2014 2go conso_pse

2GO Group, Inc. [Formerly ATS Consolidated (ATSC), Inc.]

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS December 31, 2014

(With Comparative Figures for 2013 and 2012)

2GO GROUP, INC. [Formerly ATS Consolidated (ATSC), Inc.]

AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET

AS AT DECEMBER 31, 2014 (With Comparative Figures for 2013 and 2012)

(Amounts in Thousands)

Note 2014 2013

ASSETS Current Assets Cash and cash equivalents 6 P1,235,052 P918,645 Trade and other receivables - net 7, 23 3,973,094 3,949,819 Inventories - net 8 877,542 421,957 Other current assets 9 1,209,253 1,054,409

Total Current Assets 7,294,941 6,344,830

Noncurrent Assets Property and equipment 10, 13, 20 5,403,570 5,054,932 Available-for-sale (AFS) investments 11 5,707 6,907 Investments in associates and joint ventures 12 192,951 181,977 Investment property 14 9,763 9,763 Software development costs 15 29,139 15,379 Deferred tax assets - net 29 589,334 477,076 Goodwill 5 250,450 250,450 Other noncurrent assets 16 140,402 180,590

Total Noncurrent Assets 6,621,316 6,177,074

TOTAL ASSETS P13,916,257 P12,521,904

LIABILITIES AND EQUITY Current Liabilities Loans payable 17 P1,415,651 P1,344,927 Trade and other payables 18, 23 4,612,088 4,189,244 Income tax payable 18,009 5,772 Redeemable preferred shares 21, 24 5,988 6,680 Current portions of:

Long-term debts 19 85,977 373 Obligations under finance lease 13, 20 32,837 28,592 Total Current Liabilities 6,170,550 5,575,588

Forward

Note 2014 2013

Noncurrent Liabilities Long-term debts - net of current portion 19 P3,519,186 P3,597,496 Obligations under finance lease - net of

current portion 13, 20 103,165 89,192 Accrued retirement benefits 28 217,558 167,243 Other noncurrent liabilities 14,079 9,369

Total Noncurrent Liabilities 3,853,988 3,863,300

Total Liabilities 10,024,538 9,438,888

Equity Attributable to the equity holders of the

Parent Company: Share capital 24 2,484,653 2,484,653 Additional paid-in capital 910,901 910,901 Acquisitions of non-controlling interests 24 (3,243) (3,243) Excess of net assets over cost of

investments 24 (9,835) (9,835) Other comprehensive losses - net (120,257) (86,405) Retained earnings (deficit) 24 648,421 (179,314) Treasury shares 24 (58,715) (58,715)

3,851,925 3,058,042 Non-controlling interests 39,794 24,974

Total Equity 3,891,719 3,083,016

TOTAL LIABILITIES AND EQUITY P13,916,257 P12,521,904

See Notes to Consolidated Financial Statements.


AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2014

(With Comparative Figures for 2013 and 2012) [Amounts in Thousands, Except for Earnings (Loss) Per Common Share]

Years Ended December 31

Note 2014 2013 2012

REVENUES Freight 23 P5,573,683 P4,891,953 P5,880,775 Passage 3,145,253 3,108,127 3,190,366 Service fees 23 2,886,979 3,045,597 2,293,305 Sale of goods 2,489,011 2,050,835 2,128,009 Others 332,069 276,681 161,176 14,426,995 13,373,193 13,653,631

OPERATING COSTS AND EXPENSES 25

Operating 8,665,726 8,574,141 9,598,108 Cost of goods sold 8 2,087,071 1,720,991 1,761,564 Terminal 1,405,330 1,356,859 1,065,765 Overhead 1,113,304 1,231,108 1,106,706 13,271,431 12,883,099 13,532,143

OPERATING INCOME 1,155,564 490,094 121,488

OTHER INCOME (CHARGES) Equity in net earnings of

associates 12 10,974 44,846 37,694 Financing charges 26 (332,630) (369,014) (400,472) Reversal of impairment losses on

assets held for sale and property and equipment - net 10, 13 - 60,606 -

Others - net 26 54,205 486,241 143,434 (267,451) 222,679 (219,344)

INCOME (LOSS) BEFORE INCOME TAX 888,113 712,773 (97,856)

PROVISION FOR INCOME TAX 29 45,558 485,692 257,899

NET INCOME (LOSS) P842,555 P227,081 (P355,755) Forward


Note 2014 2013 2012

Attributable to: Equity holders of the Parent

Company 10, 13 P827,735 P212,044 (P366,084) Non-controlling interests 12 14,820 15,037 10,329 P842,555 P227,081 (355,755)

Basic/Diluted Earnings (Loss) Per Share 30 P0.3384 P0.0867 (P0.1497)

See Notes to the Consolidated Financial Statements.


AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2014 (With Comparative Figures for 2013 and 2012)



Note 2014 2013 2012

NET INCOME (LOSS) P842,555 P227,081 (P355,755)

OTHER COMPREHENSIVE INCOME (LOSS) - Net of tax

Items that will be reclassified subsequently to profit or loss: Net changes in unrealized gain

on AFS investments 11 - 38 137 Item that will not be

reclassified subsequently to profit or loss: Remeasurement gains (losses)

on net defined benefit liability 28 (48,360) (24,949) 9,860

Income tax effect 14,508 7,485 (2,958) (33,852) (17,464) 6,902

Share in re-measurement gains (losses) on retirement benefits of associates and joint ventures - 2,225 309

(33,852) (15,201) 7,348

TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR P808,703 P211,880 (P348,407)

Attributable to: Equity holders of the Parent

Company P793,883 P196,843 (P358,756) Non-controlling interests 14,820 15,037 10,349 P808,703 P211,880 (P348,407)



AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



Attributable to Equity Holders of the Parent Company Other Comprehensive Income (Loss)

Note

Share Capital

(Note 24)

Additional Paid-in Capital

Acquisition of Non-

controlling Interests (Note 24)

Excess of Cost Over Net Assets (Excess of Net Assets

Over Cost) of Investments

(Note 24)

Unrealized Gain (Loss)

on AFS Investments

(Note 11)

Share in Cumulative Translation Adjustment

of Associates

Re-measurement

Gains (Losses) on

Accrued Retirement

Benefits - Net of tax

Share in Re-measurement

Gains (Losses) on

Accrued Retirement Benefits of Associates

and Joint Ventures (Note 12) Subtotal

Retained Earnings

(Deficit) (Note 24)

Treasury Shares

(Note 24) Total

Non-controlling

interests Total

Equity BALANCE AT JANUARY 1, 2012 P2,484,653 P910,901 P5,940 P13,208 P279 P5,294 (P81,322) (P2,783) (P78,532) (P25,274) (P58,715) P3,252,181 P20,843 P3,273,024

Total comprehensive gain (loss) - - - - 117 - 6,902 309 7,328 (366,084) - (358,756) 10,349 (348,407) Changes in ownership interest resulting in

the decrease of non-controlling interest - - - - - - - - - - - - (3,292) (3,292) Dividend distribution to non-controlling

interests 24 - - - - - - - - - - - - (600) (600) BALANCES AT DECEMBER 31, 2012 2,484,653 910,901 5,940 13,208 396 5,294 (74,420) (2,474) (71,204) (391,358) (58,715) 2,893,425 27,300 2,920,725

Total comprehensive gain (loss) - - - - 38 - (17,464) 2,225 (15,201) 212,044 - 196,843 15,037 211,880 Changes in ownership interest resulting in

the decrease of non-controlling interest - - (9,183) (23,043) - - - - - - - (32,226) (5,142) (37,368) Dividends declared 24 - - - - - - - - - - - - (12,221) (12,221) BALANCES AT DECEMBER 31, 2013 2,484,653 910,901 (3,243) (9,835) 434 5,294 (91,884) (249) (86,405) (179,314) (58,715) 3,058,042 24,974 3,083,016

Total comprehensive gain (loss) - - - - - - (33,852) - (33,852) 827,735 - 793,883 14,820 808,703 BALANCES AT DECEMBER 31, 2014 P2,484,653 P910,901 (P3,243) (P9,835) P434 P5,294 (P125,736) (P249) (P120,257) P648,421 (P58,715) P3,851,925 P39,794 P3,891,719



AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS



Note 2014 2013 2012 CASH FLOWS FROM

OPERATING ACTIVITIES

Income (loss) before income tax P888,113 P712,773 (P97,856)

Adjustments for: Depreciation and

amortization of property and equipment and software development cost 13, 15 803,730 1,042,231 935,930

Interest and financing charges 26 332,628 369,014 400,472

Movement in accrued retirement 28 22,192 34,403 (21,411)

Provision for cargo losses and damages 25 9,903 22,697 24,946

Equity in net earnings of associates and joint ventures 12 (10,974) (44,846) (37,694)

Income from reversal of liabilities 26 (5,880) (24,130) (182,984)

Property and equipment 13, 26 (5,562) - (98,978) Interest income 26 (2,669) (1,690) (59,843) Unrealized foreign exchange

gains (359) (666) (4,343) Dividend income 26 (176) - (3,009) Write-off of carrying value

of sunk vessel 26 - 227,743 - Writedown of vessel engine

and related parts 26 - 221,900 - Recovery from insurance

claims 26 - (943,315) - Reversal of impairment loss

on vessels in operation - net 10, 13 - (60,606) -

Gain from other insurance claims - - (2,086)

Loss (gain) on disposals of: Assets held for sale 10, 26 - 51,041 201,715 AFS investments 26 - - -

Forward

Years Ended December 31 2012

Note 2014 2013 (As restated,

Note 2) Operating cash flows before

working capital changes P2,030,946 P1,606,549 P1,054,859 Decrease (increase) in:

Trade and other receivables (604,426) (534,577) 99,500 Inventories (153,262) (50,178) (15,305) Other current assets (154,844) (124,921) 155,426

Increase (decrease) in trade and other payables 430,820 685,607 257,387

Cash generated from operations 1,549,234 1,582,480 1,551,867

Income taxes paid, including creditable withholding taxes (110,179) (168,031) (163,162)

Net cash flows provided by operating activities 1,439,055 1,414,449 1,388,705

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to: Property and equipment 13 (1,460,570) (1,696,880) (861,428) Software development

costs 15 (16,491) (7,157) (7,929) Proceeds from:

Insurance claims 26 559,273 367,957 - Sale of property and

equipment 13 32,148 4,780 160,785 Redemption of AFS

investments 11 1,200 - 1,200 Disposal of assets held for

sale 10 - 85,260 151,950 Sale of a subsidiary - - -

Interest received 6,635 1,690 59,698 Dividends received 12, 26 176 - 15,822 Receipts of various deposits 17,911 22,959 33,091 Net cash used in investing

activities (859,718) (1,221,391) (446,811) Forward

Years Ended December 31 2012

Note 2014 2013 (As restated,

Note 2) CASH FLOWS FROM

FINANCING ACTIVITIES

Proceeds from availments of: Loans payable 17 P1,730,747 P2,143,080 P1,121,343 Long-term debts 19 1,164 3,619,952 -

Payments of: Loans payable 17 (1,659,527) (2,222,292) (952,653) Interest and financing

charges 17, 20, 21 (303,836) (346,309) (378,034) Obligations under finance

lease 20 (30,366) (24,243) (37,830) Long-term debts 19 (427) (3,203,325) (800,000) Debt transaction costs 19 - (26,607) -

Redemption of preferred shares 21 (691) (202) (20,481)

Dividends paid 24 - - (2,040) Dividends paid to non-

controlling interests - - (600) Net cash provided by (used

in) financing activities (262,936) (59,946) (1,070,295)

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 6 (1,323) 1,683

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 316,407 131,789 (126,718)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 918,645 786,856 913,574

CASH AND CASH EQUIVALENTS AT END OF YEAR 6 P1,235,052 P918,645 P786,856



AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS

(Amounts in Thousands, Except Number of Shares, Earning per Common Share, Exchange Rate Data and When Otherwise Indicated)

1. Corporate Information, Status of Operations and Management Action Plans, and

Approval of the Consolidated Financial Statements Corporate Information 2GO Group, Inc. [formerly ATS Consolidated (ATSC), Inc.] [“2GO” or the “Company”, formerly ATS Consolidated (ATSC), Inc.] was incorporated in the Philippines on May 26, 1949 and registered with the Philippine Securities and Exchange Commission (SEC) on May 26, 1949. Its corporate life was renewed on May 12, 1995 and will expire on May 25, 2045. The Company is a public company under Section 17.2 of the Securities Regulation Code and its shares of stocks are listed in the Philippine Stock Exchange (PSE). The Company and its subsidiaries (collectively referred to as “the Group”) are primarily engaged in the business of operating vessels, motorboats and other kinds of watercrafts; aircrafts and trucks; and acting as agent for domestic and foreign shipping companies for purposes of transportation of cargoes and passengers by air, land and sea within the waters and territorial jurisdiction of the Philippines. The Company’s registered office address is 15th Floor, Times Plaza Building, United Nations Avenue corner Taft Avenue, Ermita, Manila while its principal place of business is located at Pier 2 and Pier 4, North Harbor, Tondo, Manila. As at December 31, 2013 and 2012, the Company is 88.3%-owned subsidiary of Negros Navigation Co., Inc. (“NN” or the “Parent Company”). Its ultimate parent is Negros Holdings and Management Corporation (NHMC). NN and NHMC are both incorporated and domiciled in the Philippines. On December 1, 2010, the Board of Directors (BOD) of Aboitiz Equity Ventures, Inc. (AEV) and Aboitiz and Company, Inc. (ACO) approved the sale of their shareholdings in the Company to NN in accordance with the securities and purchase agreements executed among AEV, ACO and NN. On December 28, 2010, the sale was finalized at P1.8813 per share. AEV sold its entire shareholdings in the Company comprising of 1,889,489,607 common shares of P3.6 billion. ACO, on the other hand, sold its entire shareholdings in the Company comprising of 390,322,384 common shares for P734.0 million. This resulted to 93.2% NN’s ownership of the outstanding common shares of the Company, along with all the Company’s non-controlling shares that may be tendered to NN subsequent to December 31, 2010. On February 22, 2011, in relation to the tender offer issued by NN for the outstanding common shares held by public shareholders of the Company, NN acquired 120,330,004 common shares from the Company’s non-controlling shareholders equivalents to 4.9% additional ownership interest in the Company for a total purchase price of P226.8 million. As a result, NN’s ownership interest in the Company increased to 98.12%. On December 21, 2012, NN sold 240,000,000 common shares of the Company at a price of P1.65 per share to the public shareholders. The sale of shares resulted to a reduction in the ownership of NN in the Company from 98.12% to 88.31%.

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In February and March 2012, the SEC approved the application of the Company and its subsidiaries to amend their Articles of Incorporation and By-laws, which include, among others, the change in their corporate names to 2GO Group, Inc. [formerly ATS Consolidated (ATSC), Inc.] (formerly ATSC), 2GO Express, Inc. [formerly ATS Express, Inc. (ATSEI)], and 2GO Logistics, Inc. [formerly ATS Distribution, Inc. (ATSDI)]. On August 24, 2011, the SEC also approved the amendment to the Company’s secondary purpose to include rendering technical services requirement to customers for refrigerated marine container vans and related equipment or accessories. This amendment was previously approved by the BOD on April 28, 2011 and ratified by the stockholders on June 22, 2011. On November 27, 2014, the SEC approved the amendment of the Company’s Second Article of the Articles of Incorporation with the inclusion of “merchandising materials such as souvenirs, corporate gift items and products bearing the corporate logos and brands, food and beverages” in the Company’s Secondary Purpose. On the same date, the SEC also approved the amendment of the Company’s Third Article of the Articles of Incorporation to change the principal office address from “Metropolitan Manila, Philippines” to “15th Floor, Times Plaza Building, U.N. Avenue cor. Taft Avenue, Ermita Manila, Philippines”. Status of Operations and Management Action Plans NN and subsidiaries’ (collectively referred as “the Group”) Net Profit after Tax increased by 263% to P415.7 million in 2014 from a P255.4 million net loss in 2013. Likewise, its operating income increased by 360% to P912.5 million in 2014 from P198.5 million in 2013. These positive results were achieved despite the severe effects of the port congestion as a result of the Manila daytime truck ban. Management credits the strong performance largely to the increasing customers’ acceptance of the integrated service offerings by the different units within the Group that provide seamless end-to-end supply chain solutions to their requirements. This is further strengthened by the combined business expansion, realization of increased efficiencies as well as stringent management of operating costs and expenses. Comparing this to the Group’s performance in 2012, NN’s Operating Income increased by 751% or P805.2 million from 2012 to 2014. NN thru its operating company, 2GO Group, Inc. [formerly ATS Consolidated (ATSC), Inc.], has transformed its business model into a complete supply chain solutions provider, capitalizing on the strengths of its various business units. During the year, the non-shipping group (or the logistics group) continues to steadily grow and increase its revenue contribution to the Group. The share of the non-shipping group is expected to further increase substantially in the months and years to come. The Group is tapping its core competencies and expanding its reach by offering a complete end-to-end platform by means of integrated, seamless solutions and services. It capitalizes on its nationwide logistics infrastructure, domestic freight scale and capability, integrated information technology and its last mile transportation capability to seize opportunities in the growing domestic and international markets.

- 3 -

The Group’s commercial approach is to strengthen its Key Accounts Management, wherein it will establish collaborative relationships and partner with the Group’s top customers and key clients: 1. To reinforce its competency both at the strategic and tactical levels to address

customer-specific needs or challenges through developing focused and customized solutions.

2. To drive value through higher on-shelf availability, expanded market reach and

efficiency 3. The Company’s customer-focused approach, nationwide infrastructure and service

reliability differentiate 2GO from competition and provides a foundation for future growth

The Group is continuously improving and synchronizing its operations to develop an implementation roadmap in order to fulfill its vision of being the Philippines’ integrated supply chain service provider of choice.

Approval of Consolidated Financial Statements The consolidated financial statements as at and for the year ended December 31, 2014 were authorized for issue by the BOD on April 14, 2015.

2. Summary of Significant Accounting and Financial Reporting Policies Basis of Preparation The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

Items Measurement bases Available-for-sale investments Fair value Accrued retirement benefits Fair value of the plan assets less the

present value of the defined benefit retirement obligation

Statement of Compliance The consolidated financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRSs). PFRSs are based on International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). PFRSs which are issued by the Philippine Financial Reporting Standards Council (FRSC), consist of PFRSs, Philippine Accounting Standards (PASs), and Philippine Interpretations.

