COVER SHEET - [email protected] (049) 508-1111 0917-869-5688 No. of Stockholders...

COVER SHEETfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

1 0 7 4 3 2

Company Name

I O N I C S , 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)

C i r c u i t S t r e e t , L i g h t I n d u s t r y

a n d S c i e n c e P a r k o f t h e P h i l i p

p i n e s - I , B o . D i e z m o , C a b u y a o C i t y

L a g u n a , P h i l i p p i n e s

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

A A F S

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

[email protected]

(049) 508-1111 0917-869-5688

No. of StockholdersAnnual Meeting

Month/DayFiscal YearMonth/Day

882 05/15 2015/12/31

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

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

RONAN R. ANDRADE [email protected]

(049) 508-1111 0917-869-5688

Contact Person’s Address

No.14 Mountain Drive, Light Industry and Science Park II Brgy. La Mesa, Calamba, LagunaNote: In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission withinthirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.

IONICS, INC. AND SUBSIDIARIES________________________________________

(Company’s Full Name)

Circuit Street,Light Industry and Science Park of the Philippines I, Bo. Diezmo, Cabuyao City, Laguna, Philippines

________________________________________(Company’s Address)

(049) 508 - 1111_________________________________________

(Telephone Number)

2015/12/31_________________________________________

(Fiscal Year Ending)(month & day)

Annual Audited Financial Statements(SRC Form 17-A)

________________________________________________Form Type

________________________________________________Amendment Designation (if applicable)

_________________________________________Period Ended Date

__________________________________________Secondary License Type and File Number

2

IONICS, INC. AND SUBSIDIARIES

TABLE OF CONTENTSSEC FORM 17-A

PagePART I - BUSINESS AND GENERAL INFORMATION

Item 1 Business 5Item 2 Properties 11Item 3 Legal Proceedings 12Item 4 Submission of Matters to a Vote of Security Holders 12

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuer’s Common Equity andRelated Stockholder Matters 12

Item 6 Management’s Discussion and Analysis orPlan of Operation 14

Item 7 Financial Statements 17Item 8 Changes in and Disagreements With Accountants on

Accounting and Financial Disclosure 25

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Issuer 26Item 10 Executive Compensation 30Item 11 Security Ownership of Certain Beneficial

Owners and Management 32Item 12 Certain Relationships and Related Transactions 33

PART IV - CORPORATE GOVERNANCE

Item 13 Corporate Governance 34

PART V - EXHIBITS AND SCHEDULES

Item 14 a. Exhibits and Reports on SEC Form 17-C 35b. Reports on SEC Form 17-C (Current Report) 35

SIGNATURES 37

INDEX TO FINANCIAL STATEMENTS ANDSUPPLEMENTARY SCHEDULES

INDEX TO EXHIBITS

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SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141

OF THE CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended December 31, 2015

2. SEC Identification Number 107432

3. BIR Tax Identification No. 000-124-671-000

4. Exact name of issuer as specified in its charter IONICS, INC.

5. Province, Country or other jurisdiction of incorporation or organization Laguna, Philippines 6. Industry Classification Code: (SEC Use Only)

7. Circuit Street, Light Industry and Science Park of the Philippines I, 4025Bo. Diezmo, Cabuyao City, Laguna, Philippines

Address of principal office Postal Code

(049) 508-1111 and Fax Number (049) 508-1111 loc. 309 Issuer's telephone number, including area code

9. In 1996, the Company changed its principal place of business from Makati, Metro Manila toCabuyao, Laguna.

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

Title of Each Class Number of Shares of Common StockOutstanding and Amount of Debt Outstanding

Common P=1.00 par value per share, with 857,974,992issued shares and 856,574,992outstandingshares (net of 1,400,000 shares of treasurystock)

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

Yes [ x ] No [ ]

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

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12. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunderor Section 11 of the SRC and SRC Rule 11(a)-1 thereunder, and Sections 26 and 141 of TheCorporation Code of the Philippines during the preceding twelve (12) months (or for such shorterperiod that the registrant was required to file such reports);

Yes [ x ] No [ ]

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

Yes [ x ] No [ ]

13. Based on the closing price at the Philippine Stock Exchange on December 29, 2015 at US$0.052per share, the Company’s common shares held by non affiliates as of December 31, 2015 wouldhave a current market price of US$25,651,808.

14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 ofthe Code subsequent to the distribution of securities under a plan confirmed by a court or theCommission.

Yes [ x ] No [ ]

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PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

Ionics, Inc. and Subsidiaries (The Group)

Ionics, Inc. (the Parent Company)The Parent Company was incorporated in the Philippines on September 10, 1982 and startedcommercial operations in July 1987 to engage in electronic manufacturing services business.

In September 1999, the Parent Company transferred its primary manufacturing business to amajority owned subsidiary, Ionics EMS, Inc. (IEMS). Net assets with a book value of P=530million as of April 30, 1999 were transferred to IEMS under a tax-free exchange for shares ofstock of IEMS. Accordingly, the Parent Company ceased to be a manufacturing company andamended its primary purpose from that of a manufacturing entity to that of a holdingcompany.

In relation to the voluntary delisting of IEMS from the official list of Singapore ExchangeSecurities Trading Limited (Singapore Exchange), the Parent Company acquired an additional104,801,455 shares or 6.72% ownership over IEMS.

Ionics EMS, Inc.(IEMS)IEMS was incorporated on September 21, 1999 to take over the electronic manufacturingservices business of the Parent Company. Certain assets and liabilities of the Parent Companywere transferred to IEMS in a restructuring exercise that took effect on May 1, 1999. Itsoperations include printed circuit board assembly, box build assembly (finished productassembly), disk drive, magnetic head assembly, compact disk read-write assembly, systemsand subsystems assembly, as well as design and testing services.

On February 25, 2000, IEMS offered its shares of stock to the public and became a publiccompany listed in the Singapore Exchange. In accordance with the Singapore ExchangeListing Rule 1311, IEMS gave notice to the Singapore Exchange on March 4, 2008 that it hasrecorded: (a) pre-tax losses for the three most recently completed consecutive financial years;and (b) an average daily market capitalization of less than SGD$40.00 million over the last120 days on which trading was not suspended for a full market day. Pursuant to the saidlisting rule, IEMS was notified of inclusion on the Watch-list effective March 5, 2008. OnMarch 02, 2010, IEMS and the Parent Company jointly announced the proposed voluntarydelisting of IEMS from the official list of Singapore Exchange pursuant to Rules 1307 and1309 of the Listing Manual of the SGX-ST. Subsequently, SGX-ST confirmed that the lastday of trading was June 8, 2010 and the closing date was June 15, 2010. On June 23, 2010,the Company was officially delisted from the SGX-ST.

On August 12, 2010, the Board of Directors approved to set-up a company in the UnitedStates which shall serve as a full service design and prototyping house in Silicon Valley.

Ionics Properties, Inc. (IPI)IPI was incorporated on July 8, 1997 primarily to own the land, buildings, houses, apartmentsand other structures of whatever kind of the Ionics Group of Companies. IPI startedcommercial operations in January 1998.

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Ionics Circuits, Limited (ICL)Formerly Rising Moon Limited, ICL was incorporated in the Cayman Islands on July 5, 2000with limited liability. On February 14, 2001 Rising Moon changed its corporate name to ICL.On March 22, 2005, the company registered address is Scotia Centre, 4th floor, George Town,Grand Cayman, Cayman Islands.

Iomni Precision, Inc. (Iomni)Iomni was incorporated in the Philippines on June 20, 2000 primarily to manufacture and sellhigh-precision plastic products, parts, and injection molds and related products of every kindand description, and other disposition of plastic parts and related products, for its ownaccount as principal or in a representative capacity.

The company registered office address is No. 14 Mountain Drive, Light Industry and SciencePark of the Philippines II, Brgy. La Mesa, Calamba City, Laguna.

As of December 31, 2007, Iomni was 70% owned by the Parent Company. On January 20,2008, the Parent Company acquired the remaining 30% of Iomni, thus it became a wholly-owned subsidiary.

Synertronix, Inc. (SI)SI was registered with the Securities and Exchange Commission on May 10, 1990, tomanufacture, purchase or otherwise acquire, buy and sell retail and wholesale, assemble,produce, or otherwise dispose of, and generally deal in components, parts and devices of allkinds and types used in connection with electronic and electrical machinery, appliances andequipment including but not limited to capacitors, semi-conductors, condensers andtransformers for export abroad and for constructive exports to local companies. SI startedcommercial operations in June 1998.

On August 15, 2003, the Parent Company decided to discontinue the operations of SI.

On July 2, 2014, the Board of Directors of Parent Company approved the sale of real propertyasset of SI and executed the Contract to Sell on July 18, 2014.

Line of Business

The Group is a total one-stop shop Electronics Manufacturing Services (EMS) provider. Ithasbeen the EMS solutions provider to some of the world’s biggest Original EquipmentManufacturers (OEM) for over 38 years.

There are basically two general categories of electronics manufacturers or assemblers in theregion: the Original Equipment Manufacturer (OEM) and the Contract ElectronicsManufacturer (CEM). OEMs are companies who are leaders in PC, Computer Peripherals,Telecommunications, Consumer Electronics, Automotive, Industrial and Medical Equipment.

On the other hand, CEMs are firms involved in the production of electronic items similar tothose produced by OEMs. These firms are basically independent, third party manufacturers orassemblers which do not have any corporate affiliations with their respective customers.CEMs therefore undertake subcontracting work only, and generally provide labor andmanufacturing overhead as their basic inputs in the assembly of electronic products.

The Group is essentially a CEM. Most of the Group’s “end” products, therefore, arecomponents and sub-assembly which are eventually used as inputs for the finished products ofits customers. The Group can accommodate most types of electronic manufacturing andassembly projects. Customers provide the specifications and blue print or prototype of acomponent or product that they want to be manufactured or assembled and the Group deliversthe finished item.

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The Group provides “On Consignment” or “Turnkey” manufacturing arrangements to itsclients. Under an “On Consignment” arrangement, the Group furnishes labor andmanufacturing overhead inputs, while the product design and raw or input materials areprovided by the customer. Under the “Turnkey” arrangement, the Group provides allproduction inputs for its clients. The product design, however, is still provided and owned bythe client.

In 2002, one of the Group’s subsidiaries had successfully offered design services to itscustomer and also added an Original Design Manufacturer (ODM) component to its businessline.

Products

The following is a brief description of the primary products produced by the Group:

· Telecommunication ProductsØ Wireless broadband productsØ Wired telecom productsØ Fiber Optics - Synchronous Optical NetworksØ Infrastructure and BackplanesØ Wi-Fi based RFID TagsØ Telephone Ring GeneratorsØ Satellite Receivers and LONB’sØ Service GatewaysØ Optical Network Pole CabinetsØ Two-way handheld RadiosØ Wi-Fi ModulesØ Mobile Phone SIM’s for Roaming

· Automotive ProductsØ GPS Navigation SystemØ RF TunersØ Vehicle Security SystemsØ Electronic DashboardsØ Engine SensorsØ Engine StartersØ Car Antenna Control SystemØ Automotive Multi-Media Device

· Computer Products / PeripheralsØ Micro DrivesØ MotherboardsØ PCBA for HDD and Optical DrivesØ CD-RW and DVD-RW Optical DrivesØ Flip Chip on Flex for HDDØ Adaptive PFC Power SuppliesØ Headless ComputersØ Radio RepeatersØ Main boards for projectorsØ Power Supplies for projectorsØ Sub-assemblies for printers

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· Consumer ProductsØ E-BooksØ Personal Media PlayerØ USB DrivesØ DVD Players and RecordersØ Recorder / One Touch Media Upload ConverterØ Home Speaker SystemsØ IPOD Docking UnitsØ GPS for SLR Cameras and GolfØ Electronic BallastsØ Electronics Fishing DevicesØ Digipass Security ToolØ Display SignagesØ Electronically Controlled Chemical DispensersØ High Fidelity Sound SystemsØ TV Tuners for TabletsØ RFID systems for petroleum distributionØ Tap payment devices for gas stationsØ Label writersØ Overhead ProjectorØ Home Automation ControllersØ Cellphone SecurityØ Electronic KeylocksØ Gaming Assemblies

· Medical ProductsØ Digital ThermometersØ Personal Health Care Products

· Plastic ProductsØ EnclosuresØ Sub-assemblies for Printers, Copiers and Optical DrivesØ Concentrators for Solar CellsØ High Voltage Connectors for X-RayØ Automotive Plastics - Air Intake manifold & Fuel Delivery ModulesØ Air Tight Wi-Fi Antenna CoverØ Wiring Harness ProtectorsØ Hayabusa

Information on export sales and the relative contribution of each segment (based on productline) to total sales are fully disclosed in Note 29 to Audited Consolidated FinancialStatements.

Significant Customers

The top five customers collectively accounted for 74.87% and 70.87% of the Group’s salesin 2015 and 2014, respectively. The Group anticipates that concentration of business inmajor customers will continue in the foreseeable future, although the Group’s managementstarted new relationships with other customers.

One customer accounted for approximately 42.99% and 29.68% of net sales in 2015 and 2014,respectively. Contracts with the customers are on a continuing basis and the Group has been inbusiness with them for many years.

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Distribution Method

The bulk of the Group’s products are intermediate products which are shipped to thecustomers’ manufacturing plants in Asia, USA and Europe for incorporation or furtherassembly into the final finished products.

Competition, Status of New Products and Business Risk

The Group competes with other electronic manufacturers both domestic and foreign. Themarket for PCBA and the other product lines of the Group are subject to normal price, service,and quality competition. Among the Group’s top competition are from the following:

Ø FlextronicsØ JabilØ Sanmina-SCIØ VentureØ IMIØ EMS

While the traditional PC peripheral business has driven to build IEMS’ strength in thetelecommunications, automotive, electronics and medical and consumer product lines,IEMS has shifted its resources and established more flexible and adaptable manufacturingplatforms so it can readily shift production into various products and components on the sameproduction floor. IEMS will continue its profitable growth path; it plans to grow more in globalsales and marketing, to focus on telecommunication, automotive, medical and IoT (internet ofthings). There is no publicly-announced new product that will require material amount of theresources of the Group.

The following are the major risks that the Group has:

1. Credit Risk2. Liquidity Risk3. Market Risk

Details of the above risks were fully discussed in Note 4 of the Audited ConsolidatedFinancial Statements.

The Group has a Risk Management Committee which conducts meetings on a quarterly basisto discuss and analyze these major risks and decide on the measures on how to manage theserisks.

Sources and Availability of Raw Materials

The customers under a consignment arrangement supply the bulk of raw material componentsneeded in the manufacturing of their products. However, in response to global competition,the Group started building up its raw materials inventory for turnkey transactions. Among theprincipal suppliers of the Group are the following:

Ø Avnet Asia Pte.LtdØ Ceragon NetworksØ SJS Precision CorporationØ Arrow Electronics Asia(S) Pte.Ltd.Ø Panasonic Factory Solutions Asia PaØ WPG South Asia Pte.Ltd.Ø Universal Microwave Technology, Inc.Ø Future Electronics, Inc.

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Ø Shennan Circuits Co., Ltd.Ø Le Champ (S.E.A) Pte.Ltd.

The Group has entered into non-cancellable purchase commitments with its suppliers.Purchases of raw materials and supplies are based on ordinary purchase transactions coveredby a purchase order.

Sales

The Group’s revenue is purely from export sales except for IPI which derives its revenue fromthe lease of properties. Amounts of revenue, profitability, and identifiable assets attributableto the Group’s operations for 2015, 2014, and 2013 are as follows:

(In ‘000 US Dollars)2015 2014 2013

Export sales 63,746 63,305 64,356Income (loss) on Operation 3,008 868 (2,964)Total Assets 59,419 55,531 57,135

The following tables below show the percentage of sales and net assets per geographical areafor the last three years:

a. Sales

2015 2014 2013Asia 68.50% 67.01% 78.85%Europe 23.14% 19.63% 14.21%North America 8.36% 13.36% 6.94%

100.00% 100.00% 100.00%

b. Net Assets

2015 2014 2013Asia 97.41% 96.75% 85.13%North America 2.59% 3.25% 14.87%

100.00% 100.00% 100.00%

See related discussion on Note 29 of the Audited Consolidated Financial Statements.

Transaction with and/or Dependence on Related Parties

The Group has no significant transactions that are dependent on related parties except for thetransactions discussed in Item 12 of this report and in Note 23 of the Audited ConsolidatedFinancial Statements.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements, or LaborContracts, including Duration

Not applicable to the Group.

Need for Any Governmental Approval of Principal Products or Services

None

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Effect of Existing or Probable Governmental Regulations on the Business

None

Estimate of Amount Spent for Research and Development Activities of the LastCompleted Fiscal Year

None

Cost and Effects of Compliance with Environmental Laws

IEMS’ plants are located in industrial parks with a centralized water treatment system.

Employees

As of December 31, 2015, the Group has a total of 1,544 employees consisting of seventy-seven(77) managers, four hundred fifty-one (451) administrative personnel and one thousandsixteen (1,016) factory workers.

Aside from basic salaries, employees receive vacation and sick leave credits, transportationallowance, free medical and dental benefits, group insurance benefits and funeral assistance.

There is no existing collective bargaining agreement or labor union in the Group.

Debt Issues


Investment Company Securities


Item 2. Properties

As of December 31, 2015 the Group’s manufacturing, design and prototyping operations areconducted in the following plants:

The EMS-2 Plant is located at the Light Industry and Science Park of the Philippines II (LISPII) in Calamba City, Laguna and has an area of 1,375 square meters. The property is leasedfrom Iomni from January 16, 2016 to January 15, 2017.

The EMS-5 and EMS-6 Plants are located at the LISP I in Cabuyao City, Laguna and have anaggregate area of 9,035square meters. The land and the building thereon are owned by theParent Company. The plants are leased to IEMS for a period of five (5) years from May 1,2004 to April 30, 2009. Monthly rental is US$4.35 per square meter in the first year with anannual escalation rate of 5%. The new lease agreement is subject to yearly renewal at the rateof US$3.49 per square meter for EMS-5 and US$3.49 for EMS-6.

The EMS-7 Plant is located at the LISP II also in Calamba City, Laguna and has an aggregatearea of 17,710 square meters. The land and building thereon are owned by IPI. The propertyis leased to IEMS for a period of five (5) years from January 1, 2001 to December 31, 2005.On June 1, 2005, IEMS terminated its lease agreement for Plant 7 and the facility was rentedout to another PEZA-registered company.

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The plant of Iomni is also located in LISP II in Calamba City, Laguna. It has an aggregatetotal area of 10,893.15 square meters of covered factory building and paved open space. Theland is leased from a non-related third party from January 16, 2016 to January 31, 2021.

Ionics EMS (USA), Inc. is located at 5488 Marvell Lane, Santa Clara, California, USA.

Item 3. Legal Proceedings

As of December 31, 2015, there are no materials pending legal proceedings to which theParent Company or any of its subsidiaries is a party or of which any of their properties is asubject.

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

There were no matters submitted to a vote of security holders for the fourth quarter of 2015.

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matter

(Amounts in US Dollar) (Amounts in PhP)HIGH LOW HIGH LOW

Latest price as of March 31, 2016 0.064 0.061 2.93 2.82

2015First Quarter 0.014 0.014 0.63 0.62Second Quarter 0.012 0.012 0.56 0.53Third Quarter 0.084 0.068 3.94 3.18Fourth Quarter 0.055 0.052 2.58 2.45



The Parent Company’s common stock is listed in the Philippine Stock Exchange.

The number of shareholders of record as of December31, 2015 is 882 holding a total of856,574,992 outstanding common shares.

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The following were the top 20 stockholders based on the number of shares held andpercentage to total shares outstanding as of March 31, 2016:

Class of Securities NameNo. ofShares %

Common Aqua Holdings, Inc. 335,153,100 39.13Common PCD Nominee Corp.-Filipino 299,441,892 34.96Common Leonardo Siguion Reyna * 75,006,000 8.76Common PCD Nominee Corp.-Non Filipino 70,399,900 8.22Common Lawrence C. Qua 27,454,760 3.21Common Ionics Properties, Inc. 14,059,000 1.64Common Raymond C. Qua 8,562,350 1.00Common Meliton C. Qua 6,497,362 0.76Common Cecilia Q. Chua 5,584,412 0.65Common Ma.Asuncion Q. Cedilla 4,640,616 0.54Common Pan Malayan Management & Investment 2,154,000 0.25Common Virginia Judy Q. Dy 1,033,603 0.12Common Benjamin S. Geli 470,000 0.05Common Teh Min Yang 466,000 0.05Common Telengtan Brothers & Sons Inc. 400,000 0.05Common Abeto A.Uy 250,000 0.03Common Que Liong Hee 100,000 0.01Common Jose L. Cuisia Jr. 100,000 0.01

Common Romeo Villonco and/or Thelma V.Mabanta 100,000 0.01

Common Arsenia C. Dy 99,000 0.01

*deceased

Dividends per Share

2015 None

2014 None

2013 None

Description of Any Restriction that Limits the Payment of Dividends on Common Shares

Dividends shall be declared at such time and in such percentage as the Board of Directors maydetermine, but no dividends shall be declared or paid except from the surplus profits arisingfrom its business nor shall any dividends be declared that will impair the capital of the ParentCompany.

Recent Sales of Unregistered or Exempt Sales

There are no recent sales of unregistered or exempt securities, including any recent issuance ofsecurities constituting an exempt transaction.

Description of Registrant’s SecuritiesThe registrant has an authorized capital stock of 1,000,000,000 shares with par value ofPhP1.00 per share. The issued and outstanding shares as of December 31, 2015 are856,574,992.

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No transfer of stock or interests which will reduce the ownership of Filipino citizens to lessthan the required percentage of the capital stock as provided by existing laws shall be allowedor permitted to be recorded in the books of the Parent Company.

Debt Securities

There are no issuances of debt securities.

Stock Options

There are no issuances of stock options.

Securities Subject to Redemption or Call

There are no issuances of securities subject to redemption or call.

Warrants

There are no issuances of warrants.

Market Information for Securities Other Than Common Equity

There is no material information relating to securities other than the Parent Company’scommon equity.

Other Securities

There are no issuances of other securities.

Item 6. Management Discussion and Analysis or Plan of Operation

Management Plan for the Year 2016

Ionics EMS, Inc. (IEMS)

IEMS maintains a positive outlook for 2016 and will continue its profitable growth path. It plans togrow more in global sales and marketing, to focus on telecommunication, automotive, medical andIoT (internet of things).

IEMS will invest in good and automated machines and equipment that would improve operationalefficiency and provide high margin.

IEMS’ supply chain strategy is to partner with distributors and suppliers.

While IEMS has a very strong cash flow generated by its operations, it will continue to avail of thesupport from its Parent Company as the need arises.

Iomni Precision, Inc. (Iomni)

The localization thrust of multinational firms to produce plastic parts in the country instead ofimporting from abroad so as to reduce logistical costs and facilitate swifter deliveries provides goodopportunities for growth in the different sectors.

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While the automotive requirements constitute a significant segment in the sales of Iomni, saidcompany still targets to develop more products in other fields in order to maintain balance in itscustomer portfolio.

In order to increase productivity, enhance efficiency and accommodate market expansion, Iomni plansto upgrade some of its equipment.

Ionics Properties, Inc. (IPI)

The property market is robust and the revenue stream from IPI's property rentals is stable andconsistent. Further, existing property contracts of IPI were renewed by three to ten years.

As of filing date, the management of the Group is not aware of:

a) any significant expenditures for product research and development;b) any expected significant change in number of employees;c) any known trends, events or uncertainties that have or are reasonably likely to have a material

impact on the registrant’s short term or long term liquidity;d) any event that will trigger direct or contingent financial obligation that is material to the Group,

including any default or acceleration of an obligation;e) any material off-balance sheet transactions, arrangements, obligations (including contingent

obligations), and other relationships of the Group with unconsolidated entities or other personscreated during the reporting period;

f) any known trends, events or uncertainties that have or that are reasonably expected to have amaterial impact on the net sales or revenues or income from continuing operations; and

g) any seasonal aspects that had a material effect on the financial condition or results of operations.

Sources of liquidity are expected from the Group’s internal cash flow from the results of operationsand from the Group’s external borrowings.

Below are the consolidated key financial ratios for the years ended December 31, 2015 and 2014.

December 31, 2015 December 31, 2014Revenue Growth 0.47% (0.87%)Gross Profit Margins 9.63% 7.81%Net Income Margins 4.42% 1.59%Return on Equity 7.35% 2.82%Current Ratio 2.52:1 2.49:1Leverage Ratio 0.07:1 0.15:1Debt to Equity Ratio 0.49:1 0.49:1Asset to Equity Ratio 1.49:1 1.49:1Interest Coverage Ratio 81.51:1 46.76:1

1. Revenue GrowthThe revenue growth is the Group’s increase in revenue for a given period. Revenuegrowth is computed by deducting prior year revenue from current year revenue anddividing it by revenue of the prior year. The result is expressed in percentage.

2. Gross Profit MarginThe gross profit margin reflects the management’s policies related to pricing andproduction efficiency. This is computed by dividing gross profit by net sales. The resultis expressed in percentage.

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3. Net Income MarginsNet income margin is the ratio of the Group’s net income after tax for a given period.This is computed by dividing net income by net sales. The result is expressed inpercentage.

4. Return on EquityThe return on equity is the ratio of the Group’s net income to stockholders’ equity. This iscomputed by dividing net income by total stockholders’ equity. The result is expressed inpercentage. This measures the management’s ability to generate returns on theirinvestments.

5. Current RatioThe current ratio is the ratio of the Group’s current resources and its current obligations.This is computed by dividing current assets by current liabilities. The result is expressedin ratio.

6. Leverage RatioLeverage ratio shows the balance that the Group’s management has struck between forcesof risk versus cost. This is computed by dividing net debt by the sum of total equity andnet debt.

7. Debt to Equity RatioThe debt to equity ratio indicates the relative proportion of equity and debt used to financethe Group’s assets. This is computed by dividing total liabilities by equity.

8. Asset to Equity RatioAsset to equity ratio shows the relationship of the total assets of the Group to the portionowned by shareholders. This is computed by dividing total assets by equity.

9. Interest Coverage RatioInterest coverage ratio is the ratio of the Group’s ability to meet its interest payments. Thisis computed by dividing the sum of income before income taxes and finance costs by thefinance costs.

As of filing date, the management of the Group is not aware of:

a) any known trends, demands, commitments, events or uncertainties that will have amaterial impact on the issuer’s liquidity;

b) any events that will trigger direct or contingent financial obligation that is material to theGroup, including any default or acceleration of an obligation;

c) all material off-balance sheet transactions, arrangements, obligations (including contingentobligations), and other relationships of the Group with unconsolidated entities or otherpersons created during the reporting period;

d) any material commitments for capital expenditures, the general purpose of suchcommitments and the expected sources of funds for such expenditures;

e) any known trends, events or uncertainties that have had or that are reasonably expected tohave a material favorable or unfavorable impact on net sales/ revenues/ income fromcontinuing operations;

f) any significant elements of income or loss that did not arise from the issuer’s continuingoperations; and

g) any seasonal aspects that had a material effect on the financial condition or results ofoperations.

The causes for any material change from period to period which shall include vertical andhorizontal analysis of any material item were disclosed in pages 18 to 24of this report.

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Financial Performance

2015

CONSOLIDATED RESULTS OF OPERATIONS

The Group registered a turnover of US$63.75 million, slightly higher than the previous year'sUS$63.31 million. It generated an income of US$2.93 million from an income of US$1.05 million in2014.Increase in income was due to higher demand from customers under consignment agreement.

The Group’s rental income decreased by US$0.13 million or 5.18%, from US$2.53 million in 2014 toUS$2.40 million in 2015, due to rental rate reduction of a renewed long-term lease contract with a thirdparty. The Group reported a gross income of US$6.37 million in 2015 from US$5.14 million in 2014.

