TEL: Vega Telecom acquisition

8/16/2019 TEL: Vega Telecom acquisition

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R.G. Manabat & Co.The KPMG Center, 9/F6787 Ayala AvenueMakati City 1226, Merro Manita, philippines

Branches: Subic. Cebu. Bacolod. loilo

+63 (2, 885 7000+63 (2) 894 [email protected]

TelephoneFax

lnternBtE-Mail

REPORT OF' INDEPENDENT ATIDITORS

The Board of Directors and StockholdersVega Telecom, Inc.No. 40 San MiguelAvenueMandaluyong Cify

Report on the Separate Financial StatemenB

we have auditedthe accompalying separate financial statements of vega Telecom, Inc.(a wholly-owned subsidiaryorban luriguel c_orporatiorl, *r,r"r,

""mprisethe separate statementsof financial position as at December 3 i 20rs and zotq,'anitir"p*rur" statements ofomprehensive income, separate statements of changes i"

"qr,tyia separate statements of cashflows for the years then ended, and notes, comprisirig ,orrnury'oisignificant accounting policiesand other explanatory information.

Management's Respons ib irity for the separate Ftnanc iar statements

Management is responsible.f-olihgreparation and fair presentation of the separate financialstatements in accordance with Philippine Iiinancial R.p;;;; s;dards, and for such intemalcontrol as management determin.. is n..essury to enabte tnJprefaration of the separate financialstatements that are free from materiatmisstatement, whetier due to fraud or error.

Audi tors' Respons ibility

our responsibility is to express an opinion on these separate financial stat'ments based on ouraudits' we conducted our audits in iccordance with riilippin" iiandards on Auditing. Thosestandards require that we comply with ethical r"quir"*"ntil;l;, and perform the audit toobtain reasonable assurance a6out whether the separate financiaistatements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosurss in-the separate financial statements. The procedures selected depend on the auditors,udgment, including the assessment of therisks of material misstatement of the separate financialstatements, whether due to fraud or error. In making those risk assessments, the auditors considerinternal control relevant to the entity's preparation u]la ai, p."r"nrution of the separate financialstatements in order to design audit procedures that are upp.op.i"t" in the circum.i"n""r, uu, no,fbr.the-purpose of expressing an opinion on the effectiveness ofthe entitlz,s internalcontrol. Anaudit also includes evaluating the appropriateness ofaccounting policies used and thereasonableness of accounting estimates made by management,is well as .uutuuiirt ii,e overallpresentation of the separate financial statements.

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

R.G. M.nrbtt & Co.. a Pirippino pcnnorship snd r rurtor lhm o{ tha KPMGn8twork ol indopoodont li{mi rflihltod with KPMG lnbrn.tion.t CmpoGtvor(PMG lntomltjonrl'|, Swiss ontity. KpMG trbrnstio.€lprwides no qli6.tsoryrc€r. No mdmbor lirm h 3 any autiori, 10 obtigrt€ or bind l(pMG,nlomsionsl o( sny olhsr rumblr lirmvis- -vis third psilrca. no. dss (pMGlnlornStionsl ha6 any such ovtiority tq obhgrla o. bind any mmb6,lirm. Ailrqllis r€sNad.

PFC-BOA Ro0ist6ion No. 0003, v.lid untit O6c6mb€r 31, Z01CS,EC Accrediution No. C0O4-FR-4, Group A. vatid untit Nowmbsr tO, 201 ?,,C

Ae.od$rton No. t-2014101,i-8. vatid unr,t Augusr 26. 2Ol 7

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Opinion

R"G. IT{ANABAT & CO.

March 17,zArcMakati City, Metro Manila

In our opinion' the separate financial statemerts present fairly, in all material respects, thenconsolidated financial position of vega ielecom, hr.. ;; ii;;ber 3 l, 2a$ andz0t4, andts unconsolidated financiat perrormanc uii irr urcoosoriaai"a r^ri flows for the years thennded in accordance with philippine finun.iuf R.p",ti;; S;;l;;J;Report on the supprementary rnformation Required under Revenue Regurationso. 15-2010 of the bureau ollnternal Revenue

The supplementary information required for purposes_ of filing with the Bureau of Intemalevenue is presented by the.manager"ri"iir4a ret."om, ti".;;; separate schedure. suchupplementary information is not a'required parrof the br;il6;; financial statements. ourpinion on the separate financiar rt"t.rr"rrc i'r.not affectedby the presentation of treupplementary information in a separato,"fr.irf

".

DARWINP. YIROCELParkrerCPA License No. 0094495SEC Accreditation No:.lj16^1,.lroup A, valid until February S,ZOtlTax Identification No. 912_535-g64

r - -' '--BIR Accreditation No. 0g-0019 g7_31-2A13

_HTg De_cember 2,2013;vatiO until O"J.*t., t,201,6PTRNo.53215lSMDIssued January 4,2016 at Makati City

lrrll ;r^lrt :ii \/ -r t;iI)' lf ji. a:,i.,i;lr'ti,Il

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A VEGA TELECOM,INC.ofSanSEPARA TE STA TEMENTS or'

3lASSETS 2414

Curreat AssetsCash in banksReceivables t2

5,7, 12Other current assetsP11,6753,42

4,67tJlgg,El6PI,g0g,g79

1,267,2AI,270

Total Current AssetsNoncurrent Asset

4,695,647,00g 1,27A,679,66314

and advances 6 726P37,119,692,734

I 181 62P20,096,g60,025

LTABILmmSAND EQtrITyCurrert LiabilitiesAccounts payable and other current liabilities g, 12 P235J,17,701or future stock

Total Uabitities9l 730 P220,5AA,027

15,060J79,431 220,500,027EquityCapital stockAdditional paid-in capitalDeposit for future stock subscriptionDeficit

t0rut0

14,950,000100071424,975,000

435,250,0002i7,500,000

21,393,926,79g3t (2,1 70,3 16, 790)otal Equiry22,058303J03 19,976,3 5g,ggg

P20,096,g60,a2537,t19,692,734

See Notes to the Separate Fironcial Stalemenrs,

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VEGA TELECOM,INC.(A ofSan

SEPARATE STAITMENTS oF' r\rE INCO MEFOR TEE YEARS ENDED DECEMBER 31, 2015 AI''{D 2014

Note 2015EXPENSESProfessional feesTaxes and licensesRepairs aud MaintenanceOthers

P122,497,g7395,102,141

1,940,904

2014

P47,50055,647,339

7 t4,s41217,092,996 55,709,3g0

OTHER INCOME

Reversal of impairment losses on i:rvestmentIaterest income 67

2,1701795,02939,226 8,696,95gnrealized foreign gam

1,5592,170,93s,912 8,696,95g

rNcoME (LOSS) BEFORE rNcoME TAXINCOME TAX

1,953,752,926 (47,012,422)

174,886I

PI,953,745,093 (P47,191 ,309)

See Notes to the Separate Finoncial Slatementr.

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VEGA TELECOM,INC.(A ofSan &IiguelSEFARATE STATEMENTS OT' CIIANGES u.[ EQ UITY

r,OR TIIE YEARS ENDED DECEMBER 31,2015 AND 2014

Note 2015 2014CAPITAL STOCKCommon Stock - Pl00 par valueAuthorized - 30,000,000 shares i12015;

6,550,000 shares in 201413,500,000 shares issued and outstaading in

2015; 4,352,500 shares in ZOl4Preferred Stock - p1,000 par valueAuthorized - 22,000,000 shares in 2015

13,500,000 shares issued and outstanding in2015

P1,350,000,000 P435,250,000

ADDMONAT ?AID-IN CAPITALCommsa s1661Preferred stock

10 14,950,000,000 435,250,000

674,975,000 217,500,000

la 7,424,975,000 217,500,000DEPOSIT TOR FUTURE STOCK

Net income (loss)/total comprehensive income

2l 788

(2,170,316,790) (2,123,t29,4g2)

laDET'ICTTBalance at beginniag of year

Balance at end of year

See Notes to lhe Separate Financial Statemenls.