- 4 -

Adoption of Amendments to Standards The Group has adopted the following amendments to standards starting January 1, 2014 and accordingly, changed its accounting policies. The adoption of these amendments to standards did not have any significant impact on the Group’s consolidated financial statements. Offsetting Financial Assets and Financial Liabilities (Amendments to PAS 32). These

amendments clarify that: • an entity currently has a legally enforceable right to set-off if that right is:

o not contingent on a future event; and o enforceable both in the normal course of business and in the event of default,

insolvency or bankruptcy of the entity and all counterparties; and • gross settlement is equivalent to net settlement if and only if the gross settlement

mechanism has features that: o eliminate or result in insignificant credit and liquidity risk; and o process receivables and payables in a single settlement process or cycle.

Recoverable Amount Disclosures for Non-Financial Assets (Amendments to PAS 36). These narrow-scope amendments to PAS 36 address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments clarified that the scope of those disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs of disposal.

Measurement of short-term receivables and payables (Amendment to PFRS 13). The amendment clarifies that, in issuing PFRS 13 and making consequential amendments to PAS 39 and PFRS 9, the intention is not to prevent entities from measuring short-term receivables and payables that have no stated interest rate at their invoiced amounts without discounting, if the effect of not discounting is immaterial.

Standards Issued But Not Yet Adopted A number of new standards and amendments to standards are effective for annual periods beginning after January 1, 2014. The Group has not applied the following new or amended standards in preparing these consolidated financial statements. Unless otherwise stated, none of these are expected to have a significant impact on the Group’s consolidated financial statements.

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Effective July 1, 2014

Annual Improvements to PFRSs: 2010-2012 and 2011-2013 Cycles Amendments were made to a total of nine standards, with changes made to the standards on business combinations and fair value measurement in both cycles. Most amendments will apply prospectively for annual periods beginning on or after July 1, 2014. Earlier application is permitted, in which case the related consequential amendments to other PFRSs would also apply. Special transitional requirements have been set for amendments to the following standards: PFRS 2, PAS 16, PAS 38 and PAS 40. The following are the said improvements or amendments to PFRSs, which are applicable the Group: • Disclosures on the aggregation of operating segments (Amendment to PFRS 8).

PFRS 8 has been amended to explicitly require the disclosure of judgments made by management in applying the aggregation criteria. The disclosures include: a brief description of the operating segments that have been aggregated; and the economic indicators that have been assessed in determining that the operating segments share similar economic characteristics. In addition, this amendment clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets is required only if this information is regularly provided to the entity’s chief operating decision maker. This change aligns the disclosure requirements with those for segment liabilities.

• Scope of portfolio exception (Amendment to PFRS 13). The scope of the

PFRS 13 portfolio exception - whereby entities are exempted from measuring the fair value of a group of financial assets and financial liabilities with offsetting risk positions on a net basis if certain conditions are met - has been aligned with the scope of PAS 39 and PFRS 9. PFRS 13 has been amended to clarify that the portfolio exception potentially applies to contracts in the scope of PAS 39 and PFRS 9 regardless of whether they meet the definition of a financial asset or financial liability under PAS 32 - e.g. certain contracts to buy or sell non-financial items that can be settled net in cash or another financial instrument.

• Definition of ‘related party’ (Amendment to PAS 24). The definition of a ‘related

party’ is extended to include a management entity that provides key management personnel (KMP) services to the reporting entity, either directly or through a group entity. For related party transactions that arise when KMP services are provided to a reporting entity, the reporting entity is required to separately disclose the amounts that it has recognized as an expense for those services that are provided by a management entity; however, it is not required to ‘look through’ the management entity and disclose compensation paid by the management entity to the individuals providing the KMP services. The reporting entity will also need to disclose other transactions with the management entity under the existing disclosure requirements of PAS 24 - e.g. loans.

Effective January 1, 2016 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

(Amendments to PFRS 10 and PAS 28). The amendments address an inconsistency between the requirements in PFRS 10 and in PAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

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The amendments require that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments apply prospectively for annual periods beginning on or after January 1, 2016. Early adoption is permitted.

Accounting for Acquisitions of Interests in Joint Operations (Amendments to PFRS 11). The amendments require business combination accounting to be applied to acquisitions of interests in a joint operation that constitutes a business. Business combination accounting also applies to the acquisition of additional interests in a joint operation while the joint operator retains joint control. The additional interest acquired will be measured at fair value. The previously held interests in the joint operation will not be remeasured. The amendments place the focus firmly on the definition of a business, because this is key to determining whether the acquisition is accounted for as a business combination or as the acquisition of a collection of assets. As a result, this places pressure on the judgment applied in making this determination. The amendments apply prospectively for annual periods beginning on or after January 1, 2016. Early adoption is permitted.

Clarification of Acceptable Methods of Depreciation and Amortization (Amendments

to PAS 16 and PAS 38). The amendments to PAS 38 introduce a rebuttable presumption that the use of revenue-based amortization methods for intangible assets is inappropriate. This presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are ‘highly correlated,’ or when the intangible asset is expressed as a measure of revenue. The amendments to PAS explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. This is because such methods reflect factors other than the consumption of economic benefits embodied in the asset - e.g. changes in sales volumes and prices. The amendments are effective for annual periods beginning on or after January 1, 2016, and are to be applied prospectively. Early application is permitted.

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Annual Improvements to PFRSs (2012-2014 Cycle).This cycle of improvements contains amendments to four standards, none of which are expected to have significant impact on the Company’s separate financial statements. The amendments are effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted.

• Changes in method for disposal (Amendment to PFRS 5). PFRS 5 is amended to

clarify that: o if an entity changes the method of disposal of an asset (or disposal group) -

i.e. reclassifies an asset (or disposal group) from held-for-distribution to owners to held-for-sale (or vice versa) without any time lag - then the change in classification is considered a continuation of the original plan of disposal and the entity continues to apply held-for-distribution or held-for-sale accounting. At the time of the change in method, the entity measures the carrying amount of the asset (or disposal group) and recognizes any write-down (impairment loss) or subsequent increase in the fair value less costs to sell/distribute of the asset (or disposal group); and

o if an entity determines that an asset (or disposal group) no longer meets the

criteria to be classified as held-for-distribution, then it ceases held-for-distribution accounting in the same way as it would cease held-for-sale accounting.

Any change in method of disposal or distribution does not, in itself, extend the period in which a sale has to be completed. The amendment to PFRS 5 is applied prospectively in accordance with PAS 8 to changes in methods of disposal that occur on or after January 1, 2016.

Effective January 1, 2018

PFRS 9, Financial Instruments (2014). PFRS 9 (2014) replaces PAS 39 Financial Instruments: Recognition and Measurement and supersedes the previously published versions of PFRS 9 that introduced new classifications and measurement requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). PFRS 9 includes revised guidance on the classification and measurement of financial assets, including a new expected credit loss model for calculating impairment, guidance on own credit risk on financial liabilities measured at fair value and supplements the new general hedge accounting requirements published in 2013. PFRS 9 incorporates new hedge accounting requirements that represent a major overhaul of hedge accounting and introduces significant improvements by aligning the accounting more closely with risk management. The new standard is to be applied retrospectively for annual periods beginning on or after January 1, 2018 with early adoption permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of PFRS 9.

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Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and the following wholly-owned and majority-owned subsidiaries, all incorporated and operating in the Philippines, as at December 31 of each year:

Percentage of Ownership Nature of Business 2014 2013 2012 Supercat Fast Ferry Corp. (SFFC) Transporting passenger 100.0 100.0 100.00 Special Container and Value Added

Services, Inc. (SCVASI) (1) Transportation/logistics 100.0 100.0 100.0 2GO Express, Inc. (2GO Express) Transportation/logistics 100.0 100.0 100.0

2GO Logistics, Inc. (2GO Logistics) Transportation/logistics 100.0 100.0 100.0 Scanasia Overseas, Inc. (SOI) Distribution 100.0 100.0 100.0 Hapag-Lloyd Philippines, Inc. (HLP) (2) Transportation/logistics 100.0 100.0 85.00 WRR Trucking Corporation (WTC) Transportation 100.0 100.0 100.0

NN-ATS Logistics Management and Holding Co., Inc. (NALMHCI) (3)

Holding and logistics management 100.0 100.0 100.0

J&A Services Corporation (JASC) Vessel support services 100.0 100.0 100.0 Red.Dot Corporation (RDC) Manpower services 100.0 100.0 100.0 North Harbor Tugs Corporation (NHTC) Tug assistance 58.9 58.9 58.9 Super Terminals, Inc. (STI) (4) Passenger terminal operator 50.0 50.0 50.0 Sungold Forwarding Corporation (SFC) Transportation/logistics 51.0 51.0 51.0 Supersail Services, Inc. (SSI) Manpower provider and

vessel support services 100.0 100.0 100.0 Astir Engineering Works, Inc. (AEWI) (5) Engineering services 100.0 100.0 -

WG&A Supercommerce, Inc. (WSI) (6) Vessels’ hotel management 100.0 100.0 100.0

(1) SCVASI was incorporated on March 9, 2012 and started its commercial operation on January 1, 2013. (2) In 2013, 2GO Express acquired additional 15% ownership interest in HLP, thus, making HLP a

100%-owned subsidiary. (3) On November 22, 2011, NALMHCI, a wholly-owned subsidiary of 2GO, was incorporated to be the

holding company of JASC, RDC, NHTC, STI, SFC and SSI effective December 1, 2011. (4) NALMHCI has control over STI since it has the power to cast the majority of votes at the BOD’s

meeting and the power to govern the financial and reporting policies of STI. (5) In 2013, NN ownership in AEWI was transferred to NALMHCI. (6) WSI ceased operations in February 2006.

The financial statements of the subsidiaries are prepared for the same reporting year as the Company using consistent accounting policies. Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect that return through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: Power over the investee (i.e., existing rights that give it the current ability to direct

the relevant activities of the investee) Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee; Rights arising from other contractual arrangements; and The Group’s voting rights and potential voting rights.

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The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included or excluded in the consolidated financial statements from the date the Group gains control or until the date the Group ceases to control the subsidiary. Non-controlling interest represents a portion of profit or loss and net assets of subsidiaries not held by the Group, directly or indirectly, and are presented separately in the consolidated statement of income and within the equity section in the consolidated balance sheet and consolidated statement of changes in equity, separately from the Company’s equity. However, the Group must recognize in the consolidated balance sheet a financial liability (rather than equity) when it has an obligation to pay cash in the future (e.g., acquisition of non-controlling interest is required in the contract or regulation) to purchase the non-controlling’s shares, even if the payment of that cash is conditional on the option being exercised by the holder. The Group will reclassify the liability to equity if a put option expires unexercised. Non-controlling interest shares in losses, even if the losses exceed the non-controlling equity interest in the subsidiary. Changes in the controlling ownership interest, i.e., acquisition of noncontrolling interest or partial disposal of interest over a subsidiary that do not result in a loss of control, are accounted for as equity transactions. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognized in assets, liabilities and equities, are eliminated in full on consolidation. A change in ownership interest in a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: Derecognizes the assets (including goodwill) and liabilities of the subsidiary; Derecognizes the carrying amount of any non-controlling interest; Derecognizes the related other comprehensive income, like cumulative translation

differences, recorded in equity; Recognizes the fair value of the consideration received; Recognizes the fair value of any investment retained; Recognizes any surplus or deficit in profit or loss; and Reclassifies the parent’s share of components previously recognized in other

comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

Business Combinations and Goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs incurred are expensed as incurred and are included in operating expenses.

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When the Group acquires a business, it assesses the financial assets and financial liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized in accordance with PAS 39 either in profit or loss or as a change to OCI. If the contingent consideration is not within the scope of PAS 39, it is measured in accordance with the appropriate PFRS. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity. Goodwill acquired in a business combination is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest, and any previous interest held, over the fair values of net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units. Where goodwill forms part of a CGU or a group of CGUs and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the CGU retained. When subsidiaries are sold, the difference between the selling price and the net assets plus any other comprehensive income, and fair value of retained interest is recognized in profit or loss. Where there are business combinations in which all the combining entities within the Group are ultimately controlled by the same ultimate parties before and after the business combination and that the control is not transitory (“business combinations under common control”), the Group accounts for such business combinations under the purchase method of accounting, if the transaction was deemed to have substance from the perspective of the reporting entity. In determining whether the business combination has substance, factors such as the underlying purpose of the business combination and the involvement of parties other than the combining entities such as the non-controlling interest, shall be considered.

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In cases where the business combination has no substance, the Group accounts for the transaction similar to a pooling of interests. The assets and liabilities of the acquired entities and that of the Company are reflected at their carrying values. Comparatives shall be restated to include balances and transactions as if the entities had been acquired at the beginning of the earliest period presented and as if the companies had always been combined. Investments in Associates and Joint Ventures The following are the significant associates and joint ventures of the Group as at December 31, 2014 and 2013:

Effective Percentage

of Ownership Nature of Business 2014 2013 Associates:

MCC Transport Philippines (MCCP) Container transportation 33.0% 33.0% Hansa Meyer Projects (Phils), Inc.

(HMPPI)(1) Project logistics and consultancy 47.1% 47.1% Joint Ventures:

KLN Logistics Holdings Philippines Inc. (KLN) (2) Holding Company 78.4% 78.4%

Kerry Logistics (Phils), Inc. (KLI) (3) International freight and cargo forwarding 62.5% 62.5%

(1) HMPPI is an associate of 2GO Express. On June 16, 2014, the Philippine SEC approved the amendment in its

Articles of incorporation and By-Laws to change its corporate name to HMPPI [formerly Hansa Meyer-ATS Projects, Inc. (HATS)].

(2) KLN is 78.4% owned by 2GO Express. (3) KLI is an associate of 2GO Express. On December 2, 2014, the Philippine SEC approved the amendment

in its Articles of incorporation and By-Laws to change its corporate name to KLI [Formerly Kerry-ATS Logistics, Inc. (KALI)].

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but has no control or joint control over those policies. A joint arrangement is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A joint venture is a type of joint arrangement where the parties that have joint control of the arrangement have rights over the net assets of the joint venture. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Investments in associates and joint ventures (investee companies) are accounted for under the equity method of accounting. An investment is accounted for using the equity method from the day it becomes an associate or joint venture. On acquisition of investment, the excess of the cost of investment over the investor’s share in the net fair value of the investee’s identifiable assets, liabilities and contingent liabilities is accounted for as goodwill and included in the carrying amount of the investment and not amortized. Any excess of the investor’s share of the net fair value of the investee’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment, and is instead included as income in the determination of the share in the earnings of the investees.

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Under the equity method, the investments in the investee companies are carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share in the net assets of the investee companies, less any impairment loss. The consolidated statement of income reflects the share of the results of the operations of the investee companies. The Group’s share of post-acquisition movements in the investee’s equity reserves is recognized directly in equity. Profits and losses resulting from transactions between the Group and the investee companies are eliminated to the extent of the interest in the investee companies and for unrealized losses to the extent that there is no evidence of impairment of the asset transferred. Dividends received are treated as a reduction of the carrying value of the investment. The Group discontinues applying the equity method when their investments in investee companies are reduced to zero. Accordingly, additional losses are not recognized unless the Group has guaranteed certain obligations of the investee companies. When the investee companies subsequently report net income, the Group will resume applying the equity method but only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended. The reporting dates of the investee companies and the Group are identical and the investee companies’ accounting policies conform to those used by the Group for like transactions and events in similar circumstances. Upon loss of significant influence over the associate, the Group measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in the consolidated statement of income. Interest in a Joint Operation The Group has an interest in a joint operation which is a jointly controlled entity, whereby the joint venture partners have a contractual arrangement that establishes joint control over the economic activities of the entity. The assets, liabilities, revenues and expenses relating to its interest in the joint operation are recognized in the consolidated financial statements of the Group. Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, with original maturities of three months or less, and are subject to an insignificant risk of change in value. Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or

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

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The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a nonfinancial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or

liabilities; Level 2 - Valuation techniques for which the lowest level input that is significant to

the fair value measurement is directly or indirectly observable; and Level 3 - Valuation techniques for which the lowest level input that is significant to

the fair value measurement is unobservable. For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the assets or liability and the level of the fair value hierarchy. Financial Instruments Initial Recognition Financial assets and financial liabilities are recognized in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way purchases or sales) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the asset. Financial instruments are recognized initially at fair value, which is the fair value of the consideration given (in case of an asset) or received (in case of a liability). If part of consideration given or received is for something other than the financial instrument, the fair value of the financial instrument is estimated using a valuation technique. The initial measurement of financial instruments, except for those financial assets and liabilities at fair value through profit or loss (FVPL), includes transaction costs.

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Classification of Financial Instruments On initial recognition, the Group classifies its financial assets in the following categories: financial assets at FVPL, loans and receivables, held-to-maturity (HTM) investments and AFS investments. The Group also classifies its financial liabilities into FVPL and other financial liabilities. The classification depends on the purpose for which the investments are acquired and whether they are quoted in an active market. Management determines the classification of its financial assets and financial liabilities at initial recognition and, where allowed and appropriate, reevaluates such designation at the end of each reporting period. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a component that is a financial liability are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity, net of any related income tax benefits. The Group has no financial assets classified as financial assets at FVPL and HTM investments. Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, they are not entered into with the intention of immediate or short-term resale and are not designated as AFS investments or financial assets at FVPL. Loans and receivables are carried at amortized cost using the effective interest method, less impairment loss. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are integral part of the effective interest rate. Gains and losses are recognized in profit or loss when the loans and receivables are derecognized or impaired, as well as through the amortization process. Loans and receivables are included in current assets if maturity is within 12 months from the end of reporting period. As at December 31, 2014 and 2013, financial assets included under this classification are the Group’s cash in banks, cash equivalents, trade and other receivables excluding advances to suppliers, officers and employees, and refundable deposits (presented as part of “Other current assets” and “Other noncurrent assets” in the consolidated balance sheet). AFS Investments AFS investments are those non-derivative financial assets which are designated as such or do not qualify to be classified as financial assets designated at FVPL, HTM investments or loans and receivables. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions. After initial measurement, AFS investments are measured at fair value with unrealized gains or losses recognized in the consolidated statement of comprehensive income and consolidated statement of changes in equity in the “Unrealized gain or loss on AFS investments” until the AFS investments is derecognized, at which time the cumulative gain or loss recorded in equity is recognized in profit or loss. Assets under this category are classified as current assets if expected to be realized within 12 months from the end of reporting period and as noncurrent assets if maturity date is more than a year from the end of reporting period. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

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As at December 31, 2014 and 2013, the Group’s AFS investments include investments in quoted and unquoted shares of stock and club shares. Other Financial Liabilities This classification pertains to financial liabilities that are not designated as at FVPL upon the inception of the liability. Included in this category are liabilities arising from operations or borrowings. The financial liabilities are recognized initially at fair value and are subsequently carried at amortized cost, taking into account the impact of applying the effective interest method of amortization (or accretion) for any related premium (discount) and any directly attributable transaction costs. As at December 31, 2014 and 2013, financial liabilities included in this classification are the Group’s loans payable, trade and other payables excluding provision for cargo losses and damages and unearned revenue, long-term debts, obligations under finance lease, restructured debts, redeemable preferred shares of a subsidiary and other noncurrent liabilities. Classification of Financial Instruments between Debt and Equity Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest relating to a financial instrument or a component that is a financial liability is reported as expenses. A financial instrument is classified as debt if it provides for a contractual obligation to: deliver cash or another financial asset to another entity; or exchange financial assets or financial liabilities with another entity under conditions

that are potentially unfavorable to the Group; or satisfy the obligation other than by the exchange of a fixed amount of cash or another

financial asset for a fixed number of own equity shares. If the Group does not have an unconditional right to avoid delivering cash or another financial asset to settle its contractual obligation, the obligation meets the definition of a financial liability. The components of issued financial instruments that contain both liability and equity elements are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as the fair value of the liability component on the date of issue. Redeemable Preferred Shares (RPS) The component of the RPS that exhibits characteristics of a liability is recognized as a liability in the consolidated balance sheet, net of transaction costs. The corresponding dividends on those shares are charged as interest expense in profit or loss. On issuance of the RPS, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond; and this amount is carried as a long term liability on the amortized cost basis until extinguished on conversion or redemption.