With the foregoing, operating expenses slightly decreased from US$3.91 million in 2014 toUS$3.02 million in 2015, due to the cost minimization of the Group.

The summarized revenues and net income (losses) of the Group for the year ended December 31,2015 are as follows:

(In US Dollars)COMPANY REVENUE NET INCOME (LOSS)Parent Company 1,483,952 865,218IEMS 61,067,932 1,650,689IPI 2,358,017 1,870,088ICL (144,614) (152,123)Iomni 3,099,091 (148,902)SI 7.19 (9,196)Total 67,850,252 4,075,774Reclass/Eliminating entries (1,429,107) (1,150,690)Consolidated 66,421,145 2,925,084

CONSOLIDATED FINANCIAL POSITION

As of December 31, 2015, the consolidated assets of the Group amounted to US$59.42 million whichis US$3.89 million higher than the December 31, 2014 figure of US$55.53 million. The increase inthe Group’s total assets was due to increase in Property, Plant and Equipment and Cash and Cashequivalents funded by net cash flows from operations and bank loans.

Current ratio improved to 252% in 2015 from 249% in 2014 while debt to equity ratio remained at49%. For the year ended December 31, 2015, the Group has continuously improved its cash positionfrom the cash flows generated from operations.

At the end of December 31, 2015, the Group’s long-term debt has increased to US$1.02 million fromUS$0.14 million in 2014 due to acquisition of machinery and equipment.

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INDIVIDUAL RESULT OF OPERATIONS

The individual performance of the subsidiaries for the year ended December 31, 2015 is as follows:


IEMS and its subsidiary reported a slight increase in sales of US$60.84 million in 2015 fromUS$60.17 million in 2014. The increase in sales is due to increase in its consignment business.

With the continuing increase in consignment business, gross profit increased by US$1.10million fromUS$3.24 million in 2014 to US$4.34million in the same period of 2015.

Operating expenses increased from US$2.49 million in 2014 to US$2.58 million in 2015due to highersales subject to commission.

With the foregoing, IEMS reported a net income of US$1.65 million in 2015 from a net income ofUS$0.64 million in 2014.


IPI, the subsidiary in real estate holdings remained profitable with a reduced net income ofUS$ 1.87 million in 2015 from US$2.00 million in 2014, due to rental rate reduction of a renewedlong-term lease contract with a third party.

Ionics Circuits, Limited (ICL)

ICL, the offshore investment subsidiary has further reduced its losses from US$0.81 million in 2014 toUS$0.15 million in 2015 despite an equity take up in the net loss of investment in an associateamounting US$0.40 million.

Synertronix, Inc. (SI)

SI reported a net loss for the year ended December 31, 2015of US$$0.009 million fromUS$0.14 million in 2014.


Iomni, the plastic injection molding unit, has experience a decrease in sales from US$3.24 million in2014 to US$2.96 million in 2015. Despite the decrease in sales, due to continuing processimprovement and strong cost controls, it has reported an improved performance from a net loss ofUS$0.40 million to US$0.15 million.

Operating expenses decreased to US$0.21 million in 2015 from US$0.22 million in 2014.

2014

The Group registered a turnover of US$63.305 million. Though slightly decreased as compared with theprevious year's $64.356 million, it generated an income of $1.049 million from a loss of $2.740 millionin 2013. A key element was the gainful reversal of the major manufacturing subsidiary which was inthe red the past years.

The Group’s rental income increased by US$0.472 million or 22.97% from US$2.055 million in 2013to US$2.527 million in 2014 due to new third party lease contracts which started in Q4 2013. TheGroup reported a gross income of US$5.143 million in 2014 from US$1.987 million in 2013.

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With the foregoing, operating expenses decreased from US$4.935 million in 2013 to US$3.913 millionin 2014, due to dropped in sales which are subject to commission and lower amount of impairment losscompared in 2013.

The summarized revenues and net income (losses) of the Group for the year ended December 31,2014 are presented as follows:

(In US Dollars)

COMPANY REVENUENET INCOME

(LOSS)Parent Company 2,422,170 1,850,415IEMS 60,309,166 638,044IPI 2,458,577 2,002,112ICL (102,716) (814,277)Iomni 3,410,708 (403,305)Synertronix 186,107 (137,073)TOTAL 68,684,012 3,135,917Reclass/Eliminating entries (2,652,369) (2,086,695)Consolidated 66,031,643 1,049,222


As of December 31, 2014, the consolidated assets of the Group amounted to US$55.531 million whichis US$1.604 million lower than the US$57.135 million as of December 31, 2013.

Current ratio improved to 249% in 2014 from 221% in 2013. Likewise, debt to equity improved to49% in 2014 from 57% in 2013. For the year ended December 31, 2014, the Group has continuouslyimproved its cash position from the cash flows generated by operations.

At the end of December 31, 2014, the Group’s long-term debt has decreased to US$0.136 million fromUS$0.371 million in 2013.



Ionics EMS (IEMS)

IEMS and its subsidiary’s reported sales of US$60.173 million in 2014 from US$61.436 million in2013.

The full year cost benefits of Ionics EMS plants consolidation and production line realignmentimplemented during the second half of 2013 and the higher mix of consignment business in 2014 havecontributed in the significant improvement of IEMS gross margin to US$3.238 million in 2014 from0.420 million in 2013.

Other income decreased from US$0.361 million in 2013 to US$0.136 million in 2014 due to lowerforeign exchange transactions.

Operating expenses decreased from US$2.655 million in 2013 to US$2.493 million in 2014 due todropped in sales which are subject to commission.

With the foregoing, IEMS reported a net income of US$0.638 million in 2014 from a net loss ofUS$1.993 million in 2013.

20


Ionics Properties Inc. (IPI), the subsidiary in real estate holdings, upped its net income to $2.002million in 2014 from $1.625 million the year before with additional third party lease contracts.Property rentals have been consistent earner for the Group and the existing contracts were renewed byfive to ten years.


Ionics Circuits Limited (ICL), the investment subsidiary, reported a net loss of US$0.814 million in2014 as compared to a net loss of US$1.779 million in 2013. In 2014, management provided for theimpairment loss on its direct and indirect investment in Pacific Synergies IV and Astute Networks,Inc., amounting to US$0.204 and US$0.500 million respectively. In 2013, similar impairmentprovisions were provided as a prudent move to cover the investments in Alphion and Pacific Synergy.


SI reported a net loss for the year ended December 31, 2014 amounted to US$$0.137 million fromUS$0.101 million in 2013.


Iomni Precision, Inc. (Iomni), the plastic injection molding unit, reported an slight increase in sales ofUS$0.116 million or 4% from US$3.127 million in 2013 to US$3.242 million in 2014. The companyreported a gross loss of US$0.179 million in 2014 from a gross loss of US$0.183 million in 2013.

Operating expenses decreased to US$0.219 million in 2014 from US$0.235 million in 2013.

With the foregoing, the Company reported a net loss of US$0.403 million in 2014 from a net loss ofUS$0.419 million in 2013.

2013

CONSOLIDATED RESULTS OF OPERATIONS

The Group’s turnover in 2013decreased by US$13.54million or 17.39% from US$77.90 million in 2012to US$64.36 million in 2013, the decrease in turnover was attributable to the decrease in customer orderfrom telecom companies during the period.

The Group’s rental income increased by US$0.12 million or 5.98% from US$1.94 million in 2012 toUS$2.06 million in 2013 due to new third party contracts starting Q4 2013. Other income decreasedfrom US$0.73 million in 2012 to US$0.55 million in 2013. The Group reported a gross incomeofUS$0.15 million in 2013 versus US$1.33 million in 2012.

Operating expenses increased from US$4.39 million in 2012 to US$4.94 million in 2013 because theGroup has directly written off its investments in Alphion, Pacific Synergies IV, and Eagle Ridge Golfand Country Club amounting to US$1.74 million, US$0.04 million, and US$0.004 million,respectively, due to prolonged decline in the investment’s value and management has assessed that it isnot probable to recover all the cost of investment.

With the foregoing, the Group reported a consolidated net loss attributable to equity holders of theParent Company amounting to a loss of US$2.74 million in 2013 from a lossof US$0.78 million in2012.

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The summarized revenues and net income (losses) of the Group for the year ended December 31,2013 are presented as follows:

(In US Dollars)COMPANY REVENUE NET INCOME (LOSS)Parent Company 5,391,646 4,868,296IEMS 61,797,172 (1,992,101)IPI 2,058,012 1,624,886ICL (9,866) (1,778,800)Iomni 3,195,605 (419,448)SI 40,876 (101,247)Total 72,473,445 2,201,586Reclass/Eliminating entries (5,660,394) (5,007,259)Consolidated 66,813,051 (2,805,673)


As of December 31, 2013, the consolidated assets of the Group amounted to US$57.14 million whichis US$11.17 million lower than the US$68.31 million as of December 31, 2012. The decrease in theGroup’s total assets was due to the decrease in receivables and inventories. Receivables decreased dueto slow down in sales in telecommunication sector. Consequently, material purchases were controlledresulting to decrease in inventories and accounts payable and accrued expenses of the Group.

Current ratio improved to 221% in 2013 from 188% in 2012. Debt to equity ratio is 57% in 2013 from74% in 2012.

At the end of December 31, 2013, the Group’s long-term debt has increased to US$0.371 million fromUS$0.128 million in 2012.




IEMS and its subsidiary’s turnover decreased by US$14.09 million or 18.66% from US$75.53 millionin 2012 toUS$61.44 million in the same period of 2013 due to slowdown of demand fromtelecommunication sector. With lower sales, gross profit decreased by US$0.54 million fromUS$0.96 million in 2012 to US$0.42 million in the same period of 2013.

Other income increased from US$0.01 million in 2012 to US$0.36 million in 2013 due to foreigncurrency exchange gains.

Operating expenses decreased from US$2.88 million in 2012 to US$2.66 million in 2013 due to a dropin sales which are subject to commission.

With the foregoing, IEMS and subsidiary reported a net loss of US$1.99 million as compared to a netloss of US$2.14 million in 2012.


IPI contributed rent income of US$2.06 million in 2013 and US$1.94 in 2012 and net income amountedto US$1.63 million andUS$1.43 million in 2013 and 2012, respectively.

22


ICL reported a net loss amounting to US$1.78million in 2013 as compared to a net loss ofUS$0.62 million in 2012. Management provided for the impairment loss on its direct and indirectinvestment in Alphion amounting to US$1.77 million in 2013.


SI reported a net loss for the year ended December 31, 2013 amounting to US$$0.10 million fromUS$0.11 million in 2012 due to poor operation performance.


Iomni’s turnover in 2013 increased by US$0.55 million or 21% from US$2.58 in 2012 toUS$3.13 million in 2013; however, Iomni reported a gross loss of US$0.18 million in 2013 from agross income of US$0.08 million in 2012.

Operating expenses increased to US$0.24 million in 2013 from US$0.22 million in 2012.With theforegoing, the Iomni reported a net loss of US$0.42 million in 2013 and US$0.16 million in 2012.

Below is the summary of Balance Sheet Accounts with more than 5% increase (decrease)

2015 2014

% %ASSETS

Cash and cash equivalents 46 49Receivables (5) 10Inventories (12) (29)Prepayments and other current assets (31) 21Investments (including available-for-sale) (1) (7)Property, plant and equipment 24 20Investment properties 20 (25)Refundable depositsDeferred tax asset

49

N/A83

LIABILITIES

Accounts payable and accrued expenses (13) (31)Bank loans and finance lease liability 266 (53)Income tax payable 145 32Advances from customers (57) (29)Security deposits 4 28Pension liability 8 N/A

2015

Cash and cash equivalents increased due to cash flows provided by operations. Decrease in receivableswas due to improved collection performance. Decrease in inventories was due to decrease in rawmaterials as a result of decrease in turnkey sales and controlled material purchases. Prepayments andother current assets decreased due to lower advances to suppliers for its raw materials. Property, plantand equipment increased due to additional acquisition of machineries and equipment and purchase ofland. Accounts payable and accrued expenses decreased due to controlled purchases to minimizeexposure on inventory purchases. Bank loans and finance lease liability increased due to availment ofequipment loan during the year. Income tax payable increased due to additional tax provision.

23

Advances from customers decreased due to implementation of risk management measures on aginginventories. The increase in security deposits was due to three months rental deposit from a newcontract of lease signed by a third party and IPI. Pension liability increased due to additional accrualfor the year.

2014

Cash and cash equivalents increased due to cash flows provided by operations. Increase in receivableswas due to sales to a new customer. Decrease in inventories was due to controlled material purchasesto reduce exposures with some turnkey customers. Prepayments and other current assets increased dueto advance payment made to suppliers. Investments available for sale decreased due to impairment ofinvestment in Pacific Synergies IV, Astute Networks, Inc., and Eagle Ridge Golf and Country Club.Property, plant and equipment increased due to additional acquisition of machineries and equipmentfor production use. Investment properties decreased due to sale of Synertronix’s land and building.Accounts payable and accrued expenses decreased due to lower purchases for inventories as a result oflow customer demand and production requirements. Bank loans decreased due to payment madeduring the period. Income tax payable increased due to additional tax provision and reversal ofdeferred tax assets. Advances from customers decreased due to offsetting of the advances against thereceivables. Increase in security deposits was due to three months rental deposit from new leases.Pension liability increased due to additional accrual for the year.

2013

Cash and cash equivalents increased due to cash flows provided by operations. Decrease in receivablesand inventories were attributable to lower sales and customer demand which prompted a controlledmaterial ordering. Prepayments and other current assets decreased due to the release of restricted cashto secure a bank loan which was paid during the year and decrease in advance payment to suppliers formaterial ordering. Investments available for sale decreased due to return of capital by the investee andimpairment of investment in Alphion, Pacific Synergies IV and Eagle Ridge Golf and Country Club.Property, plant and equipment increased due to additional acquisition of machineries and equipmentfor production use. Refundable deposits decreased to due to refund of deposit from a utility company.Accounts payable and accrued expenses decreased due to controlled purchases in response toslowdown of orders from the telecom sector. Bank loans decreased due to payment made during theperiod. Income tax payable increased due to additional tax provision. Advances from customersdecreased due to return of customer’s advance payment for material ordering. Increase in securitydeposits was due to three months rental deposit from a new lessee.

Item 7. Financial Statements

The Group’s consolidated financial statements and schedules listed in the accompanying Index toFinancial Statements and Supplementary Schedules (page 68) are filed as part of this Form 17-A

1. General Notes to Financial Statements:

See Audited Consolidated Financial Statements.

Assets subject to lien and restriction on sales of assets:


Restriction which limits the availability of Retained Earnings for dividend declaration:

See related discussion on Note 2 of the Audited Consolidated Financial Statements.

24

Commitments and Contingent Liabilities:

See related discussion on Leases under Note 24 of the Audited Consolidated Financial Statements.

Material Related Party Transactions which affect the Financial Statements:

The Parent Company has no significant related party transactions with its subsidiaries, affiliatesand stockholders that affect the Financial Statements except for the matters discussed in Note 23to the Audited Consolidated Financial Statements.

Bonus, Profit Sharing and Other Similar Plans:

The Group has an employee car plan and profit sharing for its BOD and Management.

Interest Cost:

IEMS paid interest on bank loans.

2. Subsidiaries

As of December 31, 2015, the details of investments and advances to subsidiaries are as follows:

Subsidiaries % owned Investment AdvancesIPI 100 US$1,535,578 US$700,000ICL 100 2,579,265 956Iomni 100 5,013,276 200,000IEMS 97 36,969,459 10,563,655

3. Cash and Cash Equivalents

Out of the total cash and cash equivalents of US$10,283,552 as of December 31 2015,US$868,175 is peso-denominated. This represents savings deposit and current accounts in localbanks.

4. Accounts Receivable - Others

Receivable from customers other than sales US$1,337,947Rent receivable 189,302Advances to officers and employees 88,933Claims against SSS and other government agencies 22,133Others 657,982

5. Inventories

Inventories decreased due to well-enforced management actions to improve the inventorymovement with the current business level.

6. Property, Plant and Equipment

As of December 31, 2015, the Group has no equipment that is still under installation as discussedin Note 12 to the Audited Consolidated Financial Statements.

7. General and Administrative Expenses - Please see schedule in page 46.

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Item 8. Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure

1. External Audit Fees and Services

(a) Audit and Audit - Related Fees

The Auditing firm of Sycip Gorres Velayo & Co. (SGV) has been the externalauditor of the Company since 1992. The Auditing partner in charge of theaccounts of the Company for the financial year ended December 31, 2015 is Ms.Cyril Jasmin B. Valencia who took office after her appointment at the May 18,2012 stockholders’ meeting of the Company. Audit fee for Ionics, Inc. in 2015 isforty seven thousand five hundred two dollars (US$47,502) and fifty thousandeight hundred twenty dollars (US$50,820) in 2014.The fees are generally basedon the complexity of the issues involved, the work to be performed, the specialskills required to complete the work, the experience level of the team membersand most importantly the ability to provide the auditors’ report expressing anopinion on the financial statements of the Company.

(b) There are no assurance and related services by the external auditor that arereasonably related to the performance of the audit or review of the Company’sfinancial statements.

(c) All Other Fees

(d) Any additional services that the Company may request will be the subject of aseparate written arrangement.

(e) The Audit Committee’s approval policies and procedures for the above services

The Audit Committee heard the reports of the External Auditor and validated thefinancial reports prepared by Management.

2. Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure

There are no changes in, and no disagreements with, the registrant’s accountants onany accounting and financial disclosure during the two most recent fiscal years or anysubsequent interim period.

26

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Registrant

The Executive Officers of the Registrant

Position Name TermPeriodServed Age Citizenship

Director, Chairman and President Lawrence C. Qua 1 year 32 69 FilipinoDirector -Independent Alfredo de R. Borja 1 year 12 71 FilipinoDirector -Independent Amelia B. Cabal 1 year 5 68 FilipinoDirector Meliton C. Qua 1 year 22 74 FilipinoDirector Ibarra A. Malonzo 1 year 1 72 FilipinoDirector Raymond Ma. C. Qua 1 year 26 65 FilipinoDirector Virginia Judy Q. Dy 1 year 22 75 FilipinoDirector Cecilia Q. Chua 1 year 8 63 FilipinoDirector Monica Siguion Reyna

Villonco 1 year 5 62 FilipinoDirector Guillermo D. Luchangco 1 year 22 76 FilipinoDirector Yang Teh Lin 1 year 1 43 TaiwaneseCorporate Secretary Manuel R. Roxas 1 year 23 66 FilipinoAsst. Corporate Secretary Adrianne Marie C. Alazas 1 32 FilipinoVice President Judy C. Qua 65 FilipinoVice President Ronan R. Andrade 45 FilipinoAVP Internal Audit Cesar G. Caubalejo 49 Filipino

All of the above-named directors, are nominated to the Board of Directors of the Company forthe ensuing year, and have been approved for re-election by the Nominations Committee at itsmeeting last March 15, 2016. The members of the Nomination Committee are:

Alfredo de Borja – ChairmanRaymond C. Qua – MemberVirginia Judy Q. Dy - Member

Mr. Alfredo R. de Borja and Amelia B. Cabal are nominated as independent directors.

Directors serve for a term of one (1) year and until the election and qualification of hissuccessor.

The amendment of the corporate By-Laws to include the provisions required by the SecuritiesRegulation Code, specifically Rule 38 (as amended) on Independent Directors was approvedby the Securities and Exchange Commission in a Certificate of Filing of Amended By Lawsdated October 6, 2005. In accordance with the said provisions, Mr.Alfredo R. de Borja andMs. Amelia B. Cabal have been evaluated by the Nominations Committee which has certifiedthat said nominees comply with the requirements of the corporate by laws on independentdirectors and possess none of the disqualifications therefore. Mr. De Borja and Ms. Cabal areboth nominated by Aqua Holdings, Inc. in order to comply with the requirement ofmaintaining independent directors in the Board. Neither of them is subject to any deed of trustor other contract or arrangement with said Aqua Holdings, Inc.

27

Lawrence C. Qua, 69, is the founding Chairman and Chief Executive Officer (CEO) of IonicsEMS, Inc., the Chairman, President & CEO of the Philippines’ leading electronicsmanufacturing services group, Ionics, Inc., and its executive director since 1985. He is alsothe Chairman and CEO of Iomni Precision, Inc. and the Chairman and Director of AquaHoldings, Inc. He is, further, a director and member of the investment committee of ICCPVenture Partners, Inc. and a director of various companies engaged in retailing and propertydevelopment. He has been a trustee of the Semiconductor & Electronics Industry of thePhilippines Inc. since its organization. He served as a board trustee of the Graduate BusinessSchool of De La Salle University for three years. Mr. Qua graduated from De La SalleUniversity with a Bachelor of Science degree in Mechanical Engineering.

Alfredo De Borja, 71, has been an independent director of Ionics, Inc. since 2004 and anindependent director of Ionics EMS, Inc. since 2007. He is the incumbent President andDirector of Makiling Ventures, Inc., a real estate development company, and President andDirector of E. Murio, Inc., a furniture manufacturer and exporter. He is also a director ofInvestment Capital Corp. of the Phil. (ICCP), ICCP Venture Partners, Inc. (where he isChairman of the Investment Com), ICCP Management Corp, Pueblo de Oro DevelopmentCorp., Regatta Properties, Inc., Science Park of the Phil (SPPI), Cebu Light Industrial Park,Inc., Ionics, Inc., Ionics EMS, Inc., and Araneta Properties, Inc., both listed companies withthe Philippine Stock Exchange; and Philippine Coastal Storage & Pipeline Corp. He has alsoserved as board Director of a number of companies including First Metro Investment Corp.,SPI, Alsons Power, Alsons Cement, Iligan Cement, Manila Memorial Park, Philcom,Shopwise, and Republic Glass. He was the President of Gervel, Inc. from 1973 to 1986;Director and Chairman of the Executive Committee of First Metro Investment Co. from 1978to 1983; Director and Vice President of Iligan Cement Corp. from 1973 to 1977; ProfessionalLecturer of the University of the Philippines-Graduate School of Business Administrationfrom 1971 to 1974; Executive Assistant to the Vice President of Philippine Long DistanceTelephone Co. from 1970 to 1973; and Executive Assistant to the Vice President ofInvestment Manager, Inc. from 1966 to 1968. He holds a Master of Business Administrationdegree from Harvard University and a Bachelor of Science in Economics from the Ateneo deManila University.

Amelia B. Cabal, 68, is an independent director of Ionics, Inc. and Ionics EMS, Inc. She islikewise an independent director of Deutsche Regis Partners, Inc. Ms. Cabal served as amember of the External Audit Committee of the International Monetary Fund, and of theboard of directors of Metropolitan Bank and Trust Company from 2009 to 2011. She waspreviously a part of SGV as Vice Chairman and Head of Financial Markets Practice up to2006 and as a Senior Adviser on Regulatory Matters and Financial Markets from 2006 to2009. Presently, Ms. Cabal is the Chairman of the External Audit Committee of theInternational Monetary Fund; a member of the board of directors of Philippine Savings Bank;and the Bank Supervisor for Metrobank China (Ltd.)

Meliton C. Qua, 74, held key positions in several companies which included the PhilippineBank of Communications as Senior Vice President; Citibank N.A., as Vice President; Bancnetas Director and Aqua Holdings, Inc. as Director. Mr. Qua has been a director of Ionics, Inc.since 1985. He received his Bachelor of Science degree in Business Administration from DeLa Salle University, Philippines.

Ibarra A. Malonzo, 72, Filipino, a Commissioner of the Social Security Commission, earnedhis degrees of Bachelor of Arts in English and Bachelor of Laws from the University of thePhilippines in 1965 and 1972, respectively. He is a President and Board Member ofKasanyangan-Mindanao Foundation, Inc; Corporate Secretary and Board Member ofCommunity Organizers Multiversity; Honorary President of the National Federation of Labor;Board Member of the National Corn Competitiveness Board and Philam Life TowerManagement Corp.; Chairperson of the KFI Center for Community Development Foundation,

28

Inc. Previous affiliations include Alliance Select Foods International, Inc. as Board Member;Technical Education and Skills Development Authority (TESDA) as Board Member; TaskForce Siembrada, Inc. as President; National Federation of Labor as President; NationalConfederation of Labor as General Secretary; and Center for Educational Research forGovernment Employees as Executive Director.

Raymond Ma. C. Qua, 65, has been a member of the Board of Directors of Ionics, Inc. since1985 and holds the position of Treasurer and Senior Vice President. He is also a director ofIonics EMS, Inc. Previously he was the Senior Vice President and General Manager ofSynertronix, Inc. and the Vice President for Administration of Ionics, Inc. Mr. Qua ispresently affiliated with various organizations and 14 associations serving as head, rankingofficer or member. Mr. Qua received his Bachelor of Science degree in Commerce from DeLa Salle University, Philippines.

Virginia Judy Q. Dy, 75, has been a member of the Board of Directors of Ionics, Inc. since1991. In the last seven years, she is connected with Aqua Holdings, Inc. as director. She isalso the Finance Director of DVPRO Solutions, Inc. from 2001 to the present. Previouscorporate affiliations include Philippine Commercial and International Bank as BranchManager, Insular Bank of Asia & America as Branch Manager, Ladtek Corporation/InterphaseDevelopment System as Accounting Manager and the International Corporate Bank as BranchManager. Ms. Dy received her Bachelor of Science in Commerce degree from theAssumption Convent and is a Certified Public Accountant, having passed the governmentboard exams in 1963.

Cecilia Q. Chua, 63, was a director of Ionics, Inc. from 1997 to 2000 and from 2007 up to thepresent. She is the Treasurer of B-Pack Corporation, Vice President of CQ B-PackCorporation and has been the Purchasing Manager of Ionics Circuits, Inc. since 1985.Previous corporate affiliations include Complex Electronics Corporation, InterphaseDevelopment Corporation, Ladtek Corporation and Pimeco.

Monica Siguion-Reyna Villonco, 62, is the Chairman of Lowe Philippines, where she hasserved as a director since 2002. She also served as the editor-in-chief of Town & CountryPhilippines from 2007-2010. Ms. Villonco is the incumbent President of Whitespace, Inc. andDatascope Communications (Phils.), Inc. Ms. Villonco is a member of the Board of Governorsof the Philippine National Red Cross. She is also a member of the board of directors ofProvident Plans International Corp. and Sa Aklat Sisikat Foundation; She was a member ofthe Film Rating Board from 1998 to 2002; and a board member of CCP Tanghalang Pilipinofrom 1988-1990.

Guillermo D. Luchangco, 76, has been a member of the Board of Directors of Ionics, Inc.since 1991. He is the Chairman and Chief Executive Officer of the ICCP Group, whosemembers include, among others, Investment & Capital Corporation of the Philippines, whoseprincipal activities are in investment banking; ICCP Venture Partners Inc., which is in venturecapital; Science Park of the Philippines, Inc., a developer of industrial parks; and Pueblo deOro Development Corporation, a developer of residential and township projects; and ManilaExposition Complex, Inc., the owner of the World Trade Center Metro Manila. Beforefounding ICCP in 1988, he served as Vice Chairman and President of Republic GlassCorporation, a publicly-listed company. Between 1969 and 1980, Mr. Luchangco workedwith the SGV, the Philippines’ leading auditing and consulting firm. He rose to the position ofManaging Director and Regional Coordinator for management services. Mr. Luchangco serveson a number of Boards, including the following publicly-listed companies in the PhilippineStock Exchange: Phinma Corporation, Globe Telecom, Inc., Ionics, Inc, and Roxas & Co.,Inc. He holds a Master of Business Administration degree from the Harvard Business Schooland a Bachelor of Science degree in Chemical Engineering (magna cum laude) from De LaSalle University, Philippines.