),87

Q16,571,697) (2,170,376P22,059,303,303 Plg,g 76,359,999

,790)


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VEGA TELECOM,INC.(A Wholly-owned ofSan Miguel

SEPARATE S TATEIVIENTS OT CASH FLOWSFOR THE YEARS ENDED DECEMBER 3I, 2015 AND 2014

Note 2015 2014CASU FLOWS T'ROM OPERATING

ACTIVITIESGain (loss) before income taxAdjustments for:Impairment loss on investrnent in an associateInterest income

P1,953,752,926 (P47,A12,422)

(2,170,795,029)

Q9,225) (8,696,959)

67Unrealized cain

Operating Ioss before working capital ,559)

lncrease in:ReceivablesOther current assets

changes (21 7,092,996) (55,709,390)

(13,560,020)(1,379,639)

J (862,190,064)(1,003,536)Accounts and other current

Net cash absorbed by operations,717

(1,065,558,81, (70,749,$gt

liabilities

Income tax paid6,357Net cash flows used in operating activities (17,106,492)

9,

t0 12,283,153,249 3,460,13"1,393

(1,065,566,645)CASH FLOWS FROM FINANCING

ACTTVTTIESAdditional deposit from future stock

subscription

Issuance of shares 98,212 t+,.Net cash flows provided by financing activities 12,511351,46A 3,464,631,29gCASII FLOWS FROM INVESTING

ACTIVTTTESlnterest receivedAdditional investment in subsidiary and in

associate

39,226 g,696,95gg1 (3,3 96,439

Net cash flows used in investing activities (11,436,020,110) (3,397,741,914)

1,559

9,766,263 (21 7, i 1 g)

EFFECTS OF FOREIGN EXCHANGERATE CHANGES ON CASII

NET INCREASE (DECREASE) IN CASHIN BANKS

CASH IN BANKS ATBEGINNING OF YEAR

ICASH IN AT END OF'YEAR PI PI

See Notes to the Separate Financial Statements,


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VEGA TELECOM,INC.of San

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

1. Reporting Entity

2. Basis of Preparation

Statement of Compliance

lh3.acgomrynying separate financial statemeats have been prepared in compliance withPhilippine Financial Reporring standards (PFRS). pFRS'are ua="a on IntemationarFinancial Reporting standards (IFRS) issued by the Internationaieccounting standardsBoard (IASB). PFRS consist of pFRS, philippine a"counting stanaurds (pAS) andPhilippine Interpretations issued by the Financiil Reporting staniards counrif iin(ci'-The Company elected not to present consolidated financial statements and insteadprepared separate financial statements as its primary financial statements since

it meetsall the conditions set out in paragraph 4(a) of pFRS r0, cansotidqted FinanciarStatements. SMC produces consolidated financial statements in accordance with PFRS,which are available for public use, SMC shares are listed in the philippi; St""iExchange' Its consolidated financial statements are available at the philippin" s""rriii",and Exchange Commission.

The separate financial statements were authorized for issue by the Board of Directors(BOD) on March 17,20t6.

Bqsis of MeasurementThe separate financial statements have been prepared on a historical cost basis ofaccounting.

vega Telecom, Inc. (the company), a whoily-owned subsidiary of san Miguercorporation (sMC or_?arent company), was incorporated l, trr" phirippin;;;;;registered with the philippine securities and Exchange Commission 'isBcl o"November 4,2A03.

The ultimate parent company is Top Frontier lnvestment Holdings, Inc. and theintermediate parent company is San Miguel Corporation

on February 4, z00B; the sEC approved the changein the corporate name of theCompany from SM View Realty Corp. to Vega Telecom, Inc. andthe amendment of itsprimary business purpose.

The company's amended primarytusiness purpose.is to engage in and render any and a1types of domestic and intemational telecommunications r".ii.""r.

The company's registered office address is No. 40 san Miguel Avenue, MandaluyongCity.

The pri.ncipal place of business of the company is 5ir g0g BIdg., Meralco Avenue cor.Gen. Lim St., Brgy. San Antonio, pasig City.

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The separate financial statements-are presented in phirippine peso, which is theCompany's functional currency. All financial information ,.ilo*a"a offto the nearestpeso, except when otherwise indicated.

3. Significant Accounting PoliciesThe accounting policies set out below have been applied consistently to all yearspresented in the separate financial statements, e*cepf for the changes in accountingpolicies as explained below.

Adoption of Amended Standards.The company has adopted thefollowing relevant and applicable amendments tostandards starting January r, zals and aioroTq,r,

"h*g#il'accounting poricies.Except as otherwise indicated, the adoption or tr,"se u*Jrar.nt, did not have anysignificant impact on the company's separate financiar statements.--

' Annual Improvemenx to PFRS cycles 2010-2012 and 201 t-2013 contain I I changesto nine standards.with consequentiar amendment,

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'otll.,standards andinterpretations, ofrviich only the folrowing *" uppii""utJ to",t" company. Thisamendment to PFRS has no significant effect on me nn*"lal statements of theCompany.

o scope ofportfolio exception (Amendment to pFRS 13, Fair value Measurement),The scope of the pFRS 13 portforio exceprion: yh;;; entities are exemptedfrom measuring the fair value of a group of financial assets and finaacialliabilities with ofilsetting risk positions on a net basis if certain conditions aremet - has been aligned with the scope of PAs 39, Financial Instruments:Recognition and Measurement andpFRi g, Ftnanciat In,tlu*nntr.PFRS 13 has been amended to clarify-th-ar the portfolio exception potentiallyapplies to contacts-in the scope of pAS 39 and ppns g regardress of whetherthey meet the definition of a dnancial asset or financial liability under pAS 32,Financial Instruments: Disclosure and Presentattoi -'".i.- "ertain contracts tobuy or sell non-financial items that can be settled net in caitr or another financialinstrument.

e Definition of 'related party' (Amendment to pas 24, Retated party Dtsclosures).The definition of a ' related parry, is extended to include a management entitythat provides key management personner (KMp) ,"*i"rr1o ttff;i;;ffiieither directry or.through a group entity. For reiated pu.ty tr*ru"tions that arisewhen KMp services are providid to a reporting "niity,'tt" reporting entity isrequired to separately disclose the amounts that It rru, ir"ogrir"a u, i .;#;;for those services.that are provided by a management entity; however, it is notrequired to ' Iook through'the management entit and disclos'e compensation paidby thg management entity to the indiviauab pioviding tfre rrvp services. Thereporting entity will also need to discloie othei transactions with themanagement entity under the existing disclosure requirements of pAS z+ _ ef.loans.

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New or Revised s*tandards. and Amendments to standards Not yet AdoptedA number of new or revised standards and amendments to standards are effective forannual periods beginning after January l,2o1s, and have not been applied in preparingthe separate financial statements. Unless otherwise indicated, none of thesr is .*p".t"a tIhave a significant effect on the separate financial statements.

The Company will adopt the following new and amended standards and interpretation onthe respective effective datcs:

' Equity Method in Separate Financial Statements (Amendments to pAS 27, SeparateFinancial Statements). Thp amendments allow tle use of the equity methoa inseparate financial statements, and appty to the accounting not only for associates anjjoint ventures, but also for subsidiaries. The amendments apply retrospectively foiannual periods beginning on or after January 1,2016. Early adoption is permittej.

' Disclosure Initiative (Amendments to PAS l, Presentation af Financial Statements)addresses some concerns expressed about existing presentation and disclosurerequirements and to ensure that entities are able to use judgment when applyingPAS l. The amendments clariff that:

I Information should not be obscured by aggregating or by providing immaterialinformation.

r Materiality considerations apply to all parts of the financial statements, evenwhen a standard rcquires a specific disclosure.

e The list of line items to be presented in the statement of financial position andstatement of profit or loss and other comprehensive income can be disaggregatedand aggregated as relevant and additional guidance on subtotals

*i-nih.r.

statements.

o An entity's share of OCI of equity-accounted associates and joint venturesshould be presented in aggregate as single line items based on whether or not itwill subsequently be reclassified to profit or loss.

The amendments are to be applied retospectively for annual periods beginning on orafter January 1,2016. Early adoption is permitted.

' fll 9 Q0l4), replaces PAS 39 and supersedes Sre previously published versions ofPFRS 9 that inkoduced new classifications and measur"*.nir"quirements (in ZOOqand 2010) and a new hedge accounting model (in 2013). PFR$9 includesrevisedguidance on the classification and measurement of financial assets, including a newexpected credit loss model for calculating impairmen guidance on own crJdit riskon financial liabilities measured at fair value and supplements the new general hedgeaccounting requirements published in 2013, pFRs 9 incorporates new hedleaccounting requirements that represent a major overhaul of hedge accounting aidintoduce significant improvements by aligning the accounting more closely wiih riskmanagement.

The new standard is to be applied retrospectively for annual periods beginning on orafter January 1, 2018 with early adoption permitted.