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Day 1 Difference Where the transaction price in a non-active market is different from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Group recognizes the difference between the transaction price and fair value (a Day 1 profit and loss) in profit or loss unless it qualifies for recognition as some other type of asset. In cases where use is made of data which is not observable, the difference between the transaction price and model value is only recognized in profit or loss when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the Day 1 profit or loss amount. Offsetting of Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented at gross amounts in the consolidated balance sheet. Derecognition of Financial Assets and Liabilities Financial Asset A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: the rights to receive cash flows from the asset have expired; the Group retains the right to receive cash flows from the asset, but has assumed an

obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

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

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through agreement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. In such case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Financial Liability A financial liability is derecognized when the obligation under the liability is discharged, or cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.

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Impairment of Financial Assets The Group assesses at the end of each reporting period whether a financial asset or group of financial assets is impaired. Loans and Receivables For loans and receivables carried at amortized cost, the Group first assesses individually whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the financial asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent period, the amount of the impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or decreased by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognized in profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Assets Carried at Cost If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost had been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods. AFS Investments For AFS investments, the Group assesses at the end of each reporting period whether there is objective evidence that an investment or group of investment is impaired.

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In the case of quoted equity investments classified as AFS investments, objective evidence of impairment would include a significant or prolonged decline in the fair value of the investments below its cost. The Group treats “significant” generally as 20% or more and “prolonged” as greater than 12 months for quoted equity securities. Where there is evidence of impairment, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss) is removed from equity and recognized in profit or loss. Impairment losses on equity investments are not reversed through profit or loss. Increases in fair value after impairment are recognized in OCI. In the case of debt instruments classified as AFS investments, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of “Interest income” in profit or loss. If, in subsequent period, the fair value of a debt instrument increased and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss. Inventories Inventories are valued at the lower of cost and net realizable value (NRV). Cost comprises all cost of purchase and other costs incurred in bringing the inventories to their present location or condition. Cost is determined using weighted average method for trading goods, moving average method for materials, parts and supplies, flight equipment, expendable parts and supplies, and the first-in, first-out method for truck and trailer expendable parts, fuel, lubricants and spare parts. NRV of the trading goods is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. NRV of materials and supplies is the current replacement costs. An allowance for inventory obsolescence is provided for damaged goods based on analysis and physical inspection. Assets Held for Sale and Discontinued Operation Assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Noncurrent assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within 12 months from the date of classification. Property and equipment once classified as held for sale are not depreciated or amortized. If there are changes to a plan of sale, and the criteria for the asset or disposal group to be classified as held for sale are no longer met, the Group ceases to classify the asset or disposal group as held for sale and it shall be measured at the lower of: (a) its carrying amount before the asset was classified as held for sale adjusted for any depreciation, amortization or revaluations that would have been recognized had the asset not been classified as held for sale, and (b) its recoverable amount at the date of the subsequent decision not to sell. The Group includes any required adjustment to the carrying amount of a noncurrent asset or disposal group that ceases to be classified as held for sale in profit or loss from continuing operations in the period in which the criteria for the asset or disposal group to be classified as held for sale are no longer met. The Group presents that adjustment in the same caption in profit or loss used to present a gain or loss recognized, if any.

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In the consolidated statement of income of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from normal income and expenses down to the level of profit after taxes, even when the Group retains a non-controlling interest in the asset after the sale. The resulting profit or loss (after taxes) is reported separately in profit or loss. Property and Equipment Property and equipment, other than land, are carried at cost, less accumulated depreciation, amortization and impairment losses, if any. The initial cost of property and equipment consists of its purchase price and costs directly attributable to bringing the asset to its working condition for its intended use. When significant parts of property and equipment are required to be replaced in intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciation, respectively. Land is carried at cost less accumulated impairment losses. Subsequent expenditures relating to an item of property and equipment that have already been recognized are added to the carrying amount of the asset when the expenditures have resulted in an increase in the future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. Expenditures for repairs and maintenance are charged to the operations during the year in which they are incurred. Drydocking costs, consisting mainly of main engine overhaul, replacement of steel plate of the vessels’ hull and related expenditures, are capitalized as a separate component of “Vessels in operations.” When significant drydocking costs are incurred prior to the end of the amortization period, the remaining unamortized balance of the previous drydocking cost is derecognized in profit or loss. Vessels under refurbishment, if any, include the acquisition cost of the vessels, the cost of ongoing refurbishments and other direct costs. Construction in progress represents structures under construction and is stated at cost. This includes cost of construction and other direct costs. Borrowing costs that are directly attributable to the refurbishment of vessels and construction of property and equipment are capitalized during the refurbishment and construction period. Vessels under refurbishment and construction in progress are not depreciated until such time the relevant assets are complete and available for use. Refurbishment of existing vessels is capitalized as part of vessel improvements and depreciated at the time the vessels are put back into operation. Vessel on lay-over, if any, represents vessel for which drydocking has not been done pending availability of the necessary spare parts. Such vessels, included under the “Property and equipment” account in the consolidated balance sheet are stated at cost less accumulated depreciation and any impairment in value.

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Depreciation and amortization are computed using the straight-line method over the following estimated useful lives of the property and equipment:

In Years Vessels in operation, excluding drydocking

costs and vessel equipment and improvements 15 - 30 Drydocking costs(1) 2 - 5 Vessel equipment and improvements 3 - 5 Containers and reefer vans 5 - 10 Terminal and handling equipment 5 - 10 Furniture and other equipment 3 - 5 Land improvements 5 - 10 Buildings and warehouses 5 - 20 Transportation 5 - 10 (1) Drydocking cost are included under various property and equipment classification

Leasehold improvements are amortized over their estimated useful lives of 5-20 years or the term of the lease, whichever is shorter. Flight equipment is depreciated based on the estimated number of flying hours. Depreciation or amortization commences when an asset is in its location or condition capable of being operated in the manner intended by management. Depreciation or amortization ceases at the earlier of the date that the item is classified as held for sale in accordance with PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations, and the date the asset is derecognized. The asset’s residual values, useful lives and depreciation and amortization methods are reviewed at each reporting period, and adjusted prospectively if appropriate. When property and equipment are sold or retired, their cost and accumulated depreciation and amortization and any allowance for impairment in value are eliminated from the accounts and any gain or loss resulting from their disposal is included in profit or loss. Fully depreciated assets are retained in the accounts until these are no longer in use. Investment Property Investment property, consisting of a parcel of land of 2GO Express, is measured at cost less any impairment loss. The Group used the fair value of the land as the cost in the consolidated financial statements at the date the Company acquired 2GO Express. Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the item can be measured reliably. Derecognition of an investment property will be triggered by a change in use or by sale or disposal. Gain or loss arising on disposal is calculated as the difference between any disposal proceeds and the carrying amount of the related asset, and is recognized in the consolidated statement of income. Transfers are made to investment property when, and only when, there is change in use, evidenced by cessation of owner-occupation, commencement of an operating lease to another party or completion of construction or development, transfers are made from investment property when, and only when, there is a change in used, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

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Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of the acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets are regarded to have an indefinite useful life when, based on analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group. Software Development Costs Software development costs are initially recognized at cost. Following initial recognition, the software development costs are carried at cost less accumulated amortization and any accumulated impairment loss. The software development costs is amortized on a straight-line basis over its estimated useful economic life of three to five years and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization commences when the software development costs is available for use. The amortization period and the amortization method for the software development costs are reviewed at each financial year end. Changes in the estimated useful life is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense is recognized in profit or loss in the expense category consistent with the function of the software development costs. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually either individually or at the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized. Impairment of Nonfinancial Assets The Group assesses at the end of each reporting period whether there is an indication that nonfinancial asset may be impaired. If any such indication exists, or when annual impairment testing for nonfinancial asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s estimated recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use (VIU) and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses of continuing operations are recognized in profit or loss in those expense categories consistent with the function of the impaired asset.

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A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation or amortization expense is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. The Group’s nonfinancial assets consist of creditable withholding taxes (CWTs), input value added tax (VAT), prepaid expense, advances to suppliers, officers and employees, other current assets, assets held for sale, property and equipment, investment property, investments in associates and joint ventures, software development costs, and deferred input VAT. Goodwill Goodwill is tested annually for impairment and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGU) to which the goodwill relates. Where the recoverable amount of CGU (or group of CGUs) is less than their carrying amount, an impairment loss is recognized immediately in profit or loss of the CGU (or the group of CGUs) to which goodwill has been allocated. Impairment losses relating to goodwill cannot be reversed in future periods. Provisions and Contingencies Provisions are recognized when: (a) the Group has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the consolidated financial statements but disclosed in the notes to consolidated financial statements when an inflow of economic benefits is probable. Equity Share capital is measured at par value for all shares issued. When the Company issues more than one class of stock, a separate account is maintained for each class of stock and the number of shares issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax. Additional paid-in capital (APIC) is the difference between the proceeds and the par value when the shares are sold at a premium. Contributions received from shareholders are recorded at the fair value of the items received with the credit going to share capital and any excess to APIC. Retained earnings (deficit) represents the cumulative balance of net income or loss, net of any dividend declaration and other capital adjustments.

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Treasury shares are own equity instruments that are reacquired. Treasury shares are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized as APIC. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them. Other Comprehensive Income comprises items of income and expenses that are not recognized in profit or loss for the year. Other comprehensive income of the Group includes net changes in fair value of AFS investments, share in other comprehensive income of associates and remeasurement gains (losses) on accrued retirement benefits. Revenue Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding discounts, rebates VAT or duties. The Group assesses its revenue arrangement against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The specific recognition criteria for each type of revenue are as follows: Freight and passage revenues are recognized when the related services are rendered. Customer payments for services which have not yet been rendered are classified as unearned revenue under “Trade and other payables” in the consolidated balance sheet. Service fees are recognized when the related services have been rendered. Service fees are also recognized when cargoes are received by either shipper or consignee for export and import transactions. These amounts are presented, net of certain costs which are reimbursed by customers. Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, which is upon delivery of the goods and acceptance by the buyer. Revenue from sale of food and beverages is recognized upon delivery and acceptance by customers. Vessel lease revenues from short-term leasing arrangements are recognized in accordance with the terms of the lease agreements. Manning and crewing services revenue is recognized upon embarkation of qualified vessel crew based on agreed rates and when the corresponding training courses have been conducted. Arrastre and stevedoring revenue is recognized when related services are rendered. Management fee is recognized when the related services are rendered. Commissions are recognized as revenue in accordance with the terms of the agreement with the principal and when the related services have been rendered. Rental income arising from operating leases is recognized on a straight-line basis over the lease term.

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Interest income is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Dividend income is recognized when the shareholders’ rights to receive the payment is established. Costs and Expenses Costs and expenses are recognized in profit or loss when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after the inception of the lease only if any of the following applies: a. there is a change in contractual terms, other than a renewal or extension of the

arrangement; b. a renewal option is exercised and extension granted, unless the term of the renewal or

extension was initially included in the lease term; c. there is a change in the determination of whether fulfillment is dependent on a

specified asset; or d. there is a substantial change to the asset. When a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances give rise to the reassessment for scenarios (a), (c) or (d) and at the date of renewal or extension period for scenario (b). The Group as a Lessee Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized directly in profit or loss. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as expense in profit or loss on a straight-line basis over the lease term. The Group as a Lessor Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same bases as rental income. Contingent rentals are recognized as revenue in the period in which they are earned.

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Borrowing Costs Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalization of borrowing costs commences when the activities necessary to prepare the asset for intended use are in progress and expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the asset is available for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized. Borrowing costs include interest charges and other costs incurred in connection with the borrowing of funds, as well as exchange differences arising from foreign currency borrowings used to finance these projects, to the extent that they are regarded as an adjustment to interest costs. All other borrowing costs are expensed as incurred. Retirement Benefits The net defined benefit liability or asset is the aggregate of the present value of the defined benefit obligation 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 ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. The cost of providing benefits under the defined benefit plans is actuarially determined using the projected 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 nonroutine settlements are recognized as expense in profit or loss. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent qualified actuaries. Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to the net defined benefit liability or asset. Net interest on the net defined benefit liability or asset is recognized as expense or income in profit or loss. Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately in other comprehensive income in the period in which they arise. Remeasurements are not reclassified to profit or loss in subsequent periods. Taxes Current income tax Current income tax assets and liabilities for the current periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted at the end of each reporting period, in the countries where the Group operates and generates taxable income.

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Current income tax relating to items recognized directly in equity is recognized in equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred Income Tax Deferred income tax is provided, using the balance sheet liability method, on all temporary differences at the financial reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets are recognized for deductible temporary differences, carryforward benefits of unused tax credits from 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 sufficient future taxable profits will be available against which the deductible temporary differences, carryforward benefits of unused tax credits from excess of MCIT over RCIT and unused NOLCO can be utilized. Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred income tax, however, is not recognized when it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit or loss nor taxable profit or loss. Deferred income tax liabilities are not provided on non-taxable temporary differences associated with investments in domestic subsidiaries, associates and interest in joint ventures. With respect to investments in other subsidiaries, associates and interests in joint ventures, deferred income tax liabilities are recognized except when the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that sufficient future taxable profits will allow the deferred income tax asset to be recovered. It is probable that sufficient future taxable profits will be available against which a deductible temporary difference can be utilized when there are sufficient taxable temporary difference relating to the same taxation authority and the same taxable entity which are expected to reverse in the same period as the expected reversal of the deductible temporary difference. In such circumstances, the deferred income tax asset is recognized in the period in which the deductible temporary difference arises. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rate and tax laws that have been enacted or substantively enacted at the end of the reporting period. Deferred income tax relating to items recognized in OCI or directly in equity is recognized in the consolidated statements of comprehensive income and consolidated statement of comprehensive income and consolidated statement of changes in equity and not in profit or loss.

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Deferred income tax assets and liabilities are offset, if there is a legally enforceable right to offset current income tax assets against current income and consolidated statement of changes in equity and not in profit or loss. Deferred income tax assets and liabilities are offset, if there is a legally enforceable right to offset current income tax assets against current income tax liabilities and they relate to income taxes levied by the same tax authority and the Group intends to settle its current income tax assets and liabilities on a net basis. VAT Revenue, expenses, assets and liabilities are recognized, net of the amount of VAT, except where the VAT incurred as a purchase of assets or service is not recoverable from the tax authority, in which case VAT is recognized as part of the cost acquisition of the asset or as part of the expense item as applicable. The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of “Other current assets” or “Trade and other payables” in the consolidated balance sheet. Creditable withholding taxes Creditable withholding taxes (CWT), included in “Other current assets” account in the consolidated balance sheet, are amounts withheld from income subject to expanded withholding taxes. CWTs can be utilized as payment for income taxes provided that these are properly supported by certificates of creditable tax withheld at source subject to the rule on Philippine income taxation. CWTs which are expected to be utilized as payment for income taxes within 12 months are classified as current assets. Foreign Currency-denominated Transactions and Translations The Group’s consolidated financial statements are presented in Philippine Peso, which is the Company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the end of the reporting period. All differences are taken to the profit or loss except for the exchange differences arising from translation of the balance sheets of subsidiaries and associates which are considered foreign entities into the presentation currency of the Company (Peso) at the closing exchange rate at the end of the reporting period and their statement of income translated using the weighted average exchange rate for the year. These are recognized in OCI until the disposal of the net investment, at which time they are recognized in profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions and are not retranslated. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Earnings Per Common Share Basic earnings per common share are determined by dividing net income by the weighted average number of common shares outstanding, after retroactive adjustment for any stock dividends and stock splits declared during the year.

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Diluted earnings per common share amounts are calculated by dividing the net income for the year attributable to the ordinary equity holders of the parent by the weighted average number of common shares outstanding during the year plus the weighted average number of ordinary shares that would be issued for any outstanding common share equivalents. The Group has no potential dilutive common shares. Dividends on Common Shares Dividends on common shares are recognized as a liability and deducted from retained earnings when approved by the respective shareholders of the Company and subsidiaries. Dividends for the year that are approved after the reporting period are dealt with as an event after the reporting period. Segment Reporting The Group’s operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Financial information on business segments is presented in Note 4. Events After the Reporting Period Post year events that provide evidence of conditions that existed at balance sheet date are reflected in the consolidated financial statements. Subsequent events that are indicative of conditions that arose after reporting period are disclosed in the notes to consolidated financial statements when material.

3. Significant Judgments, Accounting Estimates and Assumptions The preparation of the consolidated financial statements in compliance with PFRSs requires management to make judgments, accounting estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The judgments, estimates and assumptions are based on management’s evaluation of relevant facts and circumstances as at the date of the consolidated financial statements. Actual results could differ from these estimates and assumptions used. Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognized in the consolidated financial statements: Determination of Functional Currency Based on the economic substance of the underlying circumstances relevant to the Group, the functional currency is determined to be the Peso. It is the currency that mainly influences the sale of services and the cost of rendering the services. Determination if Significant Influence or Control Exists in an Investee Company Control is presumed to exist when the parent company owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity unless, in exceptional circumstances, it can be clearly demonstrated that such ownership does not constitute control. Management has determined that despite only having 50% ownership in STI, it has control by virtue of its power to cast the majority votes at meetings of STI’s BOD and control of the entity is by that BOD.