29

Yang Teh Lin, 43, Taiwanese, was a director of Ionics, Inc. from 2001 to 2003. She earnedBachelor of Arts in Communication from Santa Clara University in Santa Clara, California.Ms. Yang currently owns TLY Designs, a Hong Kong company which engages in jewelrymaking lectures and events. Her previous corporate affiliations include Ionics EMS, Inc. andDiversified Financial Network.

Manuel R. Roxas, 66, Filipino, has been the Company’s Corporate Secretary for the pastseventeen (17) years. His professional experience covers general corporate law practice ascounsel to various companies engaged in banking, investments, pharmaceuticals, shipping,and manufacturing. Atty. Roxas received his Bachelor of Science degree in Economics fromthe University of Pennsylvania in 1970 and Bachelor of Laws degree from the University ofthe Philippines in 1975. His other professional affiliations include: Roxas de los Reyes LaurelRosario & Leagogo as Partner, Tax Management Association of the Philippines as pastPresident, President Manuel A. Roxas Foundation, Inc., Mother Rosa Memorial Foundation,Inc. as Secretary, the Integrated Bar of the Philippines, Philippine Bar Association, and theWharton Club of the Philippines as member.

Adrianne Marie C. Alazas, 32, Filipino, is the Company’s Assistant Corporate Secretaryelected on 15 March 2016. Ms. Alazas is an associate lawyer in Roxas de los Reyes LaurelRosario & Leagogo Law Offices. Her professional experience covers general corporate practice as counsel to various companies engaged in the manufacturing, real estate, andtrading sector. She received her Bachelor of Science degree in Business Management fromthe University of the Philippines College Cebu in 2004, and her Juris Doctor degree from theAteneo Law School in 2008. She is a member of the Philippine Bar Association and theIntegrated Bar of the Philippines.

Judy C. Qua, 65, is the Company’s Vice President for Business Development and CorporateAffairs. She is concurrently the President and COO of Iomni Precision, Inc. She is further theExecutive Assistant to the Chairman and CEO on special assignments. She was the ExecutiveDirector for Finance of IONOTE Ltd., the joint venture facility of Ionics EMS, Inc. and NOTEAB of Sweden in China. Prior to joining Ionics, she was in college teaching, advertising andmarketing practice, data management, and was a consulting resource for Ionics in peoplemanagement and corporate communications. Ms. Qua is a transformational psychologist, aprofessional lecturer, a certified faculty for the American Management Association and theSwedish-based CELEMI management simulation learning systems, and an author of four (4)books on life essays. She is the lecturer-facilitator of The Second Wind Mind Worksneurotraining course. She holds a Master of Arts degree in Social and Industrial Psychologyfrom the Ateneo de Manila University and a Master of Business Administration degree fromKellogg-HKUST Business School of Northwestern University.

Ronan Andrade, 45, is the Vice President for Finance. He graduated from San Beda Collegein 1991 and passed the Certified Public Accountant Board Examination in the same year. Heworked with SGV in audit division from 1992 to 1998, starting as an audit staff member untilhe became audit supervisor. He joined Ionics in 1999 as Senior Manager for Finance andbecame Assistant Vice President and Acting Finance Head of the Company, prior to histransfer to Internal Audit as Vice President. In 2007, Mr. Andrade was appointed as VicePresident for Finance.

Cesar G. Caubalejo, 49, is the Assistant Vice President for Internal Audit. He graduated fromthe University of the Philippines at Tacloban City, Leyte in 1988 with a degree in Bachelor inBusiness Administration Major in Accounting. He is a Certified Public Accountant and aCertified Fraud Examiner. He worked and started his career with SGV in 1988 until hisresignation from the firm as a Senior Director under the Business Risk Services in December2008. During his stint with SGV, he was assigned to work in other countries such as US,France, Vietnam, Cambodia, Laos, Malaysia and Kingdom of Saudi Arabia. He also worked

30

for a year (1997) as a group controller in one of the diversified companies in the Philippines.He is a member of Philippine Institute of Certified Public Accountants, and PhilippineChapters of Association of Certified Fraud Examiners and Institute of Internal Auditors. Hejoined Ionics EMS, Inc. on January 5, 2009.

The Directors of the Company are elected at the annual stockholders’ meeting to hold officeuntil the next succeeding annual meeting and until their respective successors have beenelected.

Messrs. Lawrence C. Qua, Meliton C. Qua, Raymond C. Qua, Virginia Judy Q. Dy andCecilia Q. Chua, all of whom are directors of the Company, are all related within the seconddegree of consanguinity.

Mrs. Judy C. Qua, the Company’s Vice President for Business Development, is the spouse ofthe President/Chairman/Chief Execuive Officer, Mr. Lawrence C. Qua.

No director has transacted with the Group in his/her personal capacity.

None of the directors were involved, during the past five years and up to the date hereof, inany bankruptcy petition filed by or against any business of which a director was a generalpartner or executive officer either at the time of the bankruptcy or within two years to thattime; nor was any director convicted by final judgment in a criminal proceeding, domestic orforeign, or was subject to a criminal proceeding, domestic or foreign, excluding trafficviolations and other minor offenses; or was subject to any order, judgment, or decree, notsubsequently reversed, suspended or vacated, of any court of competent jurisdiction, domesticor foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting hisinvolvement in any type of business, securities, commodities or banking services; or wasfound by a domestic or foreign court of competent jurisdiction (in a civil action), thecommission or comparable foreign body, or a domestic or foreign exchange or electronicmarketplace or self-regulatory organization, to have violated a securities or commodities law.

None of the directors has informed the Group that he/she intends to oppose any action to betaken by the Group at the meeting.

While all of the employees are valued, none are expected to contribute more significantly thanthe others to the business of the Company.

Item 10. Executive Compensation.

The following table summarizes the compensation of the five (5) highest paid executiveofficers of the Group and the aggregate compensation of all officers and directors as a groupfor the last two completed calendar years, and the estimated aggregate compensation of thesaid officers and directors for the present calendar year.

31

SUMMARY COMPENSATION TABLEAnnual Compensation

Year Salary Others*Executive Officer and Four (4) most highly compensated executive officers

2016(estimate)

US$473,775 US$57,594

20152014

430,705426,853

20,8311,677

All officers and directors as a groupunnamed

2016(estimate)

1,085,718 147,393

20152014

987,016895,172

64,10819,993

*Others -includes per diem of directors

The following are the CEO and four (4) most highly compensated executive officers of theGroup (i.e. on a consolidated basis):

1. Mr. Lawrence C. Qua. is the Chairman of the Board of Directors, the Chief ExecutiveOfficer and the President of the Company.

2. Mr. Ronan R. Andrade is the Vice President for Finance.3. Mr.Cesar Enrique Modina is the Vice President for Operations.4. Mr. Cesar G. Caubalejo is the Assistant Vice President of Internal Audit.5. Ms.Judy C. Qua is the Vice President for Corporate Affairs/Business Development.

Directors who are not officers of the Company are entitled to a per diem of Fifteen ThousandPesos (P=15,000.00) per regular meeting attended.

The Chairman of the Board who is also the Chief Executive Officer of both Ionics and itssubsidiary, IEMS, receives compensation on a monthly basis plus a percentage of net profitafter tax before bonus. All other executive officers receive monthly compensation without,however, any entitlement to a percentage of the profits.

As of December 31, 2015, no executive officer of the Registrant is under employmentcontract.

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Item 11. Security Ownership of Certain Beneficial Owners and Management.

As of December31, 2015.

(a) Security Ownership of Certain Record and Beneficial Owner

Title ofclass

Name and addressOf owner

Name of BeneficialOwner and

Relationship withRecord Owner Citizenship

Number ofShares Held

Percentof class

Common Aqua Holdings, Inc.c/o Ionics EMS, Inc.Carmelray IndustrialPark II, Bgy.Tulo,Calamba, Laguna

Shareholder

Lawrence C. Qua,Meliton C. Qua,

Raymond C. Qua,Virginia Judy Q. Dy

(stockholders of AquaHoldings, Inc.)

Filipino 335,153,100(R)

39.13%

Common Social Security SystemSSS Bldg., EastAve.,Diliman, QuezonCityShareholder

Republic of thePhilippines

(represented byMr.Ibarra A. Malonzo

Filipino 59,476,198(R)

6.94%

Common Leonardo T. SiguionReyna*7 Tanguile Road, NorthForbes ParkMakati City

Director

N/A Filipino 75,006,000(R)

8.76%

Common Yang Tah Lu &/or YangHuang Un-Chyong#2108 Emerald Masion,Emerald Ave., Pasig City

Director

N/A Taiwanese 44,727,000(R)

5.22%

*deceased

(b) Security Ownership of Management

Title of class Name of Beneficial Owner

Amount andnature ofbeneficialownership Citizenship

Percent ofclass

Common Lawrence C. QuaChairman/President/CEO

27,454,760(R)

Filipino 3.21%

Common Teh Lin YangDirector

2,000(R)

Taiwanese Nil

Common Meliton C. QuaDirector

6,497,362(R)

Filipino 0.76%

Common Guillermo D. LuchangcoDirector

19,620,000(R)

Filipino 2.29%

Common Alfredo R. de BorjaDirector

14,000(R)

Filipino Nil

Common Ibarra A. MalonzoDirector

1(R)

Filipino Nil

Common Virginia Judy Q. DyDirector

1,033,603(R)

Filipino 0.12%

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Common Raymond C. QuaDirector/Treasurer

8,562,350(R)

Filipino 1.00%

Common Monica Siguion Reyna VilloncoDirector

24,000(R)

Filipino Nil

Common Amelia B.CabalDirector

54,000(R)

Filipino Nil

Common Cecilia Q. ChuaDirector

5,584,412(R)

Filipino 0.65%

Common Judy QuaVP-Corporate Affairs 0

Filipino 0

Common Manuel R. RoxasCorporate Secretary

14,500(R)

Filipino Nil

Common Adrianne Marie C. AlazasAssistant Corporate Secretary 0

Filipino 0

Common Ronan R. AndradeVP-Internal Audit 0

Filipino 0

Total 68,860,988(R)

8.04%

*deceased

(c) Voting Trust Holders of 5% or More

There are no voting trust holders of 5% or more

(d) Changes in control

The Group has not entered into any arrangement which may result in a change in controlof the Group.

Item 12. Certain Relationships and Related Transactions

The Group has no significant related party transactions with its stockholders, directors,officers and affiliated companies except for the following:

(a) lease arrangements:· the Company leases two factory buildings to its subsidiary, Ionics EMS, Inc. as

production plant site V and VI for its manufacturing business. The rental rate was basedon the prevailing and current market rates within the area and assumed no risks on thetransactions.

· Ionics EMS, Inc. also entered into a lease agreement with IOMNI Precision, Inc., a whollyowned subsidiary of Ionics, Inc. for its corporate office with an area of 1,375 squaremeters from January 16, 2016 to January 15, 2017.The rental rates was based on thecurrent market rates and the rate of another tenant within the building.

(b) legal servicesThe Company retains for legal services the law firms Siguion Reyna Montecillo&Ongsiako Law Offices, where Monica Siguion Reyna Villonco’s husband is a partner andRoxas de los Reyes Laurel Rosario & Leagogo Law Offices where the CorporateSecretary, Manuel R. Roxas, and the Assistant Corporate Secretary, Adrianne Marie C.Alazas, are partner and associate lawyer, respectively. The Company believes that legalfees are reasonable for the services rendered.

34

(c) financial advisorsInvestment and Capital Corporation of the Philippines (“ICCP”) is retained by theCompany as its Financial Advisor. Guillermo D. Luchangco, who has been a director ofthe Company since 1991, is Chairman and Chief Executive Officer of ICCP. TheCompany believes that the retainer fees are reasonable for the services rendered.

(d) acquisition of assetsIonics Properties, Inc. entered into a tripartite agreement with Science Park of thePhilippines, Inc. and Kyocera Circuit Solutions Philippines, Inc. (Kyocera) on 13November 2015 to purchase the leasehold rights of Kyocera with option to buy a certainparcel of land with an area of 15,366 sqm. situated in Barangay Real and BarangayCalamba, Province of Laguna, covered by Transfer Certificate of Title (“TCT”) No.376494, issued by the Register of Deeds of Laguna (the land)and is currently finalizingthe documentation for the acquisition of said land.

(e) acquisition of sharesThere has been no acquisition of shares for the past three years

PART IV – CORPORATE GOVERNANCE REPORT

Item 13. Corporate Governance

a) Evaluation SystemThe Compliance Officer is currently in charge of evaluating the level of compliance of theBoard of Directors and top-level management of the Corporation. The implementation ofthe Corporate Governance Scorecard allows the Company to properly evaluatecompliance to the Manual.

b) Compliance ReportMeasures are slowly being undertaken by the Company to fully comply with the adoptedleading practices on good corporate governance and one of them is attending seminars byour Corporate Directors.

c) DeviationsThe Company is taking steps towards full compliance of its Corporate GovernanceManual

d) Plan to improveThe Company continues to improve its Corporate Governance when appropriate andwarranted, it its best judgment.

Please refer to the attached Annual Corporate Governance Report (ACGR).

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PART V - EXHIBITS AND SCHEDULES

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

(a) Exhibits - See accompanying Index to Exhibits

(b) Reports to SEC via Form 17-C

1. March 17, 2015-Announced the date and time of the annual shareholders’ meeting. Approvalof amendment of Article III of the Articles of Incorporation to reflect the correct address ofthe principal place of business of the Corporation.

2. April 01, 2015 – Submission of copy of the Corporation’s Disclosure on CorporateGovernance Guidelines for Listed Companies.

3. April 10, 2015– Election of Nomination Committee of the Corporation and independentdirectors.

4. May 18, 2015-Announced the result of the annual stockholder’s meeting and organizationalmeeting of Ionics Inc. and Ionics EMS Inc.

5. June 30, 2015- Received from the Securities and Exchange Commission the Certificate ofFiling of Amended Articles of Incorporation dated 25 June 2015 reflecting the completeaddress of the principal office of Ionics, Inc.

6. August 11, 2015-Approval of investment in a wholly owned subsidiary, Ionics ProductsSolutions, Inc. Approval of purchase by its wholly owned subsidiary, Ionics Properties, Inc. ofa parcel of land and the acceptance of the resignation of Atty.Maila Katrina Y. Ilarde asAssistant Corporate Secretary of the Corporation.

7. August 26, 2015 –- Received from the Securities and Exchange Commission the Certificate ofFiling of Amended Articles of Incorporation dated 20 August 2015 reflecting the completeaddress of the principal office of Ionics Ems, Inc.

8. August 26, 2015 – Advised the purchased of 90,000 shares of stock at P=0.47 of theCorporation by Mr.Lawrence C. Qua dated August 24, 2015.

9. September 01, 2015 – Advised the purchased of 50,000 shares of stock at P=0.475 of theCorporation by Mr. Lawrence C. Qua dated August 27, 2015.

10. September 03, 2015- Press Release which being released by IBM in the United States, statingthat Ionics is working with IBM as a key design partner to launch the IBM IoT Platform.

11. September 09, 2015 – Advised the purchased of 810,000 shares of stock at P=0.55 of theCorporation by Mr. Lawrence C. Qua dated September 04, 2015.

12. September 11, 2015 – Advised the purchased of 27,000 shares of stock at P=0.60 of theCorporation by Mr. Alfredo R. de Borja dated September 08, 2015.

13. September 16, 2015 – Advised the purchased of 1,000,000 shares of stock atP=1.00 of theCorporation by Mr. Lawrence C. Qua dated September 16, 2015.

14. September 15, 2015 – Advised the purchased of 2,000 shares of stock at P=0.56 and 50,000shares at P=0.58 of the Corporation by Ms. Amelia B. Cabal dated September 08, 2015.

36

15. December 10, 2015 – Advised the purchased of shares of stock of the Corporation byMr.Alfredo R. de Borja dated December 03, 2015, 350,000 shares at P=2.20, 31,000 shares atP=2.21 and 50,000 shares at P=2.22,P=2.23, P=2.24 and P=2.25, and dated December 07,2015 forshares of 32,000, 6000, 28000 at P=2.20, P=2.23 P=2.24 respectively.

16. December 08, 2015 – Advised the purchased of shares of stock of the Corporation byMr.Alfredo R. de Borja dated December 08, 2015, 376,000 shares at P=2.14, 486,000 shares atP=2.15, 46,000 shares at P=2.16, 11,000 shares at P=2.17 and dated December 09,2015 for sharesof 3,000, 50,000, 8,000 at P=2.18, P=2.14, P=2.11 respectively.

17. December 21, 2015 – Ionic Ems, Inc. signed two agreements with IBM Philippines (Statementof Work and Bluemix Reseller Agreement) to build a platform for the development of cloud-based computer applications to sell IBM’s Cloud

18. and Bluemix technology as part of EMS’s Internet of Things Cloud Services and to developIBM’s Expert Factory App as part of its operational efficiency optimizing program.

19. December 22, 2015 – Collaboration of IBM and Ionics Ems, Inc.

1

SECURITIES AND EXCHANGE COMMISSION

SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

1. Report is Filed for the Year 2015

2. Exact Name of Registrant as Specified in its Charter IONICS, INC.

3. Circuit St., Light Industry and Science Park, Cabuyao, Laguna 4025 Address of Principal Office Postal Code

4. SEC Identification Number 107432 5. (SEC Use Only)

Industry Classification Code

6. BIR Tax Identification Number 000-124-671

7. (632) 584-4615 to 16; (632) 584-4667 to 68 Issuer’s Telephone number, including area code

8. Not Applicable. Former name or former address, if changed from the last report

2

TABLE OF CONTENTS

A. BOARD MATTERS………………………………………………………………………………………………………………………….……….41) BOARD OF DIRECTORS

(a) Composition of the Board………………………………………………………………………………….………4(b) Corporate Governance Policy/ies……………………………………………………………………………….4(c) Review and Approval of Vision and Vision…………………….……………………………………........5(d) Directorship in Other Companies……………………………………………………………………………….5(e) Shareholding in the Company…………………………………………………………………………………….5

2) CHAIRMAN AND CEO…………………………………………………………………………………………………………………63) PLAN FOR SUCCESSION OF CEO/MANAGING DIRECTOR/PRESIDENT AND TOP KEY POSITIONS….64) OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS……………………………………….75) CHANGES IN THE BOARD OF DIRECTORS…………………………………………………………………………………126) ORIENTATION AND EDUCATION PROGRAM……………………………………………………………………………14

B. CODE OF BUSINESS CONDUCT & ETHICS……………………………………………………………………………………………..151) POLICIES…………………………………………………………………………………………………………………………………..152) DISSEMINATION OF CODE………………………………………………………………………………………………….…….163) COMPLIANCE WITH CODE………………………………………………………………………………………………………..164) RELATED PARTY TRANSACTIONS………………………………………………………………………………………………16

(a) Policies and Procedures…………………………………………………………………………………………...17(b) Conflict of Interest……………………………………………………………………………………………………18

5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS…………………………………………………….……186) ALTERNATIVE DISPUTE RESOLUTION……………………………………………………………………………………….19

C. BOARD MEETINGS & ATTENDANCE……………………………………………………………………………………………….…….191) SCHEDULE OF MEETINGS…………………………………………………………………………………………………………192) DETAILS OF ATTENDANCE OF DIRECTORS………………………………………………………………………………..193) SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS………………………………………………………………194) QUORUM REQUIREMENT ……………………………………………………………………………………………………….195) ACCESS TO INFORMATION……………………………………………………………………………………………………….206) EXTERNAL ADVICE……………………………………………………………………………………………………………………207) CHANGES IN EXISTING POLICIES……………………………………………………………………………………………….20

D. REMUNERATION MATTERS………………………………………………………………………………………………………………211) REMUNERATION PROCESS……………………………………………………………………………………………………….212) REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS…………………………………………………….223) AGGREGATE REMUNERATION …………………………………………………………………………………………………224) STOCK RIGHTS, OPTIONS AND WARRANTS………………………………………………………………………………235) REMUNERATION OF MANAGEMENT…………………………………………………………………………………….….23

E. BOARD COMMITTEES………………………………………………………………………………………………………………………241) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES…………………………………………………..242) COMMITTEE MEMBERS……………………………………………………………………………………………………………253) CHANGES IN COMMITTEE MEMBERS……………………………………………………………………………………….274) WORK DONE AND ISSUES ADDRESSED…………………………………………………………………………………….275) COMMITTEE PROGRAM……………………………………………………………………………………………………………28

F. RISK MANAGEMENT SYSTEM……………………………………………………………………………………………………………281) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM…………………………………………..282) RISK POLICY……………………………………………………………………………………………………………………………..283) CONTROL SYSTEM……………………………………………………………………………………………………………………29

3

G. INTERNAL AUDIT AND CONTROL………………………………………………………………………………………………………311) STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM…………………………………………..312) INTERNAL AUDIT

(a) Role, Scope and Internal Audit Function…………………………………………………………………..32(b) Appointment/Removal of Internal Auditor………………………………………………………………32(c) Reporting Relationship with the Audit Committee…………………………………………………..32(d) Resignation, Re-assignment and Reasons…………………………………………………………………32(e) Progress against Plans, Issues, Findings and

Examination Trends………………………………………………………..….……………………………………33(f) Audit Control Policies and Procedures……………………………………………………………………..33(g) Mechanisms and Safeguards…………………………………………………………………………………...34

H. ROLE OF STAKEHOLDERS….……………………………………………………………………………………………………………...35I. DISCLOSURE AND TRANSPARENCY………………………………………………………………………………………………..…36J. RIGHTS OF STOCKHOLDERS………………………………………………………………………………………………………………39

1) RIGHT TO PARTICIPATE EFFECTIVELY IN STOCKHOLDERS’ MEETINGS……………………………………….392) TREATMENT OF MINORITY STOCKHOLDERS…………………………………………………………………………….43

K. INVESTORS RELATIONS PROGRAM…………………………………………………………………………………………………..44L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES…………………………………………………………………………….44M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL…………………………………………………………………….44N. INTERNAL BREACHES AND SANCTIONS…………………………………………………………………………………………….45

4

A. BOARD MATTERS

1) Board of Directors

Number of Directors per Articles of Incorporation 11

Actual number of Directors for the year 11

(a) Composition of the Board

Complete the table with information on the Board of Directors:

Director’s Name

Type[Executive (ED),Non-Executive

(NED) orIndependentDirector (ID)]

If nominee,identify the

principal

Nominator inthe last election(if ID, state the

relationship withthe nominator)

Datefirst

elected

Date last elected(if ID, state the

number of yearsserved as ID)1

Electedwhen

(Annual/SpecialMeeting)

No. ofyears

servedas

director

Lawrence C. Qua ED N/A NominationCommittee

1985 15 May 2015 * 30

Meliton C. Qua NED N/A NominationCommittee

1985 15 May 2015 * 30

Raymond C. Qua. ED N/A NominationCommittee

1985 15 May 2015 * 30

Guillermo D.Luchangco

NED N/A NominationCommittee

1991 15 May 2015 * 24

Alfredo de Borja ID N/A AquaHoldings, Inc.(no relations)

2004 15 May 2015(3 years)

* 11

Amelia B. Cabal ID N/A AquaHoldings, Inc.(no relations)

2012 15 May 2015(4 years)

* 4

Monica S. Villonco NED N/A NominationCommittee

2011 15 May 2015 * 4

Virginia Judy Q. Dy NED N/A NominationCommittee

1991 15 May 2015 * 24

Cecilia Q. Chua ED N/A NominationCommittee

1997 15 May 2015 * 8**

Yang Teh Lin NED N/A NominationCommittee

2015 15 May 2015 * 1

Ibarra A. Malonzo NED SocialSecuritySystem

NominationCommittee

2015 15 May 2015 * 1

*All the foregoing directors were last elected at the Annual Stockholders’ Meeting of the Company held on 15 May 2015.** Ms. Cecilia Q. Chua was a director of the Company from 1997 to 2000. She was re-elected to the Board in 2007 and has served as directorsince then.

(b) Corporate Governance Policy.

Corporate governance is a necessary component of what constitutes sound strategic business managementand therefore the Company shall undertake every effort necessary to create awareness within theorganization. The Company further recognizes that the most cogent proof of good corporate governance isthat which is visible to the eyes of its investors. As such, the Board shall respect and protect shareholderrights, and allow possibilities to seek redress for violation of their rights.

1 Reckoned from the election immediately following January 2, 2012.

5

(c) Review of Vision and Mission

The Board reviews the Company’s vision and mission when appropriate and warranted, in its best judgment.

(d) Directorship in Other Companies

(i) Directorship in the Company’s Group2

Identify, as and if applicable, the members of the company’s Board of Directors who hold the office ofdirector in other companies within its Group:

Director’s Name Corporate Name of theGroup Company

Type of Directorship(Executive, Non-Executive,Independent). Indicate if

director is also the Chairman.Lawrence C. Qua Ionics EMS, Inc. ; Synertronix,

Inc. ; Ionics Properties, Inc.,Iomni Precision, Inc.;

ED; Chairman

Meliton C. Qua Ionics EMS, Inc. IonicsProperties, Inc., Iomni Precision,Inc.

NED

Raymond C. Qua. Ionics EMS, Inc. IonicsProperties, Inc., Iomni Precision,Inc.

ED

Guillermo D. Luchangco Ionics EMS, Inc. IonicsProperties, Inc., Iomni Precision,Inc.

NED

Alfredo de Borja Ionics EMS, Inc., IomniPrecision, Inc.

ID

Amelia B. Cabal Ionics EMS, Inc., IomniPrecision, Inc.

ID

Monica S. Villonco Ionics EMS, Inc.; NED

Virginia Judy Q. Dy Ionics EMS, Inc.; IonicsProperties, Inc.

NED

Cecilia Q. Chua Ionics Properties, Inc. NED

Yang Teh Lin Ionics Properties, Inc. NED

(ii) Directorship in Other Listed Companies

Identify, as and if applicable, the members of the Company’s Board of Directors who are also directors ofpublicly-listed companies outside of its Group:

Director’s Name Name of Listed Company

Type of Directorship(Executive, Non-Executive,Independent). Indicate if

director is also the Chairman.Guillermo D. Luchangco PHINMA Corporation; Roxas &

Co., Inc.; Trans-Asia Oil andEnergy Development Corp.

ID

Alfredo de Borja Araneta Properties, Inc. ID

(iii) Relationship within the Company and its Group

Provide details, as and if applicable, of any relation among the members of the Board of Directors, which

2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the Company.

6

links them to significant shareholders in the Company and/or in its group:

Director’s Name Name of theSignificant Shareholder Description of the relationship

Lawrence C. Qua Aqua Holdings, Inc. Stockholder; ChairmanMeliton C. Qua Aqua Holdings, Inc. StockholderRaymond C. Qua Aqua Holdings, Inc. StockholderIbarra A. Malonzo Social Security System NomineeMonica S. Villonco Leonardo T. Siguion Reyna* Immediate FamilyYang Teh Lin Yang Tah Lu and/or Yang Huang

Un-ChyongImmediate Family

*deceased

(iv) Limit on Number of Board Seats in Other Companies.

In pre-screening and shortlisting all candidates nominated to the Board of Directors, the NominationCommittee takes into account the number of directorships/active memberships and officerships in othercorporations or organizations.

(e) Shareholding in the Company

Complete the following table on the members of the Company’s Board of Directors who directly andindirectly own shares in the Company:

Name of Director Number of Direct shares Number of Indirect shares % of Capital Stock

Lawrence C. Qua 27,454,760 1,950,000 3.43%Meliton C. Qua 6,497,362 - 0.76Raymond C. Qua 8,562,350 - 1.00%Guillermo D. Luchangco - 19,620,000 2.29%Alfredo de Borja 14,000 - nilAmelia B. Cabal - 54,000 nilMonica S. Villonco 24,000 127,000 nil/nilIbarra A. Malonzo 1 - nilVirginia Judy Q. Dy

1,033,603 4,887,140 0.12%/0.57%

Cecilia Q. Chua 5,584,412 3,000 0.65%/

nilTeh Lin Yang 2,000 - 0.52%

TOTAL 49,172,487 26,641,140 8.85%

2) Chairman and CEO

(a) Do different persons assume the role of Chairman of the Board of Directors and CEO? If no, describe thechecks and balances laid down to ensure that the Board gets the benefit of independent views.

