, impairment, and hedge accounting. PFRS 9 iseffective for annual periods beginning on or after January 1, 2018, with early applicationpermitted. Retrospective application is required, but comparative information is not compulsory.Early application of previous versions of PFRS 9 is permitted if the date of initial application isbefore February 1, 2015. The Company is currently assessing the impact of adopting this standard.

Significant Accounting Policies

Cash and Cash EquivalentsCash consists of cash on hand and in banks denominated in U.S. Dollar and Philippine Peso. Cashequivalents are short-term, highly liquid investments that are readily convertible to knownamounts of cash with original maturities of three months or less from dates of placement and aresubject to an insignificant risk of change in value.

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Financial InstrumentsDate of recognitionFinancial instruments within the scope of PAS 39 are recognized in the statement of financialposition when the Company becomes a party to the contractual provisions of the instrument.Purchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized using the settlementdate accounting.

Initial recognition of financial instrumentsFinancial instruments are initially recognized at fair value. Except for financial assets andliabilities at fair value through profit or loss (FVPL), the initial measurement of financialinstruments includes transaction costs. The Company classifies its financial assets into thefollowing categories: financial assets at FVPL, held-to-maturity (HTM) investments, available-for-sale (AFS) investments and loans and receivables.

The Company classifies its financial liabilities into financial liabilities at FVPL and other financialliabilities carried at cost or amortized cost. The classification depends on the purpose for whichthe investments were acquired and whether they are quoted in an active market. Managementdetermines the classification of its financial assets at initial recognition and, where allowed andappropriate, re-evaluates such designation at every reporting date.

The Company has no financial liabilities at FVPL, and HTM and AFS investments as ofDecember 31, 2014, and 2013.

Determination of fair valueThe fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction in the principal market at the measurement date under current marketconditions (i.e., an exit price) regardless of whether that price is directly observable or estimatedusing another valuation technique. The fair value measurement is based on the presumption thatthe transaction to sell the asset or transfer the liability takes place either:

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

The principal or the most advantageous market must be accessible to by the Company.The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded atfair value if their economic characteristics and risks are not closely related to those of the hostcontracts and the host contracts are not held for trading or designated at fair value though profit orloss. These embedded derivatives are measured at fair value with changes in fair value recognizedin profit or loss. Reassessment only occurs if there is a change in the terms of the contract thatsignificantly modifies the cash flows that would otherwise be required.

For financial instruments that are recognized at fair value on a recurring basis, the Companydetermines whether transfers have occurred between Levels in the hierarchy by re-assessingcategorization (based on the lowest level input that is significant to the fair value measurement asa whole) at the end of each reporting period.

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As of December 31, 2014, and 2013, the Company has embedded prepayment option derivativefinancial asset related to the loans payable.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments andfixed maturities that are not quoted in an active market. After initial measurement, loans andreceivables are subsequently carried at amortized cost using the effective interest method, less anyallowance for credit losses. Amortized cost is calculated by taking into account any discount orpremium on the issue, and includes fees that are an integral part of the effective interest rate (EIR)and transaction costs. The level of allowance for credit losses is evaluated by management on thebasis of factors that affect the collectability of accounts. Gains and losses are recognized in profitor loss, when the loans and receivables are derecognized or impaired, as well as through theamortization process. Any effects of restatement of foreign currency-denominated loans andreceivables are recognized in profit or loss.

Loans and receivables are classified as current assets if maturity is within 12 months from thereporting date. Otherwise, these are classified as noncurrent assets.

This accounting policy applies primarily to the Company’s ‘Cash and cash equivalents’, ‘Tradeand other receivables’, ‘Nontrade receivables from CDC’, ‘Loan receivable from employees’ and‘Refundable deposits’.

Other financial liabilitiesIssued financial liabilities or their components, which are not designated at FVPL, are classified asother financial liabilities where the substance of the contractual arrangement results in theCompany having an obligation either to deliver cash or another financial asset to the holder, or tosatisfy the obligation other than by the exchange of a fixed amount of cash or another financialasset for a fixed number of own equity shares.

After initial measurement, other financial liabilities are subsequently measured at amortized costusing the effective interest method (EIR). Amortized cost is calculated by taking into account anydiscount or premium on the issue and fees that are an integral part of the EIR.

This accounting policy applies primarily to the Company’s ‘Accounts payable and accruedexpenses’, ‘Interest payable’, ‘Loans payable’, and ‘Other noncurrent liability’.

Derecognition of Financial Assets and Financial Liabilities

Financial AssetA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized where (a) the rights to receive cash flows from the asset haveexpired; (b) the Company retains the right to receive cash flows from the asset, but has assumed anobligation to pay them in full without material delay to a third party under a ‘pass-through’arrangement; or (c) the Company has transferred its rights to receive cash flows from the asset andeither has transferred substantially all the risks and rewards of the asset, or has neither transferrednor retained substantially all the risks and rewards of the asset, but has transferred control of theasset.

Where the Company has transferred its right to receive cash flows from an asset and has neithertransferred nor retained substantially all the risks and rewards of the asset nor transferred controlof the asset, the asset is recognized to the extent of the Company’s continuing involvement in theasset.

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

Impairment of Financial AssetsThe Company assesses at each reporting date whether a financial asset or a group of financialassets is impaired.

For loans and receivables, the Company first assesses whether objective evidence of impairmentexists individually for financial assets that are individually significant, or collectively for financialassets that are not individually significant.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss ismeasured as the difference between the asset’s carrying amount and the amount that the Companyreasonably believes will be collected, for specific customer balances.

The carrying amount of the asset is reduced through the use of an allowance account and theamount of loss is charged to profit or loss. If, in a subsequent year, the amount of the estimatedimpairment loss decreases because of an event occurring after the impairment was recognized, thepreviously recognized impairment loss is reduced by adjusting the allowance account. If a futurewrite-off is later recovered, any amounts formerly charged are credited to profit or loss.

If the Company determines that no objective evidence of impairment exists for individuallyassessed financial asset, whether significant or not, it includes the asset in a group of financialassets with similar credit risk characteristics and collectively assesses these assets for impairment.Assets that are individually assessed for impairment and for which an impairment loss is, orcontinues to be, recognized are not included in a collective assessment for impairment.

Offsetting of Financial InstrumentsFinancial assets and liabilities are offset and the net amount reported in the statement of financialposition if, and only if, there is an enforceable legal right to offset the recognized amounts andthere is an intention to settle on a net basis, or to realize the asset and settle the liabilitysimultaneously. This is not generally the case with master netting agreements, where the relatedassets and liabilities are presented at gross amounts in the statement of financial position.

InventoriesInventories are valued at the lower of cost and net realizable value (NRV). NRV is the estimatedselling price in the ordinary course of business, less the costs of completion and the estimatedcosts necessary to make the sale. Cost is determined using weighted average method. Formanufactured inventories, cost includes the applicable allocation of fixed and variable overheadcosts.

Property, Plant and EquipmentProperty, plant and equipment are carried at cost less accumulated depreciation and impairmentlosses, if any. The initial cost of an item of property and equipment comprises purchase price andany cost attributable in bringing the asset to its intended location and working condition. Cost alsoincludes interest and other financing charges on borrowed funds used to finance the acquisition ofproperty, plant and equipment to the extent incurred during the period of installation andconstruction.

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Subsequent costs are capitalized as part of property, plant and equipment account only when it isprobable that future economic benefits associated with the item will flow to the Company and thecost of the item can be measured reliably. All other expenses related to repairs and maintenance ischarged to profit or loss as incurred.

Depreciation of property, plant and equipment commences once the property, plant and equipmentare available for use and are computed using the straight-line method over the estimated usefullives (EUL) of the assets.

The EUL of the Company’s property, plant and equipment follow:

YearsBuilding and Improvements 40Machinery 7Transportation Equipment 5Production Equipment 5Furniture and Other Equipment 2 - 5

The useful lives and depreciation method are reviewed at least at each reporting period to ensurethat the period and method of depreciation are consistent with the expected pattern of economicbenefits from items of property, plant and equipment.

Construction in progress (CIP) represents plant, administration office and certain machineries andequipment under construction. CIP is stated at cost and includes the cost of construction and anydirectly attributable costs. CIP is not depreciated until such time that the relevant assets arecompleted and available for use.

An item of property, plant and equipment is derecognized upon disposal or when no futureeconomic benefits are expected to arise from the continued use of the asset. Any gain or lossarising on derecognition of the asset (calculated as the difference between the net disposalproceeds and the carrying amount of the item) is included in profit or loss in the year the item ofproperty, plant and equipment is derecognized.

Impairment of Nonfinancial AssetsThe carrying values of assets (i.e., property, plant and equipment) are reviewed for impairmentwhen events or changes in circumstances indicate that the carrying values may not be recoverable.If any such indication exists and where the carrying values exceed the estimated recoverableamounts, the assets or cash-generating units are written down to their recoverable amounts. Anasset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less coststo sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount,the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current market assessments of the time value of moneyand the risks specific to the asset. Impairment losses of continuing operations are recognized inprofit or loss in those expense categories consistent with the function of the impaired asset.

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EquityCapital stock is measured at par value for all shares issued and outstanding. When the shares aresold at premium, the difference between the proceeds and the par value is credited to additionalpaid-in capital. Direct costs incurred related to equity issuance, such as underwriting, accountingand legal fees, printing costs and taxes are chargeable to additional paid-in capital. If additionalpaid-in capital is not sufficient, the excess is charged against (to) the retained earnings (deficit).Retained earnings (deficit) represent accumulated income (losses) of the Company.

Cash DividendsCash dividends on capital stock are recognized as a liability and deducted from equity when theyare approved by the BOD. Dividends for the year that are approved after the financial reportingdate are dealt with as an event after the financial reporting date.

Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theCompany and the revenue can be reliably measured. The following specific recognition criteriamust also be met before revenue is recognized.

Sale of GoodsSale of goods is recognized upon shipment when the risks and rewards of ownership of the goodshave passed to the buyer and the amount of revenue can be measured reliably.

WarehousingIncome is recognized upon performance of the obligation related to warehousing services andrecorded in the accounting period in which the related services are rendered.

Realized Gains and LossesRealized gains and losses on the sale of property and equipment are calculated as the differencebetween net sales proceeds and the net book value. Realized gains and losses are recognized inprofit or loss when the sale transaction occurs.

Interest incomeInterest is recognized as the interest accrues using the effective interest method.

Expense RecognitionExpenses are recognized in profit or loss when decrease in future economic benefit related to adecrease in an asset or an increase in a liability has arisen that can be measured reliably.

Expenses are recognized in profit or loss:· On the basis of a direct association between the costs incurred and the earning of specific

items of income;· On the basis of systematic and rational allocation procedures when economic benefits are

expected to arise over several accounting periods and the association can only be broadly orindirectly determined; or

· Immediately when expenditure produces no future economic benefits or when, and to theextent that, future economic benefits do not qualify or cease to qualify, for recognition in thestatement of financial position as an asset.

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The following specific recognition criteria must be met before costs and expenses are recognized:

Cost of Goods SoldCost of goods sold includes all expenses associated with the specific sale of goods. Cost of goodssold include all materials and supplies used, direct labor, depreciation of production equipmentand other expenses related to production. Such costs are recognized when the related sales havebeen recognized.

General and Administrative ExpensesGeneral and administrative expenses constitute costs of administering the business and arerecognized when incurred.

Leases

Company as lesseeLeases where the lessor retains substantially all the risks and benefits of ownership of the asset areclassified as operating leases. Operating lease payments are recognized as an expense in profit orloss on a straight-line basis over the lease term.

Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of an asset thatnecessarily takes a substantial period of time to get ready for its intended use or sale arecapitalized as part of the cost of the respective assets. All other borrowing costs are expensed inthe period they occur. Borrowing costs consist of interest and other costs that an entity incurs inconnection with the borrowing of funds.

Retirement Benefits

Defined benefit planThe Company does not maintain a formal retirement plan. The Company has recognizedretirement liability in the statement of financial position calculated based on the requirements ofthe Retirement Law. The retirement liability under the defined benefit plan of the Company isaccounted for in accordance with PAS 19, Employee Benefits, as revised.

The net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the reporting period reduced by the fair value of plan assets (if any),adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceilingis the present value of any economic benefits available in the form of refunds from the plan orreductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following:- Service cost- Net interest on the net defined benefit liability or asset- Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

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

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

Income TaxCurrent TaxCurrent tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted at the reporting date.

Deferred TaxDeferred tax is provided using the liability method on all temporary differences at the reportingdate between the tax bases of assets and liabilities and their carrying amounts for financialreporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, with few exceptions.Deferred tax assets are recognized for all deductible temporary differences, carryforward benefitof the excess of minimum corporate income tax (MCIT) over regular corporate income tax (RCIT)and unused net operating loss carryover (NOLCO), to the extent that it is probable that taxableprofit will be available against which the deductible temporary differences and carryforward ofMCIT and unused NOLCO can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or partof the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at eachreporting date and are recognized to the extent that it has become probable that future taxableprofit will allow the deferred tax asset to be recovered.

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

ProvisionsProvisions are recognized when the Company has a present obligation (legal or constructive),where, as a result of a past event, it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliable estimate can be made of the amountof the obligation.

Foreign Currency-denominated Transactions and TranslationsThe Company’s financial statements are presented in U.S. Dollars, its functional currency.Transactions in foreign currencies are initially recorded at the functional currency rate prevailingat the date of the transaction. Monetary assets and liabilities denominated in foreign currencies areretranslated at the functional currency spot rate of exchange ruling at the reporting date. Alldifferences are taken to profit or loss.

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Non-monetary items that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates as of the dates of the initial transactions. Non-monetary itemsmeasured at fair value in a foreign currency are translated using the exchange rates at the datewhen the fair value is determined.

Earnings Per Share (EPS)The Company presents basic and diluted EPS data for its ordinary shares. Basic EPS is calculatedby dividing the net income attributable to ordinary shareholders of the Company by the weightedaverage number of ordinary shares issued and outstanding during the period after givingretroactive effect to stock dividends declared and stock rights exercised during the year, if any.Diluted EPS is calculated in the same manner, adjusted for the effects of any dilutive potentialordinary shares. If the number of ordinary shares outstanding increases as a result of acapitalization, bonus issue or share split, or decreases as a result of a reverse share split, thecalculation of basic and diluted earnings per share for all periods presented shall be adjustedretrospectively. If these changes occur after the reporting period but before the financialstatements are authorized for issue, the per share calculations for those and any prior periodfinancial statements presented shall be based on the new number of shares.

Operating SegmentFor management purposes, the Company is organized and managed as one business segment. TheCompany’s business is the manufacture, assembly, test and warehousing of semiconductor andmemory devices and applications and related products which accounted for the majority of theCompany’s total revenue. Accordingly, the Company operates mainly in one reportable businessand geographical segment which is the Philippines.

ContingenciesContingent liabilities are not recognized in the financial statements but are disclosed unless thepossibility of an outflow of assets embodying economic benefits is remote. Contingent assets arenot recognized in the financial statements but disclosed when an inflow of economic benefits isprobable. If it is virtually certain that an inflow of economic benefits will arise, the asset and therelated income are recognized in the financial statements.

Events after the Reporting DatePost year-end events up to the date of approval of the BOD of the financial statements that provideadditional information about the Company’s position at reporting date (adjusting events) arereflected in the financial statements. Post year-end events that are not adjusting events, if any, aredisclosed when material to the financial statements.

3. Significant Accounting Judgments and Estimates

The preparation of the financial statements in accordance with PFRS requires the Company tomake judgments and estimates that affect the reported amounts of assets, liabilities, income andexpenses and disclosure of contingent assets and liabilities. Future events may occur which willcause the judgments and assumptions used in arriving at the estimates to change. The effects ofany change in judgments and estimates are reflected in the financial statements as they becomereasonably determinable.

Judgments and estimates are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be determinable underthe circumstances.

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JudgmentsIn the process of applying the Company’s accounting policies, management has made thefollowing judgments, apart from those involving estimations, which has the most significant effecton the amounts recognized in the financial statements:

Recognition of receivable from Clark Development Corporation (CDC)Pursuant to Executive Order No. 856 (Expanding the Coverage of Executive Order No. 666,Series of 2007, In Support of the Power Requirement of Clark Freeport Zone) dated January 2010signed by the then President of the Philippines Gloria Macapagal-Arroyo, the PhilippineGovernment agreed to provide electricity to the Company at a discounted or subsidized rate, inline with the Philippine Government’s thrust to support power-intensive industries with substantialinvestments in recognition of the corresponding benefit of their investments to the economy.Subsequently, in March 2010, the Company entered into a lease agreement with CDC that, amongothers, further embodied the grant of incentives to the Company as a foreign locator in the ClarkFreeport Zone, including the power subsidy.

The grant of the power subsidy to the Company has not been implemented yet, which resulted inthe accumulation of unpaid electricity charges. To address the then power disconnection threatsagainst the Company and its adverse impact on the business of the Company, the Company wasconstrained to pay for its power consumptions from 2011 to date at commercial rates, inclusive ofthe amount corresponding to the subsidized portion of the Company’s electricity charges. Thepayments do not constitute waivers of the Company’s existing rights under the law and theMarch 2010 lease agreement with CDC and were made on the understanding (and with the expressreservation) that the Company will be able to claim reimbursement of the advances/paymentscovering the power subsidy.

In a letter dated December 2, 2013, CDC informed the Company that the National Governmenthas included in its 2014 National Budget an amount for the power subsidy of the Company. Theamount will prioritize the reimbursement of the Company’s power subsidy advances for year2014, while the remaining amount will be for the reimbursement of advances made for previousyears (i.e., 2011, 2012 and 2013). The advances that will not be paid from the 2014 NationalBudget will be requested for inclusion in the 2015 and 2016 National Budgets. With thesedevelopments, the Company assessed that the Government will fulfill its power subsidycommitment and has accordingly recognized the fair value of the receivable from CDCcorresponding to the amount of the power subsidy advances.

In another letter dated April 3, 2014, CDC advised the inclusion of the amount for the powersubsidy in the 2014 National Budget as part of the unprogrammed funds that will be releasedwhen the revenue collections of the Government exceed the original revenue targets submitted bythe President of the Philippines to Congress.

On July 1, 2014, the Supreme Court (SC) promulgated its decision in the DisbursementAcceleration Program (DAP) case (in “Araullo, et al., v. Aquino, et al.,” GR. Nos. 209287/209135/ 209136/ 209155/ 209164/ 209260/ 209442/ 209517/ 209569, July 1, 2014) whichincluded a ruling and statements relating to the disbursement of unprogrammed funds. The SCdeclared void (for noncompliance with the conditions provided in the General Appropriations Actsor GAAs) the use of the unprogrammed funds from the GAAs of 2011, 2012 and 2013 for theDAP despite the absence of a certification by the National Treasurer that the revenue collectionsexceeded the revenue targets. Specifically, based on the language of the GAAs, the SC declaredthat, in determining whether or not the revenue collections exceeded the revenue targets, the totalrevenue collections must exceed the total revenue targets. A motion for reconsideration was filedby the office of the Solicitor General on July 25, 2014.

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In July 2014, CDC advised that the Department of Budget and Management (DBM), through thePhilippine Economic Zone Authority (PEZA), requested for the documents supporting theCompany’s claims on the power subsidy. The Company submitted these documents on July 21,2014 through CDC.

On December 23, 2014, the 2015 National Budget was signed into law. It expressly recognizesthat the unprogrammed funds for Budgetary Support to Government-Owned or -ControlledCorporations includes “the payment of subsidies and other incentives” to “retain and attractproductive foreign investments. Further, it categorically states that the unprogrammed funds shallbe released upon the satisfaction of any one of the following conditions, subject to compliancewith the conditions under the pertinent special provisions set out in the 2015 National Budget:i) When there are excess revenue collections in any one of the identified non-tax revenue

sources from its corresponding revenue collection target, as reflected in Tables C.1 and C.4 ofthe Budget of Expenditures and Sources of Financing (BESF) submitted by the PhilippinePresident to Congress;

ii) When there are new revenue collections, i.e., those arising from new tax laws or new non-taxsources which are not part of nor included in the original revenue sources reflected in theTables C.3 and C.4 of the BESF; or

iii) When there are newly approved loans for foreign-assisted projects.

Releases from item (i) above shall be subject to the issuance of a certification from the Departmentof Finance (DOF) or Bureau of Treasury (BTR) as the case may be, that the actual collectionsfrom a particular revenue source has exceeded its corresponding revenue collection target, asreflected in Tables C.1 and C.4 of the BESF.

Releases from item (ii) above shall be subject to certification by the DOF or BTR, as the case maybe, that the collections identified were not part of nor included in the original revenue collectiontargets reflected in Tables C.3 and C.4 of the BESF.

Releases from item (iii) above shall be supported by a perfected loan agreement, which shall besufficient basis for the issuance of a Special Allotment Release Order covering the loan proceeds.

As of December 31, 2014, the subsidy included in the 2014 National Budget was not releasedalthough the relevant government agencies have continued to indicate the Philippine government’scommitment to honor the power subsidy granted to the Company.

In a letter dated January 22, 2015 to the Company, CDC advised that an amount has indeed beenallocated in the 2015 National Budget under the unprogrammed funds for the reimbursement ofthe Company’s power subsidy advances.

In a letter dated January 26, 2015 to the Company, PEZA confirmed that the National Governmenthas included in the 2015 National Budget under the unprogrammed funds, an amount for thepower subsidy reimbursements . The allocated amount will prioritize the 2015 power subsidywhile the remaining amount will be for the reimbursement of the power subsidy advances made bythe Company in the previous years. The release of the allocation is subject to the specialprovisions of the 2015 GAA.

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The PEZA letter also advised that while the release of the allocation in the 2014 National Budgetis no longer possible due to the recent decision in the DAP case, which purportedly imposed anadditional condition of the use of unprogrammed funds, the relevant government agencies will askfor a higher subsidy in the 2016 National Budget to cover the arrears.

On February 3, 2015, the SC resolved the Motion for Reconsideration filed in the DAP case (SCResolution), affirming its earlier decision on the unprogrammed funds based on the specificprovisions of the GAAs that are the subject of the DAP case.

The Company and its legal counsel believe that the release and use of the unprogrammed fundsunder the 2015 National Budget shall be determined by the language of the special provisionsunder the 2015 National Budget itself. These special provisions are differently worded from thespecial provisions set out in the GAAs that are the subject of the DAP case, and appear to providefor less stringent conditions for the release and use of unprogrammed funds (see above discussionon these conditions) compared to the GAAs that are the subject of the DAP case.

In the SC Resolution, the SC also clarified that the release of unprogrammed funds may take placeeven prior to the end of the fiscal year, indicating that this could be done on a quarterly basis, solong as the requirements for the release of the funds under the relevant National Budgets arecomplied with.