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Einansial Assets and Financial LiabiiitiesDate of Recognition' rne cimflr,y tecognizes a financial asset or a financial liability inhe separate statements of financial posiion when it u""o.", u party to t1,e contractualrovisions of the instrument. In the case.of a regularwayfur"t*" or sare of financialssets, recognition is done using settlement date uJ"orntirfi. .-'-

I:r:r: Recognition of Financiat Instruments. Financial instrinitially at fa'lr value. The initiar measurement of financial ilrr.r"I"t rfl:rff.T:::esigaated as at fair varue tfuough profit or loss crvpil, rnciul", our,.uorion costs.The company classifies its financial assets in the following categories: held-to-maturity(HTM) investrnents,availabre-for-sare (AFS) rq?"r ;;;1i., Hr-"o"iur assets as at FVpind loans and receivablelJh* company classifies its nr"rr"iur liabilities as eitherinancial liabilities as at FWL or other financiat liabilitier. iii"

"r"rrification depends onhe purpose for which the invesfments are acquired and *t"tr,., they are quoted in anctive market' Management determines the "t"ssin"ation;l;r financial assets andinancial liabilities at initial recognition and, where uro*rorii appropriate, re-evaluatessuch designation at every ,rportiig drt..

The company has *=-{}'tinvestnents, AFS financial assets and financial assets andinancial liabilities at FVpL.'Day 1' Profit' Where the. bansaction price in a non-active market is different from theair value of other observable current market &ansactions in tho same instrument or basedn a valuation technique whose variables include only da-ta fr#an observable markehe company recogniies the difference bet',rieen the transaction prrce and the fair valuea'Day 1' profit) in profit or loss unless it qualifies for recognition as some other assetype' In cases where data used is not observubl", the diff.*;;l;rween rhe transactionprice and model varue is onry recognized in profit or io;;-;;r, the inputs becomeobservable or when the instrument is derecogniied. For .."h t *ru"tion, the company

determines the appropriate methods of recognlzing trr. ;p"y i'; i.ri,t amount.Financial AssetsLoans and Receiva&/es' Loans and receivables are non-derivative financial assets withixed or determinable payments and maturitiSg that are not quoted in an active market.They are not entered into with the intention of immediat. o, .iort-*rm resale and are notdesignated as AFS financiar assets or financiar ;;;i-vp;.'"'""subsequent to initial measuremen loans and receivables are canied at amortized costusing the effective interest.method, Iess any impairment in value. Any interest earned onloans and receivables-shall be recognizej as part of .,Interest income,, account in trreseparate statements of comprehensive income on an accrual basis. Amortized cost iscalculated

by taking into account any discount or premium on ac[uisition and fees that1". ry integral part of the effective interest rate. The periodic amortization is alsoincluded as part of "rnterest income,, account in itre ,*p".ur, statements ofcomprehensive income. Gains or losses are recognized in pronioi loss when Ioans andreceivables are derecognized or impaired.The company's cash in banks and receivabres are included in this category Q.{otes 5and 12).

Cash in banks are stated at face value.

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Financial Liabilitiesother Financiat Liabilitles. This_category pertains to financial liabilities that are notesignated or classified as at FVPL. a}"r initiut .n"urur"**1,1ther financial liabilitiesre carried at amortized cost using the efitective intererl metoi. a*onired cost isalculated by taking into account ariy p."mium or discount and any directly

athibutableansaction costs that are considered-an integr.r pJ;i;i; ;+;j" interest rate of theiability. The effective interest ,ut" u^iiiixron is inctuaJ-i, "i:lnr"rest expense andther financing charges" ac:ou.nl in the separate statements of comprehensive income.ains and losses are reco8nized in profit o.-loru when the ri"uliiti-, are derecognized asell as through ttre amortization process.The company's accounts payable and other curent liabilities are included in thisategory [Notes 7 and g).

Dgrecogqition of Financial Assets and LiabilitiesFinanciar assers. A financtc;G;*G;;ricabre, apart of a financiar asset or paxrof a group of simirar financiar assetsy is pri**;ty a"."rogolJ;;rr"n,' the rights to receive cash flows from the asset have expired; or' the company n|^-qirt,red its rights to receive cash flows from the asset or hasssumed an obligation to pay theri in full without ,il;;i delay to a third parrvunder a "pass through" arrangement; and either: c) h;;;;;f.;;i ;;bd;r"rrr""lihe risks and rewards of ttr-e

^r"i o, (b) has n"itri", t.*sferred nor retainedubstantially all the risks and rewards of the'asset, tri;;; transfened control of thewhen the company has tansferred its rights to receive cash flows from an asset or hasntered into a pass-through arrangemen It evaluates ir and to what extent it has retainedhe risks and rewards

or o*rr"r.t ip.'wt

rn it has neith", trlrr.o.d nor retainedubstantially all the risks and rewards'of the asset nor kansferred contror of the asse theompany continues to recognize the transferred asset t" irr, ,,.,.rt of the company,sontinuing invorvement' In that .*", th" company ut.o-.""ognlzes

the associatediabiritv. The transfened asset *d th; ;;;i""a ii"uiiirv;""#;;rr"d on the basis thateflects the rights and obrigations that tt-,r corpuny has retained.Financial Liabilities' A financial liability is derecognized when the obligation under theiability is discharged or cancelled or has expirer. frh"n ;;;;rrirg financial liabiliry iseplaced by another from dre same lender on substantiany diff.;;terms, or the terms ofn existing liability are substantially modified, such ;, .;;-*g" or modification isreated as a derecognjtion of the originar ri"blii.;;; il" .;;;;trion of a new liabiliw.he difference in the respective

carry'ing amounts rs ,ecognizeJ?, p.rn, or Ioss"tn]ealnnent of FlnanoThe company assesses,

1_the rengrting date, wleth9r there is objective evidence that ainancial asset or group of financiat assis is impaired.

A financiar asset or a group of financial assets is d.:l"g to be impaired if, and onry i{here is objective evidence of impairment as a result of one or more events that haveccurred after the initial recog:rition of the asset (an incurred loss eventl and that lossvent has an impact on the estimated future cash flows of the fin:anci.r ;;;;i;;;;of financial assets that can be reliably estimated.

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Assets carried at Amortbed cosr' For assets carried at amortized cost such as loans andeceivables, the company first assesses whether ot;""tiue evi]-.n", of impairment existsndividually for financial assets that are, ind.ividurily .iCn"ant, or coltectively forinancial assets that are not individually significant. if';; objective evidence ofmpairment has been identified for a particuia, finun"iui"rr", ,t u, was individuallyssessed, the company includes the asset as. plt of a g.oup

of financiar assets withimilar credit risk characteristics una *tt""tiu"ry urr"ri_-, it" group for impairment.Assets that are individually assessed for impairm"rt *a ro, *tl.n an impairment loss is,r continues to be, recognized are not included in the colleciive'impai.*ent assessment.Evidence of impairment for^specific impairment.purposes may include indications thathe borrower or a group of booo*"., -is exprri.o"ing nr*}ar difficurty, default orelinquency in principal tr interest payments., or may enier into bankruptcy or other formf financial reorganization intended to alteviate ure financiai-iJnoruon of the borrower,or collective impairment purposes, evidence or irpairm"ni ml 'in"tua, observable datan existing economic conditions or industry-wide,developmenfiinaicating that there is aeasurabre decrease in the estimated future cash flows ortr,..rtut o assets.

If tiere is objective evidence of impairment, the amount of loss is measured as theifference between the asset's"arryin iil:-lt and the pr.r.nt vatu" or"stimated futureash flows (excluding future credit lIsr"rl discounted? ti" nn*"i"l asset,s originalffective interest rat'e (i,e., the effective interest rate computeJ at initial recognition).ime value is generally not considered wt en the effect or &rrnunting the cash flows isot material' If a loan or receivable has a variable rate, G. air**, rate for measurinsny impairment loss is the current effective interest r*, "J:rJ"i for the original crediiisk premium' For collective impairment purposes, impainienf ioss is computed basedn their respecfive default and hisiorical loss experience.

The carrying amount of the asset shalt be reduced either directly or through the use of anllowance account. The impairment Ioss ro. tt," period ,iruti"i"l".o gnizedin profitoross' If, in a subsequent period, the amount of the impairme,t los, de"rea.es and theecrease can be related ob.lectivety to an event occurring after the impairment wasecognized, the previousry recognized impairment ross ii *rrrr"a, Any subsequenteversar of an impairment ross is ,e"ognizea in proirt oi-ro.r,"io trre extent that thearrying amount of the asset does not r*Jr"J its am;ilized .".i

"itrr"reversal date.