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Classification of Financial Instruments The Group classifies a financial instrument, or its component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual agreement and the definitions of a financial asset, a financial liability or an equity instrument. The substance of a financial instrument, rather than its legal form, governs its classification in the consolidated balance sheet. The Group’s classification of financial instruments is presented in Note 33. Classification of Leases - the Group as a Lessee The Group has entered into commercial property leases on its distribution warehouses, sales outlets, trucking facilities and administrative office locations. Based on an evaluation of the terms and conditions of the arrangements, management assessed that there is no transfer of ownership of the properties by the end of the lease term and the lease term is not a major part of the economic life of the properties. Thus, the Group does not acquire all the significant risks and rewards of ownership of these properties and so accounts for these as operating leases. The Group has also entered into finance lease agreements covering certain property and equipment. The Group has determined that it bears substantially all the risks and benefits incidental to ownership of said properties based on the terms of the contracts (such as existence of bargain purchase option and the present value of minimum lease payments amount to at least substantially all of the fair value of the leased asset). As at December 31, 2014 and 2013, the carrying amount of the property and equipment under finance lease amounted to P153.2 million and P135.4 million, respectively (see Note 20). Classification of Leases - the Group as a Lessor The Group has entered into short-term leases or chartering arrangements, which provide no transfer of ownership to the lessee. The Group has determined that, based on an evaluation of the terms and conditions of the arrangements, it retains all the significant risks and rewards of ownership of these equipment and accounts for these as operating leases. Classification and Valuation of Assets Held for Sale Management assessed whether its existing vessels met the criteria as assets held for sale based on the following: (1) the related assets are available for immediate sale; (2) preliminary negotiations with willing buyers were executed; and (3) the sale is expected to be completed within 12 months from the end of reporting period. In June 2013, the Group sold one of the vessels held for sale for total cash proceeds of P85.3 million, which resulted to a loss amounting to P51.0 million (see Note 10). In December 2013, the Group decided to put back into operation the other vessel held for sale to property and equipment due to certain incidents that happened in 2013 that have a significant impact on the passage and cargo capacity of the Group (see Note 13). Thus, as at December 31, 2014 and 2013, there were no vessels classified as held for sale. Classification of Redeemable Preferred Shares (RPS) The Group has RPS which is redeemable at any time, in whole or in part, within a period not exceeding 10 years from the date of issuance. If not redeemed, the RPS may be converted to a bond over prevailing treasury bill rate to be issued by the Company. The Company classified this RPS amounting to P6.0 million and P6.7 million as liability as at December 31, 2014 and 2013, respectively (see Note 21).

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Evaluation of Legal Contingencies The Group is a party to certain lawsuits or claims arising from the ordinary course of business. The Group’s management and legal counsel believe that the eventual liabilities under these lawsuits or claims, if any, will not have material effect on the consolidated financial statements. Accordingly, no provision for probable losses arising from legal contingencies was recognized in 2014 and 2013 (see Note 22). Evaluation of Events After the Reporting Period Management exercises judgment in determining whether an event, favorable or unfavorable, occurring between the end of the reporting period and the date when the financial statements are authorized for issue, is an adjusting event or nonadjusting event. Adjusting events provide evidence of conditions that existed at the end of the reporting period whereas nonadjusting events are events that are indicative of conditions that arose after the reporting period. Estimates and Assumptions The following are the key assumptions concerning the future and other key sources of estimation uncertainty, at the end of reporting period that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. Determination of Fair Value of Financial Instruments Where the fair value of financial assets and liabilities recorded in the consolidated balance sheet cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows model. The inputs to the models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing the fair values. The judgments include considerations of inputs such as liquidity risk and credit risk. Changes in assumptions about these factors could affect the reported fair value of financial instruments. The carrying values and corresponding fair values of financial assets and financial liabilities and the manner in which fair values were determined are described in Note 34. Estimation of allowance for doubtful receivables The Group maintains allowances for doubtful accounts on trade and other receivables at a level considered adequate to provide for potential uncollectible receivables. The level of this allowance is evaluated by the Group on the basis of factors that affect the collectibility of the accounts. These factors include, but are not limited to, the length of the Group’s relationship with debtors, their payment behavior and known market factors. The Group reviews the age and status of the receivables, and identifies accounts that are to be provided with allowance on a continuous basis. The amount and timing of recorded expenses for any period would differ if the Group made different judgment or utilized different estimates. An increase in the Group’s allowance for impairment losses would increase the Group’s recorded expenses and decrease current assets. The main considerations for impairment assessment include whether any payments are overdue or if there are any known difficulties in the cash flows of the counterparties. The Group assesses impairment into two areas: individually assessed allowances and collectively assessed allowances.

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The Group determines allowance for each significant receivable on an individual basis. Among the items that the Group considers in assessing impairment is the inability to collect from the counterparty based on the contractual terms of the receivables. Receivables included in the specific assessment are the accounts that have been endorsed to the legal department, non-moving account receivables, accounts of defaulted agents and accounts from closed stations. For collective assessment, allowances are assessed for receivables that are not individually significant and for individually significant receivables where there is no objective evidence of individual impairment. Impairment losses are estimated by taking into consideration the age of the receivables, past collection experience and other factors that may affect collectibility. As at December 31, 2014 and 2013, trade and other receivables amounted to P3,973.1 million and P3,949.8 million, respectively, net of allowance for doubtful receivables of P395.6 million and P379.4 million, respectively (see Note 7). Determination of NRV of Inventories The Group’s estimates of the NRV of inventories are based on the most reliable evidence available at the time the estimates are made, of the amount that the inventories are expected to be realized. These estimates consider the fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. A new assessment is made of NRV in each subsequent period. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is a clear evidence of an increase in NRV because of change in economic circumstances, the amount of the write-down is reversed so that the new carrying amount is the lower of the cost and the revised NRV. As at December 31, 2014 and 2013, the carrying values of inventories amounted to P877.5 million and P422.0 million, net of inventory write-down amounting to P66.7 million and P55.7 million, respectively (see Note 8). Estimation of Useful Lives of Property and Equipment The useful life of each of the Group’s item of property and equipment is estimated based on the period over which the asset is expected to be available for use until it is derecognized. Such estimation is based on a collective assessment of similar businesses, internal technical evaluation and experience with similar assets. The estimated useful life of each asset is reviewed periodically and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the asset. It is possible, however, that future results of operations could be materially affected by changes in the amounts and timing of recorded expenses brought about by changes in the factors mentioned above. A reduction in the estimated useful life of any item of property and equipment would increase the recorded depreciation expenses and decrease the carrying value of property and equipment. There were no changes in the estimated useful lives of property and equipment in 2014 and 2013. As at December 31, 2014 and 2013, property and equipment amounted to P5,403.6 million and P5,054.9 million, net of accumulated depreciation, amortization and impairment loss of P6,830.0 million and P6,171.2 million, respectively (see Note 13).

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Estimation of Useful Life of Software Development Costs The estimated useful life used as a basis for amortizing software development costs was determined on the basis of management’s assessment of the period within which the benefits of these costs are expected to be realized by the Group. As at December 31, 2014 and 2013, the carrying value of software development costs amounted to P29.1 million and P15.4 million (see Note 15). Impairment Assessment of AFS Investments The Group considers AFS investments as impaired when there has been a significant or prolonged decline in the fair value of such investments below their cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires judgment. The Group treats “significant” generally as 20% or more and “prolonged” as greater than 12 months. In addition, the Group evaluates other factors, including normal volatility in share price for quoted equities and future cash flows and discount factors for unquoted equities in determining the amount to be impaired. As at December 31, 2014 and 2013, the carrying value of AFS investments amounted to P5.7 million and P6.9 million, respectively (see Note 11). No impairment loss was recognized in 2014 and 2013. Estimation of Probable Losses on Prepaid Taxes The Group makes an estimate of the provision for probable losses on its CWTs and input VAT. Management’s assessment is based on historical experience and other developments that indicate that the carrying value may no longer be recoverable. The aggregate carrying values of CWTs, input VAT and deferred input VAT amounting to P1,120.9 million and P1,028.9 million as at December 31, 2014 and 2013, respectively, are fully recoverable (see Notes 9 and 16). Assessment of Impairment of Nonfinancial Assets and Estimation of Recoverable Amount The Group assesses at the end of each reporting period whether there is any indication that the nonfinancial assets listed below may be impaired. If such indication exists, the entity shall estimate the recoverable amount of the asset, which is the higher of an asset’s fair value less costs to sell and its value-in-use. In determining fair value less costs to sell, an appropriate valuation model is used, which can be based on quoted prices or other available fair value indicators. In estimating the value-in-use, the Group is required to make an estimate of the expected future cash flows from the CGU and also to choose an appropriate discount rate in order to calculate the present value of those cash flows. Determining the recoverable amounts of the nonfinancial assets, which involves the determination of future cash flows expected to be generated from the continued use and ultimate disposition of such assets, requires the use of estimates and assumptions that can materially affect the consolidated financial statements. Future events could indicate that these nonfinancial assets are impaired. Any resulting impairment loss could have a material adverse impact on the financial condition and results of operations of the Group. The preparation of estimated future cash flows involves significant judgment and estimations. While the Group believes that its assumptions are appropriate and reasonable, significant changes in these assumptions may materially affect its assessment of recoverable values and may lead to future additional impairment changes under PFRS.

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Assets that are subject to impairment testing when impairment indicators are present (such as obsolescence, physical damage, significant changes to the manner in which the asset is used, worse than expected economic performance, a drop in revenues or other external indicators) are as follows:

Note 2014 2013 (In Thousands)

Property and equipment - net 13 P5,403,570 P5,054,932 Investment property 14 9,763 9,763 Investments in associates and joint

ventures 12 192,951 181,977 Software development costs 15 29,139 15,379

The Group recognized provision for impairment losses on property and equipment amounting to nil and P234.8 million in 2014 and 2013, respectively (see Note 13). As at December 31, 2014 and 2013, no impairment losses were recognized on the group’s investment property, investment in associates and joint ventures and software development costs as their recoverable values are higher than their carrying values. Impairment of Goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the CGUs to which the goodwill is allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The significant assumptions used in estimating for the recoverable amount of goodwill are described in Note 5. The carrying amount of goodwill as at December 31, 2014 and 2013 amounted to P250.5 million (see Note 5). Estimation of Retirement Benefits Costs and Obligation The determination of the obligation and cost for pension and other retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions were described in Note 28 and include among others, discount rate and rate of compensation increase. While it is believed that the Group’s assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the group’s pension and other retirement obligations. The discount is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. As at December 31, 2014 and 2013, the Group’s pension asset amounted to P0.8 million and P1.4 million while the Group’s accrued retirement benefits amounted to P217.6 million and P167.2 million, respectively (see Notes 16 and 28). Recognition of Deferred Tax Assets The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient future taxable income will be available to allow all or part of the deferred tax assets to be utilized.

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As at December 31, 2014 and 2013, the Group has recognized deferred tax assets on its temporary differences, carryforward benefits of NOLCO and excess MCIT amounting to P591.1 million and P481.9 million, respectively (see Note 29). Tax effect of the temporary difference and carryforward benefits of unused NOLCO and MCIT for which no deferred income tax assets were recognized amounted to P26.1 million and P454.4 million as at December 31, 2014 and 2013, respectively (see Note 29).

4. Operating Segment Information Operating segments are components of the Group: (a) that engage in business activities from which they may earn revenue and incur expenses (including revenues and expenses relating to transactions with other components of the Group); (b) whose operating results are regularly reviewed by the Group’s BOD to make decisions about resources to be allocated to the segment and assess its performance; and (c) for which discrete financial information is available. The Group’s Chief Operating Decision Maker is the Parent Company’s BOD. For purposes of management reporting, the Group is organized into business units based on their products and services. The Group has the following segments: The shipping segment renders passage transportation and cargo freight services. The non-shipping segment provides logistics services and supply chain management. The Group’s BOD regularly reviews the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. The Group has the Philippines as its only geographical segment as all of its assets are located in the Philippines. The Group operates and derives principally all its revenue from domestic operations. Thus, geographical business information is not required. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue includes transfer of goods and services between operating segments. Such transfers are eliminated in the consolidation. Further, there were no revenue transactions with a single customer that accounts for 10% or more of total revenue. Further, the measurement of the segments is the same as those described in the summary of significant accounting and financial reporting policies, except for the land property of 2GO Express, which is carried at cost in the Company’s consolidated financial statements but was measured to fair value in the NN’s consolidated financial statements at the date of the business combination of the Company and NN. There have been no changes in the measurement methods used to determine repented profit or loss from prior periods

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Segment revenue, expenses, results, assets, liabilities and other information about the business segments follows:

2014

Shipping Non-

shipping Eliminations/Adjustments

Consolidated Balances

(In Thousands)

Revenues P8,538,222 P7,205,921 (P1,317,149) P14,426,995 Operating Costs and

Expenses Operating 5,510,581 4,93,740 (1,138,595) 8,665,726 Terminal 1,446,408 - (41,078) 1,405,330 Cost of goods sold - 2,087,071 - 2,087,071 Overhead 670,070 614,949 (171,715) 1,113,304 Total Cost and Expenses 7,627,058 6,995,760 (1,351,387) 13,271,431

Operating income (loss) before interest and others 911,165 210,161 34,239 1,155,564

Interest and financing charges (337,846) (34,644) 39,860 (332,630)

Others - net 156,475 62,803 (154,098) 65,179 Income before income tax 729,793 238,319 (80,000) 888,113 Provision for income tax (36,518) 82,077 - 45,558 Segment profit (loss) P766,311 P156,243 (P80,000) P842,555

Segment assets P11,807,625 P4,712,350 (P2,603,718) P13,916,257 Segment liabilities 8,509,319 3,695,709 (2,180,489) 10,024,538 Other information:

Depreciation and amortization 749,019 54,711 - 803,730

Investments in associates and joint ventures 529,864 72,791 (409,705) 192,951

Equity in net earnings of associates and joint ventures 1,224 9,751 (1) 10,974

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2013

Shipping Non-shipping Eliminations/Adjustments

Parent Balances

(In Thousands)

Revenues P8,556,276 P6,103,731 (P1,286,814) P13,373,193 Operating Costs and

Expenses Operating 6,174,827 3,523,627 (1,124,313) 8,574,141 Terminal 1,401,229 1,472 (45,842) 1,356,859 Cost of goods sold - 1,720,991 - 1,720,991 Overhead 777,967 569,625 (116,484) 1,231,108 Total Cost and Expenses 8,354,023 5,815,715 (1,286,639) 12,883,099

Operating income (loss) before interest and others 202,253 288,016 (175) 490,094

Interest and financing charges (364,728) (53,721) 49,435 (369,014)

Others - net 573,688 84,116 (66,111) 591,693 Income before income tax 411,213 318,411 (16,851) 712,773 Provision for income tax 418,076 67,616 - 485,692 Segment profit (loss) (P6,863) P250,795 (P16,851) P227,081

Segment assets P11,201,978 P3,560,781 (P2,240,855) P12,521,904 Segment liabilities (8,777,183) (2,543,062) 1,881,357 (9,438,888) Other information:

Depreciation and amortization 966,167 76,064 (5,640) 1,036,591

Reversal of vessel impairment loss 60,606 - - 60,606

Investments in associates and joint ventures 16,500 62,473 103,004 181,977

Equity in net earnings of associates and joint ventures 32,427 12,419 - 44,486

5. Business Combinations Acquisition of SOI and Impairment Testing of Goodwill On June 3, 2008, 2GO Express acquired 100% ownership in SOI in line with the Group’s business strategy to provide total supply chain solutions to clients and to further improve the effectiveness and efficiency of its delivery services. Goodwill resulting from this acquisition amounted to P250.5 million. Impairment Testing of Goodwill The amount of goodwill acquired from the acquisition of SOI hence attributed to SOI a CGU. The recoverable amount of goodwill has been determined based on a VIU calculation using cash flow projections based on financial budgets approved by senior management covering a five-year period. The discount rate applied to cash flow projections is 11% in 2014 and 2013. Cash flows beyond the five-year period are extrapolated using a zero percent growth rate. Key Assumptions Used in Value in Use Calculations The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill.

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Budgeted Earnings Before Interest, Tax, Depreciation and Allowance (EBITDA) Budgeted EBITDA has been based on past experience adjusted for the following: Passage and Cargo Volume. Management based the passage and cargo volume on

the number of round trips per year. The increase in volume is based on the assumption that traffic will grow in relation with the expected gross domestic product (GDP) growth of 5% to 6%.

Rates, Exclusive of VAT. Management expects an increase in passage and freight

rates by 3% in 2015 and in subsequent years based on the history of rates increases. Fuel Prices. Management expects an increase in fuel prices of 5% starting on the 2nd

year and every year onwards. Management expects to recover from the Group’s customers any change in fuel prices that are beyond budget through implementation of surcharge. Management believes the fuel surcharge would not cause any material change in the forecasted passenger and cargo volume.

Fixed Operating Costs and Expenses. Based on the cost savings analysis made by

Management, terminal operation’s fixed costs are expected to decrease due to consolidation of ports and container yards in various locations in the Philippines.

General and Administrative Expenses. Management expects that the general and

administrative expenses for 2015 are expected to further decline due to the cost cutting initiatives undertaken.

Other Operating Expenses. Management expects that costs and expenses, in general,

will increase by 3% on the second year and remains steady until the fifth year. Budgeted Capital Expenditure Budgeted capital expenditure is based on management’s plan to expand the Group’s supply chain segment. Sensitivity to Changes in Assumptions Other than as disclosed above, management believes that any reasonably possible change in any of the above key assumptions would not cause the carrying value of goodwill to exceed its recoverable amount. As at December 31, 2014 and 2013, the Group has not recognized any impairment on the goodwill.

6. Cash and Cash Equivalents

2014 2013 (In Thousands)

Cash on hand and in banks P986,853 P869,215 Cash equivalents 248,199 49,430 P1,235,052 P918,645

Cash in banks earn interest at the respective bank deposit rates. Cash equivalents are made for varying periods of up to three months depending on the immediate cash requirements of the Group.

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Interest income earned by the Group from cash in banks and cash equivalents amounted to P2.7 million in 2014 and P1.7 million in 2013 (see Note 26).