With the foregoing developments, the Company reassessed the estimated timing of collections ofthe receivable from CDC. The Company considers the appropriated amount in the 2015 GAA tocover a portion of the advance made in prior years and that the remaining amount in arrears,including the amount that should have been paid out of the 2014 National Budget, will be coveredin the 2016 GAA. As a result of the change in the expected timing of collection, the Companyrecognized a provision for valuation loss on the receivable from CDC amounting to $1,044,972 in2014.

The carrying amount of receivable recognized under ‘Other noncurrent assets’ amounted to$18.88 million and $14.28 million as of December 31, 2014 and 2013, respectively (see Note 7).

Determination of functional currencyThe Company determines the functional currency based on economic substance of underlyingcircumstances relevant to the Company. The functional currency has been determined to be theU.S. Dollar since the Company’s revenues and expenses are substantially denominated in U.S.Dollar.

Operating lease commitments - as lesseeThe Company has entered into commercial property leases on land for its plant and administrationoffice. The Company has determined, based on an evaluation of the terms and conditions of thearrangements, that it does not acquire all the significant risks and rewards of ownership of theseproperties and so accounts for the contracts as operating leases. The Company considers retentionof ownership title to the leased property and option to purchase the leased asset, among others.

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Management’s Use of EstimatesThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year are discussed below:

Useful lives and impairment of property, plant and equipmentThe Company reviews on an annual basis the estimated useful lives of property, plant andequipment based on expected asset utilization as anchored on business plans and strategies thatalso consider expected future technological developments and market behavior. It is possible thatfuture results of operations could be materially affected by changes in these estimates broughtabout by changes in the factors mentioned. A reduction in the estimated useful lives of property,plant and equipment would increase the recorded depreciation expense and decrease the relatedasset accounts.

The carrying value of property, plant and equipment amounted to $108,541,291 and $114,954,193as of December 31, 2014 and 2013, respectively (see Note 8).

Fair value of derivative financial assetWhen the fair value of financial assets and financial liabilities recorded in the statement offinancial position cannot be derived from active markets, their fair value is determined usingvaluation techniques. The inputs to these models are taken from observable markets wherepossible, but where this is not feasible, a degree of judgment is required in establishing the fairvalue.

The fair value of the Company’s derivative financial asset is measured using the interest ratebinomial tree method for valuing call, put and prepayment options embedded in host debtcontracts as disclosed in Note 19. Changes in assumptions about these factors could affect thereported fair value of the derivative financial asset.

The carrying value of derivative financial asset amounted to $206,291 and $451,047 as ofDecember 31, 2014, and 2013 respectively (see Note 7).

Retirement CostThe determination of the Company’s obligation and cost for pension and other retirement benefitsis dependent on selection of certain assumptions used by actuaries in calculating such amounts.Those assumptions are described in Note 12 and include among others, discount rates and salaryrate increase. While the Company believes that the assumptions are reasonable and appropriate,significant differences in actual experience or significant changes in assumptions materially affectretirement obligations.

The retirement liability amounted to $200,593 and $106,014 as of December 31, 2014 and 2013,respectively (see Note 11).

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4. Cash and Cash Equivalents

This account consists of:

2014 2013Cash on hand $10,789 $22,822Cash in banks (Note 21) 25,289,818 3,365,437Time deposits 5,000,000 12,950,450Debt service account 6,493,151 6,767,067

$36,793,758 $23,105,776

Cash in banks earns interest at the prevailing bank deposit rates. In 2014, and 2013, the Companyearns interest of 0.25% to 0.50% on all Peso (PHP) accounts, and 0.10% and 0.25% on Dollar(USD) accounts. Time deposits are generally made on 30-day term and earn interest at 1.375% to2.75% in 2013 for PHP accounts and 0.875% to 1.50% in 2014, and 0.75% to 0.875% in 2013 forUSD accounts.

Debt Service Account maintained with the BDO Unibank, Inc. - Trust and Investments Group(trustee) is to be used solely for the next quarterly payment of interest, and principal due that isrelated to facility loan granted by BDO Unibank, Inc. (BDO) to the Company (see Note 10).

Interest income from cash and cash equivalents recognized in profit or loss amounted to $128,414,$162,952 and $65,742 in 2014, 2013 and 2012, respectively (see Note 16).

5. Trade and Other Receivables

This account consists of:

2014 2013Trade accounts receivables $21,213,101 $19,858,783Others (Note 12) 500,430 1,283,132

$21,713,531 $21,141,915

Trade receivables are non-interest bearing and are generally on a 15-day term.

Other receivables include lease of equipment to STS, receivables from suppliers and advances toemployees.

The carrying amount of all trade accounts receivable as of December 31, 2014, and 2013 arepledged, through execution of Assignment Agreement, for the loan with BDO (see Note 10).

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6. Inventories

This account consists of:

2014 2013At cost:

Raw materials $7,936,162 $8,489,808Raw materials in transit 631,650 1,414,865Work in process 1,053,213 1,510,329Finished goods 607,517 172,416

$10,228,542 $11,587,418

The amount of inventories recognized in cost of goods sold amounted to $152,024,937,$136,240,711 and $126,127,084 in 2014, 2013 and 2012, respectively.

7. Prepayments and Other Current Assets/Other Noncurrent Assets

Prepayments and other current assets consist of:

2014 2013Advances to suppliers (Note 12) $232,717 $375,413Prepayments 153,740 167,824Derivative financial asset 82,516 130,804Refundable deposits (Note 20) 31,461 169,187Advance rental - 78,789Others 71,504 63,466

$571,938 $985,483

Advances to suppliers pertain to cash payments to various suppliers and the Parent Company forinventories returned but has been previously paid.

Prepayments, on the other hand, pertain to unamortized portion of prepaid insurance, house rentalsand other prepaid expenses.

Other noncurrent assets consist of:

2014 2013Nontrade receivable from CDC, net of allowance

for valuation loss $18,876,550 $14,280,473Refundable deposits (Notes 18 and 20) 1,428,374 1,438,370Other investment 990,878 969,662Intangible assets 249,508 370,468Derivative financial asset 123,775 320,243Loan receivable from employees 6,708 32,939

$21,675,793 $17,412,155

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Nontrade receivable from CDC represents the Company’s advances in 2014 and previous years tothe electricity service provider covering the Government’s subsidy for electricity charges. In 2014,the Company recognized a provision for valuation loss amounting to $1,044,972 as a result ofchanges in the management’s assessment of the estimated timing of collection. As ofDecember 31, 2014, the allowance for valuation loss amounted to $1,328,101 (see Note 3).

The advance rental and portion of refundable deposits pertain to operating lease agreement withCDC (see Note 18).

As of December 31, 2014 and 2013, the net book value of intangible asset amounted to $249,508and $370,468, respectively. Amortization in 2014, 2013 and 2012 amounted to $120,960,$121,492, and $66,802 respectively.

The derivative financial asset pertains to the prepayment option that was separated from the loanspayable and carried at fair value through profit or loss.

The table below shows the movements of the derivative financial asset in 2014 and 2013:

2014 2013Balances at January 1 $451,047 $2,223,075Fair value loss on derivative, included in “Finance

cost” (see Note 16) (244,756) (1,772,028)Balances at December 31 $206,291 $451,047

8. Property, Plant and Equipment

The rollforward analysis of this account follows:

2014

Building andImprovements Machinery

TransportationEquipment

ProductionEquipment

Furniture andOther

EquipmentConstruction

in Progress TotalCostBalances at beginning of year $51,483,785 $77,664,851 $459,441 $10,378,871 $16,074,206 $2,436 $156,063,590Acquisitions

(Notes 12 and 13) 72,695 8,847,740 – 922,457 2,171,799 760,640 12,775,331Disposals – (630,544) (27,366) (66,306) (2,665) – (726,881)Balances at end of year 51,556,480 85,882,047 432,075 11,235,022 18,243,340 763,076 168,112,040Accumulated depreciationBalances at beginning of year 3,730,537 23,583,843 260,684 4,864,879 8,669,454 – 41,109,397Depreciation 1,288,534 11,317,579 87,778 2,146,721 3,860,411 – 18,701,023Disposals – (217,474) (11,858) (8,469) (1,870) – (239,671)Balances at end of year 5,019,071 34,683,948 336,604 7,003,131 12,527,995 – 59,570,749Net book values $46,537,409 $51,198,099 $95,471 $4,231,891 $5,715,345 $763,076 $108,541,291

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2013

Building andImprovements Machinery

TransportationEquipment

ProductionEquipment

Furniture andOther

EquipmentConstruction

in Progress TotalCostBalances at beginning of year $51,442,336 $75,790,512 $454,592 $9,877,079 $14,225,103 $88,741 $151,878,363Acquisitions

(Notes 12 and 13) 41,449 1,874,350 4,849 503,493 1,967,267 – 4,391,408Disposals – – – (1,697) (4,783) – (6,480)Transfers – – – – – (86,305) (86,305)Adjustments – (11) – (4) (113,381) – (113,396)Balances at end of year 51,483,785 77,664,851 459,441 10,378,871 16,074,206 2,436 156,063,590Accumulated depreciationBalances at beginning of year 2,443,525 12,643,841 169,607 2,850,963 4,628,699 – 22,736,635Depreciation 1,287,012 10,940,002 91,077 2,014,227 4,042,965 – 18,375,283Disposals – – – (311) (2,210) – (2,521)Balances at end of year 3,730,537 23,583,843 260,684 4,864,879 8,669,454 – 41,109,397Net book values $47,753,248 $54,081,008 $198,757 $5,513,992 $7,404,752 $2,436 $114,954,193

Items under construction in progress include certain machinery and equipment which have beendelivered but are yet to be tested before they become available for use as intended by themanagement.

The carrying amounts of all items of property, plant and equipment as of December 31, 2014 and2013 are subject to first ranking mortgage to secure the Company’s loan with BDO (see Note 10).

9. Accounts Payable and Accrued Expenses

2014 2013Trade accounts payableRelated parties (Note 12) $9,861,308 $8,841,147Third parties 7,428,899 5,439,048

17,290,207 14,280,195Accrued expenses 1,712,637 1,439,285Payable to government agencies 261,687 236,173Others 77,765 60,586

$19,342,296 $16,016,239

Trade accounts payable are non-interest bearing and are generally on 30-day term.

Accrued expenses primarily include salaries of employees, utilities and payable to third partyservice providers.

Payable to government agencies includes withholding taxes payable, fringe benefit tax payable,statutory liabilities and other taxes payable.

10. Loans Payable

On March 23, 2011, the Company entered into a loan agreement with BDO to finance theprocurement costs of various items of equipment. BDO established loan facility in favor of theCompany in the amount of $83,000,000. The Company made three (3) drawdowns and four (4)drawdowns totaling to $30,000,000 and $53,000,000 in 2012 and 2011, respectively, totaling$83,000,000. Principal is payable in sixteen (16) equal quarterly installments commencing on the27th month from initial drawdown date. Interest is paid quarterly based on current LIBOR ratesplus applicable spread of 3.90%.

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The Company may at its option prepay the loan with minimum amount of $5,000,000 anytimefrom the date of drawdown. If the prepayment is made on interest payment date, no penalty shallbe imposed. Otherwise, the Company shall pay a penalty of one and a half per cent (1.50%) foreach month and fraction thereof.

The prepayment option derivative has been separated from loans payable and carried at fair valuethrough profit or loss.

In May and June 2013, the Company obtained a new loan with BDO amounting to $29,000,000which contains majority of the provisions in the $83,000,000 loan with BDO.