From the perspective of tni sified as debt instumentf it provides for a contactual obligation to:. deliver cash or another financial asset to another entity;

' exchange financial assets or financial liabilities with another entity under conditionsthat are potentially unfavorable to the Company; or' satis$'the obligation other than by the exchange ofa fixed arnount ofcash or anotherfinancial asset for a fixed number of own equi[, shares.If the company does not have an unconditional right to avoid delivering cash or anotherfinancial asset to settle its contrachral obligation, tlhe obligation *""t. the definition of afinancial liability.

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Offsetti-q g Financial lnstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in theseparate statements of financial position id and only if, there is a currently enforceablelegal right to offset the recognized amounts and thire is an intention to seuie on . n"ibasis, or to realize dre asset and settle the liability.simultaneously. This i, not g*"rufrvthe case with master netting agreements, and the related asiots and liabilities arepresented gross in tl.re separate statements of financial position.

Ilu"rt*"rts in sh*"r of sto"k of sub.idiuri.r und an A..o"i*t"*nd Adu*.prThe Company's investments in shares of stock of ;kidi".i;and an associate areaccounted for under the co-st method as provided for under PAS 27. The investments anjadvances are carried in the separate siatements. of financial position at cosi h;;;impairment in value. The. cornpany recognizes dividend from a subsidiary *a u.*"iuiin profit or loss when its right to receive the dividend is established.A subsidiary is an entity controlled by the cglnnanr Th-e company controls an entitywhen it is exposed to, or has rights to, variable rcio.ns from its involvement with theentity and has the ability to affect those retums through its power over the entity.

An associate is an entity in which the company has significant influence. Significantinfluence. is the power to participate in the financial-ana op"iutiog policief"a

A;investee, but is not control orjoint control over those policies.

Advanoes includes advances to a telecommunication cgmqany over which the companyhas positive intention ofsubscribing to shares ofstocks i, it

"i,rtur"

The investments are as follows:

Place of

Nore IncorporationSubsidia ries

a

PhilippinesPhilippines

BVIPhilippinesPhilippinesPhilippincsPhilippincsPhilippinesPhilippines

Philippines

100.00%100.00%100.00%r00.00%100.00%100.00%100.00%I00.00%

97.46%

100.00%I00.00%I 00.00%r 00.00%I00.00%

45.s8%

Co., Inc, @rcryl c 88.17%a. Includes 50.A09/6 dbect intercst and 50.00% indirect ownership through PHC, PSCL, andNCI in20l5: anddirect interest and 54.32% ittdirect ownership through PHC, PSCL, and TCCI in 2011b. Investment in LTHI is accounted as itwest nenl in an atsociats in 2014 represenling 45,58a/o ownershipc. Includes 9,7294 direct interest and 78.4Soti in 2015

4s.68%

Impairment of Non-financial AssetsThe carrying amounts of investments and advances are reviewed for impairment whensvents or changes in circumstanoes indicate that the carrying amount may not berecoverable. If any such indioation exists, and if the canyi;g amount exceeds theestimated recoverable amount, the assets or cash-generating unif, are written down totheir recoverable amounts. The recoverable amount of thJasset is the greater of fairvalue less costs of disposal and value in use. The fair value is the price ihat would bereceived to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using

a pre-tax discount rate thatreflects current market assessments of the time value of ,on.y and the risks specific to

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AG.N.

Inc. (MTHI)(TDE)


14/28

the asset' For an asset that. does not generate largely independent cash inflows, therecoverable amounr is determined for the cash-genera:tini .,riii" irri"r, ,il;;;;;;";;.Impairment losses are recognized in profit o, 6r, i, t#;;;1n.""utrgories

consistentwith the function of the impaired asset.

An assessment is made. at each reporting date as to whether thereis any indication thatpreviously recogaized impairmeni losse-s may no longer

"*irio, may have decreased.If such indication exists, the recoverable amount is esiimated. A previously recognizedimpairment loss is reversed onry if rhere has b.., ; ;i;;;; io ,t. estimates used toetermine the asset's recoverable amount since the. rast impaTrment loss was recognized.If that is the case, the carrying amount of the asset is increased io it, ,..orr.rable amount,That in*eased amount cannot exceed the carrying amount that wourd have beendetermined had no impairment loss been recogniiedlo. the asret in prior years. suchreversal is recognized in profit or loss.Fair Value MeasurementThe company measures a number of financial and non-financial assets and liabilities atfair value.

Fair value is the price that would be received to sell an ass-et or paid to transfer a liabilityin an orderly hansaction between market participants ut tt" *Ju*rrement date. The fairvalue is based on the

-presumption that the kansaction to sell tt " "rr", or transfer theliability takes place eiiher in'the,principal market for the urr.i-o, liability or in theabsence of a principal markeg in the mosi advantageour ;;rk"t i;. t1,e asset or liability.The principal or most advantageous market must be-accessibre to &e company.The fair value of an asset.or liability is measured using the assumptions that marketparticipants would use when. pricing ths asset or liabirity, assuming that marketparticipants act in their economic best iiterest.

The company uses valuation.techniques that are appropriate in the circumstances and forwhich sufficient data are available to measure raiivarue, **irnirirrg the use of relevantobservable inputs and minimizing the use of unobservabr; ilil.'""AII assets and liabilities for which fair value is measured or disclosed in the separatefinancial statements are categorized within the fair value. hierarJy]arr.riued as follows,based on the lowest level input that is significant to the fair viiu" ,.urur.ment as awhole:

E

LevelZ: inputs other than quoted prices included within Level 1 that are observablefor the asset or riability, either directry or indirectty; ana-'

Level 3: inputs for the asset or liability that are not based on observable marketdata.

For assets and liabilities that are recognized in the separate financial statements on arecurring basis, the Company determines whether transfers have occurred betweenLevels in the hierarchy by re-assessing the categorization at the end of each .rponingperiod.

Level I: quoted prices (unadj usted) in active markets for identical assets orliabilities;

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Deposit for Future Stock SubscriptionsA deposit for future subscription is not considered as an equity iastrument unless all ofthe following elements are present:

" there is a Iack of insufiiciency of authorized unissued sharesof stock to cover tiedeposit;

' the Company's BoD and stockholders have approved an increase in capital stock tocover the shares corresponding to the amount of the depositr;dt all application for the approval of the increase in capital stock has been filed with theSEC.If any or all of the foregoing elements are notpresent, the tansaction is recognized as aliability.

Share Caoital

Common Sharescommon shares are classified as equity. Incremental costs directly athibutable to theissue of shares are recognized as adeduciion from equity, ,"t or*y tax effects.Prefeted SharesPreferred shares are classified as equity if they are non-redeemable, or redeemable onlyat the Company's option, and any diviiends tlrereon *e air"r"tiorrury. Dividends thereonare recognized as distibutions within equity upon approval by the non "rtl" C";;;;;:.Preferred shares are classified as a.liability if they are redeemable on a specific date or atthe option of the shareholders, or if dividend payments *. ooi-air".etionary. Dividendsthereon are recognized as interest expense in piofit or ross

"r """r*a.Additional Paid-in Capital

fifl:i:lJ,frt;il"fon, represents the excess of consideration received over the par

Interest IncomeInterest income is recognized as the interest accrues, taking into account the effectiveyield on the asset.

Expense Recoenition

P,nffi"f:recognizedupon receipt of goods, utilization of services or at the date they

Expenses are also recognized when decrease in future economic benefit related to adecrease in an asset or an increase in a liability that can u" m"asur"a reliably has arisen.Expenses are-recognized on the basis ofa direct association between costs incurred andthe earning of specific items of income; on the basis of systematic and rational allocationprocedures when economic benefits are expected to arise over several u""o*tirg priiol,and the association can only be broadly or indirectly determined; oiimmediately;t";;expenditure produces no future economic benefits or when, *j to the extent that futureeconomic benefits do not qualifu, or cease to quaiift, for recognition as an asset.TaxgsCurrent lax. Current tax is the expected tax payable or receivable on the taxable incomeor loss for the year, using tax rates enacted or substantively enacted at the reporting date,and any adjustrnent to tax payable in respect ofprevious years.

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16/28

Deferred Tac' Defened tax is recognized. in respect of temporary differences betweenthe carrying amounts of assets and-liabilities roi nnanciui i"iortirg purposes and themounts used for taxation purposes.