Yes No x

Chairman of the Board Lawrence C. QuaCEO/President Lawrence C. Qua

While the Chairman is, at the same time, the CEO, he sees to it that the operations of the Company are inaccordance with the internal guidelines provided for by the Board and the Committees. In addition, he alsoensures transparency and accuracy at all times in dealing with the interest of the shareholders.

7

(b) Roles, Accountabilities and Deliverables

Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO.

Chairman Chief Executive Officer

Role

To ensure that the Board of Directorsremain faithful in the performance of itsduties and responsibilities providedunder the Manual of CorporateGovernance.

As the highest-ranking executiveofficer, the CEO is in charge of theoverall management of the businessoperations of the Company.

Accountabilities

The Chairman observes the system ofchecks and balances in order toguarantee independent views andperspectives.

As Chairman, he is primarily accountableto the stockholders.

The Chief Executive Officer observesthe system of checks and balancesin order to guarantee independentviews and perspectives.

As Chief Executive Officer, he isprimarily accountable to the Boardof Directors.

Deliverables

The Chairman shall render a periodicreport to the stockholders on theoperations of the Company. He shouldlikewise address inquiries and concernsof stockholders.

The Chief Executive Officer regularlyreports to the Board of Directors toapprise the Board of developmentsconcerning business operations.

3) Explain how the board of directors plan for the succession of the CEO/Managing Director/President and the topkey management positions?

As provided under Section 11, Article III of the Articles of Incorporation of the Company, in case of absence ordisability of any officer of the Company, the Board of Directors may delegate such officer’s powers and duties toany other officer or officers for the time being and until the proper officer returns or again performs his duties orhis successor is duly elected by the Board of Directors.

4) Other Executive, Non-Executive and Independent Directors

Does the company have a policy of ensuring diversity of experience and background of directors in the Board?Please explain.

The directors of the Company are well respected businessmen, with extensive experience in different fields ofbusiness. As such, there is no need at the time, to have a specific policy on diversity of experience/background.

Does it ensure that at least one non-executive director has an experience in the sector or industry the Companybelongs to? Please explain.

Under the Company’s Manual of Corporate Governance, in order to qualify as nominee to the Company’s Board ofDirectors, one must be at least a college graduate or have a sufficient experience in managing the business inwhich the Company is engaged. Prior to election, the Nomination Committee shall pre-screen and shortlist allcandidates nominated to become a member of the Board of Directors.

Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and IndependentDirectors:

Executive Non-Executive Independent Director

Role

The Board shall have theentire charge of theproperties, business,interests and general

* *

8

operations of theCompany, with all powerand authority to manageand conduct the same.

Accountabilities

A director’s office is oneof trust and confidence.He or she shall act in amanner characterized bytransparency,accountability andfairness.

*

An independent directormust, at all times, befree from any businessor other relationshipwhich could, orreasonably be perceivedto, materially interferewith his exercise ofindependent judgmentin carrying out hisresponsibilities asdirector as a director ofthe Company.

Deliverables

The specific duties andfunctions of the Board ofDirectors areenumerated under theCompany’s Manual ofCorporate Governance,as follows:

a) Install a process ofselection to ensurea mix of competentdirectors andofficers;

b) Determine IONICS’purpose, its visionand mission andstrategies to carryout its objectives;

c) Provide soundstrategic policiesand guidelines onmajor capitalexpenditures.Establish programsthat can sustain theCompany’s long-term viability andstrength.Periodicallyevaluate andmonitor theimplementation ofsuch policies andstrategies, includingthe business plans,operating budgetsand Management’soverallperformance.

* *

9

d) Ensure that IONICScomplies with allrelevant laws,regulations andcodes of bestbusiness practices;

e) Adopt andformulate a clearpolicy oncommunicating orrelating with all theshareholders ofIONICS through aneffective investorrelations program;

f) Identify the sectorsin the community inwhich the Companyoperates or aredirectly affected byits operations, andformulate a clearpolicy of accurate,timely and effectivecommunication withsaid sectors;

g) Adopt a system ofinternal checks andbalances, andconduct a regularreview of theeffectiveness ofsuch system;

h) Identify key riskareas and keyperformanceindicators andmonitor thesefactors with duediligence;

i) Formulate andimplement policiesand procedures forpurposes ofensuring theintegrity andtransparency ofrelated partytransactionsbetween and amongthe Company and itsParent Company,

10

joint ventures,subsidiaries,associates, affiliates,major stockholders,officers anddirectors, includingtheir spouses,children anddependent siblingsand parents, and ofinterlocking directorrelationships bymembers of theBoard;

j) Establish andmaintain analternative disputeresolution systemfor the amicablesettlement ofdisputes betweenthe Company and itsstockholders, andthe Company andthird parties,including regulatoryauthorities;

k) Properly dischargeBoard functions bymeeting regularly.Independent viewsduring Boardmeetings shall begiven dueconsideration andall such meetingsshall be dulyminuted;

l) Keep Boardauthority within thepowers of theinstitution asprescribed in theArticles ofIncorporation, By-Laws and in existinglaws, rules andregulation; and

m) Appoint aCompliance Officerwho shall have therank of at least vicepresident. In theabsence of such

11

appointment, theCorporate Secretaryshall act asCompliance Officer.

*In defining the roles, functions and responsibilities of its Board of Directors, the Company does not draw anydistinction between its executive, non-executive and independent directors. It is understood, however, thatexecutive directors should likewise perform such duties and functions attached to the executive positionsthey hold in the Company.

Provide the Company’s definition of "independence" and describe the Company’s compliance to the definition.

In relation to independent directors of the Company, this shall mean absence of any business or other relationshipwhich could, or could reasonably be perceived to, materially interfere with exercise of independent judgment incarrying out responsibilities. Under Section 2, Article I of the Company’s By-Laws, the term “Independent Director”likewise applies to one who:

a. Is not a director, officer or substantial shareholder of the Company, any of its related companiesor any of its substantial shareholders except when the shame shall be an independent director ofany of the foregoing;

b. Does not own more than two percent (2%) of the shares of the Company and/or its relatedcompanies or any of its substantial shareholders;

c. Is not related to any director, officer or substantial shareholder of the Company, or any of itsrelated companies or any of its substantial shareholders. For this purpose, relatives includespouse, parent, child, brother, sister, and the spouse of such child, brother or sister;

d. Is not acting as a nominee or representative of any director or substantial shareholder of theCompany, and/or any of its related companies and/or any of its substantial shareholders,pursuant to a Deed of Trust or under any contract or arrangement;

e. Has not been employed in any executive capacity by the Company, any of its related companiesand/or by any of its substantial shareholders within the last two (2) years;

f. Is not retained, either personally or through his firm or any similar entity, as a professionaladviser, by the Company, any of its related companies and/or any of its substantial shareholders,within the last two (2) years; or

g. Has not engaged and does not engage in any transaction with the Company and/or with any ofits related companies and/or with any of its substantial shareholders, whether by himself and/orwith other persons and/or through a firm of which he is a partner and/or a company of which heis a director or substantial shareholder, other than transactions which are conducted at armslength and are immaterial.

To the best of its knowledge, the Company is compliant with the above definition.

Does the Company have a term limit of five consecutive years for independent directors? If after two years, thecompany wishes to bring back an independent director who had served for five years, does it limit the term for no morethan four additional years? Please explain.

While the Company’s Manual of Corporate Governance/Articles of Incorporation does not specifically provide for aterm limit for independent directors, the Company intends to observe the guidelines in term limits of independentdirectors provided under SEC Memorandum Circular No. 9, series of 2011, as follows:

a. Five (5)-year term limitb. Two (2)-year cooling off period upon termination of the Five (5)-year termc. Upon re-election after the cooling-off period, the independent director can serve as such for

another five (5) consecutive yearsd. Perpetual ban from being elected as independent director of the Corporation after serving

as independent director for ten (10) years.

5) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors)

12

(a) Resignation/Death/Removal

Indicate any changes in the composition of the Board of Directors that happened during the period:

Name Position Date of Cessation Reason

Marianita O. Mendoza Director 15 May 2015

Ms. Mendoza was notnominated forelection to the Boardof Directors for theyear 2015-2016.

Yang Tah Lu Director 15 May 2015

Mr. Yang was notnominated forelection to the Boardof Directors for theyear 2015-2016.

(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension

Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatementand suspension of the members of the Board of Directors. Provide details of the processes adopted(including the frequency of election) and the criteria employed in each procedure:

Procedure Process Adopted Criteria

a. Selection/Appointment

(i) Executive Directors

The Nomination Committeepre-screens the nominees andprepares a final list ofnominees, which is included inthe Information Statementsent to stockholders prior tothe stockholders’ meeting.Directors are then elected atthe annual stockholders’meeting.

Qualifications anddisqualifications providedunder the Articles ofIncorporation, Manual ofCorporation Governance,Securities Regulation Codeand other pertinent laws,rules and regulations.

(ii) Non-Executive Directors -same as above- -same as above-

(iii) Independent Directors -same as above- -same as above-

b. Re-appointment

(i) Executive Directors -same as above- -same as above-



c. Permanent Disqualification


In cases calling for thepermanent disqualification ofany director, the matter isreported to the Board ofDirectors for appropriateaction.

Causes for disqualificationprovided under the Articles ofIncorporation, Manual ofCorporation Governance,Securities Regulation Codeand other pertinent laws,rules and regulations.



d. Temporary Disqualification

(i) Executive Directors In cases calling for the Causes for disqualification

13

temporary disqualification ofany director, the matter isreported to the Board ofDirectors for appropriateaction.

provided under the Articles ofIncorporation, Manual ofCorporation Governance,Securities Regulation Codeand other pertinent laws,rules and regulations.



e. Removal


Any vacancy in the Board ofDirectors shall be filled up by amajority vote of the remainingmembers of the Board, if stillconstituting a quorum, and ifthere be no such quorum, byelection by the stockholders ata meeting duly called for thepurpose. The elected directorshall serve for the unexpiredterm.



(iii) Independent Directors

The resignation,disqualification or cessation ofdirectorship of an IndependentDirector is disclosed to theExchange and the Commission.The filling up of a vacancyresulting from the resignation,disqualification or cessation ofdirectorship of an IndependentDirector shall take place uponcompletion of the NominationCommittee of the screeningprocess provided under theCompany’s Articles ofIncorporation and Manual ofCorporate Governance.

-same as above-

f. Re-instatement


Should a director who waspreviously removed orresigned from his directorshipbe subsequently nominated tothe Board of Directors, saidnomination will be reviewedby the Nomination Committee.In case of approval of saidnomination, the name of saiddirector will be included in thefinal list of nominees whichwill be presented to thestockholders.




g. Suspension

14


In cases calling for suspensionfrom office of any director, thematter is reported to theBoard of Directors forappropriate action.

Qualifications,disqualifications, and grounds

for suspension providedunder the Articles of

Incorporation, Manual ofCorporation Governance,

Securities Regulation Codeand other pertinent laws,

rules and regulations. (ii) Non-Executive Directors -same as above- -same as above-


Voting Result of the last Annual General Meeting

Name of Director Votes ReceivedLawrence C. Qua 587,321,090Meliton C. Qua 587,321,090Raymond C. Qua. 587,321,090Guillermo D. Luchangco 587,321,090Alfredo de Borja 587,321,090Amelia B. Cabal 587,321,090Monica S. Villonco 587,321,090Ibarra A. Malonzo 587,321,090Virginia Judy Q. Dy 587,321,090Cecilia Q. Chua 587,321,090Yang Teh Lin 587,321,090

6) Orientation and Education Program

(a) Disclose details of the company’s orientation program for new directors, if any.

The Company does not have a fixed or specific orientation program for new directors. In cases, however,where a new director is elected to the Board, the Company provides such director an opportunity for plantvisits in order to orient such new director of the day to day business operations of the Company.

(b) State any in-house training and external courses attended by Directors and Senior Management for the pastthree (3) years:

Lawrence C. QuaCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015.

Raymond C. QuaCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015.

Meliton C. QuaCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015.

Alfredo R. de BorjaCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015.

Virginia Judy Q. DyCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015.

15

Cecilia Q. ChuaCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015

Monica S. VilloncoCorporate Governance seminar conducted by SGV & Co., June 2014, 14 November 2015.

Guillermo D. LuchangcoCorporate Governance seminar conducted by SGV & Co., 12 October 2015.

Ms. Amelia B. CabalUpdates on Anti Money Laundering Law conducted by Atty. Mel Racela in May 2013; Philippine InvestmentsSummit conducted by Dr. Nouriel Toubini in January 2013; Corporate Governance seminar conducted byMoody’s in 2012; and Updates on IFRS conducted by Mr. Wilson Tan in 2012; Corporate Governance seminarconducted by SGV & Co., June 2014, 12 October 2015.

Mr. Ibarra A. MalonzoCorporate Governance seminar conducted by SGV & Co., 12 October 2015.

Atty. Manuel R. RoxasCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015.

Ms. Judy C. QuaCorporate Governance seminar conducted by SGV & Co., June 2014, 12 October 2015.

Mr. Cesar Enrique ModinaCorporate Governance seminar conducted by SGV & Co., June 2014.

Mr. Ronan A. AndradeCorporate Governance seminar conducted by SGV & Co., June 2014, 9 December 2015.

Mr. Cesar CaubalejoCorporate Governance seminar conducted by SGV & Co., June 2014.

(c) Continuing education programs for directors: programs and seminars and roundtables attended during theyear.

The Company invited its directors to attend and participate in the Corporate Governance seminar conductedby SGV & Co. on 12 October 2015.

B. CODE OF BUSINESS CONDUCT & ETHICS

1) Discuss briefly the company’s policies on the following business conduct or ethics affecting directors, seniormanagement and employees:

Business Conduct &Ethics Directors Senior Management Employees

(a) Conflict of Interest

A director’s office isone of trust andconfidence. He or sheshall act in a mannercharacterized bytransparency,accountability andfairness. In relationthereto, any such

The Company, upon dueprocess, dismissesemployees who areengaged, participating orinvolved, in anytransaction undertakingor business, directly orindirectly where suchengagement,participation,

The Company, upon dueprocess, dismissesemployees who areengaged, participating orinvolved, in any transactionundertaking or business,directly or indirectly wheresuch engagement,participation, involvement isin conflict or prejudicial to

16

conflict should bedisclosed in a timelymanner.

involvement is in conflictor prejudicial to theinterest of the Company.

the interest of theCompany.

(b) Conduct ofBusiness and FairDealings

It shall be the Board’sresponsibility to fosterthe long-term successof IONICS and secureits sustainedcompetitiveness in amanner consistentwith its fiduciaryresponsibility, which itshall exercise in thebest interest of theCompany and itsshareholders.

Management andemployees of theCompany are expected toconduct business andperform their functions insuch manner consistentwith the Company’sManual of CorporateGovernance.

Management andemployees of the Companyare expected to conductbusiness and perform theirfunctions in such mannerconsistent with theCompany’s Manual ofCorporate Governance.

(c) Receipt of gifts fromthird parties

None None None

(d) Compliance withLaws & Regulations

Directors and Officersof the Company areexpected to ensure theCompany’s compliancewith all relevant lawsand regulations.

Directors and Officers ofthe Company areexpected to ensure theCompany’s compliancewith all relevant laws andregulations.

The Company’s Code ofConduct incorporatesactions or standards to beadhered to by employeesthat will ensure compliancewith laws & regulations.

(e) Respect for TradeSecrets/Use of Non-public Information

Directors and Officersare expected to keepprivate andconfidential any and alltrade secrets of theCompany.

Directors and Officers areexpected to keep privateand confidential any andall trade secrets of theCompany.

The Company, upon dueprocess, dismissesemployees who reveal ordivulge company tradesecrets, formula, plans,operations, finances,inventories and otherclassified matters orinformation.

(f) Use of CompanyFunds, Assets andInformation

A director’s office isone of trust andconfidence. He or sheshall act in a mannercharacterized bytransparency,accountability andfairness.

The Company’s Code ofConduct incorporatesactions or standards to beadhered to by employees,managers and officersthat will ensureappropriate use ofCompany funds, assetsand information.

The Company’s Code ofConduct incorporatesactions or standards to beadhered to by employees,managers and officers thatwill ensure appropriate useof Company funds, assetsand information.

(g) Employment &Labor Laws &Policies

Directors and Officersof the Company areexpected to ensure theCompany’s compliancewith all relevant lawsand regulations.

Directors and Officers ofthe Company areexpected to ensure theCompany’s compliancewith all relevant laws andregulations.

The Human ResourceDepartment has in placepolicies and procedures onrecruitment, employment,up to dismissal ortermination of employmentthat are consistent withemployment and labor lawsand regulations.

(h) Disciplinary action In cases of violation ofthe provision of the

In cases of violation of theprovision of the

In cases of reportedviolations of the Code of

17

Company’s Manual ofCorporate Governance,the same is reported tothe Board of Directorsfor the imposition ofthe appropriatedisciplinary action, andthe adoption of suchmeasures necessary toavoid a repetition ofany such violation.

Company’s Manual ofCorporate Governance,the same is reported tothe Board of Directors forthe imposition of theappropriate disciplinaryaction, and the adoptionof such measuresnecessary to avoid arepetition of any suchviolation.

Conduct, an incident reportis issued to the employee,afterwhich an investigationwill take place, to afford theemployee concerned of dueprocess. In case theemployee concerned isfound to have violatedprovisions of the Code, theappropriate penalty shall beimposed.

(i) Whistle Blower

The Board shallmaintain an open lineof communication forpurposes of raisingconcerns or reportingviolations.

Confidentiality reportingof any violationswitnessed by anyone ishandled by the Head ofthe Internal Audit eitherthrough direct phone callor email to an addressintended for such.

Confidentiality reporting ofany violations witnessed byanyone is handled by theHead of the Internal Auditeither through direct phonecall or email to an addressintended for such.

(j) Conflict Resolution

The Board shall act as abody in resolving anyreported conflictswithin the Board.

A committee is formedfor purposes of handlingany reported violations orconflicts.

A committee is formed forpurposes of handling anyreported violations orconflicts.

2) Has the code of ethics or conduct been disseminated to all directors, senior management and employees?

Yes.

3) Discuss how the company implements and monitors compliance with the code of ethics or conduct.

The Compliance Officer monitors the compliance with the Manual of Corporate Governance. A certification on theCompany’s compliance with the Code of Corporate Governance is likewise issued annually. Further, eachsupervisor, managers and officers are tasked to ensure that compliance to the Code of Conduct is adhered to bythe employees under their supervision. The Human Resource Department is responsible for monitoring overallcompliance.

4) Related Party Transactions

(a) Policies and Procedures

Describe the Company’s policies and procedures for the review, approval or ratification, monitoring andrecording of related party transactions between and among the company and its parent, joint ventures,subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses,children and dependent siblings and parents and of interlocking director relationships of members of theBoard.

Related Party Transactions Policies and Procedures

(1) Parent Company Related party transactions, and salient terms of the same arepresented to the Board of Directors quarterly. The same arelikewise disclosed to the shareholders in the Annual Reportprovided to them.

(2) Joint Ventures N/A(3) Subsidiaries -same as above-(4) Entities Under Common Control -same as above-(5) Substantial Stockholders -same as above-(6) Officers including -same as above-

18

spouse/children/siblings/parents(7) Directors including spouse/children/siblings/parents -same as above-

(8) Interlocking director relationship of Board of Directors -same as above-

(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders

Identify any actual or probable conflict of interest to which directors/officers/5% or more shareholdersmay be involved.

Details of Conflict of Interest (Actual or Probable)

Name of Director/s *Name of Officer/s *Name of Significant Shareholders *

*To the best of our knowledge, there are no actual or probable conflicts of interest to which directors/officers/5% or moreshareholders may be involved.

(ii) Mechanism

Describe the mechanism laid down to detect, determine and resolve any possible conflict of interestbetween the company and/or its group and their directors, officers and significant shareholders.

Directors/Officers/Significant Shareholders

Company

The Company maintains open lines of communications withother members of the Group, its directors, officers andshareholders to ensure that any possible conflicts aredetected, determined and resolved.

Group -same as above-

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family,3 commercial, contractual or business nature that existsbetween the holders of significant equity (5% or more), to the extent that they are known to the Company:

Names of Related Significant Shareholders Type of Relationship Brief Description of the

RelationshipNone N/A N/A

(b) Indicate, if applicable, any relation of a commercial, contractual or business nature that exists between theholders of significant equity (5% or more) and the Company:

Names of RelatedSignificant Shareholders Type of Relationship Brief Description

None N/A N/A

(c) Indicate any shareholder agreements that may impact on the control, ownership and strategic direction ofthe Company:

3 Family relationship up to the fourth civil degree either by consanguinity or affinity.

19

Name of Shareholders % of Capital Stock affected(Parties)

Brief Description of theTransaction

None

6) Alternative Dispute Resolution

Describe the alternative dispute resolution system adopted by the Company for the last three (3) years inamicably settling conflicts or differences between the Company and its stockholders, and the Company and thirdparties, including regulatory authorities.

Alternative Dispute Resolution System

Corporation & Stockholders

The Company did not encounter any suchconflicts in the last three (3) years whichcalled for the implementation of adispute resolution system.

Corporation & Third Parties -same as above-Corporation & Regulatory Authorities -same as above-

C. BOARD MEETINGS & ATTENDANCE

1) Are Board of Directors’ meetings scheduled before or at the beginning of the year?Board meetings are scheduled at the beginning of the year and presented to the Board to ensure attendance ofdirectors at such meetings.

2) Attendance of Directors

Board Name Date ofElection

No. ofMeetings Held

during theyear (2015)

No. ofMeetingsAttended

%

Chairman Lawrence C. Qua 15 May 2015 5 5 100%

Member Meliton C. Qua 15 May 2015 5 5 100%

Member Raymond C. Qua 15 May 2015 5 5 100%

Member Guillermo D. Luchangco 15 May 2015 5 4 80%

Member Ibarra A. Malonzo* 15 May 2015 5 2 66.67%

Member Virginia Judy Q. Dy 15 May 2015 5 5 100%

Member Cecilia Q. Chua 15 May 2015 5 5 100%

Member Monica S. Villonco 15 May 2015 5 3 60%

Member Teh Lin Yang* 15 May 2015 5 2 66.67%

Independent Alfredo de Borja 15 May 2015 5 5 100%

Independent Amelia B. Cabal 15 May 2015 5 5 100%

*Elected on 15 May 2015 only, and therefore only 3 meetings were held since their election.

3) Do non-executive directors have a separate meeting during the year without the presence of any executive? Ifyes, how many times?

As the need arises, non-executive directors may schedule a separate meeting without the presence of anyexecutive directors. No such meetings were held in the last year.

4) Is the minimum quorum requirement for Board decisions set at two-thirds of board members? Please explain.

No. The Company observes the minimum quorum requirement provided under the Corporation Code of thePhilippines which is set at majority of the board members.

5) Access to Information

20

(a) How many days in advance are board papers4 for board of directors meetings provided to the board?As much as practicable, Board Papers are provided to the board of directors at least 7 days in advance prior tothe meeting.

(b) Do board members have independent access to Management and the Corporate Secretary?Yes.

(c) State the policy of the role of the company secretary. Does such role include assisting the Chairman inpreparing the board agenda, facilitating training of directors, keeping directors updated regarding anyrelevant statutory and regulatory changes, etc?

The Corporate Secretary is an officer of the Company. His loyalty to the mission, vision and specific businessobjectives of the corporate entity come with his duties. He must work fairly and objectively with the Board,Management and stockholders of the Company.

The duties and responsibilities of the Corporate Secretary include the following:

a) Gather and analyze all documents, records and other information essential to the conductof his/her duties and responsibilities to IONICS;

b) Be responsible for the safekeeping and preservation of the integrity of the minutes of themeeting of the Board and its committees, as well as the other official records of theCompany;

c) Attend all Board meetings, except when justifiable causes, such as, but not limited to,illness, death in the immediate family and serious accidents, prevent him /her from doingso;

d) As to agenda, get a complete schedule thereof at least for the current year and put theBoard on notice before every meeting;

e) Assist the Board members in making business judgment in good faith and in theperformance of their responsibilities and obligations. For this purpose, he/she must have aworking knowledge of the operations of the Company;

f) Ensure that all Board procedures, rules and regulations are strictly followed by themembers;

g) Inform the members of the Board, in accordance with the by-laws, of the agenda of theirmeetings and ensure that the members have before them accurate information that willenable them to arrive at intelligent decisions on matters that require their approval;

h) Issue a certification every January 30th of the year on the attendance of directors inmeetings of the Board countersigned by the Chairman of the Board; and

i) Perform all the duties and responsibilities of the Compliance Officer as provided for underthe Company’s Manual of Corporate Governance.

(d) Is the Company secretary trained in legal, accountancy or company secretarial practices? Please explainshould the answer be in the negative.

The Company’s Corporate Secretary is a member of the Integrated Bar of the Philippines, and has been the

4 Board papers consist of complete and adequate information about the matters to be taken in the board meeting.Information includes the background or explanation on matters brought before the Board, disclosures, budgets,forecasts and internal financial documents.

21

Corporate Secretary of the Company for the past 19 years.

(e) Committee Procedures

Disclose whether there is a procedure that Directors can avail of to enable them to get information necessaryto be able to prepare in advance for the meetings of different committees:

Yes ü No

Committee Details of the procedures

Executive N/AAudit The Agenda of the meeting, copies of minutes of the previous

meetings may be secured from the Office of the CorporateSecretary upon reasonable request.

Nomination -same as above-Remuneration -same as above-Risk Management N/A

6) External Advice

Indicate whether or not a procedure exists whereby directors can receive external advice and, if so, providedetails:

Procedures Details

Board Approval Directors may seek external advice upon the approval of theBoard where such advice is not available internally.

7) Change/s in existing policies

Indicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) onexisting policies that may have an effect on the business of the Company and the reason/s for the change:

Existing Policies Changes Reason

None None None

D. REMUNERATION MATTERS

1) Remuneration Process

Disclose the process used for determining the remuneration of the CEO and the four (4) most highly compensatedmanagement officers:

Process CEO Top 4 Highest PaidManagement Officers

(1) Fixed remuneration * *

(2) Variable remuneration * *

(3) Per diem allowance * *

(4) Bonus * *

(5) Stock Options and other financial instruments * *

(6) Others (specify) * *

*The Remuneration Committee establishes a formal and transparent procedure for developing a policy onexecutive remuneration and for fixing the remuneration packages of corporate officers and directors, and

22

provide oversight over remuneration of senior management and other key personnel ensuring thatcompensation is consistent with the Company’s culture, strategy and control environment.

2) Remuneration Policy and Structure for Executive and Non-Executive Directors

Disclose the Company’s policy on remuneration and the structure of its compensation package. Explain how thecompensation of Executive and Non-Executive Directors is calculated.

RemunerationPolicy

Structure ofCompensation Packages

HowCompensation is

Calculated

Executive Directors * * *

Non-Executive Directors * * *

*compensation package of directors should be consistent with the Company’s culture, strategy and control environment. The structure ofcompensation packages and computation of compensation is based on an evaluation of prevailing compensation packages in companiessituated belonging to the same industry as the Company; individual skills of directors; and the requirements of the Company.

Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits-in-kind and other emoluments) of board of directors? Provide details for the last three (3) years.

No material issues on remuneration of the board of directors have arisen for the last three (3) years. As such,there was no need to present remuneration matters to the stockholders.