The Company and the Parent Company have agreed to provide certain collateral security to beheld by the BDO Security Trustee in trust and for the benefit of the BDO. Collaterals includeassignment of accounts receivable from Samsung Electronics Co., Ltd. (Samsung) (see Note 5),assignment of CDC agreements (leasehold rights) (see Note 19), and establishment of first rankingChattel and Real Estate Mortgage over the Company’s property, plant and equipment (see Note 8).In addition, the Parent Company has agreed to guarantee the performance of the payment of theobligations of the Company under the agreement. As Pledgor, the Parent Company pledges,through execution of Pledge Supplement, its shares in the Company, including additional shares ofstock, subscription, options, warrants or other rights to purchase or acquire such shares of stock.On May 19, 2014, in connection with the Company’s initial public offering as discussed inNote 14, BDO consented through a Deed of Release of Pledge made and executed by BDOUnibank, Inc. - Trust and Investment Group, to the release from the said pledge a total of353,408,000 common shares of the Company registered in the name of the Parent Company.Loan agreement with BDO requires the Company to maintain the following financial ratios:· Debt Service Coverage Ratio (DSCR) of 1.2 times, except in 2013, where DSCR is 1.1 times.

DSCR shall be based on the annual audited financial statements of the Company, as well asthe unaudited financial statements as of the end of the first quarter of the current year.

· Leverage Ratio of 3 times from 2011 to 2012 and 2 times from 2013 to 2016 for the$83,000,000 loan and 2 times from 2013 to 2018 for the $29,000,000 loan based on theaudited or unaudited financial statements of the Company.

On September 29, 2014, BDO consented , subject to the fulfillment of all the conditions set forthbelow, to the declaration and payment of cash dividends equivalent to not more than (a) 50% ofthe company’s net income based on the Company’s audited financial statements as of and for theyear ended December 31, 2013, inclusive of the cash dividends of $1,000,000 subject of BDO ‘sletter dated May 8, 2014, (b) 50% of the Company’s net income based on the Company’s auditedfinancial statements as of and for the year ended December 31, 2014 and (c) 20% of theCompany’s net income based on the Company’s audited financial statements for every subsequentyear, provided, that, the total cash dividends to be declared and paid by the company under(a) and (b) shall in no case exceed $12,700,000.

In addition, all of the following conditions must be met before any declaration and payment ofdividends may be made by the Company:· No event has occurred and in continuing which constitutes an event of default, or which upon

a lapse of time or giving of notice or both, would become an event of default, under or inrespect of the agreement;

· The DSCR of 1.5x is maintained;· The required maintaining balance in the debt service account is maintained; and· The Company’s capital expenditures for the preceding year do not exceed US$15,000,000.

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As of December 31, 2014 and 2013, the Company is in compliance with its loan covenants relatedto the loan facility with BDO.

As of December 31, 2014 and 2013, total BDO loan guaranteed by the Parent Company amountedto $51,875,000 and $72,625,000, respectively (see Note 12).

In 2014 and 2013, the Company made principal payments on the $83,000,000 loan, resulting to anoutstanding balance of the old loan of $51,875,000 and $72,625,000 as of December 31, 2014 and2013, respectively.

The carrying value of loans payable as of December 31, 2014 and 2013 follows:

2014 2013Current portion $24,375,000 $20,750,000Noncurrent portion 56,128,981 80,291,487

$80,503,981 $101,041,487

Interest expense charged to profit or loss amounted to $4,294,115, $5,256,137 and $4,433,675 in2014, 2013 and 2012, respectively (see Note 16). Interest payable as of December 31, 2014 and2013 amounted to $724,429 and $901,566, respectively.

11. Retirement Liability

The Company obtained the services of an independent actuary to calculate the amount ofretirement benefit obligation based on the provisions provided by PAS 19, as revised. TheCompany’s liability for retirement benefits is based solely on the requirements under RA No. 7641,otherwise known as The Philippine Retirement Pay Law of the Philippines, as the Company doesnot have a formal retirement plan.

The unfunded post-employment benefits in 2014 and 2013 are as follows:

2014Net benefit cost in statement of comprehensive income Remeasurements in other comprehensive income

January 1,2014

Currentservice cost

Interestcost Subtotal Benefits paid

Actuarialchanges arising

from changes indemographicassumptions

Actuarialchanges arising

from changesin financial

assumptionsDecember

31, 2014

Present valueof definedbenefitobligation $106,014 $43,690 $6,055 $155,759 $− ($16,391) $61,225 $200,593

2013Net benefit cost in statement of comprehensive income Remeasurements in other comprehensive income

January 1,2013

Currentservice cost

Interestcost Subtotal Benefits paid

Actuarial changesarising from

changes indemographicassumptions

Actuarialchanges arisingfrom changes in

financialassumptions

December 31,2013

Present value ofdefined benefitobligation $− $106,014 $− $106,014 $− $− $− $106,014

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The cumulative remeasurement loss in 2014 recognized in the statement of comprehensive incomefollows:

Balance as at January 1 $–Remeasurement loss during the year 44,835Balance as at December 31 44,835Income tax effect (2,242)Cumulative amount of remeasurement net of tax $42,593

The cost of defined benefit pension plan as well as the present value of the retirement liability isdetermined using actuarial valuation which involves making various assumptions.

The principal actuarial assumptions used in determining the retirement obligation are shownbelow:

2014 2013Discount rate 4.63% 5.84%Salary increase 5.00% 5.00%

The sensitivity analysis for 2014 and 2013 below has been determined based on reasonablypossible changes of each significant assumption on the defined benefit obligation as of the end ofthe reporting period, assuming if all other assumptions were held constant.

Increase(decrease)

Effect onretirementobligation

Discount rates2014 +1% ($41,159)

(1%) 53,195

2013 +1% (21,761)(1%) 28,064

Future salary increases2014 +2% 51,077

(2%) (40,528)

2013 +2% 61,797(2%) (38,840)

The average duration of the defined benefit obligation for the year ended December 31, 2014 is26.78 years.

12. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party in making financial and operating decisions or the parties are subject to commoncontrol or common significant influence, referred to as affiliates. Related parties may beindividuals or corporate entities.

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The Company’s transactions with the related parties in 2014, 2013 and 2012 follow:

2014

Category Amount/volumeOutstanding

balance Nature, terms and conditionsParent Company

Raw materials used $86,091,729 $− Purchases of raw materialsProperty, plant and equipment

9,762,474 − Purchases of property and equipment

Direct labor 346,371 − Secondment fees for the salaries and other charges incurred as a consequence of secondment of certain employees

Other manufacturing costs 2,851,559 − Purchases of various production-related items and expenses

Accounts payable and accrued expenses

− 9,861,308 Outstanding balance related to above transactions; 20-day non-interest bearing, unsecured

General and administrative expenses

412,466 − Secondment fees for the salaries and other charges incurred as a consequence of secondment of certain employees

Finance cost 606,866 − Guarantee fee related to the facility loan agreement

Other income 403,732 − Equipment lease rentalPrepaid and other current assets

− 224,667 Returns of raw materials and PPE

Trade and other receivables − 279,232 Outstanding balance on equipment lease rental, and Reimbursement to be paid by STS for defective UPS

Bokwang Jeju Co., Ltd. - Affiliate

Other non-current assets 21,215 − Payment for transaction tax on the purchase of other investment, fully paid by the Company as of December 31, 2014

Phoenix Semiconductor Telecommunications (Suzhou) Co., Ltd. - Affiliate

Other income 38,580 − Gain on sale of machinery

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2013

Category Amount/volumeOutstanding

balance Nature, terms and conditionsParent Company Raw materials used $83,561,344 $− Purchases of raw materials Property, plant and equipment

3,556,579 − Purchases of property and equipment

Direct labor 484,467 − Secondment fees for the salaries and other charges incurred as a consequence of secondment of certain employees

Other manufacturing costs 3,419,240 − Purchases of various production-related items and expenses

Accounts payable and accrued expenses

− 8,841,147 Outstanding balance related to above transactions; 20-day non-interest bearing,unsecured

General and administrative expenses

418,066 − Secondment fees for the salaries and other charges incurred as a consequence of secondment of certain employees

Finance cost 912,449 − Guarantee fee related to the facility loan agreement

Prepaid and other current assets

− 373,574 Returns of raw materials and property and equipment; 30-day non-interest bearing, unsecured

Bokwang Jeju Co., Ltd. - Affiliate

Other noncurrent assets 969,663 − Payment for membership fee for villa condominium units; 20-year period and automatically extended unless a written objection is made by the member within 30 days prior to expiration

2012

Category Amount/volumeOutstanding

balance Nature, terms and conditionsParent Company Raw materials used $93,496,867 $− Purchases of raw materials Property, plant and equipment

14,934,342 − Purchases of property and equipment

Direct labor 603,477 − Secondment fees for the salaries and other charges incurred as a consequence of secondment of certain employees

Other manufacturing costs 5,174,963 − Purchases of various production-related items and expenses

General and administrative expenses

423,444 − Secondment fees for the salaries and other charges incurred as a consequence of secondment

Finance cost 1,401,630 − Guarantee fee related to the facility loan agreement

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Remuneration of key management personnelKey management personnel are those persons having the authority and responsibility for planning,directing and controlling the activities of the Company, directly or indirectly. The Companyconsiders chief executives to constitute key management personnel. Total remunerations of keymanagement personnel are as follows:

2014 2013 2012Short-term employee benefits $3,047,119 $3,470,332 $3,579,752Post-employment benefits − − −Other long term benefits − − −

$3,047,119 $3,470,332 $3,579,752

There are no agreements between the Company and any of its directors and key officers providingfor benefits upon termination of employment.

13. Equity

The authorized capital stock of the Company is $65,000,000 (P=2,925,000,000) divided into2,925,000,000 shares with par value of $0.022286 (equivalent to P=1.00). As ofDecember 31, 2014 and 2013, the Company has 2,165,024,111 and 2,002,644,109 shares issuedand outstanding.

On April 1, 2014, the BOD approved the declaration of cash dividends amounting to $1,000,000($0.0005 per share) to stockholders of record as of April 1, 2014, in proportion to, and on the basisof outstanding shares of stock respectively held by the shareholders, payable on May 12, 2014. Onthe same day, the BOD also approved the amendment to the Articles of Incorporation of theCompany to include specific reference to Common shares, among others.

On April 1, 2014, the BOD of the Company authorized the issuance of 572,186,000 new andexisting common shares (286,093,000 new common shares and 286,093,000 issued andoutstanding common shares) with par value of P1.00 per share. Further, it was resolved that theCompany is authorized to apply with the SEC and any relevant government agencies for theregistration of the common shares to be issued, offered, sold, and distributed to the public by wayof an IPO, and with the Philippine Stock Exchange and any relevant government agencies for thelisting of the said shares.

On April 22, 2014, the SEC approved the increase in the number of the Company’s BOD. On thesame date, the Company issued one common share each at the subscription price of P=1.00 pershare to the two independent directors.

On May 8, 2014, the BOD approved that the Company, the Parent Company and the IssueManager and Lead Underwriter for the IPO have an option exercisable in whole or in part upontheir mutual agreement, to increase the offer size by up to an additional 134,630,000 new andexisting common shares during the offer period, on the same terms and conditions with the listingabove, solely to cover oversubscriptions, if any. In the event the oversubscription option isexercised, the Company may issue up to an additional 67,315,000 new common shares, and/or theParent Company may sell up to an additional 67,315,000 existing common shares.

On December 1, 2014, the Company offered to sell to the public 324,760,000 new and existingCommon Shares with par value of P1.00 per share at an offer price of P3.15 per share.