Deferred tax liabilities are recognized for a[ taxabre temporary differences, exeept:

' where the defened tax liability arises from the initial recognition of goodwill or of anasset or liability in a tansaction that is not a business comf,ination *a,"t

*r"ii*""rhe transactioq affects neither the accounting profit no, i*uut* profit or loss; and

' with respect to taxable temporary differences associated with investments inubsidiaries, associates and interests in joint ,";;;;;;ere the timing of thereversal of the temporary differences carbe controlled'anJ it is probable that tJretemporary differences will not reverse in tre foreseeabre future.Defened tax assets are recognized for all deductible temporary differences, carryforwardbenefits of unused tax credits - Minimum corporate in"o*"}*(MCIT) and unused taxosses - Net operating L?:s.carry over (Noi,co), to tr,.

"xt"nt that it is probabre thattaxable profit will be available against *i,i" th. d"aurtilr" rr*porury differences, andthe carryforward benefits of MCrr and NoLCo; ;;;il;;i]o""or,' where the defened tax.asset relating to the deductible temporary difference arisesfrom the initial recognition of * u-rr"t or liability in a iansaction that is not abusiness combination and, at the time of the t*.ution, alfects neither theaccounting profitnortaxable profrt or loss; and' with respect to deductible

-temporary differences associated with investments insubsidiaries, associates and inierest, in ;oint ""r*r;;l;ferred tax assets arerecognized only to the extent that it is proLable a"t flrr-L*porary differences willreverse in the foreseeable future and tax;ble profit will be avaiiable aeri"ri;iirir'ii;temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reducedto the extent that it is no longer probable that suffrcient ,*"uir pl"nt will be available toallow all or part of the deferred iax asset to be utilized. t;;;;;ilred defe,ed tax assetsare reassessed at each reporting date and are recognized to theixlent that it has becomeprobable that future taxable profit will allow the aJfened ,* urriiio be recovered.The measurement of defened tax reflects the tax consequences that would follow themanner in which the company expects, ut tl"._9nd of the ieporting perioa, to recover orsettle the carrying amount of its assets and liabilities. ' --o

Deferred tax assets and liabilities are measured at the tax rates that are expected to applyin the year when the asset is realized or the liability i, ,;;i;, based on tax rares(and tax laws) that have been enacted or substantively enacted ui tt"

,rporting date.

In determining the amount of current and deGrred tax, the company takes into accountthe impact of uncertain tax positions and whether additional t i". ura interest may bedue' The company believes that its accruals for tax liabilities *" uarqu"r. ro, uiiiprntax years based on its assessment of many factors, including interpretation of tax lawsand prior experience' This assessment relies on estimates*and assumptiors *a ,uyinvolve a .series of judgments about future events. New information may ,"";;;available that causes the.co_mpany to change- its jud.gment regarJing th" ;;q;;;';;existing tax liabilities; such changes to tax liaLilitiei *itt impact"tax expense in the periodthat such a determination is made.

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17/28

current tax and defened t5 * recognized in profit or loss except to the extent that irrelates to a business combination, oi ite*s retognized oirectiy in equity o. in o,r,",comprehensive income.Defened tax assets and deferred tax Iiabilities are offset,

if a legally enforceable rightexists to set off current tax assets against current tax liabilities and the deferred taxesrelate to the same taxable entity and the same taxation authority.

Yalue-added ru ffAT). Revenues, expenses and assets are recognized net of theamount of VAT, except;u where the tax incurred on a purchase ofassets or services is not recoverable from thetaxation authority, in which case tie tax is recogrized as part of the cost ofacquisition ofthe asset or as part ofthe expense item is applicaule; and' receivables and payables that are stated with the amount of tax included.Related PartiesParties are considered to be related if one party has the ability, directly or indirectly, tocontrol the other party T exercise sigrrificant lnfluence over'iire otr,", p".ry l; ;;'kt;;financial and operating decisions. Parties are also considered to be related if they aresubject to common control. Related parties may be individuals o,

"orpo."," entities,

ProvisionsProvisions are recognized when: (a) the coSRany has a present obligation (legar orconstructive) as a resurt of past gvents; (b) it is'probabre (i.e., moie riker"y ,il ;;0 ;;;an ouflow of resources.embodying economic benefits wili be required to settle theobligation; and (c) a reliable estirnate can be made of the a:nount of the obligation.If the effect of ttre time^varue of money is material, pioriri"r, are determined bvdiscounting the expected future cash flows at a pre-tax rate that r;;;; il; ffi-"Jassessment of the time.value of money and the risks specific to the liability. wh;;;discounting is used, the increase in the provision due.to tt p**g. of time is recognizedas interest expense. Where some or all of tne expenditure r.qr-i-r"?1o settle a provision isexpected to be reimburyd b.y another parry, the i"i*burr"rn"J ,irri u" ."""giir"j*rr"r,and only when, it is virrually certain that reimbursement wiil be received if the entitysettles the obligation' The reimbursement shall be teated as " s"p"r"te asset. Theamount recognized for tire reimbursement shall not exceed the amoun[ of the provision.Provisions are reviewed at each reporting date and adjusted to i"a."t the current bestestimate.

Contingencies

Contingent liabilities are not recognized in the separate financial statements, They aredisclosed in the notes to the separate financial statements unl"rr tf,, porriUif;ry Jf unoutflow of resources embodying economic benefits is remote. cortingent assets"are notrecognized in the separate financial statements but are disclosed in- the notes ," ifr"separate financialstatements when an inflow of economic benefits is probable.EvEnts After the Reporting DatePost year-end events that provide additional information about the company,s financialposition at the reporting date (adjusting events) are reflected in the separate financialstatements. Post year-end events that are not adjusting events are disclosed in the notesto the separate financial statements when material,

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18/28

4. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the separate financial statements in accordance with pFRS requiresanagement to make judgments, estimates and assumptions ,##";ffi"^"rri#Hr",accounting policies and the amounts of assets, liabilities, i;;;. and expenses reportedn the separate financialstatements at the reporting date. Ho*"r"r, uncertainty abouthese judgments, estimates and assumptions could re.-sult in an outcome that could require

il#rtt'adjustnent to the carrying amount of the affected asset or Iiability in the

Judgments and estimates are continually evaluated and are based. on historical experiencend other factors, including expectaiions of future "u*rr-in* are betieved to beeasonable under the circumstancis, Revisions-u."

.""os,r;"i in trr" period in which theudgments and estimates are revised and in any future period affected.Bsttmates anO assumThe key estimates and assumptions used in the separate financial statements are basedpon management's evaluation of relevant

facts ant rir"u.rt*."s as of the date of theeparate financial statements. Actualresurts courd differ no,n ,u.t estimates.Fair yalue Measuremenrs, A number gf t{e company,s accounting poricies andj:::[ffi:,fiffi:r'measurement oir.i. varues r"''uoir n,i"n"iur and non-financiarThe company has an established contol framework with respect to the measurement ofair values, This includes a varuatio;;.* that has tt"'orlru responsibirity forverseeing all significant fair vatue meas lrements, including Level 3 fair values, Thealuation team regularly. reviews significant

"nour"*uliJ inputs and valuationdjustments' If third parfy information is"used to measure ruir'rutr"r, then the valuationeam assesses the evidence obtained to support the conclusi;;ih"t such valuations meethe requirements of pFRs,_incrudiog thel;er in the rui, ,urr.lierarchy in which suchaluations should be classified.

The company uses market observable data when measuring the fair value of an asset oriability' Fair values are categorized into difflerent levers in"Jrui. uuru, hierarchy basedn tle inputs used in the valuition techniques.

If the inputs used to measure the fair value of al as:el or a riability can be categorized inifferent levels of the fair value t itr.."try, tuen the fair varue ,n-e-aJrrement is categorizedin its entirety in the same level of the fair'vatu" hier-cr,/basrJr, rrr.lowest level inpurhat is significant to the entire measurement.

The company recognizes transfers between levels of the fair value hierarchy at the end ofhe reporting period during which the change has occurred.

Allowance fot Impairment Losses on Receivables. Provisions are made for specific androups of accounts, where objective evidence of irnpairm.ri-r*irt.. Th;6;;;;evaiuates these accounts on the basis of factors thai affect the collectability of theaccounts. These factors include, but are not limited. to, the l*gd, .f th;-a;;;;_;;;relationship with the customers and counterparties, the .rrtorn"rii current credit statusbased on third party credit reports and known market forces, ur"rug" age of accounts,collection experience, and historical loss experience. The u*ount una riring of recordedexpenses for any period would differ if the company ,rua. aina*rt iiag",.rtr-"itilized different methodologies, An increase in allowance for imfairment losseswouldincrease the recorded costs and expenses and decrease .rr."n, *r"[.