Remuneration Scheme Date ofStockholders’ Approval

N/A N/A

3) Aggregate Remuneration

Complete the following table on the aggregate remuneration accrued during the most recent year:

Remuneration Item ExecutiveDirectors

Non-Executive Directors(other than independent

directors)

IndependentDirectors

(a) Fixed Remuneration 13,910,000.00 N/A N/A

(b) Variable Remuneration N/A N/A N/A

(c) Per diem Allowance 3,397,500.00 585,000.00 210,000.00

(d) Bonuses 959,322.00 895,366.00 255,819.00

(e) Stock Options and/orother financialinstruments

N/A N/A N/A

(f) Others (Specify) N/A N/A N/A

Total 18,266,822.00 1,480,366.00 465,819.00

23

Other Benefits ExecutiveDirectors

Non-Executive Director(other than independent

directors)

IndependentDirectors

1) Advances N/A N/A N/A

2) Credit granted N/A N/A N/A

3) Pension Plan/sContributions N/A N/A N/A

(d) Pension Plans,Obligations incurred N/A N/A N/A

(e) Life Insurance Premium 17,700.00 N/A N/A

(f) Hospitalization Plan 600,000.00 N/A N/A

(g) Car Plan 4,900,000.00 N/A N/A

(h) Others (Specify) N/A N/A N/A

Total 5,517,700.00

4) Stock Rights, Options and Warrants

(a) Board of Directors

Complete the following table, on the members of the company’s Board of Directors who own or are entitledto stock rights, options or warrants over the Company’s shares:

Director’s NameNumber of Direct

Option/Rights/Warrants

Number ofIndirect

Option/Rights/Warrants

Number ofEquivalent

Shares

Total % fromCapital Stock

N/A N/A N/A N/A N/A

(b) Amendments of Incentive Programs

Indicate any amendments and discontinuation of any incentive programs introduced, including the criteriaused in the creation of the program. Disclose whether these are subject to approval during the AnnualStockholders’ Meeting:

Incentive Program Amendments Date ofStockholders’ Approval

N/A N/A N/A

5) Remuneration of Management

Identify the five (5) members of management who are not at the same time executive directors and indicate thetotal remuneration received during the financial year:

Name of Officer/Position Total Remuneration

Earl Qua/Vice-President

23,699,000.00

Jay Chaves/AVP

Ronan Andrade/Vice-President

Cesar Enrique Modina/Vice-President

Raymond Qua/SVP-Treasurer

24

E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities

Provide details on the number of members of each committee, its functions, key responsibilities and thepower/authority delegated to it by the Board:

Committee

No. of Members

CommitteeCharter Functions

KeyResponsibiliti

esPower

Executive

Director(ED)

Non-executiv

eDirector

(NED)

Independent Director

(ID)

Executive N/A N/A N/A N/A N/A N/A N/A

Audit 0 1

2

ü

Assist theBoard in theperformance ofits oversightresponsibilityfor the financialreportingprocess,system ofinternalcontrol, auditprocess andmonitoring ofcompliancewith applicablelaws, rules andregulations

Amongothers,financialreports oftheCompanyarepresentedto theAuditCommitteeforconsideration prior toBoardapproval.TheCommitteelikewisepre-approvesall auditplans,scope andfrequencyprior to theconduct ofexternalaudit.

Nomination 1 1

1

ü

The Committeeis responsiblefor pre-screening andshortlistingcandidates tothe Board ofDirectors

To ensure thatelectedmembers ofthe Board ofDirectors haveall of thequalificationsand none ofthedisqualifications as providedunder the By-Laws, theManual ofCorporateGovernanceand pertinentlaws and rulesproviding forqualificationsand

TheCommitteeapprovesthe finallist ofnomineesto theBoard ofDirectorsandpresentsthe sameto thestockholder at annualmeetings.Further,uponBoardapproval,the

25

disqualifications of membersof the Board ofDirectors.

Committeemayprovide forgroundsfortemporarydisqualification of adirector.

Remuneration 1 1

2

ü

The Committeeis responsiblefor establishinga formal andtransparentprocedure fordevelopingpolicies onremuneration.

To ensure thatcompensationpackages are inline with theCorporation’sculture,strategy andcontrolenvironment.

TheCommitteeis in chargeof fixingtheremunerationpackagesofdirectorsandofficersandprovideoversightoverremuneration ofseniormanagement and keypersonnel.

Others(specify) N/A N/A N/A N/A N/A N/A N/A

2) Committee Members

(a) Executive Committee

Office Name Date ofAppointment

No. ofMeetings

Held


%

Length ofService in

theCommittee

Chairman N/AMember (ED) N/AMember (NED) N/AMember (ID) N/AMember N/A

(b) Audit Committee


No. ofMeetings

Held


%

Length ofService in

theCommittee

Chairman Amelia B. Cabal (ID) 15 May 2015 4 4 100 3 yearsMember (ED) N/AMember (NED) Meliton C. Qua 15 May 2015 4 4 100 11 yearsMember (ID) Alfredo de Borja 15 May 2015 4 4 100 9 yearsMember N/A

26

Disclose the profile or qualifications of the Audit Committee members.

Amelia B. Cabal, Filipino, is an independent director of the Company. She is likewise an independent directorof Deutsche Regis Partners, Inc. She also is a member of the board of directors of Metropolitan Bank andTrust Company and serves as the Bank Supervisor for Metrobank China (Ltd). Ms. Cabal completed her three-year stint at the International Monetary Fund, serving as a member and chairman of its External AuditCommittee from 2009 to 2011 and in 2012, respectively. She was a senior partner of SGV & Co. where sheserved as its Vice Chairman and Head of Financial Markets Practice at the time of her retirement in 2006. Shewas taken in by SGV & Co. as a Senior Adviser on Regulatory Matters and Financial Markets from 2006 to2009. Presently, Ms. Cabal is also a member of the board of directors of Philippine Savings Bank.

Meliton C. Qua, Filipino, held key positions in several companies which included the Philippine Bank ofCommunications as Senior Vice President; Citibank N.A., as Vice President; Bancnet as Director and AquaHoldings, Inc. as Director. Mr. Qua has been a director of Ionics, Inc. since 1985. He received his Bachelor ofScience degree in Business Administration from De La Salle University, Philippines.

Alfredo De Borja, Filipino, is the incumbent President and Director of Makiling Ventures, Inc., a real estatedevelopment company, and President and Director of E. Murio, Inc., a furniture manufacturer and exporter.He is also a director of Investment Capital Corp. of the Phil. (ICCP), ICCP Venture Partners, Inc. (where he isChairman of the Investment Com), ICCP Management Corp, Pueblo de Oro Development Corp., RegattaProperties, Inc., Science Park of the Phil (SPPI), Cebu Light Industrial Park, Inc., Ionics, Inc., Ionics EMS, Inc.,Araneta Properties, Inc. and Philippine Coastal Storage & Pipeline Corp. He has also served as board Directorof a number of companies including First Metro Investment Corp., SPI, Alsons Power, Alsons Cement, IliganCement, Manila Memorial Park, Philcom, Shopwise, and Republic Glass. He was the President of Gervel, Inc.from 1973 to 1986; Director and Chairman of the Executive Committee of First Metro Investment Co. from1978 to 1983; Director and Vice President of Iligan Cement Corp. from 1973 to 1977; Professional Lecturer ofthe University of the Philippines-Graduate School of Business Administration from 1971 to 1974; ExecutiveAssistant to the Vice President of Philippine Long Distance Telephone Co. from 1970 to 1973; and ExecutiveAssistant to the Vice President of Investment Manager, Inc. from 1966 to 1968. He holds a Master of BusinessAdministration degree from Harvard University and a Bachelor of Science in Economics from the Ateneo deManila University.

Describe the Audit Committee’s responsibility relative to the external auditor.

The Committee’s responsibilities relative to the external auditor include, among others, the discussion of thenature, scope and expenses of the audit prior to its commencement, perform direct interface functions withthe internal and external auditors, and to ensure that the internal and external auditors act independentlyfrom each other.

(c) Nomination Committee


No. ofMeetings

Held


%

Length ofService in

theCommittee

Chairman Alfredo de Borja (ID) 15 May 2015 1 1 100% 10 yearsMember (ED) Raymond C. Qua 15 May 2015 1 1 100% 12 yearsMember (NED) Virginia Judy Q. Dy 15 May 2015 1 1 100% 12 yearsMember (ID) N/AMember N/A

(d) Remuneration Committee


No. ofMeetings

Held


%

Length ofService in

theCommittee

27

Chairman Amelia B. Cabal (ID) 15 May 2015 0 N/A 3 yearsMember (ED) Lawrence C. Qua 15 May 2015 0 N/A 12 yearsMember (NED) Guillermo D. Luchangco 15 May 2015 0 N/A 12 yearsMember (ID) Alfredo de Borja 15 May 2015 0 N/A 10 yearsMember N/A

(e) Others (Specify)N/AProvide the same information on all other committees constituted by the Board of Directors:


No. ofMeetings

Held


%

Length ofService in

theCommittee

Chairman N/AMember (ED) N/AMember (NED) N/AMember (ID) N/AMember N/A

3) Changes in Committee Members

Indicate any changes in committee membership that occurred during the year and the reason for the changes:

No changes have occurred.

4) Work Done and Issues Addressed

Describe the work done by each committee and the significant issues addressed during the year.

Name of Committee Work Done Issues Addressed

Executive N/A N/AAudit

Assisted the Board in the performance ofits oversight responsibility for thefinancial reporting process, system ofinternal control, audit process andmonitoring of compliance withapplicable laws, rules and regulations.

The Committee conducted a self-assessment in accordance with SECMemorandum Circular No. 4, seriesof 2012 to ensure that all itemscovered by the MemorandumCircular are implemented by theCommittee.

Nomination

Pre-screened all nominees to theBoard of Directors.

The Committee ensured that allmembers of the Board of Directorshave all of the qualifications andnone of the disqualificationsprovided under the Articles ofIncorporation, Manual of CorporateGovernance, Securities RegulationCode and other pertinent laws andregulations.

Remuneration The Remuneration Committee isresponsible for fixing theremuneration packages of corporateofficers and directors, and exercisingoversight functions in respect ofremuneration of senior

No material issues that needed to beaddressed were encountered for thepast year.

28

management and other keypersonnel in order to ensure thatcompensation is consistent with theCorporation’s culture, strategy andcontrol environment.

5) Committee Program

Provide a list of programs that each committee plans to undertake to address relevant issues in the improvementor enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be AddressedExecutive * *Audit * *Nomination * *Remuneration * *

*As of the date of this Report, none of the Committees have approved any such programs. Upon approval of any such programs, details of thesame shall be timely disclosed to the Commission

F. RISK MANAGEMENT SYSTEM

1) Disclose the following:

(a) Overall risk management philosophy of the company;The Company undertakes a continuous process of monitoring and reporting risks for purposes of determiningsuch strategies as may be best undertaken to manage such risks. The Company conducts a periodic review ofits risk management systems to assess effectivity and adequacy.

(b) A statement that the directors have reviewed the effectiveness of the risk management system andcommenting on the adequacy thereof;

The directors have reviewed the effectiveness of the Company’s risk management policy and have consideredthe same effective and adequate.

(c) Period covered by the review;

Q1-Q4 of 2012

(d) How often the risk management system is reviewed and the directors’ criteria for assessing its effectiveness;and

Risk factors are reviewed on a quarterly basis.

(e) Where no review was conducted during the year, an explanation why not.

2) Risk Policy

(a) Company

Give a general description of the Company’s risk management policy, setting out and assessing the risk/scovered by the system (ranked according to priority), along with the objective behind the policy for each kindof risk:

Risk Exposure Risk Management Policy Objective

29

[please refer to paragraph(b) below ]

[please refer to paragraph (b) below ] [please refer to paragraph (b) below ]

(b) Group

Give a general description of the Group’s risk management policy, setting out and assessing the risk/s coveredby the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

Risk Exposure Risk Management Policy ObjectiveCredit Risk The Group has a credit policy in

place and credit risk exposuresare monitored on an ongoingbasis.

To ensure that borrowers or anycounterparties will perform theirrespective obligations during thelife of the transaction.

Liquidity Risk

The Group regularly monitors itsliquidity requirements andcompliance with lendingcovenants.

To ensure that the Groupmaintains sufficient reserves ofcash and highly liquid marketablesecurities and adequatecommitted lines of funding frommajor financial institutions tomeet the short and longer termliquidity requirements of theGroup.

Market RIskThe Group follows a prudentpolicy in managing its assets andliabilities.

To ensure that exposure tofluctuation in interest rates,equity prices and other marketfactors are kept within acceptablelimits.

(c) Minority Shareholders

Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority ShareholdersDissenting shareholders are permitted to exercise their appraisal right and to demand payment ofthe fair value of their shares as provided under the Corporation Code of the Philippines. As such,there are no principal risk with respect to controlling shareholders’ exercise of voting power thatwill materially affect the rights of minority shareholders.

3) Control System Set Up

(a) Company

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by thecompany:

Risk Exposure Risk Assessment(Monitoring and Measurement Process)

Risk Management and Control(Structures, Procedures, Actions Taken)

[please refer toparagraph (b) below ]

[please refer to paragraph (b) below ] [please refer to paragraph (b) below ]

(b) Group

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by thecompany:

Risk Exposure Risk Assessment(Monitoring and Measurement Process)

Risk Management and Control(Structures, Procedures, Actions Taken)

Inventory Regular operations and executive Related procedures:

30

obsolescence management meetings identifiedthis as a major risk for theCompany. Finance, VPOperations, Business Units Headand VP Supply Chain monitor therisk exposure and it is measuredas to the impact whether high,medium and low to the financialstatements of the Company.

Master Production ScheduleMaterial ControlInventory ManagementProcurementIncoming Quality ControlMaterial Requirement PlanningBuy back Agreement

Actions taken:- limit of purchases to allowable

inventory level Purchasematerials only when a definiteorder is given by customer.

- Required advance payment toselected customers for thepurchase materials needed in theproduction.

Collectability oftrade receivables

Regular operations and executivemanagement meetings identifiedthis as a major risk for theCompany. Finance and BusinessUnit Heads (Operation) monitorthe risk exposure and it ismeasured as to the impactwhether high, medium and lowto the financial statements of theCompany.

Related procedures:Finance Management Procedure /Invoicing Procedure / Export SalesCollective Procedure

Actions taken:- Limit of receivables to 2 months

balance.- Hold additional shipment- Required advance payment to

selected customers for thepurchase of materials needed inthe production.

Availability ofworking capital (cashflow)

Regular operations and executivemanagement meetings identifiedthis as a major risk for theCompany. Finance and BusinessUnit Heads (Operation) monitorthe risk exposure and it ismeasured as to the impactwhether high, medium and lowto the financial statements of theCompany.

Related procedures:Finance Management Procedure /Invoicing Procedure / Export SalesCollective Procedure

Actions taken:- Limit of receivables and inventory

to 2 months balance.- Required advances payment to

selected customers for thepurchase of materials needed inthe production.

Customeracquisition

Regular operations and executivemanagement meetings identifiedthis as a major risk for theCompany. Business DevelopmentDepartment monitors the riskexposure and it is measured as tothe impact whether high,medium and low to the financialstatements of the Company.

Related procedures:Request for Quotation (RFQ) /Request for InformationRequest for Quotation (RFQ) /Request for Information

Actions taken:- Entered into several agency

agreements in the US, Europe,etc.

Product quality Operations and Original DesignManagement Departments

The VP Operations makes sure thatactions made by different

31

identified this as a major risk tothe Company. Quality Controland Assurance Unit underOperations monitors the riskexposure and it is measured as tothe impact whether high,medium and low to the financialstatements of the Company.

departments are implemented.

Related procedures:Outgoing Quality ControlQuality Control and Assurance

Actions taken:- Statistical Process Control

(c) Committee

Identify the committee or any other body of corporate governance in charge of laying down and supervisingthese control mechanisms, and give details of its functions:

Committee/Unit Control Mechanism Details of its Functions

Audit Committee Risk Management

The Audit Committee performsoversight financialmanagement functions in theareas of managing riskexposures and crisismanagement.

Audit Committee/InternalAudit Internal Controls

The Audit Committee assists theBoard in the performance of itsoversight responsibility for thefinancial reporting process, systemof internal control, audit processand monitoring of compliancewith applicable laws, rules andregulations. The Internal AuditDepartment, on the other hand, isthe unit responsible for ensuringthat key organizational andprocedural controls are effective,appropriate, and complied with.

G. INTERNAL AUDIT AND CONTROL

1) Internal Control System

Disclose the following information pertaining to the internal control system of the Company:

(a) Explain how the internal control system is defined for the CompanyInternal control system is one through which the Board, senior management, and stockholders is providedwith reasonable assurance that key organizational and procedural controls of the Company are effective,appropriate, and complied with.

(b) A statement that the directors have reviewed the effectiveness of the internal control system and whetherthey consider them effective and adequate

The directors have reviewed the effectiveness of the internal control system and have considered the sameeffective and adequate.

(c) Period covered by the reviewQ1-Q4 2012

(d) How often internal controls are reviewed and the directors’ criteria for assessing the effectiveness of the

32

internal control systemQuarterly review of internal controls is conducted.

(e) Where no review was conducted during the year, an explanation why not.

2) Internal Audit

(a) Role, Scope and Internal Audit Function

Give a general description of the role, scope of internal audit work and other details of the internal auditfunction.

Role Scope

Indicatewhether In-

house orOutsource

Internal AuditFunction

Name of ChiefInternal

Auditor/AuditingFirm

Reporting process

To ensure thatkeyorganizationaland proceduralcontrols areeffective,appropriate, andcomplied with.

In theexercise of hisfunctions, TheInternalAuditor shallbe guided bytheInternationalStandards onProfessionalPractice ofInternalAuditing.

In-house

Cesar G. Caubalejo

The Internal Auditorfunctionally reports to theAudit Committee.Administratively, however, theInternal Auditor reports to theChief Executive Officer.

(b) Do the appointment and/or removal of the Internal Auditor or the accounting /auditing firm or corporation towhich the internal audit function is outsourced require the approval of the audit committee?

Yes.

(c) Discuss the internal auditor’s reporting relationship with the audit committee. Does the internal auditor havedirect and unfettered access to the board of directors and the audit committee and to all records, propertiesand personnel?

The Internal Auditor reports to the Audit Committee and the Board of Directors on a quarterly basis. Forpurposes of effectively performing his functions, the Internal Auditor has direct access to the members of theBoard and the Audit Committee. To aid the Internal Auditor in performing his audit functions, the Internalauditor is granted access to Company’s properties, records and personnel.

(d) Resignation, Re-assignment and Reasons

Disclose any resignation/s or re-assignment of the internal audit staff (including those employed by the third-party auditing firm) and the reason/s for them.

Name of Audit Staff ReasonEderlyn Joy Malabuyoc Employment not regularized (failed to pass the probationary

period)

(e) Progress against Plans, Issues, Findings and Examination Trends

33

State the internal audit’s progress against plans, significant issues, significant findings and examinationtrends.

Progress Against Plans There were 12 major processes and related risk areas that the InternalAudit Department (IAD) had planned at the start of the calendar year2012 to review aside from other special works done on a per requestbasis. At the end of the year, the IAD was able to accomplish their reviewof these 12 major processes and related risk areas and the result thereofhad been discussed with process owners and actions plans were madeand the implementation will be monitored. The reviews were madeevery quarter and the results were reported to the Audit Committeeduring the regular quarterly board meeting scheduled thereof.

Issues5 There were no significant issues uncovered during the review that havesignificant impact and materially affect the financial statements of theCompany.

Findings6 There were no significant findings uncovered that violated Company’spolicies and procedures that affect materially the financial statements ofthe Company.

Examination Trends Quarterly, the IAD reviews the identified major processes and relatedrisk areas. IAD has covered all major processes and risk areas in a span oftwo years cycle. A repeat audit review for the same major processes willbe made at the beginning of the third year.

[The relationship among progress, plans, issues and findings should be viewed as an internal control reviewcycle which involves the following step-by-step activities:

1) Preparation of an audit plan inclusive of a timeline and milestones;2) Conduct of examination based on the plan;3) Evaluation of the progress in the implementation of the plan;4) Documentation of issues and findings as a result of the examination;

5) Determination of the pervasive issues and findings (“examination trends”) based on single yearresult and/or year-to-year results;

6) Conduct of the foregoing procedures on a regular basis.]

(f) Audit Control Policies and Procedures

Disclose all internal audit controls, policies and procedures that have been established by the company andthe result of an assessment as to whether the established controls, policies and procedures have beenimplemented under the column “Implementation.”

Policies & Procedures Implementation

Contract Review and/or Amendment forProspective or Existing Customer Procedure

Implemented with suggested improvementsto the current procedure and control.

Master Production Schedule Procedure Implemented with suggested improvementsto the current procedure and control.

Material Control Procedure Implemented

Demand Receipt and AcceptanceManagement Procedure

Implemented

Request for Quotation (RFQ) / Request forInformation


5 “Issues” are compliance matters that arise from adopting different interpretations.6 “Findings” are those with concrete basis under the company’s policies and rules.

34

Design and Development Procedure Implemented with suggested improvementsto the current procedure and control.

Human Resource Procedure /Employee Motivation Procedure


Organization Design Procedure On-going Implementation to suggestedimprovements.

Procurement Procedure Implemented with suggested improvementsto the current procedure and control.

Inventory Management Procedure Implemented with suggested improvementsto the current procedure and control.

Incoming and Outgoing Quality ControlProcedure

Implemented

Quality Control and Assurance Procedure Implemented with suggested improvementsto the current procedure and control.

Material Requirement Planning Procedure Implemented with suggested improvementsto the current procedure and control.

Finance Management Procedure / InvoicingProcedure / Export Sales Collective Procedure


Bill of Materials (BOM) Costing Procedure ImplementedHuman Resource Procedure /Measurement and Monitoring Procedure

On-going Implementation to suggestedimprovements.

(g) Mechanisms and Safeguards

State the mechanism established by the Company to safeguard the independence of the auditors, financialanalysts, investment banks and rating agencies (example, restrictions on trading in the Company’s shares andimposition of internal approval procedures for these transactions, limitation on the non-audit services that anexternal auditor may provide to the Company):

Auditors(Internal and External) Financial Analysts Investment Banks Rating Agencies

Performance of the AuditCommittee of directinterface functions with theinternal and externalauditors to ensure that theinternal and externalauditors act independentlyfrom each other.

Evaluation of non-audit workof the external auditor andperiodic review of non-auditfees paid to the externalauditor. Non-audit work isdisallowed where the samemay pose threat to theexternal auditor’sindependence.

Restrictions on trading inthe shares of theCompany as providedunder applicable laws,rules and regulations.



(h) State the officers (preferably the Chairman and the CEO) who will have to attest to the company’s fullcompliance with the SEC Code of Corporate Governance. Such confirmation must state that all directors, officersand employees of the company have been given proper instruction on their respective duties as mandated bythe Code and that internal mechanisms are in place to ensure that compliance.

A Certification on the Company’s compliance with the provisions of the Code of Corporate Governance issubmitted by the Corporate Secretary as the Company’s Compliance Officer. The said Certification is

35

countersigned by the Chairman.

H. ROLE OF STAKEHOLDERS

1) Disclose the company’s policy and activities relative to the following:

Policy Activities

Customers' welfare

It is the Company policy to alwaysthink about the customer in terms ofthe quality of services to bedelivered among others. TheCustomer Sales & ServiceDepartment handles this area ofcustomers’ welfare.

Quarterly business review withcustomers and business units.

Customer satisfaction survey.

Supplier/contractor selectionpractice

Supply Chain ManagementDepartment handles theaccreditation and qualification ofprospective supplier/ contractor. Atleast 3 quotes are needed forselection and depending on the levelof transaction, a bidding committeewill convene to select theappropriate supplier/ contractor.

Plant or site visit of prospectivesupplier/ contractor.

Financial statements review.

Environmentally friendly value-chain

The Company is aware of itsresponsibility towards the safety ofits employees and the environment.As such, Environmental Health &Safety Unit was created to monitorour compliance towards this aspect.

Audit of Environmental Healthand Safety Aspects of theCompany and identifies area forcompliance.

Community interaction

The Company’s offices andmanufacturing plants are located ineconomic zones. It is our policy to beinvolved in the association to be ableto experience sharing of ideas andpractices. The Company is also amember of Semi-Conductor andElectronics Industries in thePhilippines Inc. (SEIPI)

Participation in sportstournament with the association.

Participation in trainings given bySEIPI.

Anti-corruption programmes andprocedures?

Fraud and corruption is nottolerated by the Company. Anyonecaught will be sanctioned andeventual dismissal or cases will befiled in the court of law.

Confidentiality of reporting ishandled by the Internal Audit Headfor proper disposition.

Meetings and awareness ofpolicies and controls.

Safeguarding creditors' rights

Creditors will be paid due to them inaccordance with properdocumentation presented andquality of products or services are inaccordance with quality proceduresof the Company.

No significant activities.

2) Does the Company have a separate corporate responsibility (CR) report/section or sustainability report/section?

36

The Company is aware of its corporate responsibilities to the community, and as such, the Company, from time totime, participates in programs aimed at helping the community.

3) Performance-enhancing mechanisms for employee participation.

(a) What are the Company’s policy for its employees’ safety, health, and welfare?

The Company recognizes the contribution of its employees to the success of the Company, and thus, thepromotion of the health, safety and welfare of the employees is one of the primordial concerns of theCompany.

(b) Show data relating to health, safety and welfare of its employees.The Company’s safety and health policy is provided under the Health and Safety Procedure, while its welfarepolicy is provided under the Company’s Motivation Procedure. Further, a report concerning the matter isannually submitted to the Department of Labor and Employment.

(c) State the company’s training and development programmes for its employees. Show the data.

The Company’s Management Development Board is responsible for managing all internal and externaltraining programs provided to employees.

(d) State the company’s reward/compensation policy that accounts for the performance of the Company beyondshort-term financial measures

The Company has a Balanced Score Card for each department and individual key performance indicators isgiven and agreed with individual employees. Their reward or future compensation adjustments will dependon their performance and the Company’s performance as well.

4) What are the company’s procedures for handling complaints by employees concerning illegal (includingcorruption) and unethical behavior? Explain how employees are protected from retaliation.

There is a confidentiality reporting or “whistle blower” procedure that will be handled by the Internal Audit Head.No information will be given as to who reported the complaints to avoid retaliation by employee.

I. DISCLOSURE AND TRANSPARENCY

1) Ownership Structure

(a) Holding 5% shareholding or more

Shareholder Number of Shares Percent Beneficial OwnerAqua Holdings, Inc. 335,153,100 39.13% Lawrence C. Qua, Meliton

C. Qua, Raymond C. Qua,Virginia Judy Q. Dy arestockholders of AquaHoldings, Inc.

Social Security System 59,126,198 (B) 6.9% Republic of the Philippines

Leonardo T. Siguion Reyna* 75,006,000 8.76% N/A*deceased

Name of SeniorManagement Number of Direct shares

Number ofIndirect shares / Through(name of record owner)

% ofCapitalStock

Judy C. Qua 0 27,454,760(Through Lawrence C. Qua*)

3.20%

37

Ronan Andrade 0 0 0Cesar Caubalejo 0 0 0

TOTAL 27,454,7603.20%

*Lawrence C. Qua is the spouse of Ms. Judy C. Qua

2) Does the Annual Report disclose the following:

Key risks ü

Corporate objectives ü

Financial performance indicators ü

Non-financial performance indicators ü

Dividend policy ü

Details of whistle-blowing policy x

Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any otherdirectorships of listed companies) of directors/commissioners

ü

Training and/or continuing education programme attended by each director/commissioner x

Number of board of directors/commissioners meetings held during the year x

Attendance details of each director/commissioner in respect of meetings held x

Details of remuneration of the CEO and each member of the board of directors/commissioners ü

Should the Annual Report not disclose any of the above, please indicate the reason for the non-disclosure.