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The Common Stock is comprised of: (a) 162,380,000 new Common Shares, issued forsubscription by the Company from its authorized and unissued capital stock by way of a primaryoffer; and (b) 162,380,000 issued and outstanding Common Shares, offered for sale by the ParentCompany, the selling stockholder, pursuant to a secondary offer. The total net proceeds from theissuance of new shares amounted $11,070,260 (P=494,507,193), net of the direct cost amounting to$388,006 (P=16,989,807) charged to “Additional paid-in capital”. Other IPO costs not directlyrelated to the issuance of new shares and charged to profit and loss amounted to $647,746(P=27,801,228).

14. Other Manufacturing Costs

This account consists of:

2014 2013 2012Utilities $8,016,895 $4,477,334 $8,706,280Production consumables 6,486,874 5,779,201 6,694,668Spare parts, tools and jigs 4,879,910 2,414,074 3,188,958Service fee 4,615,297 4,827,080 4,551,240Indirect labor (Note 17) 2,587,432 2,607,551 2,191,961Repairs and maintenance 1,645,752 1,122,984 1,355,935Insurance 497,148 483,245 392,204Production supplies 335,715 200,247 310,067Rent (Note 18) 259,725 271,046 328,440Jigs and tools 185,708 116,677 135,682Entertainment and representation 128,864 141,409 193,370Taxes and dues 124,011 161,180 160,489Travel 98,593 99,096 109,059Communications 97,163 103,448 128,792Miscellaneous 766,555 585,946 665,290

$30,725,642 $23,390,518 $29,112,435

15. General and Administrative Expenses

This account consists of:

2014 2013 2012Salaries, wages and benefits (Note 17) $1,518,885 $1,519,245 $1,352,140Outside services 915,038 719,576 684,096Depreciation (Note 8) 481,250 480,084 443,758Professional fees 320,043 147,742 261,705Insurance 171,603 175,755 181,422Taxes and licenses 146,929 72,964 58,521Entertainment, amusement and recreation 138,054 111,022 160,123Repairs and maintenance 132,945 125,520 73,373Supplies 72,371 90,418 91,029Communications, light and water 68,890 39,182 66,877Rent (Note 18) 61,241 39,367 35,166Transportation and travel 38,513 32,268 59,762Miscellaneous 211,615 204,498 168,853

$4,277,377 $3,757,641 $3,636,825

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16. Finance Cost/Other Income/Other Expense

Finance cost consists of:

2014 2013 2012Interest expense $4,294,115 $5,256,137 $4,433,675Guarantee fee (Note 12) 606,866 912,449 1,401,630Fair value loss (gain) on derivative 244,756 1,772,028 (644,912)

$5,145,737 $7,940,614 $5,190,393

Other income consists of:

2014 2013 2012Interest income $459,694 $162,952 $65,742Rental income (Note 12) 433,072 23,774 24,494Income from sale of scrap 134,296 73,778 59,339Miscellaneous 39,613 61,035 9,919

$1,066,675 $321,539 $159,494

Other expense consists of:

2014 2013 2012Provision for valuation loss -

nontrade receivablefrom CDC $1,044,972 $– $–

Loss on sale of scrap 270,704 − −Foreign currency exchange loss - net 144,271 570,424 283,920Miscellaneous 452,462 242,021 86,733

$1,912,409 $812,445 $370,653

17. Salaries and Employee Benefits

The details of salaries and employee benefits follow:

2014 2013 2012Salaries and wages $5,852,579 $6,012,307 $5,740,987Employee benefits 2,821,835 2,670,502 2,373,755

$8,674,414 $8,682,809 $8,114,742

Salaries and wages and employee benefits included in cost of goods sold and general andadministrative expenses amounted to $7,155,529 and $1,518,885, respectively, in 2014,$7,163,564 and $1,519,245, respectively, in 2013 and $6,762,602 and $1,352,140, respectively, in2012.

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18. Operating Lease Agreements

On March 24, 2010, the Company entered into a non-cancellable operating lease agreement withCDC covering the land where its plant and administration offices are being constructed. The leaseis for a term of fifty (50) years starting from the date of signing, renewable subject to mutualagreement of both parties.

The lease agreement contains an escalation clause of 10.00% p. a. starting the fourth year andevery three (3) years thereafter. The Company is also entitled to non-payment of lease rentals fora period of seventy (70) months.

Pursuant to the lease agreement, the Company made an advance rental covering lease term fromthe 71st month to 18th year amounting to $1,070,884.

Future minimum lease payments under operating leases as of December 31, 2014 and 2013 are asfollows:

2014 2013Within one year $– $–More than one year but less than five years – –More than five years 12,157,048 12,157,048

$12,157,048 $12,157,048

19. Fair Value Measurement

PFRS 13 requires disclosures relating to fair value measurements using a three-level fair valuehierarchy. The level within which the fair value measurement is categorized in its entirety isdetermined on the basis of the lowest level input that is significant to the fair value measurement.Assessing the significance of a particular input requires judgment, considering factors specific tothe asset or liability.

The following table shows financial instruments recognized at fair value, categorized betweenthose whose fair value is based on:

Level 1: Quoted prices in active markets for identical assets or liabilities;Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair

value are observable, either directly or indirectly; andLevel 3: Techniques that use inputs that have a significant effect on the recorded fair value that

are not based on observable market data.

The Company’s financial assets consist of cash and cash equivalents, trade and other receivables, ,loans receivable from employees and refundable deposits. The financial liabilities consist ofaccounts payable and accrued expenses, interest payable, loans payable and other noncurrentliability. Due to the short term nature of the Company’s financial assets and liabilities, thecarrying amount approximates their fair value as of December 31, 2014 and 2013.

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As of December 31, 2014 and 2013, the carrying value of the nontrade receivable from CDCapproximates its fair value, and is categorized under Level 2 in the fair value hierarchy. In 2014,with the developments discussed in Note 3, the Company reassessed the expected timing ofcollection and has accordingly computed the present value of the receivable as of December 31,2014 using a risk free rate as the discount rate, which also represents its fair value. The presentvalue technique captures the estimate of future cash flows, time value of money as represented bythe rate on risk free monetary assets that have maturity dates or durations that coincide with theperiod covered by the cash flows.

The ‘Derivative financial asset’ amounting $206,291 and $451,047 as of December 31, 2014 and2013, respectively, in the statements of financial position is the only financial instrument carried atfair value classified under Level 3 in the fair value hierarchy. There were no transfers betweenlevels of the fair value hierarchy in 2014, and 2013.

Loans payable carried at amortized cost which fair value is disclosed amounting to $81,244,549,and $98,193,447, as of December 31, 2014 and 2013, respectively, is categorized under Level 3 inthe fair value hierarchy.

The fair value of the Company’s embedded derivative financial asset and loans payable which fairvalue is disclosed, are measured using interest rate binomial tree method for valuing call, put andprepayment options embedded in host debt contracts.

The method incorporates various inputs such as the following:a) USD yield curveb) Volatility of USD interest rates based on historical datac) Credit spread from most recent quotes from banks

Valuation is performed on a quarterly basis for internal reporting purposes and is performed by theCompany’s own internal valuer. The Company decides whether the fair value can be determinedreliably, which valuation method should be applied and the assumptions made for unobservableinputs used in the valuation methods. The Company further performs an analysis to determine ifthe change in fair value is reasonable by comparing the change in fair value with relevant externalresources.

In 2014, 2013 and 2012, the Company used the volatility of 25.00% and credit spread of 3.90% inthe valuation which are considered as significant unobservable inputs. The 5.00% increase in thevolatility used in the valuation of derivative financial asset would result in increase in fair value of$38,704, $80,620, and $253,977; while the decrease in the volatility of 5% would result indecrease in fair value of $38,105, $81,126, and $263,756 in 2014, 2013 and 2012, respectively.The 1% increase in credit spread would result in increase in fair value of $29,527, $69,397, and$278,093, while the decrease in credit spread would decrease the fair value by $27,948, $70,890,and $298,093 in 2014, 2013, and 2012, respectively.

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20. Financial Risk Management Objectives and Policies

The Company has various financial assets such as cash and cash equivalents, trade and otherreceivables, nontrade receivables and refundable deposits, which arise directly from normaloperations.

The Company’s principal financial liabilities consist of accounts payable and accrued expenses,interest payable and loans payable. The main purpose of these financial liabilities, except loanspayable, is to raise working capital for the Company’s operations. The main purpose of the loanpayable is to finance the construction of the Company’s plant and administration office andpurchase and installation of machinery and equipment.

The main risks arising from the Company’s financial instruments are market risk, credit risk andliquidity risk. The management reviews the procedures and agrees policies for managing each ofthese risks as summarized below:

Market RiskMarket risk is the risk of loss to future earnings, to fair values or to future cash flows that mayresult from changes in the price of a financial instrument. The value of a financial instrument maychange as a result of changes in foreign currency exchange rates, interest rates, commodity pricesor other market changes.

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in foreign exchange rates. Exposure to foreign currency riskarises mainly when receivables and payables are denominated in a currency other than theCompany’s functional currency.

As of the December 31, 2014, 2013 and 2012, the foreign-currency denominated financial assetsand financial liabilities in original currencies and their U.S. Dollar equivalents are as follows:

2014

PHP JPYEquivalents in

USDFinancial assets Cash and cash equivalents P=480,114,830 JPY− $10,736,020 Loans and receivables:

Nontrade receivables fromCDC 844,159,318 − 18,876,550

Refundable deposits 63,149,181 − 1,412,102 Receivable from employees 300,000 − 6,708

Other receivables 5,546,233 − 124,0211,393,269,562 JPY− 31,155,401

Financial liabilitiesAccounts payable and accrued

expenses Trade 21,930,300 89,100,900 1,230,494 Accrued expenses 64,799,401 − 1,448,999

Others (nontrade) 3,281,225 − 73,37390,010,926 89,100,900 2,752,865

P=1,303,258,636 (JPY89,100,900) $28,402,535

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2013PHP JPY Equivalents in USD

Financial assetsCash and cash equivalents P=30,333,187 JPY− $683,187Loans and receivables: − − −

Nontrade receivables fromCDC 634,052,985 − 14,280,473

Refundable deposits 63,502,881 − 1,430,245Receivable from employees 1,462,500 − 32,939Other receivables 6,496,169 − 146,310

735,847,722 − 16,573,154

Financial liabilitiesAccounts payable and accrued

expensesTrade 17,871,753 6,063,650 460,393Accrued expenses 60,066,051 − 1,309,147Others (nontrade) 2,494,064 − 56,173

80,431,868 6,063,650 1,825,713P=655,415,854 (JPY6,063,650) $14,747,441

2012

PHP JPYEquivalents in

USDFinancial assets

Cash and cash equivalents P=26,406,668 JPY− $641,094Loans and receivables:

Refundable deposits 7,726,400 − 187,580Receivable from employees 13,467,172 − 326,952

47,600,240 − 1,155,626

Financial liabilitiesAccounts payable and accrued

expensesTrade 15,980,099 16,687,660 581,890Accrued expenses 298,790,776 − 7,253,964

314,770,875 16,687,660 7,835,854(P=267,170,635) (JPY16,687,660) ($6,680,228)

The following table demonstrates the sensitivity to a reasonably possible change in the U. S.Dollar-Philippine Peso exchange rate, with all variables held constant, of the Company’s incomebefore income tax (due to changes in the fair value of monetary assets and liabilities):

Increase/decrease inPHP rate

Effect on incomebefore income tax

2014 +1% ($291,426)-1% 291,426

2013 +1% ($148,053)-1% 148,053

2012 +1% $64,863-1% (64,863)

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Increase/decrease inJPY rate

Effect on incomebefore income tax

2014 +1% $7,401-1% (7,401)

2013 +1% $579-1% (579)

2012 +1% $1,939-1% (1,939)

The sensitivity analysis has been prepared on the basis that the proportion of financial instrumentsin foreign currencies is constant.