7. Trade and Other Receivables


Trade: 23 Freight P1,525,869 P1,403,534 Service fees 722,717 586,874 Distribution 471,528 281,738 Passage 56,281 46,037 Others 629,013 503,068

Nontrade 23 582,722 414,429 Insurance and other claims 13, 22 324,543 908,358 Advances to officers and employees 31,575 25,746 Due from related parties 23 24,462 159,418 4,368,710 4,329,202 Less allowance for doubtful receivables 395,6196 379,383 P3,973,094 P3,949,819

Trade receivables are noninterest-bearing and are generally on 45 days’ terms. Nontrade receivables include advances to suppliers, passage bonds and receivable from trustee fund. These receivables are non-interest bearing and payable on demand. Insurance and other claims pertain to the Group’s claims for reimbursement of losses against insurance coverages for hull and machinery, spare parts, cargo, and personal accidents. In 2013, the Group recognized insurance claims receivables relating to the sunk and damaged vessels amounting to P943.3 million, of which P642.5 million and P300.8 million were collected in 2014 and 2013, respectively (see Note 13). Freight receivables of the Group amounting to P1,189.3 million and P1,274.0 million as at December 31, 2014 and 2013, respectively, were assigned to secure the long-term debts (see Note 19). Trade and other receivables that are individually determined to be impaired at the end of reporting period relate to debtors that are in significant financial difficulties and have defaulted on payments and whose accounts are under dispute and legal proceedings. These receivables are not secured by any collateral or credit enhancements. The following tables sets out the rollforward of the allowance for doubtful receivables as at December 31:

2014

Trade Insurance and Other

Note Freight Service Fees Distribution Others Nontrade Claims Total (In Thousands) Beginning P175,643 P117,907 P15,344 P8,037 P11,077 P51,375 P379,383 Provision 25 14,179 - 195 77 1,902 6 16,359 Accounts written off (46) - - - (80) - (126)

Ending P189,776 P117,907 P15,539 P8,114 P12,899 P51,381 P395,616

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2013

Trade Insurance and Other

Note Freight Service Fees Distribution Others Nontrade Claims Total

(In Thousands) Beginning P126,086 P114,396 P15,344 P4,768 P6,665 P21,375 P318,634 Provision 25 49,557 3,511 - 3,461 4,431 - 60,960 Accounts written off - - - (192) (19) - (211)

Ending P175,643 P117,907 P15,344 P8,037 P11,077 P51,375 P379,383

The following table sets out the analysis of collective and individual impairment of trade and other receivables as at December 31:

2014 2013

Collectively

Impaired Individually

Impaired Total Collectively

Impaired Individually

Impaired Total (In Thousands) Trade P20,663 P310,673 P331,336 P48,901 P268,030 P316,931 Nontrade - P12,899 P12,899 - 11,077 11,077 Insurance and other

claims - P51,381 P51,381 - 51,375 51,375 P20,663 P374,953 P395,616 P48,901 P330,482 P379,383

8. Inventories


At NRV: Materials, parts and supplies P501,320 P102,761

At cost: Trading goods 265,458 194,026 Fuel, oil and lubricants 110,764 125,170

P877,542 P421,957 The inventory write-down as at December 31, 2014 and 2013 amounted to P66.7 million and P55.7 million, respectively. The cost of inventories recognized as “Cost of goods sold” in the consolidated statements of income pertains to the trading goods sold by the non-shipping segment and food and beverages sold by the shipping segment totaling to P2,087.0 million in 2014 and P1,721.0 million in 2013 (see Note 25).

9. Other Current Assets


CWT P967,837 P881,693 Prepaid expenses 128,186 107,274 Input VAT 71,683 38,304 Others 41,547 27,138 P1,209,253 P1,054,409

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Outstanding CWT pertains mainly to the amounts withheld from income derived from freight, sale of goods and service fees for logistics and other services. The CWTs can be applied against any income tax liability of a company in the group to which the CWTs relate. Others pertain to current portion of recoverable deposit.

Prepaid expenses include prepaid insurance and prepaid taxes.

10. Assets Held for Sale As at January 1, 2013, the Company has two vessels held for sale with recoverable amount of P359.2 million, which is based from quotations obtained from prospective buyers, net of estimated costs to sell. In June 2013, the Group sold one of the vessels held for sale for total cash proceeds of P85.3 million, resulting to a loss of P51.0 million (see Note 23). In December 2013, the Company reclassified the remaining one vessel from assets held for sale to property and equipment in consideration of the change in the Company’s operating requirement, which is significantly affected by the incidents on the damaged and sunk vessels in 2013. Consequently, the Company assessed that the vessel will be recoverable through continuing use rather than through sale. The Company recorded depreciation of P131.6 million as if the Company had not classified the vessel as asset held for sale. Further, the Company reversed portion of the previously recognized impairment loss amounting to P73.5 million on the basis that the value in use of the vessel is higher than its carrying value as if it was not previously reclassified to assets held for sale. As at December 31, 2014 and 2013, management assessed that there are no vessels that would qualify as asset held for sale (see Note 26).

11. AFS Investments


Unquoted equity investments - at cost P5,067 P6,267 Quoted equity investments - listed shares

of stocks 640 640 P5,707 P6,907

a. Listed shares of stocks are carried at market value. The recurring fair value is

classified under Level 1 as disclosed in Note 34 to the consolidated financial statements. Unrealized gains or losses on AFS investments are recognized in the consolidated statements of comprehensive income and included in the “Equity” section of the consolidated balance sheets.

b. Unquoted shares of stocks pertain to fixed number of shares that are subject to mandatory redemption every year.

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c. The following table shows the movement of “Unrealized gain on AFS investments” account:


At beginning of year P798 P760 Net fair value changes of AFS

investments - 38 At end of year 798 798 Attributable to non-controlling interest 364 364 P434 P434

12. Investments in Associates and Joint Ventures The Group has the power to participate in the financial and operating policy decisions in MCCP and HMPPI, which does not constitute control or joint control. The Group also has interest in KLN and KLI, which are joint ventures. The Group’s investments in its associates and joint ventures are accounted for using equity method of accounting as at December 31:

2014 2013

Ownership

Interest Carrying

Values Ownership

Interest Carrying

Values (In Thousands) (In Thousands)

Associates: MCCP 33.0% P120,727 33.0% P119,504 HMPPI 47.1% 32,199 47.1% 32,075

Joint Ventures: KLN 78.4% 40,025 78.4% 30,398 KLI 62.5% 62.5% -

P192,951 P181,977 Details of investment in associates and joint ventures are as follows:


Acquisition - at beginning of year P28,175 P28,175 Accumulated equity in net earnings:

Balances at beginning of year 148,757 109,520 Equity in net earnings during the year 10,974 44,846 Dividends received - (5,609) Balances at end of year 159,731 148,757

Share in remeasurement loss on retirement benefits of associates and joint ventures (249) (249)

Share in cumulative translation adjustment of associates 5,294 5,294

P192,951 P181,977

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Joint Ventures On March 18, 2009, 2GO Express and KLN Investments Holdings Philippines, Inc. (KLN Investments) formed KLN Logistics Holdings Philippines, Inc. (KLN Holdings), a joint venture. In accordance with the Joint Venture Agreement, 2GO Express and KLN Investments (the “venturers”) will hold ownership interests of 78.4% and 21.6%, respectively, in KLN Holdings. However, the venturers exercise joint control over the financial and operating policies of KLN Holdings. On March 30, 2009, KLN Holdings and KLN Investments formed another joint venture entity, Kerry Logistics (Phils), Inc. (KLI) [formerly Kerry-ATS Logistics, Inc. (KALI)] to engage in the business of international freight and cargo forwarding. In accordance with the Joint Venture Agreement, KLN Holdings and KLN Investments will hold 62.5% and 37.5% interest in KLI, respectively, thus giving the Group a 49.0% indirect ownership interest in KLI.

2014 Associates Joint Ventures MCCP HMPPI KLN/KLI Total (In Thousands)

Current assets P2,541 P107,950 P184,206 P294,697 Noncurrent assets 18,526 12,727 19,302 50,555 Current liabilities 2,790 57,361 77,499 137,650 Noncurrent liabilities 15,616 11,506 56,756 83,878 Equity 2,661 51,811 69,253 123,725 Revenue 20,107 206,208 608,557 834,872 Net income 3,708 263 19,647 23,618 Group share of net income

for the year 1,224 123 9,627 10,974

2013 Associates Joint Ventures MCCP HMPPI KLN/KLI Total (In Thousands)

Current assets P188,080 P128,129 P160,906 P477,115 Noncurrent assets 414,963 7,084 9,162 431,209 Current liabilities 311,674 81,198 108,953 501,825 Noncurrent liabilities 6,691 1,296 4,642 12,629 Equity 284,678 52,719 56,473 393,870 Revenue 1,254,268 348,907 591,976 2,195,151 Net income 98,264 9,961 15,934 124,159 Group share of net income

for the year 32,427 4,693 7,726 44,846

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13. Property and Equipment

2014

Vessels in

Operation Containers Handling

Equipment Flight

Equipment

Furniture and Other

Equipment Land

Improvements Buildings and

Warehouses Transportation

Equipment Leasehold

Improvements Construction

in Progress Total

Cost (In Thousands) January 1, 2014 P6,201,468 P1,582,873 P1,260,678 P - P785,901 P418,935 P268,425 P289,938 P394,150 P23,754 P11,226,122 Additions 1,211,219 108,345 13,002 - 43,040 9,217 26,119 24,813 24,591 223 1,460,570 Disposals/retirements (99,935) (78,531) (9) - (14,052) - (916) (14,438) (4,791) (223) (212,896) Reclassifications (268,000) 17,044 25,722 - (7,741) (8,250) (4,505) (666) (7,951) 14,136 (240,212)

Balance 7,044,752 1,629,731 1,299,392 P - 807,148 419,902 289,123 299,647 405,999 37,890 12,233,584

Accumulated Depreciation, Amortization and Impairment Loss

January 1, 2014 2,223,252 1,331,713 1,201,333 - 693,372 112,642 207,132 85,351 316,431 - 6,171,190 Depreciation and amortization 613,887 34,604 43,062 - 33,936 7,751 17,871 30,623 19,265 - 801,000 Disposals/Retirements (13,343) (76,999) (9) - (24,422) - (10,352) (23,684) (4,790) - (153,599) Reclassifications 11,487 (6,583) - - (65) - 6,583 - - - 8,693

mpairment for the year - - - - - - - - - - -

Balance 2,835,283 1,282,736 1,244,386 - 702,822 120,393 221,234 92,254 330,906 - 6,830,014

NBV as of December 31, 2014 P4,209,469 P346,995 P55,006 P - P104,326 P299,509 P67,889 (P23,723) P75,093 P37,890 P5,403,570

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2013

Note

Vessels in Operation (Notes 19

and 20)

Containers and Reefer

Vans (Note 20)

Terminal and Handling

Equipment Flight

Equipment

Furniture and Other

Equipment Land

Improvements Buildings and

Warehouses Transportation

Equipment Leasehold

Improvements Construction

in Progress Total

(In Thousands) Cost January 1, 2013 P6,160,707 P1,529,443 P1,289,930 P4,999 P771,929 P410,685 P261,470 P103,709 P365,773 P49,042 P10,947,687 Additions 1,357,487 73,954 16,769 - 37,922 8,250 10,523 199,826 28,395 54,654 1,787,780 Disposals (1,149,283) (20,524) (50,159) - (25,666) - (219) (13,597) (2,525) - (1,261,973) Retirements/reclassifications (1,205,301) - 4,138 (4,999) 1,716 - (3,349) - 2,507 - (1,205,288) Reclassification from asset held

for sale 10 1,037,858 - - - - - - - - (79,942) 957,916

December 31, 2013 6,201,468 1,582,873 1,260,678 - 785,901 418,935 268,425 289,938 394,150 23,754 11,226,122

Accumulated Depreciation, Amortization and Impairment Loss

January 1, 2013 2,499,697 1,326,051 1,203,895 4,781 679,654 104,790 190,255 65,538 295,720 - 6,370,381 Depreciation and amortization 25 849,929 25,108 43,542 - 39,161 7,852 17,349 30,611 23,039 - 1,036,591 Disposals/retirements (808,995) (19,446) (50,157) - (26,458) - (113) (10,384) (2,410) - (918,413) Reclassification from asset held

for sale (1,205,301) - 4,053 (4,781) 1,015 - (359) - 82 - (1,205,291) Reclassification from assets

held for sale 10 653,161 - - - - - - - - - 653,161 Impairment for the year 234,761 - - - - - - - - - 234,761

December 31, 2013 2,223,252 1,331,713 1,201,333 - 693,372 112,642 207,132 85,315 316,431 - 6,171,190

Net Book Value P3,978216 P251,160 P59,345 P - P92,529 P306,293 P61,293 P204,623 P77,719 P23,754 P5,054,932

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Noncash Additions - Property and Equipment under Finance Lease Vessels in operations, containers and reefer vans, include units acquired under finance lease arrangements (see Note 20). In 2014 and 2013, noncash additions include costs of those leased assets amounting to P43.7 million and P90.9 million, respectively. The related depreciation of the leased containers amounting to P16 million and P12.1 million in 2013 were computed on the basis of the Group’s depreciation policy for owned assets. Capitalization of Drydocking Costs Vessels in operation also include capitalized drydocking costs incurred amounting to P252.4 million and P377.7 million for the vessels drydocked in 2014 and 2013, respectively. The related depreciable life of drydocking costs ranges from two to two and half years. Disposal, Retirement and Impairment of Property and Equipment In 2014 and 2013, the Group disposed certain property and equipment for net cash proceeds of P32.1 million and P4.8 million, respectively (see Note 26). In July 2013, one of the Group’s operating passenger-cargo vessels was damaged. Thus, the Group wrote off the carrying value of the damaged vessel’s engine and the related component parts amounting to P221.9 million (see Note 26), which represents the estimated repair cost of the damaged vessel. In September 2014, Group sold the damaged vessel for P66.7 million resulting to a net gain from disposal amounting to P5.6M. In August 2013, a passenger-cargo vessel of the Group sunk after colliding with a cargo vessel. As a result, the carrying value of the sunk vessel as at the date amounting to P227.7 million was written off (see Note 26). Subsequent to the above incidents which happened in 2013, management filed the insurance claims with the insurance company to recover the insured values of the damaged vessel and sunken vessel and cargoes on board, and other related expenses which were incurred by the group as a result of the incidents. The total recovery from the insurance company amounting to P943.3 million in 2013 is included under “Others - net” in the consolidated statements of income (see Note 26). In 2013, the Group also recognized impairment loss of P12.9 million included under “Reversal of (provision for) impairment loss on assets held for sale and property and equipment - net” on two non-operating vessels to write down their carrying values to their salvage values. In 2014, the Group did not recognize any impairment loss on property and equipment. Depreciation and Amortization Depreciation and amortization were recognized and presented in the following accounts in the consolidated statements of income (see Note 25):


Operating expenses P672,100 P886,032 Terminal expenses 93,474 76,833 Overhead expenses 35,426 73,726 P801,000 P1,036,591

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Property and Equipment Held As Collateral As at December 31, 2014 and 2013, the Group’s vessels in operations with total carrying value of P3,907.0 million and P3,490.6 million are mortgaged to secure certain obligations, respectively (see Note 19). As at December 31, 2014 and 2013, containers and other equipment held as collateral for finance lease amounted to P511.5 million and P555.4 million, respectively (see Note 20). Fair Value of Vessels in Operation The Company’s vessels in operation were appraised for the purpose of determining their market values. Based on the latest appraisal with various dates in 2014 made by independent appraisers, the related vessels in operation have an aggregate market value of P4,220.0 million against net book value of P3,322.1 million. The fair values of the vessels in operations are categorized under Level 3 hierarchy (see Note 34).

14. Investment Property The Group’s investment property as at December 31, 2014 and 2013 amounting to P9.8 million pertains to a parcel of land not currently being used in operations. The recurring fair value of the investment property as at February 16, 2014, the latest appraisal report, amounted to P59.8 million. This was determined based on the valuation performed by independent appraisers using the Market Data Approach. Under the Market Data Approach, the value of the land is based on sales and listings to a common denominator. This is done by adjusting the differences between the subject property and those actual sales and listings regarded as comparable. The properties used as basis of comparison are situated within the immediate vicinity of the subject property. The Group assessed that the fair value determination for the investment properties as Level 3 since significant unobservable inputs were used in the valuation. Significant increase (decrease) in estimated price per square meter in isolation would result in a significantly higher (lower) fair value (see Note 34). As at December 31, 2014 and 2013, there were no income and expenses arising from the Group’s investment property.

15. Software Development Costs Software development costs amounted to P29.1 million and P15.4 million, net of accumulated amortization of P85.6 million and P82.9 million, as at December 31, 2014 and 2013, respectively. The Group recognized additions to software amounting to P16.5 million and P7.2 million in 2014 and 2013, respectively. Amortization of software costs included under “Overhead expenses” in the consolidated statement of income amounting to P2.7 million and P5.6 million in 2014 and 2013, respectively (see Note 25).

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16. Other Noncurrent Assets


Deferred input VAT P81,351 P108,896 Refundable deposits - net of current portion 50,195 65,788 Pension asset 28 825 1,354 Others 8,030 4,552 P140,401 P180,590

a. Deferred input VAT relates primarily to the major capital expenditures and dry

docking of vessels. b. Noncurrent refundable deposits consist of amounts beyond one year arising from

rental deposits which can be applied as rental payment at the end of the lease term or can be paid out in cash upon termination of the lease.

17. Loans Payable As at December 31, 2014 and 2013, the loans payable amounting to P1,415.7 million and P1,344.9 million, respectively, pertain to unsecured short-term peso-denominated notes payable obtained by the Group from local banks with annual interest rates ranging from 5% to 8.5 % in 2014 and 4.5% to 7.9% in 2013. Loans payable outstanding as at December 31, 2014 will mature on various dates in 2015. Total interest expense incurred by the Group for the loans amounted to P87.5 million and P90.6 million in 2014 and 2013, respectively (see Note 26).

18. Trade and Other Payables


Trade 23 P2,439,392 P2,166,704 Nontrade 23 1,042,300 735,503 Accrued expenses 23 1,016,527 1,213,333 Unearned revenue - net of deferred

discounts 61,286 22,144 Dividends payable 24 20,787 8,566 Due to related parties 23 16,564 31,354 Provision for cargo losses and damages 15,232 11,640 P4,612,088 P4,189,244

Trade and other payables are non-interest bearing and are normally on 30-45 days’ term except for advances to related parties which are classified under nontrade payables and are payable on demand.

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Details of accrued expenses are as follows:


Freight and handling P195,602 P255,400 Fuel and lube 266,589 269,765 Outside services 92,315 133,713 Pick-up and delivery 99,155 93,158 Co-loading 73,890 66,332 Rent 64,411 76,337 Repairs and maintenance 52,810 68,125 Interest 33,048 62,255 Salaries and wages 31,464 34,061 Communication, light and water 26,842 15,094 Professional fees 12,841 8,711 Advertising and promotions 12,399 11,255 Pilotage and berthing 2,803 2,321 Steward supplies 1,591 4,870 Insurance 1,356 47,602 Taxes and licenses 1,308 5,896 Others 48,103 58,438 P1,016,527 P1,213,333

a. Nontrade payables consist of customers’ deposits and payables due to government

agencies. b. Provision for cargo losses and damages refers to the cost of claims for breakages,

cargo losses, cargo short weight or passenger claims which are not covered by insurance. In 2014 and 2013, provisions recognized amounted to P9.9 million and P22.7 million (see Note 25) while actual claims during the year amounted to P8 million and P4.8 million, respectively.