Items marked “x” above are not included in the Annual Report as the same are not required. Nonethelessreports on such matters are submitted to the Securities and Exchange Commission, as may be applicable.

3) External Auditor’s fee

Name of auditor Audit Fee Non-audit FeeSGV & Co. The fees are generally based on

the complexity of the issuesinvolved, the work to beperformed, the special skillsrequired to complete the work,the experience level of theteam members and mostimportantly the ability toprovide the auditors’ reportexpressing an opinion on thefinancial statements of theCompany. Audit Fees for 2015amounted to $47,502.

Any additional services that theGroup may request will be thesubject of a separate writtenarrangement.

4) Medium of Communication

List down the mode/s of communication that the Company is using for disseminating information.

1. Company website

38

2. PSE/SEC disclosures3. Other notices are sent to stockholders via courier

5) Date of release of audited financial report: 15 April 2015

6) Company Website

Does the Company have a website disclosing up-to-date information about the following?

Business operations ü

Financial statements/reports (current and prior years) ü

Materials provided in briefings to analysts and media x

Shareholding structure ü

Group corporate structure ü

Downloadable annual report ü

Notice of AGM and/or EGM ü

Company's constitution (company's by-laws, memorandum and articles of association) x

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

Copies of items marked as “x” above may be provided to stockholders upon reasonable request.

7) Disclosure of RPT

RPT Relationship Nature ValueIonics EMS, Inc. Subsidiary Lease Arrangement $ 378,386.00

Siguion ReynaMontecillo & OngsiakoLaw Offices

Director Monica S.Villonco’s husband is apartner of the firm.

Legal Services $ 6,188.45

Roxas de los ReyesLaurel Rosario &Leagogo Law Offices

The CorporateSecretary, Manuel R.Roxas is a partner of thefirm.

Legal Services $ 29,242.46

Investment and CapitalCompany of thePhilippines (“ICCP”).

Director Guillermo D.Luchangco is Chairmanand Chief ExecutiveOfficer of ICCP.

Financial AdvisoryServices

$ 2,856.61

When RPTs are involved, what processes are in place to address them in the manner that will safeguard theinterest of the company and in particular of its minority shareholders and other stakeholders?

Related-party transactions are reviewed by the Audit Committee. In addition, said transactions are disclosed asrequired by law.

J. RIGHTS OF STOCKHOLDERS

1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

(a) Quorum

39

Give details on the quorum required to convene the Annual/Special Stockholders’ Meeting as set forth in itsBy-laws.

Quorum Required Majority of the outstandingcapital stock

(b) System Used to Approve Corporate Acts

Explain the system used to approve corporate acts.

System Used Board Approval/Stockholder Approval

Description

Corporate acts involving the regular conduct of business of the Company arepresented to the Board at regular/special meetings for approval; Mattersrequiring shareholder approval, on the other hand are presented to thestockholders at annual/special meetings.

(c) Stockholders’ Rights

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting that differ from those laiddown in the Corporation Code.

Stockholders’ rights concerning Annual/Special Stockholders’ meeting as provided under the CorporationCode are granted to stockholders. No such rights are granted which are incompatible with the provisions ofthe Corporation Code.

Stockholders’ Rights underThe Corporation Code

Stockholders’ Rights not inThe Corporation Code

N/A N/A

Dividends

Declaration Date Record Date Payment Date18 May 2012 18 June 2012 12 July 2012

(d) Stockholders’ Participation

1. State, if any, the measures adopted to promote stockholder participation in the Annual/SpecialStockholders’ Meeting, including the procedure on how stockholders and other parties interested maycommunicate directly with the Chairman of the Board, individual directors or board committees. Includein the discussion the steps the Board has taken to solicit and understand the views of the stockholders aswell as procedures for putting forward proposals at stockholders’ meetings.

Measures Adopted Communication Procedure

Timely distribution of Notices tostockholders’ meetings.

Notices are sent at least fifteen (15) businessdays prior to the date of the meeting.

Removal of excessive costs and otheradministrative or practical impediments toshareholders participating in meetingsand/or voting in person.

The Notices distributed to stockholderscontain information on transportationservices provided free of charge by theCompany to and from the meeting venue.

Stockholders are provided the opportunity toask questions and express opinions duringstockholders’ meetings.

At stockholders’ meetings, the Chairmanopens the floor for any stockholder who maywish to ask questions or express opinionsconcerning the operations of the Company.The Board, Management and ExternalAuditor are likewise available to address

40

stockholders’ concerns during the meeting.

2. State the Company policy of asking shareholders to actively participate in corporate decisions regarding:a. Amendments to the company's constitutionb. Authorization of additional sharesc. Transfer of all or substantially all assets, which in effect results in the sale of the Company

In case of corporate actions requiring stockholders’ approval under the Corporation Code of thePhilippines and other pertinent laws, rules and regulations, the proposed actions are included in theNotice and Information Statement distributed to the stockholders. Details of any such proposed actionsare likewise disclosed in the Information Statement to properly apprise the stockholders of the nature ofthe same. Further, stockholders are given the opportunity to make inquiries during the stockholders’meeting should they wish further clarification on the proposed corporate action.

3. Does the Company observe a minimum of 21 business days for giving out of notices to the AGM whereitems to be resolved by shareholders are taken up?

Yes.

a. Date of sending out notices: 23 April 2015

b. Date of the Annual/Special Stockholders’ Meeting:15 May 2015

4. State, if any, questions and answers during the Annual/Special Stockholders’ Meeting.

No material questions were raised at the recently held stockholders’ meeting.

5. Result of Annual/Special Stockholders’ Meeting’s Resolutions

Resolution Approving Dissenting Abstaining

Approval of theminutes of the 16May 2014stockholders’meeting

587,321,090 0 0

Ratification of Acts,Proceedings,Transactions andResolutions of theBoard of Directorsand Managementfor the Fiscal Year2012

587,321,090 0 0

Election of Directors 587,321,090 0 0

Appointment ofExternal Auditor 587,321,090 0 0

6. Date of publishing of the result of the votes taken during the most recent AGM for all resolutions:Results of the votes taken at the most recent AGM were not published as the same is not required bylaw.

(e) Modifications

State, if any, the modifications made in the Annual/Special Stockholders’ Meeting regulations during the mostrecent year and the reason for such modification:

Modifications Reason for Modification

41

N/A N/A

(f) Stockholders’ Attendance

(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held:

Type ofMeeting

Names of Boardmembers / Officers

present Date ofMeeting

VotingProcedure(by poll,show of

hands, etc.)

% of SHAttendingin Person

% of SH inProxy

Total % of SHattendance

Annual

Lawrence C. QuaRaymond C. QuaMeliton C. QuaAlfredo de BorjaAmelia CabalVirginia Judy Q. DyCecilia Q. ChuaIbarra A. Malonzo

15 May2015

viva voce

5.74% 62.83% 68.57%

Special N/A

(ii) Does the Company appoint an independent party (inspectors) to count and/or validate the votes at theASM/SSMs?Representatives of the Company’s stock and transfer agent are present at the meeting to assist incounting/validating votes, as may be necessary.

(iii) Do the Company’s common shares carry one vote for one share? If not, disclose and give reasons for anydivergence to this standard. Where the company has more than one class of shares, describe the votingrights attached to each class of shares.

One (1) vote per share applies. With respect to the election of directors, however, the stockholder mayvote such number of shares for as many persons as there are directors to be elected, or he may cumulatesaid shares and give one candidate as many votes as the number of directors to be elected, or he maydistribute them on the same principle among as many candidates as he shall see fit; provided, that thetotal number of votes cast by him shall not exceed the number of shares owned by him multiplied by thenumber of directors to be elected.

(g) Proxy Voting Policies

State the policies followed by the Company regarding proxy voting in the Annual/Special Stockholders’Meeting.

Company’s Policies

Execution and acceptance of proxiesProxies must be in writing, signed by the stockholder andpresented to the Corporate Secretary for inspection at least48 hours prior to the meeting.

Notary Proxies are not required to be notarized.

Submission of Proxy Proxies must be presented to the Corporate Secretary forinspection at least 48 hours prior to the meeting.

Several Proxies A proxy earlier issued is deemed revoked by a proxysubsequently issued by the same stockholder.

Validity of Proxy Unless otherwise provided in the proxy, the same shall onlybe valid for the meeting for which it is intended.

Proxies executed abroad Proxies executed abroad must be sent to ensure receipt ofthe Corporate Secretary at least 48 hours prior to the

42

meeting.

Invalidated ProxyHolders of proxies which are invalidated upon inspection bythe Corporate Secretary are not allowed to vote at thestockholders’ meeting.

Validation of Proxy Upon receipt of proxies, the Corporate Secretary inspect thesame for validation.

Violation of Proxy

A proxy holder must act/vote in accordance with theinstructions given to him/her by the stockholder. In case ofconflict between the vote of the proxy holder and vote of thestockholder as specifically stated in the proxy, the latter shallprevail.

(h) Sending of Notices

State the Company’s policies and procedure on the sending of notices of Annual/Special Stockholders’Meeting.

Policies Procedure

Annual and special stockholders’ meetings of theCompany shall be conducted fairly, andstockholders should be properly apprised ofmatters to be taken up at the meeting. Further,the stockholders should be encouraged topersonally attend such meetings.

Notice of Annual/Special Stockholders’ meetingare sent to the stockholders fifteen (15) businessdays prior to the date of the meeting inaccordance with the implementing rules of theSecurities Regulation Code. To encouragestockholder attendance at meetings, theCompany provides transportation to and fromthe meeting venue.

(i) Definitive Information Statements and Management Report

Number of Stockholders entitled to receiveDefinitive Information Statements andManagement Report and Other Materials

891

Date of Actual Distribution of DefinitiveInformation Statement and Management Reportand Other Materials held by marketparticipants/certain beneficial owners

23 April 2015

Date of Actual Distribution of DefinitiveInformation Statement and Management Reportand Other Materials held by stockholders

23 April 2015

State whether CD format or hard copies weredistributed Printed/hard copies were distributed.

If yes, indicate whether requesting stockholderswere provided hard copies

Printed/hard copies were distributed tostockholders at least 15 business days from thedate of the meeting.

(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

Each resolution to be taken up deals with only one item. ü

Profiles of directors (at least age, qualification, date of first appointment,experience, and directorships in other listed companies) nominated forelection/re-election.

ü

43

The auditors to be appointed or re-appointed. ü

An explanation of the dividend policy, if any dividend is to be declared. ü

The amount payable for final dividends. ü

Documents required for proxy vote. ü

*The foregoing items are included in the Definitive Information Statement distributed to stockholders together with the Notice of themeeting.

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

2) Treatment of Minority Stockholders

(a) State the Company’s policies with respect to the treatment of minority stockholders.

Policies Implementation

Minority shareholders’ right to information shouldalways be protected.

The shareholders shall be provided, upon writtenrequest, with periodic reports of the Company.Minutes of meetings are likewise available forinspection at stockholders’ meetings.

Minority shareholders’ should be encouraged toparticipate at stockholders’ meetings.

Exercise of voting rights and participation atmeetings are encouraged by providingtransportation services to stockholders to andfrom the meeting venue. Shareholders arelikewise provided the opportunity to askquestions during meetings.

Stockholders are likewise entitled to proposethe holding of a meeting, or to propose items inthe agenda of the meeting, provided thepurpose of the meeting and the items in theagenda are for legitimate business purposes.Any such proposal should be submitted inwriting to the Board of Directors or theCorporate Secretary and shall be presented forconsideration at the next following meeting ofthe Board of Directors.

(b) Do minority stockholders have a right to nominate candidates for board of directors?

Yes, provided that procedure for nomination as stated in the Articles of Incorporation and Manual ofCorporate Governance is observed.

K. INVESTORS RELATIONS PROGRAM

1) Discuss the Company’s external and internal communications policies and how frequently they are reviewed.Disclose who reviews and approves major Company announcements. Identify the committee with thisresponsibility, if it has been assigned to a committee.

Major Company announcements are reviewed by the Business Development and Corporate Affairs Department.Should any such announcements require Board approval, the same is presented to the Board for its consideration.

44

2) Describe the Company’s investor relations program including its communications strategy to promote effectivecommunication with its stockholders, other stakeholders and the public in general. Disclose the contact details(e.g. telephone, fax and email) of the officer responsible for investor relations.

Details

(1) Objectives To keep an open line of communication between and among theCorporation, its stockholders, suppliers, customers and otherstakeholders.

(2) Principles To provide the stockholders, suppliers, customers and otherstakeholders accurate and up to date information concerningthe Company.

(3) Modes of Communications Notices; Company website(4) Investors Relations Officer Inquiries may be coursed through the Business Development

and Corporate Affairs Department or through the Office of theCorporate Secretary.

3) What are the company’s rules and procedures governing the acquisition of corporate control in the capitalmarkets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets?

Extraordinary transactions are presented to the stockholders for approval in accordance with the CorporationCode of the Philippines and other related laws, rules and regulations. Proper disclosures are likewise made to theCommission and to the Exchange in case of approval of any such extraordinary transactions.

Name of the independent party the board of directors of the company appointed to evaluate the fairness of thetransaction price.

The Company did not enter into any extraordinary transaction in 2015 which necessitated the procurement of afairness opinion from an independent party.

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Discuss any initiative undertaken or proposed to be undertaken by the Company.

Initiative Beneficiary

The Company shall undertake any such initiativeswhen appropriate and warranted, in its bestjudgment.

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL

Disclose the process followed and criteria used in assessing the annual performance of the board and itscommittees, individual director, and the CEO/President.

Process Criteria

Board of Directors

The Nomination Committeeconducts an evaluation andmay, if circumstances warrant,considering providing forgrounds for temporarydisqualification of a director.

The duties and responsibilitiesas appearing in the By Laws andManual of CorporateGovernance.

Board Committees Each Committee periodically The duties and responsibilities

45

reports to the Board ofDirectors to monitorperformance of functions.

as appearing in the CommitteeCharters, By Laws and Manualof Corporate Governance.

Individual Directors

The Nomination Committeeconducts an evaluation andmay, if circumstances warrant,considering providing forgrounds for temporarydisqualification of a director.

The duties and responsibilitiesas appearing in the By Laws andManual of CorporateGovernance, together with thequalifications anddisqualifications provided underthe By Laws, Manual ofCorporate Governance andrelated laws, rules andregulations.

CEO/President

The President periodicallyreports to the Board ofDirectors to monitorperformance of functions.

The duties and responsibilitiesas appearing in the By Laws andManual of CorporateGovernance.

N. INTERNAL BREACHES AND SANCTIONS

Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manualinvolving directors, officers, management and employees

Violations Sanctions

1st violation Reprimand2nd violation Suspension from office. Duration of suspension shall

depend on the gravity of the violation committed.3rd violation Maximum penalty of removal from office.

*SGVFS016545*

IONICS, INC. AND SUBSIDIARIESINDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTARY SCHEDULESSEC FORM 17-A

CONSOLIDATED FINANCIAL STATEMENTS

Statement of Management’s Responsibility for Consolidated Financial Statements

Report of Independent Auditors’ Report

Consolidated Statements of Financial Position as at December 31, 2015 and 2014

Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013

Consolidated Statements of Changes in Equity for the years ended December 31, 2015, 2014 and 2013

Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013

Notes to Consolidated Financial Statements

SUPPLEMENTARY SCHEDULES

Report of Independent Auditors’ on Supplementary Schedules

Schedules Required under SRC Rule 68-EA. Financial AssetsB. Amounts Receivable from Directors, Officers, Employees, Related Parties, and

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

Consolidation of Financial StatementsD. Intangible AssetsE. Long-term DebtF. Indebtedness to Related Parties (Long Term Loans from Related Companies)G. Guarantees of Securities of Other IssuersH. Capital Stock

Group Structure

Schedule of all the effective standards and interpretations under PFRS as of December 31, 2015

Schedule of Financial Soundness Indicators

Schedule of Reconciliation of Retained Earnings Available for Dividend Declaration

*SGVFS016545*

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsIonics, Inc. and Subsidiaries

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Ionics, Inc. andits subsidiaries, which comprise the consolidated statements of financial position as atDecember 31, 2015 and 2014, and the consolidated statements of comprehensive income, statementsof changes in equity and statements of cash flows for each of the three years in the period endedDecember 31, 2015, and a summary of significant accounting policies and other explanatoryinformation.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with Philippine Financial Reporting Standards, and for such internal controlas management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free of materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

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

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

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

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

A member firm of Ernst & Young Global Limited

*SGVFS016545*

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Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Ionics, Inc. and its subsidiaries as at December 31, 2015 and 2014, and theirfinancial performance and their cash flows for each of the three years in the period endedDecember 31, 2015 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Cyril Jasmin B. ValenciaPartnerCPA Certificate No. 90787SEC Accreditation No. 1229-AR-1 (Group A), May 12, 2015, valid until May 11, 2018Tax Identification No. 162-410-623BIR Accreditation No. 08-001998-74-2015, February 27, 2015, valid until February 26, 2018PTR No. 5321703, January 4, 2016, Makati City

March 15, 2016

A member firm of Ernst & Young Global Limited

*SGVFS016545*

IONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Amounts in Thousands)

December 312015 2014

ASSETS

Current AssetsCash and cash equivalents (Notes 4, 5, 6 and 7) US$10,284 US$7,049Receivables (Notes 3, 4, 5 and 8) 14,110 14,873Inventories (Notes 3 and 9) 11,657 13,244Prepayments and other current assets (Note 32) 1,004 1,455

Total Current Assets 37,055 36,621

Noncurrent AssetsAvailable-for-sale investments (Notes 3, 4, 5 and 10) 2,879 2,897Investments in associates (Notes 3 and 11) 116 116Property, plant and equipment (Notes 3 and 12) 13,068 10,528Investment properties (Notes 3 and 13) 5,640 4,693Refundable deposits (Notes 4 and 5) 420 437Goodwill (Note 3) 217 217Deferred tax assets (Notes 3 and 26) 24 22

Total Noncurrent Assets 22,364 18,910US$59,419 US$55,531

LIABILITIES AND EQUITY

Current LiabilitiesAccounts payable and accrued expenses (Notes 4, 5, 6 and 14) US$10,453 US$12,061Advances from customers (Note 15) 3,616 2,304Bank loans and finance lease liability - current portion

(Notes 4, 5, 6 and 16) 548 294Income tax payable 108 44

Total Current Liabilities 14,725 14,703

Noncurrent LiabilitiesPension liability (Notes 3 and 28) 2,515 2,332Security deposits - net of current portion (Notes 4, 5 and 6) 1,127 1,079Bank loans and finance lease liability - net of current portion

(Notes 4, 5, 6 and 16) 1,024 136Other liabilities (Notes 3 and 11) 110 −

Total Noncurrent Liabilities 4,776 3,547Total Liabilities 19,501 18,250

(Forward)

*SGVFS016545*

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December 312015 2014

Equity Attributable to the Equity Holders of the ParentCompany (Note 6)

Capital stock (Note 17) US$17,633 US$17,633Additional paid-in capital (Notes 17 and 30) 9,072 9,072Retained earnings 15,173 12,248Unrealized losses on available-for-sale investments (Note 10) (233) (218)Other reserves (Note 17) (805) (708)Adjustment to non-controlling interests (Note 30) (1,000) (1,000)Exchange differences (Notes 11, 13, 28 and 30) 546 771Treasury shares (Note 17) (602) (602)

39,784 37,196Non-controlling interests 134 85

Total Equity 39,918 37,281US$59,419 US$55,531

See accompanying Notes to Consolidated Financial Statements.

*SGVFS016545*

IONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Amounts in Thousands, Except Earnings (Loss) per Share)

Years Ended December 312015 2014 2013

REVENUESales (Note 29) US$63,746 US$63,305 US$64,356Rental income (Notes 13, 24 and 29) 2,396 2,527 2,055Other income (Note 18) 279 387 552

66,421 66,219 66,963COSTS AND EXPENSESCost of sales (Note 19) 59,414 60,264 64,209Cost of rental services (Notes 13 and 20) 356 425 215Operating expenses (Note 21) 3,024 3,913 4,935Share in net losses of associates (Notes 11 and 29) 174 188 150Finance costs (Note 22) 41 29 48Other expenses 73 70 99

63,082 64,889 69,656INCOME (LOSS) BEFORE INCOME TAX 3,339 1,330 (2,693)PROVISION FOR INCOME TAX

(Notes 25, 26 and 29) 360 260 112NET INCOME (LOSS) 2,979 1,070 (2,805)OTHER COMPREHENSIVE INCOME

(LOSS)Items that may be reclassified to profit or loss:

Exchange differences (Notes 11, 13, 28 and 30) (225) 110 29Change in fair value of available-for-sale investments (Note 10) (15) 186 9

Items that will not be reclassified to profit orloss:Remeasurement losses on retirement plan - net of tax (Notes 3 and 28) (102) (376) (174)

TOTAL COMPREHENSIVE INCOME(LOSS) US$2,637 US$990 (US$2,941)

NET INCOME (LOSS) ATTRIBUTABLE TO:Equity holders of the Parent Company (Note 27) US$2,925 US$1,049 (US$2,740)Non-controlling interests 54 21 (65)

US$2,979 US$1,070 (US$2,805)

TOTAL COMPREHENSIVE INCOME(LOSS) ATTRIBUTABLE TO:

Equity holders of the Parent Company US$2,588 US$982 (US$2,871)Non-controlling interests 49 8 (70)

US$2,637 US$990 (US$2,941)

BASIC/DILUTED EARNINGS (LOSS)PER SHARE (Note 27)

For net income (loss) for the year attributable toordinary equity holders of the ParentCompany US$0.0035 US$0.0012 (US$0.0033)


*SGVFS016545*

IONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Amounts in Thousands)

Attributable to the equity holders of the Parent Company

Additional

Unrealizedlosses on

Available- Adjustment to ExchangeCapital Paid-in for-Sale Non-Controlling Differences Treasury Non-

Stock Capital Retained Investments Other Interests (Notes 11 Shares Controlling(Note 17) (Note 17) Earnings (Note 10) Reserves (Note 30) and 13) (Note 17) Total Interests Total

For the Year Ended December 31, 2015

Balances at beginning of year US$17,633 US$9,072 US$12,248 (US$218) (US$708) (US$1,000) US$771 (US$602) US$37,196 US$85 US$37,281Net income − − 2,925 − − − − − 2,925 54 2,979Other comprehensive loss − − − (15) (97) − (225) − (337) (5) (342)Total comprehensive income (loss) − − 2,925 (15) (97) − (225) − 2,588 49 2,637Balances at end of year US$17,633 US$9,072 US$15,173 (US$233) (US$805) (US$1,000) US$546 (US$602) US$39,784 US$134 US$39,918


Balances at beginning of year US$17,633 US$9,072 US$11,199 (US$404) (US$345) (US$1,000) US$661 (US$602) US$36,214 US$77 US$36,291Net income − − 1,049 − − − − − 1,049 21 1,070Other comprehensive income (loss) − − − 186 (363) − 110 − (67) (13) (80)Total comprehensive income (loss) − − 1,049 186 (363) − 110 − 982 8 990Balances at end of year US$17,633 US$9,072 US$12,248 (US$218) (US$708) (US$1,000) US$771 (US$602) US$37,196 US$85 US$37,281


Balances at beginning of year US$17,633 US$9,072 US$13,939 (US$413) (US$176) (US$1,000) US$632 (US$602) US$39,085 US$147 US$39,232Net loss − − (2,740) − − − − − (2,740) (65) (2,805)Other comprehensive income (loss) − − 9 (169) − 29 − (131) (5) (136)Total comprehensive income (loss) − − (2,740) 9 (169) − 29 − (2,871) (70) (2,941)Balances at end of year US$17,633 US$9,072 US$11,199 (US$404) (US$345) (US$1,000) US$661 (US$602) US$36,214 US$77 US$36,291


*SGVFS016545*

IONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands)


CASH FLOWS FROM OPERATINGACTIVITIES

Income (loss) before income tax US$3,339 US$1,330 (US$2,693)Adjustments for:

Depreciation (Notes 12, 13, 19, 20 and 21) 2,404 2,007 2,065Movement in pension liability (Note 28) 207 1 (140)Share in net loss of associates (Note 11) 174 188 150Provision for inventory obsolescence (Notes 9 and 19) 157 − −Write-off of receivables (Notes 8 and 21) 71 146 11Finance costs (Note 22) 41 29 48Write-off of inventories (Notes 9 and 19) 39 − −Dividend income (Notes 10 and 18) (18) (58) (168)Interest income (Note 18) (18) (16) (17)Gain on sale of property and equipment (Notes 12 and 18) (5) − (3)Impairment of available-for-sale investment (Notes 10 and 21) 3 705 1,766Gain on sale of investment properties (Notes 13 and 18) − (163) −Impairment loss on investment properties (Notes 13 and 21) − 67 −

Operating income before working capital changes 6,394 4,236 1,019Decrease (increase) in:

Receivables (Notes 8 and 21) 633 (1,599) 9,040Inventories (Notes 9 and 19) 1,391 5,503 3,570Prepayments and other current assets 451 (249) 1,397Refundable deposits 17 (9) 28

Increase (decrease) in:Accounts payable and accrued expenses (1,669) (2,015) (6,531)Advances from customers 1,330 (475) (1,124)Security deposits 48 (160) 274

Net cash generated from operations 8,595 5,232 7,673Income taxes paid (298) (272) (117)Interest paid (117) (76) (88)Interest received 77 13 32Net cash provided by operating activities 8,257 4,897 7,500

CASH FLOWS FROM INVESTINGACTIVITIES

Proceeds received from sale of:Property, plant and equipment (Note 12) 47 117 208Investment properties (Note13) − 1,627 −

Dividends received from available-for-saleinvestments (Notes 10 and 18) 18 58 168

Return of capital of available-for-sale investments(Note 10) − − 400

(Forward)

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Acquisitions of:Property, plant and equipment (Notes 12 and 31) (US$3,754) (US$3,454) (US$3,051)Investment properties (Note 13) (311) (316) (300)Available-for-sale investments (Note 10) − (300) (792)

Additional investments in associates (290) − −Net cash used in investing activities (4,290) (2,268) (3,367)

CASH FLOWS FROM FINANCINGACTIVITIES

Finance lease payments (468) − −Payments of bank loans (264) (1,060) (1,591)Proceeds from bank loans (Note 16) − 750 750Net cash used in financing activities (732) (310) (841)

NET INCREASE IN CASH ANDCASH EQUIVALENTS 3,235 2,319 3,292

CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR 7,049 4,730 1,438

CASH AND CASH EQUIVALENTS ATEND OF YEAR (Note 7) US$10,284 US$7,049 US$4,730


*SGVFS016545*

IONICS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Amounts in Thousands, Except Par Value per Share and Earnings per Share)

1. Corporate Information and Status of Operations

Ionics, Inc. (the Parent Company) is a domestic corporation incorporated under the laws of thePhilippines and registered with the Securities and Exchange Commission (SEC) inSeptember 1982. The Parent Company started commercial operations in July 1987 to engage inelectronic manufacturing services business. In September 1999, the Parent Company transferredits primary manufacturing business to a majority owned subsidiary, Ionics EMS, Inc. (EMS),which was subsequently listed in the Singapore Exchange Securities Trading Limited (SingaporeExchange). Consequently, the Parent Company’s primary purpose was amended from amanufacturing company to a holding company.

On February 25, 2000, EMS offered its shares of stock to the public and became publicly listed inthe Singapore Exchange. On September 25, 2009, Philippine SEC approved EMS’ equityrestructuring, which ultimately offset its remaining deficit and improved its debt to equity ratio.Low daily turnover and low daily market capitalization in recent years prompted EMS toreconsider its continued listing in the Singapore Exchange. Consequently, on March 2, 2010, theParent Company and EMS jointly announced the proposed voluntary delisting of EMS from theSingapore Exchange. The Parent Company offered to purchase common shares issued to the non-controlling stockholders in compliance with the delisting proposal. Subsequently in 2010, theParent Company acquired an additional 104,801,455 shares or 6.72% ownership on EMS(see Note 30).