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19/28

The company has no allowance for impairment losses on receivables as at December 3l015 and 2014 (Note 5). vrer 4r 4r ucutrrtroer J l,

Realizability o/ De/erred Tax Assets. The company reviews its deferred tax assets atach reporting date and reduces the carryingu*ourit to th;;;;"rt that it is no longerrobable that sufticient taxable profit willie available to ailo* air or part of the deferredtax asset to be utilized. The company's assessment on the recognition of deferred taxssets on deductible temporary difference, carryforward uenents orNoLCo and MCIT isased on the projected taxabli income in ihe foilowing p.;oJr,- "

Deferred tax assets have not-been recoglized because it is not probable that futuretaxable income will be available againiwhich the Comi*y"iun utilize the benefitsherefrom (Note I I).

Irnpairment of Non-financtal Assets. PFRS requires that an impairment review beerformed on inves&nents and advances when event, oi .r,*g"s in circumstancesindicate that the carrying value may not be recoverable. Determiningthe recoverableamount of assets requires the estimation of cash flo*s

"xpect"J a u. generated from theontinued use and ultimate disposition of such ass"ts lvalire-i" "*l and estimation of theair value Iess costs of disposar.of such *r"rr ur oi::lp"i,"g ffi. whle it is berievedhat the assumptions oted in the estimaiion of fair'ualu"i reflectea in the separatefinancial statements are appropriate and reasonabre, significant changes in thesessumptions may materially affect the assessment of reJoverable amounts and anyesulting impairment loss could have a material uau..r, ,nil*, on the financia.rerformance.In 2015 andzal4, no impairment loss was recognized resuiting from a comparison of thearrying amount of the inveshnent witrr the reco-veraur, umoun?6N-ot. q.

Accumulated impairment losses on investrnent and advances as at Decem ber 31, 2014mounted to p2,17 0,795,02g erlote 6).

Provis ions and ContingenciesThe Company, in the ordinary course of bus.present tegai or constuctive oblieutions, -#Ti'fr ' #;H"JJ$if'ilT:ii:,3J ::rovisions and contingencies, In .-.cognizing *i *"*rring -prori.ions, managementtakes risk and uncertainties into account]No provisions for probabre rosses we{e recogn,::d il the company,s separate financiarstatements for the years ended December : t, )O t S and 20 14. 'I

--r

5. Receivables

This account consists of,

Amounts owed by related partiesOthers

2015 zAt4P4,671,399,916 P1,253,544,250

Note7, 12

13,657 ,020P 4,67 l,3gg,g76 P 1,267,2A1,2,/ 0

other receivables pertains to advances to third parties subject for liquidation

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20/28

6, Investrnents and Advances

Investments in shares ofstock of subsidiariesInvestments in shares of stock of an associate

20Is 2014

Advances for investment in shares of

P26,864,000a,02 P9,264,194,0295,7',14,720,790

stock 5,569 5,95 8,061,59 iAllowance for loss

32,433,035,726 20,996,976,390(2, 170,795

P32,433,0351726 PIg,g26, tgl,362

2014

P2,g49,lg4,0291,650,000,000

Note 20ts

P3,697,300,0001,650,000,000

Bell Telecommunicationkrc.

Philippines,

CobaltPoint Telecom, Inc. (formerly,

Power Smart Capital Limited

Two Cassandra-CCl Conglomerates,Inc.:Comrnon SharesPreferred Shares

Perchpoint Holdings Corp.A.G.N. Philippines, Inc.Liber{y Telecoms Holdings, Inc.

Common SharesPreferred Shares

San- Miguel Equity Securities, lnc.Multi-Technolory Investment Holdings,

ulc.Trans

Digital Excel Inc.

925,000,000825,000,000

1,415,000,0001,600,000,000

3327,939,2539,319,660,949

e 25,000,000

"f 10,000,000g 3,490n000,000

ab

bbbbcd

925,000,000825,000,000

1,415,000,0001,600,000,000

Express Co., rp) h 00,000P26,964,A00,202 P9,264,194,029

a. Bell Telecommwication philippines, Inc. @TpI)In December 2014, the c-ompany subscribed g,40g,000 shares out of the remainingnissued capital stock ofBTiI ui r:ot,liler share which represents 45,6g% directnterest. As at Decemyr.]l]: 291a, the Cffiany.ha; r.*"i"ir;;;lscription payabre;f,or:r,,"t

to pl51, 087,811. The unpaia sutscripti", *;ilfi;r"nr"O in February

In Decembe r 2015,the company subscribed to r,592,000 remaining unissued capitaltock of BTpI at p368.73 plr. .hurr, thereby ;r;i;;;.""i'irllr"r, to 50%. Theompany also subscribed to 14,g14,503 common shares-out oiin"r"ur. in authorizedcapital stock, at P368.73 per share, which was filed uefo.ripc- on December 23,2015. Said application was subsequently approved on January l,iOiA.The registered office address."of the*company is at g0g Buirding, Merarco Ave., cor.Gen. Lim St,, San Antonio Village, pasig City.

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21/28

b y; fffiT'x:3:;;;fi?#:;ri;;;;)occ'' Perchpoint Hotdtngs corp (PHC)

f#l1o,thecompany compreted the acquisition of r00% interest in TCCI, pHc and

The registered office address and principal place of business of rccl is 5/F g0gBtdg', Merarco Avenue cor. Gen. r.iir.," st, g.s^ s* a;;;il pasig ciry.The registered office address an_d prinSip3r prace of business of pHc is 4rF g0gBldg', Merarco Avenue cor' Gen. tim., sL

'.il.s;;rt"Jo, p*ig ciry.

Power Smart Capital Limited is a BW registered company.

c. A.G.N. philippines,Inc. (AGN|)on December 30,

.2910,the

company executed a Share purchase Agreementthe Agreement) with ISM communi.utiorr co.poration roitir" pur.i,use of r00% ofhe outstanding and issued shares or smct of AcNp. irr""iriririon of AGNp wasuthorized by the BOD of the Comp*V oo ;;;;;; iffi;;:

upon signing of the Agreement, the company paid_p320,000,000 as initiar payment.nder the Agreemen the outstanai"g L"i*g.'rf plpsdr';;,"ooo i, payabre in twonstaltments. on December 29t, iol?, ,r," c;G;;;,;"s"ogr, orthe outstandinsalance while the remaining balance was settlea on Decembe r 2g, z0lz.The registered office address of AGNp is 5rF g0g Brdg., Merarco Avenue cor. Gen.im., St, Brry. San Antonio, pasig iiry.

-'

d. Liberty Telecoms Holdings, Inc. (LTHI)

on Jury g,2o0g, the company acquired 57g,r11,66g common shares of LTHI fromi;ilil_fr:,,|l: stockholders-* ui ;;;;r u.qrisition r", "i"iJ consideration oron october 5, 2010, the company arso acquired from the public a totar of4,589,000 common shares ,r'iim'rrounting to pzzt,4i2.39g of which,217,902,600 was unpaia ana preseniro i'p.rt of accounts payabre in ,,Accountspayable and other current liabiliiies" in the separate statements or'financial position.on July 2r, 2015, the company made a tender offer to LTHI,s commonhareholders. At crose of tender o#.;;;lug-ust 20, 2015, the iompany acquired7,27r,369 common shares

o11tre pJii.. bn septemb ", ),-26\s,the companyompleted the acquisition of 426,g00,168 common shares from LTHI,s existinghareholders, therebyi1:.."*,rg u*.irtii interest percentage on LHTI,s commonhares to totar of 97.11%. ritut

"onrialration for the acquired common sharesmounted to p1,064,957,3 g l.

Common Shares

Preferred Shareson July 2r, zo0g, the company entered into a subscription agreement with LTHI forhe subscription of sg7,g.s.r,7i7 voting, o*r"d."*uble ard participating preferredshares out of the proposed increase i, tfe uuth_orized capital ,r,,i[

,fr-rHi

at an issuerice of p3'00 per rBlgl-ryqroximatery pr,763,8i5,2ri,--a. "r December 31,009, the Company paid p735,000,000 as aeposit f", tfr" ,-**ri;;;";,

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on January 5, 20r0,.the crompany paid p5gg,000,000 as additionar deposit for theubscription of LTHI,s preferred ,[rur"..

on Aprir g, 20r0, the company paid the.r..rtling subscription payabie on LTHI,sreferred shares amounting to-pq+o,ass,zt1.