The exchange rate used to restate the Company’s PHP-denominated assets and liabilities is P=44.72to $1.00 as of December 31, 2014, P=44.40 to $1.00 as of December 31, 2013 and P=41.19 to $1.00as of December 31, 2012. For the Company’s JPY-denominated liabilities, the exchange rate usedis JPY120.39 to $1.00 as of December 31, 2014, JPY104.77 to $1.00 as of December 31, 2013 andJPY86.05 to $1.00 as of December 31, 2012. There are no impact on the Company’s othercomprehensive income other than those already affecting the income before income tax.

Interest rate riskInterest rate risk is the risk that the fair value of future cash flows of a financial instrument willfluctuate because of changes in market interest rates. The Company’s exposure to the risk ofchanges in market interest rates relates primarily to the Company’s loans payable with BDO withfloating interest rate.

The following table sets forth, for the period indicated, the sensitivity to reasonably changes ininterest rates with all other variables held constant:

Changes in basispoints

Effect on incomebefore income tax

2014 +1% ($578,273)-1% 621,403

2013 +1% (674,232)-1% 734,007

2012 +1% (705,691)-1% 705,465

Credit RiskCredit risk is the risk that counterparty will not meet its obligations under a financial instrument orcustomer contract, leading to a financial loss. The Company is exposed to credit risk from itsoperating activities (primarily trade receivables) and from its investing activities, including depositin banks and financial institutions, foreign exchange transactions and other financial instruments.

Maximum exposure to credit riskThe Company trades only with recognized, creditworthy third parties. The Company’s maximumexposure to credit risk, without taking into account any collateral held or other creditenhancements, equals the carrying values of financial assets.

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Collateral and other credit enhancementsThe amount and type of collateral required depends on the assessment of the credit risk of theborrower or counterparty. As of December 31, 2014, 2013 and 2012, the Company has nocollateral held and other credit enhancements.

Risk concentrations of the maximum exposure to credit riskConcentrations arise when a number of counterparties are engaged in similar business activities oractivities in the same geographic region or have similar economic features that would cause theirability to meet contractual obligations to be similarly affected by changes in economic, political orother conditions. Concentrations indicate the relative sensitivity of the Company’s performance todevelopments affecting a particular industry or geographical location.

As of December 31, 2014, 2013 and 2012, the Company’s only customer is Samsung, whichspecializes in digital appliances and media, semiconductors, memory and system integration.Receivables from Samsung as of December 31, 2014, and 2013 amounted to $21,213,101 and$19,858,783, respectively.

Credit quality per class of financial assetsThe table below shows the credit quality of the Company’s neither past due nor impaired loansand receivables.

2014Neither past due nor impaired

High grade Standard grade TotalCash in banks $36,793,758 $− $36,793,758Loans and receivables:

Trade and other receivables 21,213,101 500,430 21,713,531Refundable deposits 1,459,835 − 1,459,835Nontrade receivables from CDC 18,876,550 − 18,876,550

$78,343,244 $500,430 $78,843,674

2013Neither past due nor impairedHigh grade Standard grade Total

Cash in banks $23,082,955 $− $23,082,955Loans and receivables:

Trade and other receivables 19,858,783 1,283,132 21,141,915Refundable deposits 1,607,557 − 1,607,557Nontrade receivables from CDC 14,280,473 − 14,280,473

$58,829,768 $1,283,132 $60,112,900

The Company’s bases in grading its financial assets are as follows:

High grade - accounts with a high degree of certainty in collection, where counterparties haveconsistently displayed prompt settlement practices, and have little to no instances of defaults ordiscrepancies in payment.

Standard grade - active accounts with minimal to regular instances of payment default, due toordinary/common collection issues, but where the likelihood of collection is still moderate to highas the counterparties are generally responsive to credit actions initiated by the Company.

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The credit quality of financial assets was determined as follows:

Cash in banks - consists of bank deposits made with reputable financial institutions, thus classifiedas ‘high grade’.

Trade receivables - consists of receivables from customers, with no delay in payment based onhistorical experience, thus classified as ‘high grade’.

Other receivables - consists of receivables from sale of scrap and other non-operating income andreceivables from employees, thus classified as ‘standard grade’.

Refundable deposits - represent mostly deposits with CDC, a government-owned and controlledcorporation. Default is considered highly unlikely, thus the deposits are classified as ‘high grade’.

Nontrade receivable from CDC - represents the Company’s advances to the electricity serviceprovider covering the Government’s subsidy for its electricity charges. Default is consideredunlikely, thus, this receivable is classified as ‘high grade’.

Liquidity RiskLiquidity risk is the risk that an entity will encounter difficulty in raising funds to meetcommitments associated with financial assets and liabilities. Liquidity risk may result from acounterparty failing on repayment of a contractual obligation or inability to generate cash inflowsas anticipated.

The Company’s objective is to maintain a balance between continuity of funding and flexibilitythrough collection of receivables and cash management.

The table below summarizes the maturity profile of the Company’s financial assets and liabilitiesas of December 31, 2014, and 2013 based on undiscounted cash flows:

2014

On demandLess than 3

months3 to

12 monthsMore than12 months Total

Financial assetsCash and cash equivalents $25,300,607 $11,496,867 $− $− $36,797,474Loans and receivables

Trade and other receivables − 21,213,101 500,430 − 21,713,531Nontrade receivable from CDC − − − 18,876,550 18,876,550Refundable deposits − − 31,461 1,428,374 1,459,835

$25,300,607 $32,709,968 $531,891 $20,304,924 $78,847,390

Financial liabilitiesAccounts payable and accrued

expenses**Trade $− $17,290,207 $− $− $17,290,207Accrued expenses − 1,547,780 11,073 153,784 1,712,637Others − 73,373 − 4,392 77,765

Loans payable − 6,113,159 21,550,471 59,902,876 87,566,506$− $25,024,519 $21,561,544 $60,061,052 $106,647,115

**Excluding statutory liabilities amounting to $261,687

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2013

On demandLess than 3

months3 to

12 monthsMore than12 months Total

Financial assetsCash and cash equivalents $3,388,259 $19,786,407 $− $− $23,174,666Loans and receivables

Trade and other receivables − 19,858,783 1,283,132 − 21,141,915Nontrade receivable from CDC − − − 14,862,542 14,862,542Refundable deposits − − 169,187 1,438,370 1,607,557

$3,388,259 $39,645,190 $1,452,319 $16,300,912 $60,786,680Financial liabilitiesAccounts payable and accrued

expenses**Trade $− $14,280,195 $− $− $14,280,195Accrued expenses − 1,430,773 321 8,191 1,439,285Others − 56,127 44 4,415 60,586

Loans payable − 6,523,836 19,278,243 89,311,554 115,113,633$− $22,290,931 $19,278,608 $89,324,160 $$130,893,699

**Excluding statutory liabilities amounting to $236,173

Capital managementThe primary objective of the Company’s capital management is to ensure that it maintains healthycapital ratios in order to support its business and maximize shareholder value.

The Company’s capital as of December 31, 2014 and 2013 follows:

2014 2013 2012Capital stock $48,637,525 $44,999,980 $44,999,980Additional paid in capital 7,432,715 − −Retained earnings 42,088,536 25,634,725 12,041,310Remeasurement loss on

retirement plan (42,593) − −$98,116,183 $70,634,705 $57,041,290

The Company manages its capital structure and makes adjustments to these ratios in light ofchanges in economic conditions and the risk characteristics of its activities. In order to maintainor adjust the capital structure, the Company may adjust the amount of dividend payment toshareholders, return capital structure or issue capital securities. No changes were made in theobjectives, policies or processes for managing capital during the years ended December 31, 2014,2013, and 2012.

The Company is not subject to externally imposed capital requirements.

21. Registration as a Freeport Zone Enterprise

On March 24, 2010, the Company registered with CDC as Clark Freeport Zone (CFZ) enterprisepursuant to the provisions of Republic Act (R.A.) 7227 known as the Bases Conversion andDevelopment Act of 1992, as amended by R.A. 9400.

As a CFZ enterprise, the Company is entitled to certain tax benefits and non-tax incentives such asexemption from national and local taxes. In lieu thereof, the Company shall be imposed withthree percent (3.00%) and two percent (2.00%) special income tax rates based on gross income tobe remitted to the affected National and Local Government units, respectively.

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22. Income Taxes

Provision for income tax in 2014, 2013 and 2012 consists of:

2014 2013 2012Gross income tax at 5% $1,524,480 $1,424,793 $985,743MCIT at 2% 4,701 − −Current tax 1,529,181 1,424,793 985,743Deferred tax (23,888) 450,834 (400,414)Provision for income tax $1,505,293 $1,875,627 $585,329

The components of the Company’s net deferred income tax assets and liabilities are as follows:

2014 2013Deferred tax assets:

Unamortized accretion of interest on nontrade receivable from CDC $66,405 $30,720Accrued interest 36,221 45,078Provision for bonuses and

other benefits 13,932 10,730MCIT 4,701 −Remeasurement loss on

retirement plan 2,242 −

Deferred tax liability:Effect of changes in foreign exchange rates on nonmonetary assets (136,894) (126,051)

($13,393) ($39,523)

The reconciliation of the provision for income tax at statutory tax rate to the provision for incometax in profit or loss in 2014, 2013 and 2012 follows:

2014 2013 2012Income tax at statutory income tax rate $5,687,731 $4,640,713 $3,920,211Additions to (reductions in)income taxes resulting from:

Effect of income from CFZ registered activities (4,146,789) (3,383,782) (2,839,991)

Nontaxable income (61,093) (171,180) (226,543)Income subjected to final tax (38,524) (48,886) (19,723)Nondeductible expenses 53,125 362,030 93,456Functional currency

differences 10,843 476,732 (342,081)Provision for income tax $1,505,293 $1,875,627 $585,329

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23. Note to Cash Flow Statements

The Company acquired certain property, plant and equipment that remained unpaid as ofDecember 31, 2014, 2013 and 2012 amounting to $3,601,195, $82,756, and $38,211,respectively.

24. Earnings Per Share (EPS)

Basic and diluted EPS in 2014, 2013 and 2012 were computed as follows:

2014 2013 2012Net income for basic and diluted EPS $17,453,811 $13,593,415 $12,482,040Weighted average number of shares

outstanding for basic and dilutedEPS 2,015,990,412 2,002,644,109 1,977,237,688

Basic/diluted earnings per share $0.0087 $0.0068 $0.0063

As of December 31, 2014, 2013 and 2012, there were no outstanding dilutive potential shares.

25. Events After the Reporting Date

On March 3, 2015, the BOD approved the declaration of cash dividends amounting to$11,700,000 ($0.0054 per share), out of the Company’s unrestricted retained earnings as ofDecember 31, 2014, to stockholders of record as of April 2, 2015, in proportion to, and on thebasis of outstanding shares respectively held by the shareholders, payable on April 22, 2015.

26. Supplementary Tax Information Under Revenue Regulations 15-2010

In compliance with the requirements set forth under RR 15-2010, following is the information ontaxes, duties and license fees paid or accrued during 2014:

a. Value added tax (VAT)Pursuant to its registration with CDC as a CFZ enterprise, the Company’s sales and purchasesare not subject to VAT (see Note 21).

b. Information on the Company’s importationsTotal landed cost of imports amounted to $156,439,926. As a CFZ enterprise, the Company’simports are free from custom duties and tariffs.