The principal activities of the Parent Company and its subsidiaries (collectively known as theGroup) are described in Note 29. The Group’s customers are original equipment manufacturers inthe computer peripherals, telecommunications, automotive, consumer electronics, industrialequipment and medical equipment industries. The top five customers collectively account for74.87%, 70.87% and 71.77% of the Group’s sales in 2015, 2014 and 2013, respectively. TheGroup anticipates that concentration of business in major customers will continue in theforeseeable future although the Group’s management is starting to build new relationships withother customers.

On March 13, 2015, the Board of Directors (BOD) approved the amendment of Articles ofIncorporation, specifically Article III to reflect the change in the principal place of business of theGroup from Fusion Street, Light Industry and Science Park of the Philippines (LISPP) I, Bo.Diezmo, Cabuyao, Laguna, Philippines” to “Circuit Street, Light Industry and Science Park of thePhilippines I, Bo. Diezmo, Cabuyao City, Laguna, Philippines.” This was approved by SEC onJune 25, 2015.

The Parent Company is listed in the Philippine Stock Exchange.

The accompanying consolidated financial statements were approved and authorized for issue bythe BOD on March 15, 2016.

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2. Summary of Significant Accounting Policies

Basis of PreparationThe accompanying consolidated financial statements have been prepared on the historical costbasis except for available-for-sale (AFS) investments that have been measured at fair value.

The consolidated financial statements are presented in United States (US) Dollar ($), which is alsothe functional and presentation currency of the Parent Company. All values are rounded to thenearest thousand (US$000) except when otherwise indicated.

The following table shows the functional currency of the Parent Company and its subsidiaries:

Entity Functional CurrencyIonics, Inc. US DollarIonics EMS, Inc. (EMS) US DollarIonics Circuits, Limited (ICL) US DollarIonics Properties, Inc. (IPI) US DollarIomni Precision, Inc. (Iomni) US DollarIonics EMS (USA), Inc. (USA) US DollarSynertronix, Inc. (SI) Philippine Peso

For consolidation purposes, the financial statements of SI were translated to US Dollars using theprevailing closing rate as of the reporting date for the consolidated statement of financial positionaccounts and the weighted average rate for the reporting period for profit or loss accounts. Theforeign currency exchange differences arising from translation are taken to the line item“Exchange differences” in other comprehensive income.

The consolidated financial statements provide comparative information in respect of the previousperiod. In addition, the Group presents an additional statement of financial position at thebeginning of the earliest period presented when there is a retrospective application of anaccounting policy, a retrospective restatement, or a reclassification of items in financialstatements.

Statement of ComplianceThe accompanying consolidated financial statements of the Group have been prepared inaccordance with Philippine Financial Reporting Standards (PFRS).

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Companyand the following wholly and majority owned subsidiaries as at December 31 each year:

SubsidiariesCountry

of Incorporation Principal Activity

Effective Percentageof Ownership2015 2014

ICL Cayman Islands Investing 100% 100%IPI Philippines Leasing 100 100Iomni Philippines Manufacturing 100 100SI Philippines Manufacturing 100 100EMS Philippines Manufacturing 97 97- USA United States of America Manufacturing 100 100

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Control is achieved when the Group is exposed, or has rights to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestees. 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 relevantactivities 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 Groupconsiders all relevant facts and circumstances in assessing whether it has power over an investee,including:

· The contractual arrangement with the other holders of the investee;· Rights arising from other contractual arrangements; or· The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicatethat there are changes to one or more of the three elements of control. Consolidation of asubsidiary begins when the Group obtains control over the subsidiary and ceases when the Grouploses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired ordisposed of during the year are included in the consolidated financial statements from the date theGroup gains control until the date the Group ceases to control the subsidiary.

All intra-group balances, transactions, income and expenses and profits and losses resulting fromintra-group transactions are eliminated in full upon consolidation.

The financial statements of the subsidiaries are prepared in the same reporting year as the ParentCompany, using consistent accounting policies.

Non-Controlling InterestsNon-controlling interests represent the portion of profit or loss and net assets not held by theGroup and are presented separately in the consolidated statement of comprehensive income andwithin equity in the consolidated statement of financial position, separately from the ParentCompany’s equity (see accounting policy on Business Combinations).

Changes in Accounting Policies and DisclosuresThe accounting policies adopted in the preparation of the Group’s consolidated financialstatements are consistent with those of the previous financial year except for the adoption of thefollowing new and amended PFRS which became effective January 1, 2015.

The nature and impact of each new standard and amendment is described below:

· PAS 19, Employee Benefits – Defined Benefit Plans: Employee Contributions (Amendments)PAS 19 requires an entity to consider contributions from employees or third parties whenaccounting for defined benefit plans. Where the contributions are linked to service, theyshould be attributed to periods of service as a negative benefit. These amendments clarifythat, if the amount of the contributions is independent of the number of years of service, anentity is permitted to recognize such contributions as a reduction in the service cost in theperiod in which the service is rendered, instead of allocating the contributions to the periods ofservice. This amendment is effective for annual periods beginning on or after July 1, 2014.

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This amendment is not relevant to the Group, since none of the entities within the Group hasdefined benefit plans with contributions from employees or third parties.

Annual Improvements to PFRSs (2010-2012 cycle)These improvements are effective from July 1, 2014 and the Group has applied these amendmentsfor the first time in these consolidated financial statements. Unless otherwise stated, theseamendments have no impact on the Group’s consolidated financial statements. They include:

· PFRS 2, Share-based Payment – Definition of Vesting ConditionThis improvement is applied prospectively and clarifies various issues relating to thedefinitions of performance and service conditions which are vesting conditions, including:• A performance condition must contain a service condition• A performance target must be met while the counterparty is rendering service• A performance target may relate to the operations or activities of an entity, or to those of

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

period, the service condition is not satisfied.

· PFRS 3, Business Combinations – Accounting for Contingent Consideration in a BusinessCombinationThe amendment is applied prospectively for business combinations for which the acquisitiondate is on or after July 1, 2014. It clarifies that a contingent consideration that is not classifiedas equity is subsequently measured at fair value through profit or loss whether or not it fallswithin the scope of PAS 39, Financial Instruments: Recognition and Measurement (or PFRS9, Financial Instruments, if early adopted).

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

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

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

· PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets – Revaluation Method– Proportionate Restatement of Accumulated Depreciation and AmortizationThe amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the assetmay be revalued by reference to the observable data on either the gross or the net carryingamount. In addition, the accumulated depreciation or amortization is the difference betweenthe gross and carrying amounts of the asset. The adoption of this amendment did not have anyimpact in the Group’s consolidated financial statements as the Group’s property, plant andequipment and intangible assets are not carried at revalued amounts.

· PAS 24, Related Party Disclosures – Key Management PersonnelThe amendment is applied retrospectively and clarifies that a management entity, whichis an entity that provides key management personnel services, is a related party subject tothe related party disclosures.

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In addition, an entity that uses a management entity is required to disclose the expensesincurred for management services.

Annual Improvements to PFRSs (2011-2013 cycle)These improvements are effective from July 1, 2014 and the Group has applied these amendmentsfor the first time in these consolidated financial statements. Unless otherwise stated, theseamendments have no impact on the Group’s consolidated financial statements. They include:

· PFRS 3, Business Combinations – Scope Exceptions for Joint ArrangementsThe amendment is applied prospectively and clarifies the following regarding the scopeexceptions within PFRS 3:• Joint arrangements, not just joint ventures, are outside the scope of PFRS 3• This scope exception applies only to the accounting in the financial statements of the joint

arrangement itself.

· PFRS 13, Fair Value Measurement – Portfolio ExceptionThe amendment is applied prospectively and clarifies that the portfolio exception inPFRS 13 can be applied not only to financial assets and financial liabilities, but also toother contracts within the scope of PAS 39 (or PFRS 9, if early adopted).

· PAS 40, Investment PropertyThe description of ancillary services in PAS 40 differentiates between the investment propertyand owner-occupied property (i.e., property, plant and equipment). The amendment is appliedprospectively and clarifies that PFRS 3, and not the description of ancillary services inPAS 40, is used to determine if the transaction is the purchase of an asset or businesscombination. The description of ancillary services in PAS 40 only differentiates betweeninvestment property and owner-occupied property (i.e., property, plant and equipment).

Standards and interpretations issued but not yet effectiveThe Group will adopt the following amended standards and interpretations when these becomeeffective. Except as otherwise indicated, the Group does not expect the adoption of these new andamended PFRS and Philippine Interpretations to have a significant impact on the unauditedcondensed consolidated financial statements.

Effective January 1, 2016

· PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and JointVentures – Investment Entities: Applying the Consolidation Exception (Amendments)These amendments clarify that the exemption in PFRS 10 from presenting consolidatedfinancial statements applies to a parent entity that is a subsidiary of an investment entity thatmeasures all of its subsidiaries at fair value and that only a subsidiary of an investment entitythat is not an investment entity itself and that provides support services to the investmententity parent is consolidated. The amendments also allow an investor (that is not aninvestment entity and has an investment entity associate or joint venture), when applying theequity method, to retain the fair value measurement applied by the investment entity associateor joint venture to its interests in subsidiaries. These amendments are effective for annualperiods beginning on or after January 1, 2016. These amendments are not applicable to theGroup since none of the entities within the Group is an investment entity nor does the Grouphave investment entity associates or joint venture.

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· PAS 27, Separate Financial Statements – Equity Method in Separate Financial Statements(Amendments)The amendments will allow entities to use the equity method to account for investments insubsidiaries, joint ventures and associates in their separate financial statements. Entitiesalready applying PFRS and electing to change to the equity method in its separate financialstatements will have to apply that change retrospectively. The amendments are effective forannual periods beginning on or after January 1, 2016, with early adoption permitted. Theseamendments will not have any impact on the Group’s consolidated financial statements.

· PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests (Amendments)The amendments to PFRS 11 require a joint operator that is accounting for the acquisition ofan interest in a joint operation, in which the activity of the joint operation constitutes business(as defined by PFRS 3), to apply the relevant PFRS 3 principles for business combinationsaccounting. The amendments also clarify that a previously held interest in a joint operation isnot remeasured on the acquisition of an additional interest in the same joint operation whilejoint control is retained. In addition, a scope exclusion has been added to PFRS 11 to specifythat the amendments do not apply when the parties sharing joint control, including thereporting entity, are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and theacquisition of any additional interests in the same joint operation and are prospectivelyeffective for annual periods beginning on or after January 1, 2016, with early adoptionpermitted. These amendments are not expected to have any impact to the Group.

· PAS 1, Presentation of Financial Statements – Disclosure Initiative (Amendments)The amendments are intended to assist entities in applying judgment when meeting thepresentation and disclosure requirements in PFRS. They clarify the following:• That entities shall not reduce the understandability of their financial statements by either

obscuring material information with immaterial information; or aggregating material itemsthat have different natures or functions

• That specific line items in the statement of income and OCI and the statement of financialposition may be disaggregated

• That entities have flexibility as to the order in which they present the notes to financialstatements

• That the share of OCI of associates and joint ventures accounted for using the equitymethod must be presented in aggregate as a single line item, and classified between thoseitems that will or will not be subsequently reclassified to profit or loss.

Early application is permitted and entities do not need to disclose that fact as the amendmentsare considered to be clarifications that do not affect an entity’s accounting policies oraccounting estimates. The Group is currently assessing the impact of these amendments on itsconsolidated financial statements.

· PFRS 14, Regulatory Deferral AccountsPFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferralaccount balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 mustpresent the regulatory deferral accounts as separate line items on the statement of financialposition and present movements in these account balances as separate line items in thestatement of income and other comprehensive income.

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The standard requires disclosures on the nature of, and risks associated with, the entity’s rate-regulation and the effects of that rate-regulation on its financial statements. PFRS 14 iseffective for annual periods beginning on or after January 1, 2016. Since the Group is anexisting PFRS preparer, this standard would not apply.

· PAS 16, Property, Plant and Equipment and PAS 41, Agriculture – Bearer PlantsThe amendments change the accounting requirements for biological assets that meet thedefinition of bearer plants. Under the amendments, biological assets that meet the definitionof bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply.After initial recognition, bearer plants will be measured under PAS 16 at accumulated cost(before maturity) and using either the cost model or revaluation model (after maturity). Theamendments also require that produce that grows on bearer plants will remain in the scope ofPAS 41 measured at fair value less costs to sell. For government grants related to bearerplants, PAS 20, Accounting for Government Grants and Disclosure of Government Assistancewill apply. The amendments are retrospectively effective for annual periods beginning on orafter January 1, 2016, with early adoption permitted. These amendments are not expected tohave any impact to the Group as the Group does not have any bearer plants.

· PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets – Clarification ofAcceptable Methods of Depreciation and Amortization (Amendments)The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern ofeconomic benefits that are generated from operating a business (of which the asset is part)rather than the economic benefits that are consumed through use of the asset. As a result, arevenue-based method cannot be used to depreciate property, plant and equipment and mayonly be used in very limited circumstances to amortize intangible assets. The amendments areeffective prospectively for annual periods beginning on or after January 1, 2016, with earlyadoption permitted. These amendments are not expected to have any impact to the Groupgiven that the Group has not used a revenue-based method to depreciate its non-current assets.

Annual Improvements to PFRSs (2012-2014 cycle)The Annual Improvements to PFRSs (2012-2014 cycle) are effective for annual periods beginningon or after January 1, 2016 and are not expected to have a material impact on the Group. Theyinclude:

· PFRS 5, Non-current Assets Held for Sale and Discontinued Operations – Changes inMethods of DisposalThe amendment is applied prospectively and clarifies that changing from a disposal throughsale to a disposal through distribution to owners and vice-versa should not be considered to bea new plan of disposal, rather it is a continuation of the original plan. There is, therefore, nointerruption of the application of the requirements in PFRS 5. The amendment also clarifiesthat changing the disposal method does not change the date of classification.

· PFRS 7, Financial Instruments: Disclosures – Servicing ContractsPFRS 7 requires an entity to provide disclosures for any continuing involvement in atransferred asset that is derecognized in its entirety. The amendment clarifies that a servicingcontract that includes a fee can constitute continuing involvement in a financial asset. Anentity must assess the nature of the fee and arrangement against the guidance for continuinginvolvement in PFRS 7 in order to assess whether the disclosures are required. Theamendment is to be applied such that the assessment of which servicing contracts constitutecontinuing involvement will need to be done retrospectively. However, comparativedisclosures are not required to be provided for any period beginning before the annual periodin which the entity first applies the amendments.

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· PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim FinancialStatementsThis amendment is applied retrospectively and clarifies that the disclosures on offsetting offinancial assets and financial liabilities are not required in the condensed interim financialreport unless they provide a significant update to the information reported in the most recentannual report.

· PAS 19, Employee Benefits – Regional Market Issue Regarding Discount RateThis amendment is applied prospectively and clarifies that market depth of high qualitycorporate bonds is assessed based on the currency in which the obligation is denominated,rather than the country where the obligation is located. When there is no deep market for highquality corporate bonds in that currency, government bond rates must be used.

· PAS 34, Interim Financial Reporting – Disclosure of Information ‘Elsewhere in the InterimFinancial Report’The amendment is applied retrospectively and clarifies that the required interim disclosuresmust either be in the interim financial statements or incorporated by cross-reference betweenthe interim financial statements and wherever they are included within the greater interimfinancial report (e.g., in the management commentary or risk report).

Effective January 1, 2018

· PFRS 9, Financial InstrumentsIn July 2014, the IASB issued the final version of IFRS 9, Financial Instruments. The newstandard (renamed as PFRS 9) reflects all phases of the financial instruments project andreplaces PAS 39, Financial Instruments: Recognition and Measurement, and all previousversions of PFRS 9. The standard introduces new requirements for classification andmeasurement, impairment, and hedge accounting. PFRS 9 is effective for annual periodsbeginning on or after January 1, 2018, with early application permitted. Retrospectiveapplication is required, but providing comparative information is not compulsory. For hedgeaccounting, the requirements are generally applied prospectively, with some limitedexceptions. Early application of previous versions of PFRS 9 (2009, 2010 and 2013) ispermitted if the date of initial application is before February 1, 2015.

In compliance with SEC Memorandum Circular No. 3, series of 2012, the Group hasconducted a study on the impact of an early adoption of PFRS 9. After a careful considerationof the results on the impact evaluation, the Group has decided not to early adopt PFRS 9 forits 2015 annual evaluation and financial reporting. Therefore, these financial statements donot reflect the impact of the said standard.

Deferred Effectivity

· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real EstateThis interpretation covers accounting for revenue and associated expenses by entities thatundertake the construction of real estate directly or through subcontractors. The interpretationrequires that revenue on construction of real estate be recognized only upon completion,except when such contract qualifies as construction contract to be accounted for under PAS 11or involves rendering of services in which case revenue is recognized based on stage ofcompletion. Contracts involving provision of services with the construction materials andwhere the risks and reward of ownership are transferred to the buyer on a continuous basiswill also be accounted for based on stage of completion.

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The Securities and Exchange Commission and the Financial Reporting Standards Councilhave deferred the effectivity of this interpretation until the final Revenue standard is issued bythe International Accounting Standards Board (IASB) and an evaluation of the requirementsof the final Revenue standard against the practices of the Philippine real estate industry iscompleted. The Group is currently assessing the impact of adopting this standard.

The following new standard issued by the IASB has not yet been adopted by the FRSC:

· International Financial Reporting Standard (IFRS) 15, Revenue from Contracts withCustomersIFRS 15 was issued in May 2014 by the IASB and establishes a new five-step model that willapply to revenue arising from contracts with customers. Under IFRS 15, revenue is recognizedat an amount that reflects the consideration to which an entity expects to be entitled inexchange for transferring goods or services to a customer. The principles in IFRS 15 providea more structured approach to measuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenuerecognition requirements under IFRS. Either a full or modified retrospective application isrequired for annual periods beginning on or after January 1, 2018. Early adoption ispermitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the newstandard on the required effective date once adopted locally.

· IFRS 16, LeasesOn January 13, 2016, the IASB issued its new standard, IFRS 16, Leases, which replacesIAS 17, the current leases standard, and the related Interpretations.

Under the new standard, lessees will no longer classify their leases as either operating orfinance leases in accordance with IAS 17. Rather, lessees will apply the single-asset model.Under this model, lessees will recognize the assets and related liabilities for most leases ontheir balance sheets, and subsequently, will depreciate the lease assets and recognize intereston the lease liabilities in their profit or loss. Leases with a term of 12 months or less or forwhich the underlying asset is of low value are exempted from these requirements.

The accounting by lessors is substantially unchanged as the new standard carries forward theprinciples of lessor accounting under IAS 17. Lessors, however, will be required to disclosemore information in their financial statements, particularly on the risk exposure to residualvalue.

The new standard is effective for annual periods beginning on or after January 1, 2019.Entities may early adopt IFRS 16 but only if they have also adopted IFRS 15, Revenue fromContracts with Customers. When adopting IFRS 16, an entity is permitted to use either a fullretrospective or a modified retrospective approach, with options to use certain transitionreliefs. The Group is currently assessing the impact of PFRS 16 and plans to adopt the newstandard on the required effective date once adopted locally.

Significant Accounting Policies

Fair Value MeasurementThe Group measures and discloses financial instruments, such as AFS investments and loans andreceivables, respectively, at fair value at each reporting date. Also, fair values of financialinstruments measured at amortized cost are disclosed in Note 5.

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Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

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

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

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s abilityto generate economic benefits by using the asset in its highest and best use or by selling it toanother 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 whichsufficient data are available to measure fair value, maximizing the use of relevant observablesinputs and minimizing the use of observables inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statementsare categorized within the fair value hierarchy, described as follows, based on the lowest levelinput 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· 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 financial statements on a recurring basis, theGroup determines whether transfers have occurred between Levels in the hierarchy by re-assessingcategorization (based on the lowest level input that is significant to the fair value measurement asa whole) at the end of each reporting period.

Financial InstrumentsDate of recognitionThe Group recognizes a financial asset or a financial liability in the consolidated statement offinancial position when it becomes a party to the contractual provisions of the instrument.Purchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized on the trade date,i.e., the date that the Group commits to purchase or sell the asset.

Initial recognitionAll financial instruments are initially measured at fair value. Except for financial instruments atFVPL, the initial measurement of financial instruments includes transaction costs. The Groupclassifies its financial assets in the following categories: financial assets at FVPL, held-to-maturity(HTM) investments, AFS investments, and loans and receivables. Financial liabilities areclassified into financial liabilities at FVPL and other financial liabilities.

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The classification depends on the purpose for which the investments were acquired and whetherthey are quoted in an active market. Management determines the classification of its investmentsat initial recognition and, where allowed and appropriate, re-evaluates such designation at everyreporting date.

The Group has no designated financial asset and liability at FVPL and HTM investments as ofDecember 31, 2015 and 2014.

Subsequent measurementThe subsequent measurement of financial instruments depends on their classification as follows:

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments andfixed maturities that are not quoted in an active market. After initial measurement, loans andreceivables are carried at amortized cost using the effective interest rate (EIR) method lessallowance for impairment losses. Amortized cost is calculated by taking into account any discountor premium on acquisitions and fees or costs that are an integral part of the EIR method. The EIRamortization is included in the interest income in profit or loss. Receivables, which generally have30-90 days’ terms, are recognized and carried at original invoice amount less an allowance for anyuncollectible amounts.

The Group’s loans and receivables include cash and cash equivalents, receivables, and refundabledeposits as of December 31, 2015 and 2014.

AFS investmentsAFS investments are non-derivative financial assets that are designated as such or do not qualifyto be categorized as designated as FVPL, HTM or loans and receivables. They are purchased andheld indefinitely, and may be sold in response to liquidity requirements or changes in marketconditions. AFS investments also include investments in unquoted equity instruments, where theGroup’s ownership interest is less than 20% or where control is likely to be temporary. These areinitially recorded at cost being the fair value of the investment at the time of acquisition, inclusiveof direct acquisition charges associated with the investment.

After initial measurement, AFS investments are subsequently measured at fair value. The Groupis precluded from measuring the instrument at fair value if the range of reasonable fair valueestimates is significant and the probabilities of the various estimates cannot be reasonablyassessed.

The unrealized gains and losses arising from the fair valuation of AFS investments are recognizedunder other comprehensive income. Investments in unquoted equity instruments are subsequentlycarried at cost due to the unpredictable nature of future cash flows and the lack of other suitablemethod for arriving at a reliable fair value.

When an AFS investment is disposed of, the cumulative gain or loss previously under the othercomprehensive income is recognized in the current operations. The losses arising fromimpairment of such investments are recognized as ‘Provision for impairment losses’ in the profitor loss.

As of December 31, 2015 and 2014, the Group has quoted and unquoted equity securities.

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Other financial liabilitiesOther financial liabilities pertain to financial liabilities that are not held for trading or notdesignated as FVPL upon inception of the liability. These include liabilities arising fromoperations.

After initial measurement, accounts payable and similar financial liabilities not qualified as andnot designated as FVPL, are subsequently measured at amortized cost using the EIR method.Amortized cost is calculated by taking into account any discount or premium on the issue and feesthat are an integral part of the EIR.

The other financial liabilities of the Group include accounts payable and accrued expenses, bankloans and security deposits as of December 31, 2015 and 2014.

Derecognition of Financial InstrumentsFinancial assetA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized when:

· the rights to receive cash flows from the asset have expired;· the Group has transferred its rights to receive cash flows from the asset or has assumed an

obligation to pay the received cash flows in full without material delay to a third party under a‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risksand rewards of the asset, or (b) the Group has neither transferred nor retained substantially allthe risks and rewards of the asset, but has transferred control of the asset.

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

Continuing involvement that takes the form of a guarantee over the transferred asset is measuredat the lower of original carrying amount of the asset and the maximum amount of considerationthat the Group could be required to repay.

Financial liabilityA financial liability is derecognized when the obligation under the liability is discharged orcancelled or has expired. When an existing financial liability is replaced by another from the samelender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liabilityand the recognition of a new liability and the difference in the respective carrying amounts isrecognized in profit or loss.

Impairment of Financial AssetsThe Group assesses at each reporting date whether there is objective evidence that a financial assetor a group of financial assets is impaired. A financial asset or a group of similar financial assets isdeemed to be impaired if, and only if, there is objective evidence of impairment as a result of oneor more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’)and that loss event (or events) has an impact on the estimated future cash flows of the financialasset or the group of similar financial assets that can be reliably estimated. Evidence ofimpairment may include indications that the customer or a group of customers is experiencingsignificant financial difficulty, default or delinquency in interest or principal payments, theprobability that they will enter bankruptcy or other financial reorganization and when observable

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data indicate that there is measurable decrease in the estimated future cash flows, such as changesin arrears or economic conditions that correlate with defaults.

Loans and receivablesFor financial assets carried at amortized cost, which include cash and cash equivalents, receivablesand refundable deposits, the Group first assesses whether objective evidence of impairment existsindividually for financial assets that are individually significant, or collectively for financial assetsthat are not individually significant.

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

If there is objective evidence that an impairment loss has been incurred, the amount of the loss ismeasured as the difference between the assets carrying amount and the present value of estimatedfuture cash flows (excluding future expected credit losses that have not yet been incurred). Thepresent value of the estimated future cash flows is discounted at the financial assets original EIR.If a loan has a variable interest rate, the discount rate for measuring any impairment loss is thecurrent EIR.

The carrying amount of the asset is reduced through the use of an allowance account and theamount of the loss is recognized in profit or loss. Interest income continues to be accrued on thereduced carrying amount and is accrued using the rate of interest used to discount the future cashflows for the purpose of measuring the impairment loss. The interest income is recorded in profitor loss. Loans, together with the associated allowance, are written off when there is no realisticprospect of future recovery and all collateral has been realized or has been transferred to thegroup. If, in a subsequent year, the amount of the estimated impairment loss increases ordecreases because of an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is increased or reduced by adjusting the allowance account andcrediting ‘Recovery of impairment losses’ or debiting ‘Provision for impairment losses’ in profitor loss.

AFS investmentsFor AFS investments, the Group assesses at each reporting date whether there is objectiveevidence that a financial asset or group of similar financial assets is impaired.

In case of equity investments classified as AFS, objective evidence would include a significant orprolonged decline in the fair value of the investments below its cost. Where there is evidence ofimpairment, the cumulative loss, measured as the difference between the acquisition cost and thecurrent fair value, less any impairment loss on that financial asset, is removed from othercomprehensive income and charged to operations.

Impairment losses on equity investments are not reversed through the current income. Increasesand decreases in fair value subsequent to impairment are recognized directly in othercomprehensive income.

Investments in equity instruments that do not have a quoted market price in an active market andwhose fair value cannot be reliably measured shall be measured at cost subject to impairment.Evidence of impairment may include indications that the probability that the other party will enterbankruptcy or other financial reorganization and when observable data indicate that there is

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measurable decrease in the estimated future cash flows, such as changes in arrears or economicconditions that correlated with defaults.

Offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidatedstatement of financial position if, and only if, there is a currently enforceable legal right to offsetthe recognized amounts and there is an intention to settle on a net basis, or to realize the asset andsettle the liability simultaneously. The Group assesses that it has a currently enforceable right ofoffset if the right is not contingent on a future event, and is legally enforceable in the normalcourse of business, event of default, and event of insolvency or bankruptcy of the Group and all ofthe counterparties.

Cash and Cash EquivalentsCash and cash equivalents comprise of cash on hand, cash in banks and short term deposits. Shortterm deposits are highly liquid investments that are readily convertible to known amounts of cashwith original maturities of three months or less and are subject to an insignificant risk of changesin value.