The i"nru"tiJn'*as compreted with atock cerrifi""t"y"lilg

the said prefened,h".;.-;r;;;'in ,n. name of theompany on May 26,2010.

on April 29,2014, san Miguel corporation gave written notice tlat it is assigning tohe company the former'r udr*"", to LTlifin ti," umouit liiss+,ss+,r30. on theame date, the company converted its advances r; LtHr, ;ruding the assignedreceivables, to investment in LTHI's preferred shares *r"*ii"g," pr,3 r6,6g3,697.On December 15, #11^tr:i:mpany made additional investment to LTHImounting to p431,200,000. LTHI issued a totar ;a i;;,8"i,697 ,h*", ro theompany at an issue price of p I .00 per share.On September 02,2015, the Company pur:tu:"_a

2,907,76g,114 from LTHI,sxisting sharehorder at an acquisition pri"e of pq,iaiiiz,6+il ti,rrruy increasingownership interest percentage io 100% on preferred sharlsThe preferred shares issued had the folrowing features: [a] voting; [b] participating[c] nonredeemabre; :"d tlr_tith prefeience over oommon snares rn case ofiquidation or dissolution oi iffU.with additionar shares acquired in september 2.0 15, vega gained contror in LTHL IT;ril:

accounted from invesknent in associ ate in 20r4ti iir"rt *t in subsidiary inThe company owns 97,46% and 45.5g% interest in LTHI as at December

31,20r5nd 20 I 4, respectively.

ImoairmentIn 2013, the recoverable amount of the company,s capitar stock investment in LTHIas determined to be the fair varue less. cost of disposar which amounted to1,856,042,055. Accordingrv, impairment .ross,";"il;;'i iz,*0,tg5,028 hasbeen recognized as at December 3r, 2013, Fair value rlr, ,ort of disposar wasarrived with reference ro published. market price pe*h*" ;ili;L in the phirippineStock Exchange with respect to listed .orn*on- shares ana tlru Ievel 3 valuationtechnique with respect to prefened shares. The fair

".1"; ;i lreferred shares isdeterrnined based on compalabre market dak and"out

upp.ou"i Ir Lrm,, properryand equipment as its cash generaring unit. An i"dd;;;;; firm or appraisersconducted aetual inspection of the lroperty and equipment and included thefollowing studies and analyses in aniving at the estimatea rair varue: (a) cost ofreproduction of each replaceable asset in aicordance with the

"ui"nt market price ofmaterials, Iabor, etc,; Td.. b) accrued depreciation "s,uia.n."a by the observedcondition, character and utility of property.

rn 2014, the recoverable amount of the company,s investment in LTHI is based on avaluation using cash flow projections covering u fior-yru, p";iod ; iong range pransapproved by management. The growth rates used is lN for zots to 2019. Thedjscount rale applied is I l% as at becember 3 l, 2a:tr,. Malag"rn;t assessed that theallowance for impairment loss of p2,l7O,7gS,OZg is adequatef

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In 2015, the allowance for impairment was reversed due to the following reasons:(a)there was a signific-ant reeovery on the ,urt"t-pii"" or mru ]isted commonshares' Furthermore,LSYo liquidity discount was used to obtain the fair value of theunlisted preferred shares to account for share **t*uuiiny. preferred shares aresimilar to common share and hasthe same rights (voting, non-redeemabre andparticipating) with common shares exgept 6. pier.r.nc. upon liquidation;(b) significant deveropment on telecommunications business in 20r5.

e. San Miguel Equity Securities, Inc. (SMESI)on December 2,2015, the c_ompany acquired 25,000,000 shares from sMc at p1.00per share. As a resurr,

'MESIbicame a whory-ow*J."uriJiC;iil; C"*p;;:"'

The registered office address of the sMEsI is No. 40 san Miguer Avenue,Mandaluyong City.

"f. Multi-Technologt Investment Holdings, Inc. (MTHI)On December r,.l0lS, the Company acquired 10,000,000 shares of MTHIfj:::.#f,,:Hf:,,ij::'st at

p I .0o pei share. MrHr'*r," u,-"*,1 il-Fil;;;;The registered office address of the MTHI is unit 40r Emerard Building, No. 24 F,Ortigas Jr. Road, Ortigas Center, pasig City..

g. Trans Digital Excel,Inc. (fDE)on December 4,zar', the company acquired 1,000,000 shares at p3,490 per sharefor a total acquisition cost of p:,i90p00.

The registered office address of the TDE is 8e Floor Builders center, I70 salcedo st.Legaspi Village, Makati City.

h' cobaltpoint Terecom, Inc. (formerry Express Terecommunications co., Inc.)on December 4, 2015, the^ company acguired 27,as6,36s crass A shares and80,000,000 crass B shares from premier iapitar v"otu.Lr-corp., both with a parvalue Pl'80 p"r-:1q", at a price of pts,zgT p"r.ti*. io, u tot"t amount ofP1,690,100,000. This increasedthe company,s effLctive o*n"rrt ip over cobaltpointto BB-r7% (9.72% direct interestanala.4soiindirect o*n;;;lp through TDE).The registered office address of cobaltpoint is 3/F 808 BIdg., Meralco Avenue cor.Gen. Lim., St, Brgy, San Antonio, pasigCity. ---o'' r

Aclyatrces for Investments in Shares of StockIn May 2011, the company made deposit to a terecommunication company, a futureinvestee, amounting to p5,958,06r,5g1 as at December 3r, z0t4. Said cornpany wasacquired by vega in December 2015. A. ur-?:llTb1 31, zols, tr," cornpany madeadditional advances to BTpl.amounting to p5,569,03 s,524. nfni

"ppri"dfor an increasein authorized capitar stock which *as approved on January l,zit-s-.'

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1 Parfy Disclosures

The Company, in the normal course of business, obtains and provides ad.vances to andfrom its related parties. The summary of related party transactions and balances is set outbelow.

Amount of Amounts Owed Amounts OwedYear Trrnsrctiong Relatcd Psrti$ to r RelatedIntermedtate

PdrulConpony

SMC

' Deposit forfuture stocksubsription

o ?,0l5 P7,9I?,S00,0I5 P7,917,500,01S On dcrandnoa-bearing

Unsecurcd

Unsecured

Uosecurcd

Unsecwod;

no impairmcntUnsecurad;no impairment

Unsccured;no impairmcnt

Unsecued;no impairment

Unsecured;no impairment

Unsecurcd;no imprirmcrt

Unsccured;no impairmentUnsecurcd;no impaiment

P

. Subscriptionpayablc

. Advanocs

Subsidiqries

zJlE,28s

1t3,Z0o91,656

lrt 16,79t,961t1,107,\6

1,501,11f,692

717,902,600 On dcmud217,902,600 non-bearing

2J38,285 On dcmudnon-bcaring

LTHI

SMESI

20r520t4?0r5

20tsz0t,4

20t52014

20ts2014

20152014

20t52014

2015zAt4

20t52Al420ls

20t4

a

b

TCCI

PHC

PSCL

BTPI

AGNP

TDE 793,060,137 793,060,137

643,21 t,645643,211,64s

221,914,t362'21,934,136

163,250,448263,135,659

l l{420,369114,422,581

24t,496130,296

1,127,50I,89310,709,933

1$07,771992

On dcmand;tron-interrstbm'ngOn demad;notr-intcrstbcaringOn dcrnand;non-i[lcrcstbearingOn demandlnon-intaestbcuingOn demand;non-intcrastbearingOn doand;norl-inl€rcstbcaringOn demmd;interest bcaringOn demmd;non-itrtcrEstbcarina

c

d

2015 ?4,671,399,816 Pt,1J7,740,9002014 pt,2s1,su,250 r{n7,902,600

The following are the significant related pafiy transactions entered into by the Company:

a' The cornpany r.":iy.-d-111T.:: a1 deposit for future stock subscription from sMCamounting to P7,915,161,73^0. sMC signified that it will subscribe on a later d;;;vega's unissued shares of stock. Noninterest bearing advances owed to sMCamounted to P2,33 8,285 as at December 3 1 , 2015 (Note g).

b. Advances to TDE amounted top793,060,137

as atDecember 31, 2015.

c. The Company provided cash advances to LTIII subject to 6.75% annual interest rateand have no definite payment terms thus consideied payable on demand. lnterestincome from outstanding cash advances amounted to pg,691,700 in 2014. L 20ii;white Dawn solution Holdings, Inc. assigned p36,a97,141 of its receivable, d;;LTHI; Qtel West Bay Hoiding SPC assigned P413,364,140 of its receivable fromLTHI and Wi-Tribe Asia Limited assigned P584,656,309 of its receivable from LTHito the Company. In addition, the Company provided additional non-intersst bearingcash advances amounting to P82,67 4,37 L

d. In 2015, the company received an assigned receivable from sMC to SMESIamounting P 1,5A7,7'l'1,692.