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c. Other taxes and licensesTaxes and licenses, local and national lodged under ‘Cost of goods sold’ and ‘General andadministrative expenses’

USD PHPNational

Fringe benefit taxes $152,635 P=6,727,499Local

License and permit fees 118,305 5,152,615$270,940 P=11,880,114

d. Withholding taxes

USD

Remittances

Balance as ofDecember 31,

2014 TotalWithholding taxes on compensation

and benefits $1,302,300 $186,737 $1,489,037Expanded withholding taxes 163,585 15,012 178,597Final withholding taxes 150,726 3,740 154,466Total $1,616,611 $205,489 $1,822,100

PHP

Remittances

Balance as ofDecember 31,

2014 TotalWithholding taxes on compensation

and benefits P=57,754,223 P=8,347,697 P=66,101,920Expanded withholding taxes 7,257,076 671,170 7,928,246Final withholding taxes 6,727,631 167,042 6,894,673Total P=71,738,930 P= 9,185,909 P=80,924,839

e. The Company has no pending tax assessments as of December 31, 2014.

*SGVFS010994*

INDEPENDENT AUDITORS’ REPORTON SUPPLEMENTARY SCHEDULE

The Stockholders and the Board of DirectorsPhoenix Semiconductor Philippines Corp.Panday Pira Avenue, Corner CreeksideClark Freeport Zone, Pampanga

We have audited in accordance with Philippine Standards on Auditing, the financial statements ofPhoenix Semiconductor Philippines Corp. (the Company) as at December 31, 2014 and 2013 and foreach of the three years in the period ended December 31, 2014 and have issued a report thereon datedMarch 3, 2015. Our audits were made for the purpose of forming an opinion on the basic financialstatements taken as a whole. The accompanying schedules are the responsibility of the Company’smanagement. This schedule is presented for the purpose of complying with Securities RegulationCode Rule 68, As Amended (2011) and is not part of the basic financial statements. This schedule hasbeen subjected to the auditing procedures applied in the audit of the basic financial statements and, inour opinion, fairly states, in all material respects, the information required to be set forth therein inrelation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Janet A. ParaisoPartnerCPA Certificate No. 92305SEC Accreditation No. 0778-AR-1 (Group A), February 2, 2012, valid until March 31, 2015Tax Identification No. 193-975-241BIR Accreditation No. 08-001998-62-2012, April 11, 2012, valid until April 10, 2015PTR No. 4751252, January 5, 2015, Makati City

March 3, 2015

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

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

BOA/PRC Reg. No. 0001, December 28, 2012, valid until December 31, 2015SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited

*SGVFS010994*

Phoenix Semiconductor Philippines Corp.Index to the Financial Statements

December 31, 2014

Schedule 1 Reconciliation of Retained Earnings Available for Dividend DeclarationSchedule 2 Conglomerate MapSchedule 3 Schedule of Philippine Financial Reporting Standards (PFRS), Philippine

Accounting Standards (PAS) and Philippine Interpretations effective as atDecember 31, 2014

Schedule 4 Supplementary Schedules Required Under Annex 68-ESchedule A. Financial assetsSchedule B. Amounts receivable from directors, officers, employees, relatedparties and principal stockholders (other than related parties)Schedule C. Amounts receivable from Related Parties which are eliminatedduring the consolidation of financial statementsSchedule D. Intangible assets - other assetsSchedule E. Long-term debtSchedule F. Indebtedness to related partiesSchedule G. Guarantees of securities of other issuersSchedule H. Capital stock

Schedule 5 Financial soundness indicators

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.

ANNEX 68-CRECONCILIATION OF RETAINED EARNINGSAVAILABLE FOR DIVIDEND DECLARATION

December 31, 2014

Unappropriated Retained Earnings, as adjusted to available for dividend distribution, beginning $25,634,725Net Income during the period closed to Retained Earnings 17,453,811Less:

Dividend declarations during the period (1,000,000)

TOTAL RETAINED EARNINGS, END $42,088,536*AVAILABLE FOR DIVIDEND

*On March 3, 2015, the BOD approved the declaration of dividends amounting to $11,700,000 ($0.0054 per share) tostockholders of record as of April 2, 2015, in proportion to, and on the basis of outstanding shares of stock respectively heldby the shareholders, payable on April 22, 2015. In accordance with the covenants on the BDO loan, the Company’sdeclaration and payment of cash dividends in 2014 and 2013 shall in no case exceed $12,700,000 (see Note 10 to the AuditedFinancial Statements).

*SGVFS010994*

Exhibit “D”

Conglomerate Map

Bokwang Group

27.40%

STS Semiconductor &Telecommunications Co., Ltd.

88.55% 85.00%

Phoenix SemiconductorTelecommunications (Suzhou)

Co., Ltd.

Phoenix SemiconductorPhilippines Corp.

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULE OF ALL PHILIPPINE FINANCIALREPORTING STANDARDS (PFRSs) [which consist of PFRSs, PhilippineAccounting Standards (PAS) and Philippine Interpretations] effective as atDecember 31, 2014

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31,2014

Adopted NotAdopted

NotApplicable

Framework for the Preparation and Presentation of FinancialStatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

3

3

PFRSs Practice Statement Management Commentary 3

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine Financial ReportingStandards

3

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly Controlled Entity orAssociate

3

Amendments to PFRS 1: Additional Exemptions for First-time Adopters

3

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

3

Amendments to PFRS 1: Severe Hyperinflation andRemoval of Fixed Date for First-time Adopters

3

Amendments to PFRS 1: Government Loans 3

Amendments to PFRS 1: Borrowing Costs 3

Amendments to PFRS 1: Meaning of Effective PFRS 3

PFRS 2 Share-based Payment 3

Amendments to PFRS 2: Vesting Conditions andCancellations

3

Amendments to PFRS 2: Group Cash-settled Share-basedPayment Transactions

3

Amendments to PFRS 2: Definition of Vesting Condition 3

PFRS 3(Revised)

Business Combinations 3

Amendment to PFRS 3: Accounting for ContingentConsiderations in a Business Combination

3

Amendment to PFRS 3: Scope Exceptions for JointArrangements

3

PFRS 4 Insurance Contracts 3

Amendments to PAS 39 and PFRS 4: Financial GuaranteeContracts

3

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations

3

Amendments to PFRS 5: Changes in Methods of Disposal 3

PFRS 6 Exploration for and Evaluation of Mineral Resources 3

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PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31,2014

Adopted NotAdopted

NotApplicable

PFRS 7 Financial Instruments: Disclosures 3

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

3

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets - Effective Date and Transition

3

Amendments to PFRS 7: Improving Disclosures aboutFinancial Instruments

3

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets

3

Amendments to PFRS 7: Disclosures - OffsettingFinancial Assets and Financial Liabilities

3

Amendments to PFRS 7: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

3

Financial Instruments: Disclosures - Servicing Contracts 3

PFRS 8 Operating Segments 3

Amendments to PFRS 8: Aggregation of OperatingSegments and Reconciliation of the Total of theReportable Segments Assets to the Entity’s Assets

3

PFRS 9** Financial Instruments (2010 version) 3

Amendments to PFRS 9: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

3

Financial Instruments (2013 version) 3

Financial Instruments (2014 version) 3

PFRS 10 Consolidated Financial Statements 3

Amendments to PFRS 10, PFRS 12 and PAS 27:Investment Entities

3

Amendments to PFRS 10: Investments in Associates andJoint Ventures - Sale or Contribution of Assets between anInvestor and its Associate or Joint Venture

3

PFRS 11 Joint Arrangements 3

Amendments to PFRS 11: Investment Entities 3

Amendments to PFRS 11: Joint Arrangements -Accounting for Acquisitions of Interests in JointOperations

3

PFRS 12 Disclosure of Interests in Other Entities 3

Amendments to PFRS 12: Investment Entities 3

PFRS 13 Fair Value Measurement (2013 Version) 3

Amendment to PFRS 13: Short-term Receivables andPayables

3

Amendment to PFRS 13: Portfolio Exception 3

PFRS 14 Regulatory Deferral Accounts 3

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PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31,2014

Adopted NotAdopted

NotApplicable

Philippine Accounting StandardsPAS 1(Revised)

Presentation of Financial Statements 3

Amendment to PAS 1: Capital Disclosures 3

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

3

Amendments to PAS 1: Presentation of Items of OtherComprehensive Income

3

Amendments to PAS 1: Clarification of the Requirementsfor Comparative Presentation

3

PAS 2 Inventories 3

PAS 7 Statement of Cash Flows 3

PAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors

3

PAS 10 Events after the Reporting Period 3

PAS 11 Construction Contracts 3

PAS 12 Income Taxes 3

Amendment to PAS 12 - Deferred Tax: Recovery ofUnderlying Assets

3

PAS 16 Property, Plant and Equipment 3

Amendment to PAS 16: Classification of ServicingEquipment

3

Amendment to PAS 16: Revaluation Method –Proportionate Restatement of Accumulated Depreciation

3

Amendments to PAS 16: Clarification of AcceptableMethods of Depreciation and Amortization

3

PAS 17 Leases 3

PAS 18 Revenue 3

PAS 19(Amended)

Employee Benefits 3

Amendments to PAS 19: Defined Benefit Plans:Employee Contributions

3

Amendments to PAS 19: Employee Benefits - regionalmarket issue regarding discount rate

3

PAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance

3

PAS 21 The Effects of Changes in Foreign Exchange Rates 3

Amendment: Net Investment in a Foreign Operation 3

PAS 23(Revised)

Borrowing Costs 3

PAS 24(Revised)

Related Party Disclosures 3

Amendments to PAS 24: Key Management Personnel 3

PAS 26 Accounting and Reporting by Retirement Benefit Plans 3

PAS 27 Separate Financial Statements 3

- 4 -

*SGVFS010994*

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31,2014

Adopted NotAdopted

NotApplicable

(Amended) Amendments to PFRS 10, PFRS 12 and PAS 27:Investment Entities

3

Amendments to PAS 27: Separate Financial Statements -Equity Method in Separate Financial Statements

3

PAS 28(Amended)

Investments in Associates and Joint Ventures 3

Amendments to PAS 28: Investments in Associates andJoint Ventures - Sale or Contribution of Assets between anInvestor and its Associate or Joint Venture

3

PAS 29 Financial Reporting in Hyperinflationary Economies 3

PAS 32 Financial Instruments: Disclosure and Presentation 3

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

3

Amendment to PAS 32: Classification of Rights Issues 3

Amendments to PAS 32: Offsetting Financial Assets andFinancial Liabilities

3

PAS 33 Earnings per Share 3

PAS 34 Interim Financial Reporting 3

Amendment to PAS 34: Interim Financial Reporting andSegment Information for Total Assets and Liabilities

3

Amendment to PAS 34: Interim Financial Reporting -disclosure of information ‘elsewhere in the interimfinancial report’

3

PAS 36 Impairment of Assets 3

Amendments to PAS 36: Impairment of Assets -Recoverable Amount Disclosures for Non-FinancialAssets

3

PAS 37 Provisions, Contingent Liabilities and Contingent Assets 3

PAS 38 Intangible Assets 3

Amendments to PAS 38: Revaluation Method –Proportionate Restatement of Accumulated Amortization

3

Amendments to PAS 38: Intangible Assets - Clarificationof Acceptable Methods of Depreciation and Amortization

3

PAS 39 Financial Instruments: Recognition and Measurement 3

Amendments to PAS 39: Transition and InitialRecognition of Financial Assets and Financial Liabilities

3

Amendments to PAS 39: Cash Flow Hedge Accounting ofForecast Intragroup Transactions