19. Long-term Debts


Omnibus Loan and Security Agreement (OLSA) Banco de Oro Unibank, Inc. (BDO) P 3,619,952 P3,619,952

RCBC Savings Bank 3,836 1,863 Unamortized debt arrangement fees (18,625) (23,946) 3,605,163 3,597,869 Current portion (85,977) (373) P3,519,186 P3,597,496

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Omnibus Loan and Security Agreement dated February 24, 2011 2GO, SFFC, HLP and NN entered into an Omnibus Loan and Security Agreement dated February 24, 2011 (2011 Omnibus Loan) with BDO, which consists of term loans of P4.0 billion and omnibus line of P400.0 million. In March 2011, the Company availed the P4.0 billion term loans, which was used for the refinancing of its short-term loans payable and the early redemption of its long-term debt on March 15, 2011 amounting to P2.0 billion in accordance with the provision of the 2011 Omnibus Loan. The omnibus line, on the other hand, amounting to P400.0 million shall be used by 2GO and HLP for working capital requirements and to secure their obligations with BDO. The P4.0 billion term loans consist of Series A and Series B Term Loans amounting to P2.0 billion each. The interest on each of the Series A and Series B Term Loans is a combination of fixed and floating rates. Fifty percent (50%) of the principal amount of each of the Series A Term Loan and Series B Term Loan, respectively, have a fixed interest rate, and the remaining fifty percent (50%) have a quarterly floating annual interest rate, provided, such floating interest rate shall have a minimum of 5.0% per annum. The principal of the loans is subject to 16 quarterly amortizations which commenced at the end of the third quarter from the drawdown date until March 2016. Prior to the refinancing as discussed below, 2GO paid the principal of the loan amounting to P800.0 million in various dates in 2012. 2011 Omnibus Loan - Suretyship Agreement, Mortgage Trust Indenture and Assignment

of Receivables In accordance with the 2011 Omnibus Loan, the Company and NN executed a Continuing Suretyship in favor of BDO. As a result, upon the happening of an event of default, the creditor shall have the right to set-off or apply to payment of the credit facility any and all moneys of the sureties which may be in possession or control of the creditor bank. Further, the creditor bank shall likewise have the full power against all the sureties’ properties upon which the creditor bank has a lien. The Continuing Suretyship also applies with respect to the Facility Agreement entered by NN and the creditor bank on January 26, 2011. The Company, NN and SFFC also executed a Mortgage Trust Indenture (MTI) under the OLSA whereby the Group creates and constitutes a first ranking mortgage on the collaterals for the benefit of BDO. The Group shall at all times maintain the required collateral value, which is equivalent to 200% of the obligations. Further, as required by the OLSA, the Company, NN and SFFC shall assigned customer receivables sufficient to cover the availed credit facility in excess of P3.66 billion. Notwithstanding such assignment, the Company, NN and SFFC shall have the right to collect the assigned customer receivables and appropriate the proceeds therefrom for their benefit, provided that the assignors shall replace the collected receivables in accordance with the required terms and condition and there is no happening of an event of default under the OLSA. The customer receivables shall refer to all outstanding receivables of the assignors as at the date of the execution of the OLSA, and the future customer receivables of the assignors, which shall be valued at 50% of their face value expressed in Peso. As at December 31, 2014 and 2013, NN, 2GO and SFFC collateralized their vessels under MTI with carrying values amounting to P3,907.0 million and P3,118.5 million, assets held for sale amounting to nil and P75.4 million, and certain outstanding customers receivables amounting to P1,189.3 million and P1,274.0 million, respectively (see Notes 7 and 13).

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2011 Omnibus Loan Covenants The 2011 Omnibus Loan is subject to certain covenants such as but not limited to the following: Maintenance of the following required financial ratios of the Company: minimum

quarterly current ratio of 1:1; maximum quarterly debt-to-equity ratio of 2.5:1 for the first year and 2:1 for the succeeding years; and, minimum yearly debt service coverage ratio (DSCR) of 1.2:1 for first and second years and 1.5:1 for the succeeding years, provided, however, that the consolidated yearly DSCR of the Company and NN shall not fall below 1.5:1 for the first and second years, and 1.75:1 for the succeeding years;

Prohibition on any change in control in the Company or its business or majority ownership of its capital stock (except with respect to the majority investors in the case of NN) or a change in the Chief Executive Officer;

Prohibition to declare or pay any dividends to its common and preferred stockholder or make any other capital or asset distribution to its stockholders, unless the financial ratios above are fully satisfied; and

Prohibition to sell, lease, transfer or otherwise dispose of its properties and assets, divest any of its existing investments therein, or acquire all or substantially all of the properties or assets of any other third party, except those in the ordinary course of business.

As at December 31, 2012, the Company breached the minimum current ratio, maximum debt-to-equity ratio and minimum DSCR, which likewise constitute events of default. Due to the cross-default provisions in accordance with the NN/BDO Facility Agreement, this resulted in an event of default also on the long-term debt of NN. The Company obtained a letter from BDO dated December 28, 2012, which states that the Company shall not be declared in default by BDO should there be breach in minimum current ratio of 1.0, maximum debt to equity ratio of 2.0 and minimum DSCR of 1.2 and that the Company is given 12 months from December 31, 2012 to remedy the default. In view of this, the cross-default provision would not take into effect, thus, the noncurrent portion of the loans remains presented as noncurrent liability in the consolidated balance sheet as at December 31, 2012. Refinancing of the Company’s 2011 Omnibus Loan with 2013 Omnibus Loan and Security Agreement dated June 11, 2013 On June 13, 2013, the Company (as Borrower and Assignor), BDO (as Lender), NN, SOI, 2GO Express, 2GO Logistics (as Sureties and Assignors), and SFFC (as Assignor) executed an Omnibus Loan and Security Agreement (2013 Omnibus Loan) effective June 11, 2013 (i) to refinance the Company’s existing loan with the lender with original maturity date on March 15, 2016 under the 2011 Omnibus Loan and (ii) to fund various capital expenditures such as, but not limited to, drydocking, major repairs of various vessel, and other capital expenditures related to the Company’s supply chain business, as well as other general corporate requirements of the Company. In June 2013, the Company availed of P3.6 billion of the P4.0 billion term loans, which was used for the early redemption of its outstanding long-term debt based on the 2011 Omnibus Loan.

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The P4.0 billion term loans consist of Series A and Series B Term Loans amounting to P2.0 billion each. The interest on each of the Series A and Series B Term Loans is a combination of fixed and floating rates. Fifty percent (50%) of the principal amount of each of the Series A Term Loan and Series B Term Loan, respectively, have a fixed interest rate, and the remaining fifty percent (50%) have a quarterly floating annual interest rate, provided, such floating interest rate shall have a minimum of 5.0% per annum. The principal of the loans is subject to 13 quarterly amortizations which commenced at the end of the eighth quarter from the first drawdown date until June 2018. 2013 Omnibus Loan - Supplemental Indenture to the Suretyship Agreement, Mortgage

Trust Indenture and Assignment of Receivables The Borrower and the parties to the MTI executed a Supplemental Indenture to (i) include in the 2013 Omnibus Loan as part of the obligations covered and secured by the MTI, (ii) to include the vessels based on the revised list as collateral under the MTI and (iii) ensure that the Secured Obligations enjoyed the same ranking as the obligations under the term loan of the 2013 Omnibus Loan with respect to the collateral under the MTI. The Borrower and the parties to the MTI also executed a Second Supplemental Indenture to include the real properties as collateral under the MTI. Further, as required by 2013 Omnibus Loan, in the event the availed amount of the long-term debt exceeds the loan value of the collaterals under the MTI, as determined by the lender, each of the Assignors assigns, conveys, sets over and transfers unto the Lender the absolutely and unconditionally all of its respective rights, title, and interest in and to the Customers Receivables to cover the availment of the long-term debt that exceeds the loan value of the collaterals under the MTI. All other conditions with respect to the assignment of receivables under the 2013 Omnibus Loan are the same with the assignment provisions under the 2011 Omnibus Loan. 2013 Omnibus Loan Covenants In accordance with the Section 7 of the 2013 Omnibus Loan, the Group is now required to maintain the following financial ratio based on NN consolidated financial statements at each testing date: minimum current ratio of 1.0 times; maximum debt-to-equity ratio of 2.2 times; and, minimum DSCR of 2 times. Testing date means (i) with respect to any December 31 consolidated audited financial statements of the Company, April 30 of the succeeding year, (ii) with respect to any June 30 consolidated unaudited financial statements of the Company, September 30 of the same year. For the year end December 31, 2014 and 2013, the Group is in compliance with the debt covenants. Borrowing Cost and Debt Transaction Costs Interests from long-term borrowings of the Group recognized as expense amounted to P209.6 million in 2014 and P210.9 million in 2013 and P263.7 million in 2012 (see Note 26). In 2013 and 2011, the Group incurred debt transaction costs amounting to P26.6 million and P48.9 million, respectively. Amortization of these debt transaction costs included under interest and financing charges amounted to P5.3 million in 2014, P26.7 million in 2013 and P14.9 million in 2012 (see Note 26).

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20. Obligations under Finance Lease The Group has various finance lease arrangements with third parties for the lease of vessels, containers, and reefer vans, terminal equipment denominated in US dollars and an office space. The lease agreements provide for the transfer of ownership to the Group at the end of the lease term, which among other considerations met the criteria for a finance lease. Therefore, the leased assets were capitalized. The future minimum lease payments on the obligations under finance lease together with the present value of the net minimum lease payments are as follows:


Minimum lease payments due within one year P38,283 P19,618 Beyond one year but not later than five years 109,878 103,448 Later than 5 years 2,081 - Total minimum lease obligation 150,241 123,066 Less amount representing interest 14,238 5,282 Present value of minimum lease payment 136,003 117,784 Less current portion 32,837 28,592 Noncurrent portion P103,165 P89,192

The net carrying value of property and equipment held by the Group under finance lease are summarized as follows (see Note 13).


Cost P224,440 P181,032 Less accumulated depreciation 71,248 45,611 Net book value P153,192 P135,421

The interest expense recognized related to these leases amounted to P5.5 million and P6.1 million in 2014 and 2013, respectively (see Note 26). Leased assets are pledged as security for the related finance lease liabilities.

21. Redeemable Preferred Shares (RPS) On January 7, 2003, the Company issued 374,520,487 RPS in the form of stock dividends out of capital in excess of par value at the rate of one share for every four common shares held by the shareholders. The RPS has the following features: non-voting; preference on dividends at the same rate as common share; redeemable at any time, in whole or in part, as may be determined by the BOD

within a period not exceeding 10 years from the date of issuance at a price of not lower than P6 per share as may be determined by the BOD. The shares must be redeemed in the amount of a least P250,000 per calendar year;

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if not redeemed in accordance with the foregoing, the RPS may be converted to a bond bearing interest at 4% over prevailing treasury bill rate to be issued by the Company; and

preference over assets in the event of liquidation.

On June 15, 2006, the SEC approved 2GO’s application for the amendment of its Articles of Incorporation to add a convertibility feature to the RPS so as to allow holders of RPS at their option, to convert every RPS into two (2) common shares of 2GO. During the Conversion Period from September 1 to October 13, 2006, a total of 70,343,670 preferred shares or 93.91% were converted to common shares. On October 25, 2012, the BOD of the Company approved the redemption of all remaining outstanding RPS held by each eligible stockholder of such shares at a price of P6.00 per share. On March 27, 2013, the BOD approved the retirement of 4,564,330 RPS due to the mandatory redemption by the Company of the RPS. On the same date, the BOD also approved the amendment of the Articles of Incorporation of the Company to decrease its authorized capital stock as a result of the retirement of the RPS. As at December 31, 2014 and 2013, unredeemed RPS amounted to P6.0 million and P6.7 million, respectively. As at December 31, 2014 and 2013, the total redeemed shares of 3,540,505 are recognized as treasury shares.

22. Provisions and Contingencies a. There are certain legal cases filed against the Group in the normal course of business.

Management and its legal counsel believe that the group has substantial legal and factual bases for its position and are of the opinion that losses arising from these cases, if any, will not have a material adverse impact on the consolidated financial statements.

b. The Company has pending insurance claims (presented as part of “Insurance and

other claims”) amounting to P324.5 million and P908.4 million as at December 31, 2014 and 2013, respectively, which management believes is virtually certain of collection (see Note 7).

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23. Related Party In the normal course of business, the Group has transacted with the following related party:

Relationship Name Ultimate Parent Negros Holdings & Management Corporation (NHMC) Intermediate Company KGLI - NM Holdings, Inc. (KGLI-NM) Parent Company Negros Navigation Co., Inc. (NN) Significant stockholder China-ASEAN Marine B.V. (CAMBV) Subsidiaries of the Parent Company Negrense Marine Integrated Services, Inc. (NMISI) Brisk Nautilus Dock Integrated Services, Inc. (BNDISI) Sea Merchants Inc. (SMI) Bluemarine Inc. (BMI) Subsidiary 2GO Express, Inc. (Express) 2GO Logistics, Inc. (Logistics) Scan Asia Overseas, Inc. (SOI) Hapag-Lloyd Philippines, Inc. (HLP) WRR Trucking Corporation (WTC) The Supercat Fast Ferry Corporation (SFFC) Special Container and Value Added Services, Inc. (SCVASI)

NN-ATS Logistics Management and Holdings Corporation, Inc.

(NALMHCI) Super Terminals, Inc. (STI) J&A Services Corporation (J&A) Red.Dot Corporation (RDC) North Harbor Tugs Corporation (NHTC) Sungold Forwarding Corporation (SFC) Supersail Corporation (SSI) Astir Engineering Works, Inc. (AEWI) United South Dockhandlers, Inc. (USDI) W G & A Supercommerce, Inc. (WSI) Associates MCC Transport Philippines, Inc. (MCCP) Hansa Meyer Projects Philippines, Inc. (HMPPI) Vestina Securities Services, Inc. (VSSI)

The following are the revenue and income (cost and expenses) included in the consolidated statements of income with related parties which are not eliminated:

Nature 2014 2013 (In Thousands) Parent Company Interest income P - P - Vessel leasing (312,000) (527,759) Outside services - (58,535) Associates Freight revenue - 1,488 Shared cost 1,887 11,464 Freight expense (32,897) (523) Trucking income - 1,413 Rent income - 7 Outside services - (38,792) Service income - 44,322 Entities under Common

Control Rent - 1,875 Outside services (143,846) (194,330) Repairs and maintenance (41,654) (38,466) Professional and management fee - 2,250 Arraste and stevedoring - (2,769) Steward supplies (30,201) (26,571) Food and subsistence (2,112) (28) Rent expense - - Hustling and shifting - (5,396) Transportation and delivery (14,572) (1,018) Key Management Short-term employee benefits - 46,673

Personnel Post-employment benefits - 4,343

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The consolidated balance sheets include the following amounts with respect to the balances with related parties:

Financial Statement

Account Terms and Conditions 2014 2013 (In Thousands) Parent Company Trade receivables 30 to 60 days; noninterest-

bearing P - P3,061 Due from related parties On demand; noninterest-

bearing 3,447 146,068 Nontrade receivables On demand; noninterest-

bearing - 61,653 Trade payables 30 to 60 days; noninterest-

bearing (201,008) (450,923) Accrued expenses 30 to 60 days; noninterest-

bearing (19,357) (35,791) Due to related parties 30 to 60 days; noninterest-

bearing (16,564 ) (29,507) Nontrade payables 30 to 60 days; noninterest-

bearing - (26,229) Associate Trade receivables 30 to 60 days; noninterest-

bearing - 26,162 Due from related parties On demand; noninterest-

bearing - 13,293 Nontrade receivables On demand; noninterest-

bearing - 33,966 Trade payables 30 to 60 days; noninterest-

bearing (32) (5,980) Accrued expenses 30 to 60 days; noninterest-

bearing - (12,611) Due to related parties On demand; noninterest-

bearing - (148) Nontrade payables On demand; noninterest-

bearing (6,324) (400) Entities under

Common Control Trade receivables 30 to 60 days; noninterest-

bearing - 316 Due from related parties On demand; noninterest-

bearing 21,015 57 Nontrade receivables On demand; noninterest-

bearing 12,213 69,925 Trade payables 30 to 60 days; noninterest-

bearing (45,939) (51,909) Accrued expenses 30 to 60 days; noninterest-

bearing (43,534) (56,514) Due to related parties On demand; noninterest-

bearing - (1,699) Nontrade payables 30 to 60 days; noninterest-

bearing - (1,223) The outstanding related party balances are unsecured and settlement is expected to be in cash, unless otherwise indicated. The Group has not recorded any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position of the related parties and the market in which these related parties operate.

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Other terms and conditions related to the above related party balances and transactions are as follows: Transactions with NN Effective December 1, 2011, the Company entered into vessel leasing arrangements

with NN involving six of NN’s vessels at a fixed daily rate for a period of one year, subject to renewal as agreed by the parties. The vessel agreement was revised effective June 1, 2013 for a fixed monthly fee totaling P26.0 million for four vessels (see Note 32).

NN charges shared cost to the Company and its subsidiaries. Transactions with Associates and Other Related Parties under Common Control Effective August 2011, the Company pays NMISI an agency fee for its manpower

services and for the management of the Company’s food and beverage business. NMISI also provides housekeeping and manpower pooling services to the Company and SFFC.

BNDISI provides container and vessel repairs and trucking to the Company. Transactions with other associates and related companies consist of shipping

services, charter hire, management services, ship management services, purchase of steward supplies, availment of stevedoring, arrastre, trucking, and repair services and rental.

Transactions and Balances with Related Parties Eliminated during Consolidation The following are the transactions and balances among related parties which are eliminated in the consolidated financial statements:

Nature 2014 2013 (In Thousands) 2GO 2GO Express Freight P262,734 P256,717 Interest - 21,439 Shared cost 50,377 10,692 2GO 2GO Logistics Shared cost 35,090 33,613 KLI Freight 32,897 6,927 Shared cost 1,944 195 SFFC Interest 30,247 17,731 NALMHCI Shared cost 40,773 23,133 2GO Express 2GO Commission - 4,629 Services fees - 2,975 Shared cost - 10,885 KALI/J&A/STI/SSI 2GO Freight 140,781 - Purchase/sale of water - 23,889 Passage terminal - - Outside services - 14,298

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December 31 Terms and Conditions 2014 2013 (In Thousands) Amounts owed to: Amounts owed by: 2GO 2GO Express 7% interest-bearing P456,853 P132,410 SFFC 9% interest-bearing 482,124 78,597 2GO Express/2GO

Logistics/SOI/Others On demand; noninterest-bearing 358,117 126

2GO Express/2GO Logistics/SOI/Others

30 to 60 days; noninterest-bearing - 226,250

AEWI 2GO 30 to 60 days; noninterest-bearing - 37,468

2GO Express 2GO On demand; noninterest-bearing 5,916 23,464

SCVASI 30 to 60 days; noninterest-bearing 1,842 12,491

2GO Logistics 2GO On demand; noninterest-bearing 6,207 2,665

SOI RDC 30 to 60 days; noninterest-bearing - 5

KALI 2GO 30 to 60 days; noninterest-bearing 11 -

SFFC 2GO/2GO Express 30 to 60 days; noninterest-bearing 5,916 10,941

NALMHCI 2GO/2GO Express/2GO Logistics

30 days; noninterest-bearing - 117,809

USDI 30 days; noninterest-bearing - 13,366 J&A 2GO/NHTC 30 days; noninterest-bearing - 4,121 RDC 2GO

Logistics/SOI/NALMHCI

30 days; noninterest-bearing

- 2,756 SSI 2GO/2GO Express/2GO

Logistics 30 days; noninterest-bearing

- 47,869 STI 2GO 30 days; noninterest-bearing - 1,946 NHTC 2GO/J&A 30 days; noninterest-bearing - 1,802 SFC 2GO/2GO Express/2GO

Logistics/NALMHCI 30 days; noninterest-bearing

- - SCVASI 2GO On demand; noninterest-

bearing - 8,104 The Company’s transactions with 2GO Express Group include shipping and

forwarding services, commission and trucking services. The Company provided management services to SFFC, 2GO Express, 2GO

Logistics, HLP, KALI and SOI at fees based on agreed rates.