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8. Accounts P ayable and Other Current LiobilitiesThis account consists of:

Accourts payable Note P14,976,816 P2,591,42'1217,902,600

2014

Amounts owed to a rel ated party12

7, 12 0r40,88sP23s?17,701 p220,soo,o27

9, De

10. Equity

Increase in Canitalization

posit for Future Stock Subscription

In 2015, sMC aad a new investo,r signified their intention to subscribe to additionalshares of stock of rhe Comoanv. tn z-015, ttre C;p*y;;";il; pt4,825,161,730 asdeposit for funre sock subscription.

On January 2, 2013, the BOD and stockholders approved and authorized, subject to thenecessary approvals of the SEC,-thr h.:r."."r:.h tte Corpury,, urthrdr"d di;;toJrom one miltion pesos @r,000.000) divided irro r0p00's;;; il six hundred fifty fivemillion.pesos (p6s5,000,000) diviied into 6,ss0Ji06-.1;;J,O pu. value of onehundred pesos (p100) per share.Also, on january 2, 2013, ahe parent Company agreed to subscribe to the aforesaid

ll"j:ry:i, capital stock

ofthe.

Company. ffr"""g.".a ,iii.iption amounted toP652,500,000 which represents subscripiion to 4,350,'000;or;;n.rh"*.;;i;;p;;:lT: ^T94 :*\ subscriprions received in ZOB t"ln ti" par"ri'io*pro, amounted rory18jqEIq5 which represents initial sr:b.scription a q,lj,poJ ihrv.. out of the total4,350,000 shares, The increase in capitalization ** ."[*qr"rif,

"pp.;;J L; i;;ogelher with the increase in cao,al stock on Janr.ry 24, ,0 i;]il; Company then issuedadditionat 4,350,000 shares to tie parent co*punj it f isO ;;; ,#".On Deccmber l, 2014. the Comoany,s Board of Directors approved the increase in theauthorized capital srock of the'Com_pany from p655,000,066 *i.i.,irg of 6,550,000common shares with a par value of pi0d to pZS,OOO,bOO,bOO

"r^i.tirg "f:O,OOO]OOOcomrnon shore^s.with a par value of pl00 per shari and ZZ,OOO,OOO prefened shares witha par value ofP 1,000 per share.

ti{s.O.ge-a-9f Sulscription dated December 1,2014, common shares and preferred sharesof 9,14'1,500 and t3,500,000, resoectively, fr* U""n ,ut.*ri:fJto*and paid for by SMCthrough the combination of cash and conversion

"f til;;; o-f tne Co,,puny ln tteamounts of P3,222,358,979 and pl7,07.9,234,565, respectively. In December 2014, SMCmade.additional payment for preferredshares it previousty J"Cr.Ama into tl,rougt -U.ricombination of cash and assignment of receivabris i" *r" imouiis orp 237,778,414 afiP854,554,830, respectively.

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201s


26/28

This subscription is presented as an item of equity in the statements of financial positionbecause it has met ail the requirements for presentation as"quity as at December 3 r,014. The increase in capitarization was upir"a on o"""rrll r'ig, zotq,In Februarv2015, sMC settred its remaining subscription payabre ,r pig,igi',2i". in"'^pp,,"ffiiforthe increase in capitatizati:.1.*t y69rqr^liry upp.;;;, stc on April 6,2015.he company then issued additional 9,147,'50a

"o*.on sta.Js u,prso

per share and3,500,000 preferred shares at p1,500 pe, strare.

11. Income Taxes

The components of the company's income tax expense are as forows:

2015CurrentFinal

2014P- Pt73,834

7

P7,933 P174,g96Current income tzx in 201 4represents MCIT.

The reconciliation of the income tax expense computed at the statutory income tax rate tohe income tax expense as shown in profit or loss is as follows:

2015 2014Income tax computed at the statutory tax rateIncome tax effects of:

Changes in unrecognized deferred tax assetsInterest lncome suLbjected to final taxReversal of

30.a00/o 3A.00%

(30.37%)4.00%

3.33%4.00o/o

Ioss(ss.33% )

0.Atys (0.37%)

Net defened tax assets r /ere not recognized fgr-tle lolrowing temporary differences andarryforward benefit of unused Nolto *a vrcri,i;;;'",#;"ment believes theremay not be enough future taxable income that may ur gr*ul"d to realize the taxenefits therefrom.As of December 31,2015, the company's Nolco which may be appried against futuretaxable income are as follows:

Year Incurred Expiry Date Amount20142015

December 31,2017 P47,017,690December 31 ,2019 217, 6

P264,020,556

The details of the company's MCIT at December 31 are as fo[ows:

Year Incurred DateDecember 31,2016

AmountP7,5gg, I gg

December 31

2AB2014

20

,2017

P7,762,033

173,934


27/28

12. Financial Risk Management Objectives and policies

Objectives and PoliciesThe Company has significant exposure to the following financial risks primarily from itsuse of financial instruments:

, Liquidity Riskn Credit Risk

This note presents information about the Company's exposure to each of the foregoingr]sks, th9 company's objectives, policies and processes for measuring ana manlgin[these risks, and the Company's managemont of capital.

The BOD has the overall responsibitity for the establishment and oversight of theCompany's risk management framework.

t-lyiaiu Rrs&. Liquidity risk pertains to the risk that the Company will encounter{ifficulty in meeting obligations associated with financial liabilities that are settled bydelivering cash or another financial assel

The Company's objectives to manage its liquidity risk are as follows: (a) to ensure thatadequate funding is available at all times; (b) to meet commitnents as they arise withoutincuning unnecessary costs; (c) to be able to access funding when needed at the leastpossible cost; and (d) to maintain an adequate time spread of rifinancing maturities.

The table below summarizes the maturity profile of the Company's financial assets andfinancial liabilities based on contractual undiscounted puy*"ot" used for liquiditymar&gement as at December 31, 2015 and}ll4.

Amo u nt Cssh llow Withitr I Yeor Anoust Crsh Flow Within I YcarFinrrclrl AsctJCsh is bmkrAmounts owcd by rclsted

prties

Finenciel Lirbllitlct49qoryB piyrblc

Pll$75,2,47

4,67t,399,E15

P11,675,X47

4,671,J99,6r6

Pt,90t,979

t.?J3,544,250

n0,500,o27

Pr,908,979

1,253.544,250

x20,500,027

Ptr$7s112 Pt,90t,9794,67r,399,8t6 1,U3,s41,250

L35Jt1,10t 235J

It is not expected that the cash flows included in the maturity analysis could occursignificantly earlier, or at significantly different amounts.

Credit Ris,t. Credit risk is the risk of financial loss to the Company if a counterpaffy to afinancial instrument fails to meet its contactual obligations.

The Company has established controls and procedures in its credit policy to determineand monitor the credit worthiness of its counterparties. Generally, tle maximum creditrisk exposure of a financial asset is the total carrying amount

"r r-ho*n in the face of theseparate statements of financial position. The Company believes it is not exposed to anysignifi cant credit risk.

As at December 31,2015 and 2014, the maximum exposure of the Company to creditrisk is its cash in banks and amounts owed by related parties amounted to p4,6i3,075,05gand P 1,25 5,4 53,229, respectively.

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Fair ValuesDue to the short term nature of the Company's financial assets and financial liabilitiessuch as cash in banks, receivables and accounts payable and other current liabilities, theircarrying amounts approximate fair values as at Decemb er 31,2015 and 2014.

Capital ManagemerlL

The primary objective of the company,s capital management is to ensure that itmaintains a stong credit rating and healthy capital raiios in order to ,uppo.t it,businesses and maximize shareholder value.

Management monitors capital on the basis of debt-to-equity ratio, which is calculated astotal debt divided by total equity. Total debt is definedas total llability, *rrir""+,ry

j,total equity as shown in the separate statements of financial position, M*ug"*rnt ur".debt-to-equity ratio to monitor and review, on a regular basis, the company:s ;dili;;defined as total equity as shown in the separate statements of financial porition.

There were no changes in the company's approach to capital management during theyear.

The company is not subject to externally-imposed capital requirements.

13. Supplementary fnformation Required under Reveuue Regulations (RR) No. 15-2010

The Bureau of Internal Revenue has issued RR No. 15-20 i 0 which require certain taxinformation to be disclosed in the notes to the separate Iinancial itatements. TheCompany presented the required supplementary tax information as a separate scheduleatlached to its annual income tax return.

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Documents

TEL: Vega Telecom acquisition