3

Amendments to PAS 39: The Fair Value Option 3

Amendments to PAS 39 and PFRS 4: Financial GuaranteeContracts

3

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

3

- 5 -

*SGVFS010994*

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31,2014

Adopted NotAdopted

NotApplicable

PAS 39(cont’d)

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets – Effective Date and Transition

3

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

3

Amendment to PAS 39: Eligible Hedged Items 3

Amendment to PAS 39: Novation of Derivatives andContinuation of Hedge Accounting

3

PAS 40 Investment Property 3

Amendment to PAS 40: Investment Property 3

PAS 41 Agriculture 3

Amendments to Pas 41: Agriculture - Bearer Plants 3

Philippine InterpretationsIFRIC 1 Changes in Existing Decommissioning, Restoration and

Similar Liabilities3

IFRIC 2 Members' Share in Co-operative Entities and SimilarInstruments

3

IFRIC 4 Determining Whether an Arrangement Contains a Lease 3

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

3

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

3

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

3

IFRIC 8 Scope of PFRS 2 3

IFRIC 9 Reassessment of Embedded Derivatives 3

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

3

IFRIC 10 Interim Financial Reporting and Impairment 3

IFRIC 11 PFRS 2- Group and Treasury Share Transactions 3

IFRIC 12 Service Concession Arrangements 3

IFRIC 13 Customer Loyalty Programmes 3

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

3

Amendments to Philippine Interpretations IFRIC- 14,Prepayments of a Minimum Funding Requirement

3

IFRIC 15 Agreements for the Construction of Real Estate 3

IFRIC 16 Hedges of a Net Investment in a Foreign Operation 3

IFRIC 17 Distributions of Non-cash Assets to Owners 3

IFRIC 18 Transfers of Assets from Customers 3

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

3

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 3

- 6 -

*SGVFS010994*

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31,2014

Adopted NotAdopted

NotApplicable

IFRIC 21 Levies 3

SIC-7 Introduction of the Euro 3

SIC-10 Government Assistance - No Specific Relation toOperating Activities

3

SIC-12 Consolidation - Special Purpose Entities 3

SIC-13 Amendment to SIC - 12: Scope of SIC 12 3

Jointly Controlled Entities - Non-Monetary Contributionsby Venturers

3

SIC-15 Operating Leases - Incentives 3

SIC-25 Income Taxes - Changes in the Tax Status of an Entity orits Shareholders

3

SIC-27 Evaluating the Substance of Transactions Involving theLegal Form of a Lease

3

SIC-29 Service Concession Arrangements: Disclosures. 3

SIC-31 Revenue - Barter Transactions Involving AdvertisingServices

3

SIC-32 Intangible Assets - Web Site Costs 3

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE A. FINANCIAL ASSETS

Name of issuing entity and association ofeach issue

Number of Sharesor principal

amount of bondsand notes

Amount shown in thebalance sheet

Income receivedand accrued

Cash and cash equivalentUSD BDO Cent'l Savings Account-573-023-1912 $− $14,397,431 $20,188Debt Service Account-BDO − 6,493,151 46,858USD Metro Savings Account- 377-2-377008264 − 12,441 14USD KEB Savings Account-5402072029 − 150,618 141Peso Metro Checking Account-37750912-5 − 224 −PESO BDO Paseo 539-801-2550 / 539-0006-2109 − − −PESO BDO Cent'l -573-024-9676/ 5738-003866 − 10,711,617 2,437Peso Metro Savings Account-37750912-0 − 7,768 43Peso Metro Savings Account-37747847-0 − 549 16Peso KEB Savings Account-5401020570 − 9,170 37Time Deposit - USD-BDO − 5,000,000 58,199Time Deposit - Peso-BDO − 481Cash on Hand − 10,789 −

Trade accounts receivableSamsung Electronics Co., Ltd. − 21,213,101 −Other Non-trade receivables − 324,461 −Receivables from Officers and Employees − 175,969 −

Prepayments and other current/other non-current assets

Clark Development Corp. − 18,876,550 −Refundable Deposits − 1,459,835 −Receivables from Officers and Employees − 6,708 −

$78,850,382 $128,414

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE B. AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES, RELATED PARTIES AND PRINCIPAL STOCKHOLDERS(OTHER THAN RELATED PARTIES)

Name and designation ofdebtor (i)

Balance atbeginning of period Additions

Amounts collected(ii)

Amounts writtenoff (iii) Current Not current

Balance at end ofperiod

Byung Sun Kang, Team Head $4,584 $− $2,069 $− $2,012 $503 $2,515Cheolwoo Kim, Team Head 4,774 − 2,091 − 2,012 671 2,683Dong Hwan Im, Part Head 5,266 − 2,919 − 2,012 335 2,347Gil Young Koh, Team Head 4,599 − 4,599 − − − −Hansol Kim, Team Head 4,389 − 1,874 − 2,012 503 2,515In Tae Hwang, Team Head 4,367 − 2,020 − 2,012 335 2,347Jae Won Kim, Team Head 4,804 − 2,120 − 2,013 671 2,684Joon Sang Kang, Team Head 4,367 − 2,019 − 2,013 335 2,348Kyuho Han, Team Head 3,349 − 2,007 − 1,342 − 1,342Minyong Kim, Part Head 4,367 − 2,019 − 2,013 335 2,348Oshin Kwon, Part Head 4,367 − 2,019 − 2,013 335 2,348Sanghoon Ha, Team Head 3,349 − 2,007 − 1,342 − 1,342Wan Seok Cho, Team Head 4,367 − 2,019 − 2,013 335 2,348Yu Jin Kim, Part Head 4,368 − 2,018 − − 2,350 2,350

$61,317 $− $31,800 $− $22,809 $6,708 $29,517

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE C. AMOUNTS RECEIVABLE FROM RELATED PARTIES WHICH ARE ELIMINTATED DURING THE CONSOLIDATION OF FINANCIALSTATEMENTS

Name and designation ofdebtor (i)

Balance atbeginning of period Additions

Amounts collected(ii)

Amounts writtenoff (iii) Current Not current

Balance at end ofperiod

“Nothing to Report”

*SGVFS010994*

ANNEX VII

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE D. INTANGIBLE ASSETS - OTHER ASSETS

Description (i)

Beginningbalance

Additions to cost(ii) Charged to costs

and expensesCharged to other

accounts

Other changesadditions

(deductions) (iii) Ending balanceJeonsoft Payroll System $29,425 $− $16,049 $− $− $13,376PC Security System 26,538 − 12,248 − − 14,290WinPro ALNG UpgrdSAPk MVL 1,007 − 1,006 − − 1Office Pro Plus ALNG LicSAPk MVL 3,478 − 3,477 − − 1SQLSvrStd 2008R2 SNGL MVL 38 − 37 − − 1Sage ACCPAC ERP System 52,083 − 23,148 − − 28,935Security Manangement System 34,166 − 9,318 − − 24,848Tool Life Management System 83,809 − 23,388 − − 60,421Cost Management System 22,388 − 5,166 − − 17,222Module OnLine System 93,749 − 21,634 − − 72,115In-Process Quality Monitoring System 23,787 − 5,489 − − 18,298

$370,468 $− $120,960 $− $− $249,508

iii. Account being charged in the amortization of the above intangible assets is Account Code 123201-Software.

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE E. LONG-TERM DEBT

Title of issue and type of obligation

Amountauthorized by

indenture

Amount shownunder caption

“Current portionof long-term

debt” in relatedbalance sheet

Amount shownunder caption

“Long-termDebt” in related

balance sheet$83M CONTRACT FACILITY LOAN-BDO $20,750,000 $31,054,308$29M CONTRACT 2013 LOAN-BDO 3,625,000 25,074,673

$24,375,000 $56,128,981

Amounts above represent the carrying amounts at the amortized cost. The total gross amount of the loansamounted to $80,875,000.

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE F. INDEBTEDNESS TO RELATED PARTIES

Name of related partyBalance at beginning of

period Balance at end of period“Nothing to Report”

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE G. GUARANTEES OF SECURITES OF OTHER ISSUERS

Name of issuing entity ofsecurities guaranteed by theCompany for which thisstatement is filed

Title of issue of eachclass of securities

guaranteed

Total amount ofguaranteed and

outstanding

Amount owned byperson for whichstatement is filed Nature of guarantee

“Nothing to Report”

*SGVFS010994*

PHOENIX SEMICONDUCTOR PHILIPPINES CORP.SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E

SCHEDULE H. CAPITAL STOCK

Title of issue (i)

Number of sharesauthorized

Number of sharesissued and

outstanding atshown under

related balancesheet caption

Number of sharesreversed for

options, warrants,conversion and

other rights

Number of sharesheld by related

parties (ii)Directors, officers

and employees Others (iii)Common stock 2,925,000,000 2,165,024,111 − 1,840,264,104 1,000,007 323,760,000

*SGVFS010994*

Financial Soundness Indicator

2014 20131. Current/Liquidity Ratios

a. Current Ratio 1.54 1.49b. Quick Ratio 1.30 1.16

2. Debt Equity Ratio 1.03 1.68

3. Asset to Equity Ratio 2.03 2.68

4. Interest Rate Coverage Ratio 8.76 6.79

5. Profitability ratiosa. Net Income Margin 7.45% 6.48%b. Return on Assets 8.98% 7.12%C. Return on Equity 20.69% 21.29%

Computations: 122014 1220131. Current/Liquidity Ratios

a. Current Ratio (Current Assets/Current liabilities)Current Assets 69,307,769.00 56,820,592.00Current Liabilities 44,879,933.00 38,115,211.00a. Current Ratio 1.54 1.49

b. Quick Ratio (Cash and Cash Equivalents + Trade and Other Receivables)/Current Liabilities)

Cash and Cash Equivalents 36,793,758 23,105,776Trade and Other Receivables 21,713,531 21,141,915Total 58,507,289 44,247,691Current Liabilities 44,879,933 38,115,211Quick Ratio 1.30 1.16

2. Debt Equity Ratio (Total liabilities/SHE)Total liabilites 101,408,670 118,552,235Stockholder's Equity 98,116,183 70,634,705Debt Equity Ratio 1.03 1.68

3. Asset to Equity Ratio (Total Assets/SHE)Total Assets 199,524,853 189,186,940Stockholder's Equity 98,116,183 70,634,705Asset to Equity Ratio 2.03 2.68

4. Interest Rate Coverage Ratio (EBITDA/Interest Expense)Net Income After Tax 17,453,811 13,593,415

*SGVFS010994*

Finance Cost 5,145,737 7,940,614Provision for income tax 1,505,293 1,875,627Depreciation 18,701,023 18,375,283Amortization of Intangibles 120,960 121,492EBITDA 42,926,824 41,906,431Interest Expense* 4,900,981 6,168,586

Interest Rate Coverage Ratio 8.76 6.79*interest expense includes guarantee fee

5. Profitability ratiosa. Net Income Margin (Net Income/Revenue)

Net Income 17,453,811 13,593,415Revenue 234,361,810 209,675,061Net Income Margin 7.45% 6.48%

b. Return on Assets (Net Income/Total Assets)Net Income 17,453,811 13,593,415Total Assets, beg 189,186,940 192,410,125Total Assets, end 199,524,853 189,186,940Average Total Assets 194,355,897 190,798,533Return on Assets 8.98% 7.12%

c. Return on Equity (Net Income/Ave Shareholder's Equity)Net Income 17,453,811 13,593,415Shareholders Equity, CY 98,116,183 70,634,705Shareholders Equity, PY 70,634,705 57,041,290Avarage Shareholder's Equity 84,375,444 63,837,998Return on Equity 20.69% 21.29%