24. Equity a. Share Capital

Details of share capital as at December 31, 2014 and 2013 follow:

Number of Shares Amount

(In Thousands) Authorized common shares 4,070,343,670 P4,070,344

Issued and outstanding common shares of P1.00 per value each 2,446,136,400 P2,484,653

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Movements in authorized capital stocks follow:

Number of Shares Date Activity Common Shares Preferred Shares Total

May 26, 1949 Authorized capital stocks as at incorporation date 5,000 - 5,000

December 10,1971 Increase in authorized capital stocks 5,000 - 5,000 October 21, 1975 Increase in authorized capital stocks 4,990,000 - 4,990,000 September 3, 1982 Increase in authorized capital stocks 5,000,000 - 5,000,000 August 18, 1989 Increase in authorized capital stocks 10,000,000 - 10,000,000 December 29, 1993 Increase in authorized capital stocks 20,000,000 - 20,000,000 September 8, 1994 Increase in authorized capital stocks 60,000,000 - 60,000,000 November 21,1994 Increase in authorized capital stocks 900,000,000 - 900,000,000 October 26, 1998 Increase in authorized capital stocks 1,000,000,000 - 1,000,000,000 December 6, 2002 Reclassification of common shares to

preferred shares (375,000,000) 375,000,000 - November 18, 2003 Redemption of preferred shares - (224,712,374) (224,712,374) September 6, 2004 Increase in authorized capital stocks 750,000,000 - 750,000,000 November 22, 2004 Redemption of preferred shares - (74,904,026) (74,904,026) October 24, 2005 Increase in authorized capital stocks 1,624,524,400 - 1,624,524,400 October 24, 2005 Reclassification of preferred shares to

common shares 475,600 (475,600) - August 7, 2008 Reclassification of preferred shares to

common shares 70,343,670 (70,343,670) -

4,070,343,670 4,564,330 4,074,908,000

Movements in issued and outstanding capital stocks follow:

Number of Shares Date Activity Issue Price Common Shares Preferred Shares Total

May 26, 1949 Authorized capital stocks as at incorporation date 1,000.00 1,002 - 1,002

December 10,1971 to October 26, 1998 Increase in authorized capital stocks

1,000.00 1,496,597,636 - 1,496,597,636

December 6, 2002 Increase in authorized capital stocks 1.00 40,000,000 374,520,535 414,520,535 February 10, 2003 Increase in authorized capital stocks 1.00 - (48) (48) November 18, 2003 Increase in authorized capital stocks 6.67 - (224,712,374) (224,712,374) September 6, 2004 Increase in authorized capital stocks 1.00 393,246,555 - 393,246,555 November 22, 2004 Increase in authorized capital stocks 6.67 - (74,904,026) (74,904,026) December 31, 2004 Increase in authorized capital stocks 1.00 (756) - (756) October 24, 2005 Increase in authorized capital stocks 1.76 414,121,123 - 414,121,123 August 22 to October 13, 2006

Reclassification of common shares to preferred shares

3.20 140,687,340 (70,343,670) 70,343,670

December 6-31, 2012 Redemption of preferred shares 6.00 - (3,413,467) (3,413,467)

2,484,652,900 1,146,950 2,485,799,850 December 31, 2001 1.50 (38,516,500) - (38,516,500)

2,446,136,400 1,146,950 2,447,283,350

*The carrying value of treasury shares is inclusive of transaction cost amounting to P0.9 million. Issued and outstanding common shares are held by 1925 and 1,940 equity holders as at December 31, 2014 and 2013, respectively.

b. Deficit Deficit is net of undistributed earnings amounting to P202.6 million in 2013, representing accumulated equity in net earnings of subsidiaries and associates, which are not available for dividend declaration until received in the form of dividends from such subsidiaries and associates.

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c. Excess of cost over net asset value of investment - net

The pooling of interest method was applied to account for the following acquisitions since these involved entities under common control:

On August 30, 2007, the Company acquired SFFC from its affiliate, Accuria,

Inc. for a total consideration of P13.7 million. The excess of cost over SFFC’s net assets during the time of acquisition, amounting to P11.7 million is recorded in equity as “Excess of cost over net assets of investments.”

On December 1, 2011, NALHMCI acquired from NN, six of its subsidiaries for a

total consideration of P29.4 million. These subsidiaries are J&A, RDC, NHTC, STI, SFC and SSI. The excess of the combined net assets of NN’s subsidiaries at the time of acquisition over the total cost of the investment amounted to P0.8 million and is presented under equity as “Excess of cost over net assets value of investments.”

In 2013, NALHMCI acquired from NN one of its subsidiaries, AEWI, for a total

consideration of P14.3 million. The excess of AEWI’s net assets over cost during the time of acquisition amounted to P1.1 million.

25. Operating Costs and Expenses

Note 2014 2013 2012 (In Thousands) Operating Expenses Fuel, oil and lubricants P2,818,692 P2,748,764 P3,884,963 Outside services 23 2,506,380 2,056,054 1,937,183 Depreciation and amortization 13 672,100 886,032 767,558 Personnel costs 27, 28 471,512 589,688 526,480 Rent 23 371,752 418,636 329,593 Vessel leasing 23 312,000 527,759 830,166 Food and beverage 8 298,966 221,200 171,272 Insurance 255,044 145,842 157,583 Repairs and maintenance 23 163,227 241,714 289,347 Material and supplies used 118,286 118,469 133,283 Communication, light and water 110,566 126,055 92,911 Food and subsistence 72,004 91,643 87,717 Sales concessions 65,403 27,493 64,137 Commissions 55,470 33,172 31,386 Provision for cargo losses and

damages 18 9,903 22,697 24,946 Others 364,422 318,923 269,583 8,665,726 8,574,141 9,598,108

Terminal Expenses Transportation and delivery 534,843 401,766 167,203 Outside services 23 292,151 358,869 369,663 Personnel costs 27, 28 117,616 108,265 113,292 Rent 109,503 98,427 51,015 Depreciation and amortization 13 93,474 76,833 73,471 Repairs and maintenance 91,911 115,375 118,854 Fuel, oil and lubricants 75,274 61,846 60,289 Communication, light and water 15,916 24,268 22,210 Insurance 3,268 15,126 10,226 Others 71,374 96,084 79,542 1,405,330 1,356,859 1,065,765

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Overhead Expenses Personnel costs 27, 28 466,574 435,825 442,033 Outside services 23 148,932 191,739 103,111 Advertising and promotion 118,637 131,307 115,784 Communication, light and water 63,211 74,733 89,085 Depreciation and amortization 13, 15 38,156 79,366 94,901 Taxes and licenses 35,597 47,112 43,846 Rent 23 33,363 39,651 40,903 Entertainment, amusement and

recreation 30,831 31,544 16,079 Provision for doubtful accounts 7 16,353 60,960 22,311 Transportation and travel 15,435 15,842 13,966 Repairs and maintenance 12,420 13,289 18,520 Office supplies 10,537 12,084 13,189 Computer charges 6,202 27,703 24,491 Others 116,979 69,953 68,487 1,113,304 1,231,108 1,106,706

Cost of Goods Sold 8 2,087,071 1,720,991 1,761,564

P13,271,431 P12,883,099 P13,532,143

26. Other Income (Charges) Financing Charges

Note 2014 2013 2012 (In Thousands) Interest expense on:

Long-term debt 19 P209,566 P210,923 P263,722 Loans payable 17 87,529 90,579 89,136

Bank charges 8,659 23,469 18,114 Amortization of:

Debt transaction cost 19 5,321 26,705 14,872 Obligation under finance lease 20 3,013 6,050 6,407 RPS 21 - - 1,425

Other financing charges 18,541 11,288 6,796 P332,629 P369,014 P400,472

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Others - net

Note 2014 2013 2012 (In Thousands) Rental income P10,844 P - P - Income from reversal of liabilities 5,880 24,130 182,984 Gain (loss) on disposal of:

Property and equipment 13 5,562 - 98,978 AFS investments 11 - - - Assets held for sale 10 - (51,041) (201,715)

Interest income 6, 23 2,669 1,690 59,843 Foreign exchange gains (2,315) 6,203 (149) Recovery (loss) of inventory

obsolescence - (1,672) 343 Write-off of carrying value of skunk

vessel 13 - (227,743) - Write-down of vessel component

parts 13 - (221,900) - Recovery from insurance claims 7, 13 - 943,315 - Reversal of impairment on

receivables - - - Gain on other insurance claims - - 2,086 Dividend income - - 3,009 Others - net 12 31,564 13,259 (1,945) P54,204 P486,241 P143,434

27. Personnel Costs Details of personnel costs are as follows:

Note 2014 2013 2012 (In Thousands) Salaries and wages P732,626 P798,023 P765,986 Crewing cost 92,091 95,415 118,638 Retirement benefit cost 28 35,163 33,131 11,041 Other employee benefits 195,900 207,209 186,140 P1,055,780 P1,133,778 P1,081,805

28. Retirement Benefits The Group has a funded defined benefit pension plan covering all regular and permanent employees. The benefits are based on employees’ projected salaries and number of years of service. The Company’s retirement plan meets the minimum requirement specified under Republic Act 76421. The fund is administered by a trustee bank under the supervision of the board of trustee of the plan. The board of trustees is responsible for the investment strategy of the plan. The funded status and amounts recognized in the consolidated balance sheets include the retirement benefits of SGF as at December 31, 2013 and of SGF and SOI as at December 31, 2012.

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The following tables summarize the components of the net retirement benefits cost recognized in the parent company statements of income and comprehensive income and the funded status and amounts recognized in the parent company balance sheets.

2014

Defined Benefit

Obligation Fair Value

of Plan Assets

Accrued Retirement

Benefits January 1 P272,548 (P106,659) P165,889 Net retirement benefits cost in

profit or loss: Current service cost 33,815 - 33,815 Curtailment gain (4,336) - (4,336) Net interest cost 13,623 (7,939) 5,684

43,102 (7,939) 35,163

Benefits paid (30,862) 28,168 (2,694) Re-measurements losses (gains)

in other comprehensive income - actuarial changes arising from changes in: Financial assumptions 35,271 (11,412) 23,859 Demographic assumptions 8,784 - 8,784 Experience adjustments 15,717 - 15,717

59,772 (11,412) 48,360

Actual contributions - (29,160) (29,190)

December 31 P344,560 (P127,002) P217,558

2013

Defined Benefit

Obligation Fair Value

of Plan Assets

Accrued Retirement

Benefits January 1 P229,044 (P97,558) P131,486 Net retirement benefits cost in

profit or loss: Current service cost 31,331 - 31,331 Curtailment gain (4,684) - (4,684) Net interest cost 12,527 (6,043) 6,484

39,174 (6,043) 33,131

Benefits paid (16,281) 10,679 (5,602) Re-measurements losses (gains)

in other comprehensive income - actuarial changes arising from changes in: Financial assumptions (11,025) 4,338 (6,687) Demographic assumptions 6,992 - 6,992 Experience adjustments 24,644 - 24,644

20,611 4,338 24,949

Actual contributions - (18,075) (18,075)

December 31 P272,548 (P106,659) P165,889

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The plan assets available for benefits follow:

December 31 2014 2013 (In Thousands) Cash and cash equivalents P10,766 P11,932 Receivables 50,973 32,760 Investments in debt securities 46,111 56,971 Others 19,152 4,996 Fair value of plan assets P127,002 P106,659

As at December 31, 2014 and 2013, the Group has no transactions with its retirement funds such as loans, investments, gratuities, or surety. The fund also does not have investments in debt or equity securities of the companies in the Group. The Group expects to contribute P21.9 million to the retirement fund in 2015. The principal assumptions used in determining pension benefit obligations for the Group’s plans are shown below:

2014 2013 Discount rate 4.30% 6.04% Future salary increases 6.14% 7.83% Turnover rate 17.00% 17.00%

The accrued retirement benefits is subject to several key assumptions. Shown below is the sensitivity analysis of the retirement obligation to reasonably possible changes on each significant assumption:

Increase

(Decrease)

Impact on Accrued

Retirement Benefits

(In Thousands) Discount rate +1% (P19,079) -1% 23,104 Salary increase rate +1% 21,884 -1% (18,520) Turnover rate +1% (5,577) -1% 6,403

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29. Income Tax a. The components of provision for income tax are as follows:

2014 2013 2012 (In Thousands)

Current: RCIT P55,323 P98,804 P66,997 MCIT 36,666 40,617 14,293

91,989 139,421 81,290 Deferred (46,431) 346,271 176,609 P45,558 P485,692 P257,899

b. The components of the Group’s recognized net deferred income tax assets and

liabilities are as follows:

2014 2013 (In Thousands) Directly recognized in profit or loss

Deferred income tax assets on: NOLCO P248,397 P250,370 MCIT 108,593 23,528 Allowances for:

Impairment losses on receivables 100,479 100,945 Inventory obsolescence 9,811 16,698

Accrued retirement costs and others 32,868 20,456 Accruals and others 51,383 40,065

551,531 425,137

Deferred income tax liabilities:

Pension asset - (406) Others (1,758) (4,372)

(1,758) (4,778)

Directly recognized in equity Deferred income tax asset on remeasurement

of retirement costs 39,561 29,717 P589,334 P477,076

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c. Details of the Group’s NOLCO and MCIT which can be carried forward and claimed as tax credit against regular taxable income and regular income tax due, respectively, are as follows: NOLCO

Balances as at

December 31, 2014

Year Incurred Available

Until Amount Applied Expired Amount Tax

Effect (In Thousands)

2014 2017 P27,323 P - P - P27,323 P8,197 2012 2015 851,550 - - 851,550 255,465 2011 2014 1,333,510 (685,275) (646,997) - -

P2,212,383 (P686,513) (P646,997) P878,873 P263,662

MCIT

Year Incurred Available

Until Amount Applied Expired Balance as at

December 31, 2014 (In Thousands)

2014 2017 P42,838 P42,838 2013 2016 47,742 - - 47,742 2012 2015 21,919 - - 28,832 2011 2014 3,092 (1) (11,596) -

P131,369 P1 (P11,596) P119,412

d. The following are the Group’s NOLCO and MCIT and other deductible temporary

differences for which no deferred income tax assets have been recognized. In compliance with PFRS. Management, however, believes that there will be sufficient future taxable income that would substantially utilizes the NOLCO in the future:

2014 2013 (In Thousands) NOLCO P50,883 P1,350,493 MCIT 10,819 49,225

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e. Reconciliation between the income tax expense (benefit) computed at statutory income tax rate of 30% in the provision for income tax expense as shown in profit or loss is as follows:

2014 2013 2012 (In Thousands)

Tax effect of income at statutory rates P266,433 P213,832 (P29,357)

Derecognition of deferred tax assets on NOLCO 4,254 381,631

334,877

Income tax effects of: Changes in unrecognized deferred

income tax assets 9,045 - - Income tax holiday (ITH) incentive

on registered activities - 806

(36,123) Equity in net loss (earnings) of

associates 3,292 (13,454)

(11,308) Interest income already subjected

to a lower final tax (680) (619)

(1,449) Dividend income (34,813) (10,987) (903) MCIT derecognized - 13,576 624 Application of NOLCO for which

no deferred tax asset was recognized (200,319) (146,787) -

MCIT incurred for the year for which no deferred tax asset was recognized - 39,306 -

Others (1,654) 8,388 1,538 Provision for income tax P45,558 P485,692 P257,899

30. Earnings Per Common Share Basic and diluted earnings per common share were computed as follows:

Note 2014 2013 (In Thousands, except EPS) Net earnings for the year attributable to equity

holders of the parent P827,735 P212,044

Weighted average number of common shares outstanding for the year 2,446,136 2,446,136 Earnings per common share P0.3384 P0.0867

There are no potentially dilutive common shares as at December 31, 2014 and 2013.

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31. Registration with the Board of Investments (BOI) a. With the effectivity of the merger of the Company and ZIP, the Parent Company

assumed ZIP’s outstanding BOI registration as an expanding operator of logistics service facility on a non-pioneer status under Certificate of Registration No. 2008-179. The ITH incentive for a period of three years, which expired in July 2011, provided that for purpose of availment, a base figure of P924.1 million will be used in the computation of the ITH for the said expansion.

b. On January 27, 2011, BOI approved the Company’s application for registration of

the modernization of two (2) second-hand RORO vessels, M/V St. Gregory the Great and M/V St. Leo the Great. The Company was granted ITH incentive for a period of three years from March 2011 or actual start of operations. The ITH incentive shall be limited only to the sales/revenues generated by the registered project. As at December 31, 2014, 2GO’s ITH has already expired.

c. SFFC is registered with BOI as a New Operator of Domestic Shipping (Passenger

Vessel) on a Non-Pioneer status. The Company is entitled to four years ITH from date of registration until February 2012.

32. Agreements and Commitments a. The Company has a Memorandum of Agreement (Agreement) with Asian Terminals,

Inc. (ATI) for the use of the latter’s facilities and services at the South Harbor for the embarkation and disembarkation of the Company’s domestic passengers, as well as loading, unloading and storage of cargoes. The Agreement shall be for a period of five years, which shall commence from the first scheduled service of the Company at the South Harbor. The Agreement is renewable for another five years under such terms as may be agreed by the parties in writing. If the total term of the Agreement is less than ten years, then the Company shall pay the penalty equivalent to unamortized reimbursement of capital expenditures and other related costs incurred by ATI in the development of South Harbor. The Agreement became effective on January 14, 2003. Under the terms and conditions of the Agreement, the Company shall avail of the terminal services of ATI, which include, among others, stevedoring, arrastre, storage, warehousing and passenger terminal. Domestic tariff for such services (at various rates per type of service as enumerated in the Agreement) shall be subject to an escalation of 5% every year. The agreement expired in January 2013 but was extended until April 2013 upon complete transfer of the Company’s shipping operation from South Harbor to North Harbor.

b. On December 31, 2012, the Company and Manila North Harbour Port, Inc. (MNHPI) entered into an agreement to engage the services of MNHPI to handle all the freight, passenger terminal and allied port services requirements of the former and in particular, to consolidate all its operations at Manila North Harbor. The agreement is effective upon signing and shall remain in effect for 10 years, renewable for another 5 years upon such terms and conditions as the parties may agree.

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c. The Group has entered into various operating lease agreements for its office spaces. The future minimum rentals payable under the noncancellable operating leases are as follows:

2014 2013 (In Thousands) Within one year P258,292 P175,050 After one year but not more than five years 215,710 217,069 P474,002 P392,119

d. The Company entered into several vessel leasing agreements for a period ranging

from three to 15 months. In 2013 and 2014, vessel lease rates are based on agreed monthly rate of P26.0 million.

33. Financial Risk Management Objectives and Policies Risk Management Structure The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. It is, and has been throughout the year under review, the Company’s policy that no trading in financial instruments shall be undertaken. There has been no change to the Group’s exposure to credit, liquidity, foreign exchange interest rate and equity price risks on the manner in which it manages and measures the risks since prior years. Credit Risks Management Objectives and Procedures The Group’s principal financial instruments comprise of cash in banks, loans payable, longterm debt, obligations under finance lease, restructured debts and redeemable preferred shares. The main purpose of these financial instruments is to raise financing for the Group’s operations. The Group has other various financial assets and liabilities such as trade and other receivables and trade and other payables, which arise directly from operations. The main risks arising from the Group’s financial instruments are credit risk involving possible exposure to counter-party default, primarily, on its trade and other receivables; liquidity risk in terms of the proper matching of the type of financing required for specific investments and maturing obligations; foreign exchange risk in terms of foreign exchange fluctuations that may significantly affect its foreign currency denominated placements and borrowings; and interest rate risk resulting from movements in interest rates that may have an impact on interest bearing financial instruments. Credit Risk To manage credit risk, the Group has policies in place to ensure that all customers that wish to trade on credit terms are subject to credit verification procedures and approval of the Credit Committee. In addition, receivable balances are monitored on an ongoing basis to reduce the Group’s exposure to bad debts. The Group has policies that limit the amount of credit exposure to any particular customer. The Group does not have any significant credit risk exposure to any single counterparty. The Group’s exposures to credit risks are primarily attributable to cash and collection of trade and other receivables with a maximum exposure equal to the carrying amount of these financial instruments.

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As at December 31, 2014 and 2013, the Group did not hold collateral from any counterparty. The credit quality per class of financial assets that are neither past due nor impaired is as follows: December 31, 2014

Neither Past Due nor Impaired Past Due and/or High Medium Low Impaired Total (In Thousands) Loans and receivables

Cash in banks P954,727 P - P - P - P954,727 Cash equivalents 248,199 - - - 248,199 Trade and other receivables:

Service fees 722,717 - - - 722,717 Distribution 471,528 - - - 471,528 Freight 230,486 - - 1,295,383 1,525,869 Passage 56,281 - - - 56,281 Others 629,013 - - - 629,013

Nontrade receivables 221,264 - - 361,458 582,722 Due from related parties 24,262 - - - 24,262 Insurance and other claims 38,042 - - 286,501 324,543 Advances to officers and

employees 31,575 - - - 31,575 AFS investments 5,133 574 - - 5,707 Total P3,633,227 P574 P - P1,943,342 P5,577,143

December 31, 2013

Neither Past Due nor Impaired Past Due and/or High Medium Low Impaired Total (In Thousands) Loans and receivables

Cash in banks P837,089 P - P - P - P837,089 Cash equivalents 49,430 - - - 49,430 Trade and other receivables:

Freight 45,734 156,215 291,879 909,706 1,403,534 Passage 11,214 96 - 34,727 46,037 Service fees 17,550 56,104 94,568 418,652 586,874 Distribution 169,513 - - 112,225 281,738 Others 179,333 49,045 - 274,690 503,068

Nontrade receivables 5,654 38,978 - 369,797 414,429 Due from related parties 14,651 - - 144,767 159,418 Insurance and other claims 856,944 39 - 51,375 908,358 Advances to officers and

employees 20,913 2,805 - 2,028 25,746 AFS investments 6,333 574 - - 6,907 Total P2,214,358 P303,856 P386,447 P2,317,967 P5,222,628

High quality receivables pertain to receivables from related parties and customers with good favorable credit standing. Medium quality receivables pertain to receivables from customers that slide beyond the credit terms but pay a week after being past due. Low quality receivables are accounts from new customers and forwarders. For new customers, the Group has no basis yet as far as payment habit is concerned. With regards to the forwarders, most are either under litigation or suspension. In addition, their payment habits extend beyond the approved credit terms because their funds are not sufficient to conduct their operations. The Group evaluated its cash in banks as high quality financial assets since these are placed in financial institutions of high credit standing. It also evaluated its advances to officers and employees as high grade since these are deductible from their salaries.

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The aging per class of financial assets that were past due but not impaired is as follows: As at December 31, 2014

Neither Past Due Past Due but not Impaired Impaired

nor

Impaired Less than

30 Days 31 to 60

Days 61 to 90

Days More than

90 Days Financial

Assets Total (In Thousands) Loans and receivables

Cash in banks P954,727 P - P - P - P - P - P954,727 Cash equivalents 248,199 - - - - - 248,199 Trade and other

receivables: Freight 480,680 415,553 145,038 61,831 232,992 189,775 1,525,869 Passage 56,281 - - - - - 56,281 Service fees 478,420 112,243 - 4,313 9,834 117,907 722,717 Distribution 455,989 - - - - 15,539 471,528 Others 314,507 31,451 125,803 157,253 - 8,114 629,013

Nontrade receivables 211,264 - - - 310,077 12,899 582,722 Due from related parties 24,262 - - - - - 24,262 Insurance and other

claims 38,042 188,096 47,024 - - 51,381 324,543 Advances to officers and

employees 31,575 - - - - - 31,575 AFS investments 5,707 - - - - - 5,707 Total P3,309,653 P747,343 P317,865 P223,397 P552,903 P395,615 P5,577,143

As at December 31, 2013

Neither Past Due Past Due but not Impaired Impaired

nor

Impaired Less than 30 Days

31 to 60 Days

61 to 90 Days

More than 90 Days

Financial Assets Total

(In Thousands) Loans and receivables

Cash in banks P837,089 P - P - P - P - P - P837,089 Cash equivalents 49,430 - - - - - 49,430 Trade and other

receivables: Freight 493,828 222,759 142,977 84,483 283,844 175,643 1,403,534 Passage 11,310 11,274 14,427 3,791 5,235 - 46,037 Service fees 168,222 93,562 58,029 34,337 114,817 117,907 586,874 Distribution 169,513 38,946 15,974 6,859 35,102 15,344 281,738 Others 228,378 91,560 57,546 99,675 17,872 8,037 503,068

Nontrade receivables 44,632 2,517 5,748 5,955 344,500 11,077 414,429 Due from related parties 14,651 4,047 2,931 2,014 135,775 - 159,418 Insurance and other

claims 856,983 - - - - 51,375 908,358 Advances to officers and

employees 23,718 836 597 403 192 - 25,746 AFS investments 6,907 - - - - - 6,907

Total P2,904,661 P465,501 P298,229 P237,517 P937,337 P379,383 P5,222,628

Liquidity Risk The Group manages its liquidity profile to be able to finance its capital expenditures and service its maturing debt by maintaining sufficient cash during the peak season of the passage business. The Group regularly evaluates its projected and actual cash flow generated from operations. The Group’s existing credit facilities with various banks are covered by the Continuing Suretyship for the accounts of the Group.

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The liability of the Surety is primary and solidary and is not contingent upon the pursuit by the bank of whatever remedies it may have against the debtor or collaterals/liens it may possess. If any of the secured obligations is not paid or performed on due date (at stated maturity or by acceleration), the Surety shall, without need for any notice, demand or any other account or deed, immediately be liable therefore and the Surety shall pay and perform the same. The following table summarizes the maturity profile of the Group’s financial assets and financial liabilities based on contractual repayment obligations and the Group’s cash to be generated from operations and the Group’s financial assets as at December 31:

2014

Less than

1 Year 1 to 5 Years

Over 5 Years Total

(In Thousands)

Financial Liabilities Trade and other payables* P4,285,709 P - P - P4,285,709 Loans payable 1,415,651 - - 1,415,651 Long-term debts 85,977 3,519,186 - 3,605,163 Obligations under capital

lease 32,837 101,084 2,081 136,022 Redeemable preferred shares 5,988 - - 5,988 Other noncurrent liabilities - 14,079 - 14,079 P5,826,162 P3,634,349 P2,081 P9,462,612

* Excludes nonfinancial liabilities amounting to P326.4 million as at December 31, 2014.

2013

Less than

1 Year 1 to 5 Years

Over 5 Years Total

(In Thousands)

Financial Liabilities Trade and other payables* P3,839,604 P - P - P3,839,604 Loans payable 1,344,927 - - 1,344,927 Long-term debts 373 3,597,496 - 3,597,869 Obligations under capital

lease 28,592 89,192 - 117,784 Redeemable preferred shares 6,680 - - 6,680 Other noncurrent liabilities - 9,369 - 9,369 P5,220,176 P3,696,057 P - P8,916,233

* Excludes nonfinancial liabilities amounting to P349.6 million as at December 31, 2013.

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2014

Less than

1 Year 1 to 5 Years

Over 5 Years Total

(In Thousands)

Financial Assets Cash and cash equivalents P1,235,052 P - P - P1,235,052 Trade and other receivables 3,973,094 - - 3,973,094 AFS investments 5,707 - - 5,707 P5,213,853 P - P - P5,213,853

2013

Less than

1 Year 1 to 5 Years

Over 5 Years Total

(In Thousands)

Financial Assets Cash and cash equivalents P918,645 P - P - P918,645 Trade and other receivables 3,949,819 - - 3,949,819 AFS investments 6,907 - - 6,907 P4,875,371 P - P - P4,875,371

Trade and other payables and maturing other liabilities are expected to be settled using cash to be generated from operations, drawing from existing and new credit lines, and additional capital contribution of the shareholders. Foreign Exchange Risk Foreign currency risk arises when the Group enters into transactions denominated in currencies other than their functional currency. Management closely monitors the fluctuations in exchange rates so as to anticipate the impact of foreign currency risks associated with the financial instruments. To mitigate the risk of incurring foreign exchange losses, the Group maintains cash in banks in foreign currency to match its financial liabilities.

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The Group’s significant foreign currency-denominated financial assets and financial liabilities as at December 31 are as follows:

2014

AUD1 EUR2 DKK3 USD4 Total Peso Equivalent

(In Thousands) Financial Asset Cash in banks $1 €3 Kr183 $66 P4,480 Trade receivables - - - 342 15,260 Insurance receivables - - - 1 45 - 3 183 409 19,785

Financial Liabilities Trade and other

payables 82 - - - 2,969 Obligations under

finance lease - - - 1,588 70,857 82 - - 1,588 73,826

Net foreign currency denominated assets (liabilities) ($82) (€3) (Kr183) ($1,179) (P54,041)

1$1 = P36.21 3Kr1 = P7.30 2€1 = P54.34 4$1 = P44.662

2013

AUD1 EUR2 NZD3 USD4 Total Peso Equivalent

(In Thousands) Financial Asset Cash in banks $1 €3 $9 $219 P9,944 Trade receivables - - - 266 11,809 Insurance receivables - - - 13 577 1 3 9 498 22,330

Financial Liabilities Trade and other

payables 65 117 - - 9,680 Obligations under

finance lease - - - 986 43,773 65 117 - 986 53,453

Net foreign currency denominated assets (liabilities) ($64) (€114) $9 ($488) (P31,123)

1$1 = P39.46 3$1 = P36.21 2€1 = P60.82 4$1 = P44.40 The Group has recognized foreign exchange revaluation loss amounting to P2.3 million in 2014 and foreign exchange revaluation gain amounting to P1.3 million in 2013.

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The following table demonstrates the sensitivity to a reasonably possible change in the foreign currency exchange rates, with all other variables held constant, of the Group’s profit before tax as at December 31, 2014 and 2013.

Appreciation/

(Depreciation) of Effect on Income Before Tax Foreign Currency 2014 2013 (In Thousands) Australian Dollar (AUD) +5% (P146) (P126) -5% 146 126 Euro (EUR) +5% 8 (347) -5% (8) 347 Danish Kroner (DKK) +5% 67 - -5% () - US Dollar (USD) +5% (2,630) (1,083) -5% 2,630 1,083 New Zealand Dollar (NZD) +5% - 16 -5% - (16)

There is no other impact on the Group’s equity other than those already affecting profit or loss. Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group’s borrowings are subject to fixed interest rates ranging from 4.5% to 8.5% for 10 years in 2013 and in 2014. The Group’s P4.0 billion loans under the OLSA includes P2.0 billion loans which bear variable interest rates and exposes the Group to cash flow interest rate risk. The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the income before income tax for one year, based on the floating rate non-trading financial liabilities held at December 31, 2014 with other variables held constant:

Changes in Effect on Income Before Tax Interest Rates 2014 2013 (In Thousands) For more than one year +80 basis points (P28,841) (P28,762) -80 basis points 28,841 28,762

Changes in Effect on Equity Interest Rates 2014 2013 (In Thousands) For more than one year +80 basis points (P20,189) (P20,133) -80 basis points 20,189 20,133

Equity Price Risk Equity price risk is the risk that the fair value of traded equity instruments decreases as the result of the changes in the levels of equity indices and the value of the individual stocks.

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As at December 31, 2014 and 2013, the Group’s exposure to equity price risk is minimal. The effect on equity (as a result of a change in fair value of equity instruments held as AFS investments as at December 31, 2014 and 2013) due to reasonably possible change in equity indices, with all other variables held constant, follows:

Increase (decrease) in

PSE Index Effect on

Equity (In Thousands) 2014 55% P291 (55%) (291) 2013 55% 352 (55%) (352)

The impact on the Group’s equity excludes the impact of transactions affecting the consolidated statements of comprehensive income. Capital Risk Management Objectives and Procedures The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for others stakeholders and produce adequate and continuous opportunities to its employees; and to provide an adequate return to shareholders by pricing products/services commensurately with the level of risk. The Group sets the amount of capital in proportion to risk. It manages the capital structure and makes adjustments in the light of changes in economic conditions and the risk characteristics of the underlying assets. The Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. The Group’s overall strategy in managing its capital remains unchanged since prior year. The Group considers its total equity as its capital. The Group monitors capital on the basis of the carrying amount of equity as presented on the face of the balance sheet. The capital ratios are as follows:

2014 2013 (In Thousands) Assets financed by:

Creditors 72% 75% Stockholders 28% 25%

As at December 31, 2014 and 2013, the Group met its capital management objectives. As discussed in Note 19, the Group is compliant with its loan covenants.

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34. Fair Value of Financial Instruments and Nonfinancial Assets The table below presents a comparison by category of the carrying amounts and fair values of the Group’s financial instruments as at December 31, 2014 and 2013. Financial instruments with carrying amounts reasonably approximating their fair values are no longer included in the comparison.

2014 2013

Carrying

Value Fair Value Carrying

Value Fair Value (In Thousands)

Financial Liabilities Long-term debts P3,605,163 P4,119,646 P3,597,869 P4,111,311 Obligations under finance

lease 136,002 144,523 117,784 125,164 P3,741,165 P4,264,169 P3,715,653 P4,236,475

Nonfinancial Assets Vessels in operations P3,639,758 P4,209,469 P3,978,216 P4,855,000 Investments property 9,763 59,818 9,763 66,900

The following methods and assumptions are used to estimate the fair value of each class of financial instruments and nonfinancial assets: Financial Instruments Cash and Cash Equivalents, Trade and Other Receivables, Trade and Other Payables, Refundable Deposits and RPS The carrying amounts of these financial instruments approximate their respective fair values due to their relatively short-term maturities. Loans Payable The carrying value of loans payable that reprice every three (3) months, approximates their fair value because of recent and regular repricing based on current market rate. For fixed rate loans, the carrying value approximates fair value due to its short term maturities, ranging from three months to twelve months. AFS Investments The fair values of AFS investments are based on quoted market prices, except for unquoted equity shares which are carried at cost since fair values are not readily determinable. Long-term Debts Discount rate of 2.6% was used in calculating the fair value of the long term debt as at December 31, 2014 and 2013. Obligations Under Finance Lease The fair values of obligation under finance lease are based on the discounted net present value of cash flows using discount rate 3.5% to 3.7% as at December 31, 2014 and 2013. Nonfinancial Assets The fair values of the Group’s vessels in operations and investment property have been determined by the appraisal method by independent external appraisers based on the highest and best use of property being appraised.

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Vessels in Operations The fair values of the vessels in operations are determined using the replacement fixed asset approach. This method requires an analysis of the vessels by breaking them down into major components. Bills of quantities for each component developed on the basis of current costs of materials, labor, plant and equipment prevailing in the locality to arrive at the direct costs of the components. Accrued depreciation was based on the observed condition. Investment Property The fair value of the investment property is determined using the Market Data Approach, which is a process of comparing the subject property being appraised to similar comparable properties recently sold or being offered for sale. Investment in equity securities carried at cost Fair value information has not been disclosed for the Group’s investments in equity securities that are carried at cost because fair value cannot be measured reliably. These equity securities represent ordinary shares in an (nature of the investee company) company that is not quoted on any market and does not have any comparable industry peer that is listed. In addition, the variability in the range of reasonable fair value estimates derived from valuation techniques is significant. The Group does not intend to dispose of this investment in the foreseeable future. The Group intends to eventually dispose of this investment through sale to institutional investors. Fair Value Hierarchy Only the Group’s AFS investments, which are classified under Level 1, are measured at fair value. During the year ended December 31, 2014 and 2013, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

COVER SHEET For

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

Company Name 2 G O

G R O U P ,

I N C .

[ F o r m e r l y

A T S

C o n s o l i d a t e d

( A T S C ) ,

I n c . ]

A N D

S U B S I D I A R I E S

Principal Office ( No./Street/Barangay/City/Town)Province) 1 5 t h

F l o o r ,

T i m e s

P l a z a

B u i l d i n g ,

U n i t e d

N a t i o n s

A v e n u e

c o r n e r ,

T a f t

A v e n u e

E r m i t a

M a n i l a

Form Type Department requiring the report

Secondary License Type, If Applicable

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

No. of Stockholders Annual Meeting Month/Day Fiscal Year

Month/Day 1,931 December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation Name of Contact Person Email Address

Telephone Number/s Mobile Number

Contact Person's Address

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

2014 2go conso_pse

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