InventoriesInventories are valued at the lower of cost and net realizable value (NRV). Cost of finished goodsand work-in-process inventories include direct materials, labor costs and a proportion ofmanufacturing overhead costs based on normal capacity, and is determined using the first-in,first-out (FIFO) method. Costs of purchased raw materials, spare parts and supplies are stated atinvoice value determined using the FIFO method. NRV is the estimated selling price in theordinary course of business, less estimated costs of completion and marketing costs. Indetermining the NRV, the Group considers factors such as the aging and future demand of theinventory, contractual arrangements with customers and the Group’s ability to redistributeinventory to other products or return inventory to suppliers.

Investment in AssociatesThe Group’s investment in associates is accounted for under the equity method of accounting. Anassociate is an entity in which the Group has significant influence. Significant influence is thepower to participate in the financial and operational policy decisions of the investee, but is notcontrol or joint control over those polices.

Under the equity method, the investment in associates is carried in the consolidated statement offinancial position at cost plus post-acquisition changes in the Group’s share in the net assets of theassociate.

The Group’s share of the results of operations of the associate is reflected in profit or loss. Wherethere has been a change recognized directly in the equity of the associate, the Group recognizes itsshare of any changes and discloses this, when applicable, in other comprehensive income.

The Group recognizes its share of the losses of the associate until its share of losses equals itsinterest in the associate. Once the Group’s investment is reduced to zero, additional losses areprovided for, and a liability is recognized to the extent the Group has incurred legal or constructiveobligations or made payments on behalf of the associate.

The reporting dates of the associate and the Group are identical and the associates’ accountingpolicies conform to those used by the Group for like transactions and events in similarcircumstances.

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Property, Plant and EquipmentProperty, plant and equipment, except for land, are carried at cost less accumulated depreciationand amortization and any impairment in value. The initial cost of property and equipmentcomprises its purchase price, including import duties, taxes and any directly attributable costs ofbringing the asset to its working condition and location for its intended use. Subsequentreplacement costs of parts of the property and equipment are capitalized when the recognitioncriteria are met. Significant refurbishments and improvements are capitalized when it can beclearly demonstrated that the expenditures have resulted in an increase in future economic benefitsexpected to be obtained from the use of an item of property and equipment beyond the originallyassessed standard of performance. Costs of repairs and maintenance are charged as expense whenincurred.

Land is measured at cost less accumulated impairment losses recognized. Valuations areperformed frequently to ensure that the fair value of the asset does not differ materially from itscarrying amount.

Depreciation is computed using the straight-line method over the following estimated useful life(EUL) of each type of asset:

YearsMachineries and equipment 5-7Building and building improvements 5-30Tools and other equipment 5Plant water and air conditioning systems 5-15Furniture, fixtures and equipment 5Transportation equipment 5

The cost of the leasehold improvements is amortized over the lease term or EUL of theimprovements of seven years, whichever is lower.

The EUL and the depreciation methods are reviewed at each financial year-end to ensure that theperiod and the methods of depreciation are consistent with the expected pattern of economicbenefits from items of property, plant and equipment.

The carrying values of property, plant and equipment are reviewed for impairment when events orchanges in circumstances indicate the carrying values may not be recoverable. If any suchindication exists and where the carrying values exceed the estimated recoverable amounts, theassets or cash generating units are written down to their recoverable amounts (see AccountingPolicy on Impairment of Non-Financial Assets).

An item of property, plant and equipment is derecognized upon disposal or when no futureeconomic benefits are expected from its use or disposal. Any gain or loss arising on derecognitionof the asset (calculated as the difference between the net disposal proceeds and the carryingamount of the asset) is included in profit or loss in the year the asset is derecognized and the costand the related accumulated depreciation and any impairment in value, are removed from theaccounts.

Investment PropertiesInvestment properties are measured initially at cost, including transaction costs. The carryingamount includes the cost of replacing part of an existing investment property at the time that costis incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of aninvestment property.

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Subsequent to initial recognition, investment properties, except for land, are carried at cost lessaccumulated depreciation and amortization and any impairment in value. Land is carried at costless impairment in value, if any.

Expenditures incurred after the investment properties have been put into operation, such as repairsand maintenance costs, are normally charged to operations in the period in which the costs areincurred.

Depreciation is calculated on a straight-line basis using the remaining useful lives from the time ofacquisition of the investment properties as follows:

YearsBuilding 30Building improvements 7

Investment properties are derecognized when either they have been disposed of, or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal. Any gains or losses on the retirement or disposal of an investmentproperty are recognized in profit or loss in the year of retirement or disposal.

Transfers are made to or from investment properties when, and only when, there is a change in useevidenced by ending of owner-occupation, commencement of an operating lease to another partyor ending of construction or development. Transfers are made from investment properties toinventories when, and only when, there is a change in use evidenced by commencement of owner-occupation or commencement of development with a view of sale. For a transfer from investmentproperty to owner-occupied property, the deemed cost for subsequent accounting is the fair valueat the date of change in use. If owner-occupied property becomes an investment property, theGroup accounts for such property in accordance with the policy stated under property, plant andequipment up to the date of change in use.

Business CombinationsBusiness combinations are accounted for using the acquisition method. The cost of an acquisitionis measured as the aggregate of the consideration transferred, measured at fair value as at theacquisition date and the amount of any non-controlling interest in the acquiree. For each businesscombination, the acquirer measures the non-controlling interest in the acquiree either at fair valueor at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurredare expensed and included in administrative expenses.

Changes in the Parent Company's ownership interest in a subsidiary that do not result in a loss ofcontrol are accounted for as equity transactions, i.e., transactions with owners in their capacity asowners.

In such circumstances, the carrying amounts of the controlling and non-controlling interests shallbe adjusted to reflect the changes in their relative interests in the subsidiary. Any differencebetween the amount by which the non-controlling interests are adjusted and the fair value of theconsideration paid or received shall be recognized directly in equity and attributed to the ownersof the Parent Company (see Note 30).

GoodwillGoodwill is initially measured at cost being the excess of the cost of the business combinationover the Group’s share in the net fair value of the acquiree’s identifiable assets, liabilities andcontingent liabilities.

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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 theacquisition date, allocated to each of the Group’s cash generating units that are expected to benefitfrom the synergies of the combination, irrespective of whether other assets or liabilities of theacquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit isdisposed of, the goodwill associated with the operation disposed of is included in the carryingamount of the operation when determining the gain or loss on disposal of the operation. Goodwilldisposed of in this circumstance is measured based on the relative values of the operation disposedof and the portion of the cash-generating unit retained.

The goodwill of the Group came from its acquisition of the remaining 30% share in Iomni.

Impairment of Non-Financial AssetsProperty, plant and equipment and investment propertiesThe Group assesses at each reporting date whether there is an indication that an asset may beimpaired. If any such indication exists, the Group makes an estimate of the asset’s recoverableamount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fairvalue less costs to sell and its value in use and is determined for an individual asset, unless theasset does not generate cash inflows that are largely independent of those from other assets orgroups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the assetis considered impaired and is written down to its recoverable amount. In assessing value in use,the estimated future cash flows are discounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value of money and the risks specific to theasset. Impairment losses of continuing operations are recognized in profit or loss in those expensecategories consistent with the function of the impaired asset.

An impairment loss is charged to operations in the year in which it arises, unless the asset iscarried at a revalued amount, in which case the impairment loss is charged to the revaluationincrement of the said asset.

An assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indicationexists, the recoverable amount is estimated. A previously recognized impairment loss is reversedonly if there has been a change in the estimates used to determine the asset’s recoverable amountsince the last impairment loss was recognized. If that is the case, the carrying amount of the assetis increased to its recoverable amount. That increased amount cannot exceed the carrying amountthat would have been determined, net of depreciation, had no impairment loss been recognized forthe asset in prior years. Such reversal is recognized in profit or loss unless the asset is carried atrevalued amount, in which case, the reversal is treated as a revaluation increase. After suchreversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carryingamount, less any residual value, on a systematic basis over its remaining useful life.

GoodwillThe Group assesses whether there are any indicators that goodwill is impaired at each reportingdate. Goodwill is tested for impairment annually as at December 31 and when circumstancesindicate that the carrying value may be impaired.

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Impairment is determined for goodwill by assessing the recoverable amount of the cash-generatingunits, to which the goodwill relates. An impairment loss is recognized when the recoverableamount of the cash-generating units is less than their carrying amount. Impairment losses relatingto goodwill cannot be reversed in future periods.

Investments in associatesAfter application of the equity method, the Group determines whether it is necessary to recognizean additional impairment loss of the Group’s investments in its associates. The Group determinesat each reporting date whether there is any objective evidence that investment in associate isimpaired. If this is the case, the Group calculates the amount of impairment being the differencebetween the fair value of the associate and the acquisition cost and recognizes the amount in profitor loss.

Advances from customersThis account pertains to advances received from the customers to be used by the Group topurchase raw materials and cover aging inventories. Advances from customers are recognizedwhen cash is received and is measured at cost.

Foreign Currency-denominated Transactions and TranslationTransactions in foreign currencies are recorded using the exchange rate at the date of transactions.Foreign exchange gains or losses arising from foreign currency transactions and revaluationadjustments of foreign currency assets and liabilities are credited to or charged against currentoperations. Monetary assets and liabilities denominated in foreign currencies are translated usingthe foreign exchange rate prevailing at reporting date. All differences are taken to profit or loss.Non-monetary items that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates on the dates of the initial transactions. Non-monetary itemsmeasured at fair value in a foreign currency are translated using the exchange rate at the date whenthe fair value was determined.

EquityCapital stock is measured at par value for all shares issued and outstanding. When the Groupissues more than one class of stock, a separate account is maintained for each class of stock andthe number of shares issued. When the shares are sold at premium, the difference between theproceeds and the par value is credited to “Additional paid-in capital” account.

Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees,printing costs and taxes are chargeable to “Additional paid-in capital” account. If additional paid-in capital is not sufficient, the excess is charged against retained earnings.

Retained earnings represent accumulated earnings of the Group and any adjustments arising fromapplication of new accounting standards, policies or correction of errors applied retrospectively,less dividends declared. The individual accumulated earnings of the subsidiaries and accumulatedequity earnings from associates included in the consolidated retained earnings are available fordividend declaration when these are declared as dividends by the subsidiaries and associates asapproved by their respective BOD.

Retained earnings are further restricted for the payment of dividends to the extent of the cost ofcommon shares held in treasury.

The Parent Company's retained earnings available for dividend declaration amounted toUS$16.32 million, US$15.46 million and US$13.18 million as of December 31, 2015, 2014 and2013, respectively. Dividend distribution is approved by BOD.

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Treasury SharesOwn equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue orcancellation of the Group’s own equity instruments.

Earnings (Loss) Per ShareBasic earnings (loss) per share is computed by dividing net income (loss) for the year attributableto ordinary equity holders of the Parent Company by the weighted average number of commonshares issued and outstanding during the year, after giving retrospectively adjustment to any stockdividend declared or stock split made during the year.

Diluted earnings (loss) per share (EPS) is calculated by dividing the net income (loss) attributableto common shareholders by the weighted average number of common shares outstanding duringthe year adjusted for the effects of any dilutive potential common shares.

Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured. Regardless of when the payment is being made,revenue is measured at fair value of the consideration received or receivable, taking into accountcontractually defined terms of payment and excluding taxes or duty. The Group assesses itsrevenue recognition arrangements against specific criteria in order to determine if it is acting asprincipal or agent. The Group has concluded that it is acting as a principal in all arrangements.

The following specific recognition criteria must also be met before revenue is recognized:

SalesRevenue from sales is recognized upon shipment of packaged electronic products or when thepackaged electronic products are accepted by the customer depending on the specific agreementwith each customer, title and risk of ownership have been transferred to the customer, the price tobe paid by the customer is fixed or determinable and the recoverability is reasonably assured.Generally, there are no formal customer acceptance requirements or future obligations related tomanufacturing services. If such requirements exist, then revenue is recognized at the time suchprovisions or requirements are completed and obligations are already fulfilled.

Rental incomeRental income arising from operating leases on investment properties is accounted for on astraight-line basis over the lease terms of ongoing leases.

Dividend incomeDividend income is recognized when the Group’s right to receive the dividends is established.Dividend income is included in the “Other income” account in profit or loss.

Interest incomeInterest income is recognized as interest accrues taking into account the effective yield on theasset. Interest income is included in the “Other income” account in profit or loss.

Costs and ExpensesCosts and expenses encompass losses as well as those expenses that arise in the course of theordinary activities and incidental of the Group.

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The following specific recognition criteria must also be met before costs and expenses arerecognized:

Cost of salesCost of sales includes all expenses associated with the sale of goods. This includes all materialsand supplies used, direct labor and overhead costs related to production. Such costs arerecognized when the related sales have been recognized.

Cost of rental servicesCost of rental services includes all direct expenses associated with operating leases. This includesdepreciation, real property taxes, repairs and maintenance and salaries and wages related to themaintenance of investment properties. Such costs are recognized when incurred.

Operating expensesOperating expenses constitute costs which are directly related to selling, advertising and deliveryof goods to customers and costs of administering the business and are recognized when incurred.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance ofthe arrangement and requires an assessment of whether the fulfillment of the arrangement isdependent on the use of a specific asset or assets and the arrangement conveys a right to use theasset, even if that right is not explicitly specified in an arrangement.

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

Operating lease - Group as a LessorLeases where the Group does not transfer substantially all the risk and benefits of ownership of theassets are classified as operating leases. Collections of operating lease payments are recognized asan income in profit or loss on a straight-line basis over the lease term. Initial direct costs incurredin negotiating operating leases are added to the carrying amount of the leased asset and recognizedover the lease term on the same basis as the rental income. Contingent rents are recognized asrevenue in the period in which they are earned.

Finance lease - Group as a LesseeLeases where the lessor transfer substantially all the risk and benefits of ownership of the leaseditem, are capitalized at the inception of the lease at fair value of the leased property or, if lower, atthe present value of the minimum leased payments. Lease payments are apportioned between thefinance charges and reduction of the lease liability so as to achieve a constant rate of interest onthe remaining balance of the liability. Finance charges are charged directly against income.Capitalized leased assets are depreciated over the shorter of the estimated useful lives of the assetsor the respective lease terms.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonablecertainty that the Group will obtain ownership by the end of the leased term, the asset isdepreciated over the shorter of the estimated useful life of the asset and the lease term.

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

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

Defined benefit costs comprise the following:

· Service costs· Net interest on the net defined benefit liability or asset· Remeasurements of net defined benefit liability or asset

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

These amounts are calculated periodically by independent qualified actuary.

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

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in OCI in the period in which they arise. Remeasurements are not reclassified toprofit or loss in subsequent periods. All remeasurements recognized in OCI account“Remeasurement gains (losses)” on retirement plans are not reclassified to another equity accountin subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Group, nor can they be paid directlyto the Group. Fair value of plan assets is based on market price information. When no marketprice is available, the fair value of plan assets is estimated by discounting expected future cashflows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expected perioduntil the settlement of the related obligations). If the fair value of the plan assets is higher than thepresent value of the defined benefit obligation, the measurement of the resulting defined benefitasset is limited to the present value of economic benefits available in the form of refunds from theplan or reductions in future contributions to the plan.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a definedbenefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

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Termination benefitTermination benefits are employee benefits provided in exchange for the termination of anemployee’s employment as a result of either an entity’s decision to terminate an employee’semployment before the normal retirement date or an employee’s decision to accept an offer ofbenefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity canno longer withdraw the offer of those benefits and when the entity recognizes related restructuringcosts. Initial recognition and subsequent changes to termination benefits are measured inaccordance with the nature of the employee benefit, as either post-employment benefits, short-term employee benefits, or other long-term employee benefits.

Employee leave entitlementEmployee entitlements to annual leave are recognized as a liability when they are accrued to theemployees. The undiscounted liability for leave expected to be settled wholly within twelvemonths after the end of the annual reporting period is recognized for services rendered byemployees up to the end of the reporting period.

Income TaxesCurrent income taxCurrent income tax assets and liabilities for the current and prior periods are measured at theamount expected to be recovered from or paid to taxation authorities. Tax rates and tax laws usedto compute the amount are those that are enacted or substantially enacted at the reporting date.

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

Deferred income tax liabilities are recognized for all taxable temporary differences, with certainexceptions. Deferred income tax assets are recognized for all deductible temporary differences,carryforward of unused tax credits from the excess of minimum corporate income tax (MCIT)over the regular corporate income tax (RCIT), and unused net operating loss carryover (NOLCO),to the extent that it is probable that sufficient taxable income will be available against which thedeductible temporary differences and carryforward of unused tax credits from MCIT and unusedNOLCO can be utilized. Deferred income tax, however, is not recognized on temporarydifferences that arise from the initial recognition of an asset or liability in a transaction that is not abusiness combination and, at the time of the transaction, affects neither the accounting income nortaxable income.

Deferred income tax liabilities are not provided on non-taxable temporary differences associatedwith investments in domestic subsidiaries and associates. With respect to investments in foreignsubsidiaries and associates, deferred income tax liabilities are recognized except where the timingof the reversal of the temporary difference can be controlled and it is probable that the temporarydifference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient taxable income will be available to allow all orpart of the deferred tax assets to be utilized. Deferred income tax assets and liabilities aremeasured at the tax rates that are applicable to the period when the asset is realized or the liabilityis settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at thereporting date.

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Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceableright exists to offset current tax assets against current tax liabilities and deferred income taxesrelate to the same taxable entity and the same taxation authority.

ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as aresult of a past event and it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate can be made of the amount of theobligation.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements but are disclosedunless the possibility of an outflow of resources embodying economic benefits is remote.Contingent assets are not recognized but are disclosed in the consolidated financial statementswhen an inflow of economic benefits is probable.

SegmentA segment is a distinguishable component of the Group that is engaged in providing products orservices (business segment) and is subject to risks and rewards that are different from othersegments. Segment assets and liabilities reported are those assets and liabilities included in measuresthat are used by the chief operating decision maker.

Events after the Reporting PeriodPost-year-end events that provide additional information about the Group’s position at thereporting date (adjusting events) are reflected in the consolidated financial statements. Post-year-end events that are not adjusting events are disclosed in the notes when material to theconsolidated financial statements.

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the accompanying consolidated financial statements in compliance with PFRSrequires management to make judgments, estimates and assumptions that affect the reportedamounts of assets, liabilities, income and expenses and disclosure of contingent assets andcontingent liabilities, at the reporting date. The judgments, estimates and assumptions used in theconsolidated financial statements are based on management’s evaluation of relevant facts andcircumstances as of the date of the Group’s financial statements. Actual results could differ fromsuch estimates.

Judgments, estimates and assumptions are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to bereasonable under the circumstances.

JudgmentsIn the process of applying the Group’s accounting policies, management has made the followingjudgments, apart from those involving estimations, which have the most significant effect on theamounts recognized in the consolidated financial statements:

Determination of functional currencyThe Group determines the functional currency based on economic substance of underlyingcircumstances relevant to the Group. The functional currency has been determined to be the U.S.dollar since its revenues and expenses are substantially denominated in U.S. dollar.

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Operating lease commitments - Group as a LessorThe Group has entered into commercial property leases on its investment property portfolio. Alease is classified as a finance lease if it transfers substantially all the risks and rewards incidentalto ownership.

The following indicators, individually or in combination, would normally lead to a lease beingclassified as a finance lease:

· the lease does transfer ownership of the asset to the lessees by the end of the lease term;· the lessee has the option to purchase the asset at a price that is expected to be sufficiently

lower than the fair value at the date the option becomes exercisable for it to be reasonablycertain, at the inception of the lease, that the option will be exercised;

· the lease term is for the major part of the economic life of the asset even if title is nottransferred;

· at the inception of the lease the present value of the minimum lease payments amounts to atleast substantially all of the fair value of the leased asset; and

· the leased assets are of such a specialized nature that only the lessee can use them withoutmajor modifications.

For all lease agreements, the Group determined that no indicators exist to consider the leasecommitments as a finance lease. The Group retains all the significant risks and rewards ofownership of these properties and therefore, all leases are accounted for as operating leases(see Note 24). Rental income is recognized on a straight-line basis.

Operating lease commitments - Group as a LesseeThe Group has entered into commercial property leases. The Group has determined, based on theterms and conditions of the lease agreements and finance lease indicators previously set forth, thatit has not acquired all the significant risks and rewards of ownership of the leased properties andso accounts for the contracts as operating leases (see Note 24). Rent expense is recognized on astraight-line basis.

Finance lease commitments - Group as a LesseeThe Group leases certain properties and has determined, based on an evaluation of the terms andconditions of the agreements, that the lessor transfers substantially all the risk and benefitsincidental to ownership of the leased properties to the Group, thus, the Group recognizes theseleases as finance leases.

Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing material adjustment to the carrying amountsof assets and liabilities within the next financial year are discussed below.

Impairment of AFS investmentsThe Group treats AFS investments as impaired when there has been a significant or prolongeddecline in the fair value below its 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 six months for quotedsecurities. In addition, the Group evaluates other factors, including the future cash flows and thediscount factors of these securities.

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In 2015, the Group has recognized impairment in its investments in Eagle Ridge Golf and CountryClub amounting to US$0.003 million due to management’s assessment that it is not probable torecover all the cost of investment.

In the last quarter of 2014, the Group recognized the increase in fair value for one of its available-for-sale investments, Pacific Synergies IV, amounting to US$0.18 million, due to the recovery invalue of its investments thereby increasing its net assets. The increase in fair value wasrecognized in other comprehensive income.

In the third quarter of 2014, the Group has recognized impairment in its investments in PacificSynergies IV and Astute Networks, Inc. amounting to US$0.20 million and US$0.50 million,respectively, due to a prolonged decline in the investments’ value and management’s assessmentthat it is not probable to recover all the cost of investment.

In 2013, the Group has directly written off its investments in Alphion, Pacific Synergies IV, andEagle Ridge Golf and Country Club amounting to US$1.73 million, US$0.04 million, andUS$0.004 million, respectively, due to prolonged decline in the investment’s value andmanagement has assessed that it is not probable to recover all the cost of investment.

The carrying value of the Group’s AFS investments as at December 31, 2015 and 2014 amountedto US$2.88 million and US$2.90 million, respectively (see Note 10).

Fair values of financial instrumentsWhere the fair values of financial assets and liabilities recorded as of the reporting date cannot bederived from active markets, they are determined using a variety of valuation techniques thatinclude the use of mathematical models. The inputs to these models are taken from observablemarkets where possible, but where this is not feasible, a degree of judgment is required inestablishing fair values (see Note 5).

Impairment of receivablesThe Group reviews its receivable portfolio to assess impairment annually based on the factors thataffect the collectability of the account. The Group reviews the age and status of receivables andidentifies accounts that are to be provided with allowance on a continuous basis. Judgment bymanagement is required in the estimation of the amount and timing of future cash flows whendetermining the level of allowance required. Such estimates are based on assumptions about anumber of factors and actual results may differ, resulting in future changes to the allowance.

In addition to specific allowance against individually significant receivables, the Group alsomakes a collective impairment allowance against exposures which, although not specificallyidentified as requiring a specific allowance, have a greater risk of default than when originallygranted. The amount and timing of recorded expenses and reversal for any period would differ ifthe Group made different judgments or utilized different estimates.

An increase in the allowance account for impairment would increase recorded operating expensesand decrease current assets and otherwise for reversals.

The Group recognized an impairment loss from direct write-off of receivables amounting toUS$0.02 million, US$0.15 million and US$0.01 million in 2015, 2014 and 2013, respectively. In2015, a provision for an allowance for impairment losses amounting to US$0.05 million wasrecognized. As of December 31, 2015 and 2014, the carrying amount of receivables of the Groupamounted to US$14.11 million and US$14.87 million, respectively (see Notes 8 and 21).

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Impairment of inventoriesThe Group reviews its perpetual inventory levels to assess impairment at least on a quarterly basis.The semiconductor industry is characterized by rapid technological change, short-term customercommitments and rapid changes in demand. Impairment losses are provided on excess andobsolete inventory based on regular reviews of inventories on hand, and the latest forecasts ofproduct demand and product requirements from customers. If actual market conditions orcustomer’s product demands are less favorable than those forecasted, additional impairment loss isrecognized. An increase in allowance for inventory obsolescence would increase recordedoperating expenses and decrease current assets.

The Group has an allowance for inventory obsolescence on its raw materials amounting toUS$0.16 million and US$0.004 million as of December 31, 2015 and 2014, respectively. Norecovery of inventory obsolescence was recognized in 2015 and 2014. The carrying amountof inventories of the Group amounted to US$11.66 million and US$13.24 million as ofDecember 31, 2015 and 2014, respectively (see Note 9).

EUL and impairment of property, plant and equipment and investment propertiesThe Group estimates the useful lives of its property, plant and equipment and investmentproperties based on factors that include asset utilization, internal technical evaluation,technological changes, environmental and anticipated use of the assets tempered by relatedindustry benchmark information. It is possible that future results of operations could be materiallyaffected by changes in these estimates brought about by changes in the factors mentioned.A reduction in the EUL of property, plant and equipment and investment properties wouldincrease the recorded depreciation expense and decrease noncurrent assets.

Depreciation of property and equipment and investment properties is computed using the straight-line method over its useful life, regardless of utilization.

The Group reviews its property and equipment for impairment. This includes considering certainindicators of impairment such as the following:

· Significant or prolonged decline in the fair value of the asset;· Increase in market interest rates or other market rates of return on investments have increased

during the period, and those increases are likely to affect the discount rate used in calculatingthe asset’s value in use and decrease the asset’s recoverable amount materially;

· Significant underperformance relative to expected historical or projected future operatingresults;

· Significant changes in the manner of use of the acquired assets or the strategy for overallbusiness; or

· Significant negative industry or economic trends.

The carrying value of the Group’s property, plant and equipment amounted to US$13.07 millionand US$10.53 million as of December 31, 2015 and 2014, respectively (see Note 12).

The carrying value of the Group’s investment properties amounted to US$5.64 million andUS$4.69 million as of December 31, 2015 and 2014, respectively (see Note 13).

Present value of retirement benefitsThe cost of defined benefit pension plans and other post-employment medical benefits as well asthe present value of the pension obligation are determined using actuarial valuations.

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The actuarial valuation involves making various assumptions. These include the determination ofthe discount rates, future salary increases and mortality rates. Due to the complexity of thevaluation, the underlying assumptions and its long-term nature, defined benefit obligations arehighly sensitive to changes in these assumptions. All assumptions are reviewed at each reportingdate. The net pension liability as at December 31, 2015 and 2014 amounted to US$2.52 millionand US$2.33 million, respectively. Further details are provided in Note 28.

The Group used a single valuation weighted average discount rate in arriving at the present valueof defined benefit obligations. The average discount rate was based on bootstrapped PDEXPDST-R2 rates at various tenors as the end of each reporting period. Rates for intermediatedurations were interpolated. The rates were then weighted by the expected benefits payments atthose durations to arrive at a single weighted average discount rate.

Assumed discount rate is used in the measurement of the present value of the pension obligation,service and interest cost components of the pension expense.

While the Group believes that the assumptions are reasonable and appropriate, significantdifferences between actual experiences and assumptions may materially affect the cost ofemployee benefits and related obligations.

The Group has recognized directly in other comprehensive income net actuarial loss due tochanges in financial and demographic assumptions and actual return on plan assets excludinginterest costs, amounting to US$0.10 million, US$0.38 million and US$0.17 million in 2015, 2014and 2013, respectively.

Further, in 2015, 2014 and 2013, the Group recognized directly in other comprehensive incomeactuarial loss arising from the effects of changes in foreign exchange rates of the net pensionobligation, amounting to US$0.13 million, US$0.04 million and US$0.07 million, respectively.

Impairment of investments in associatesThe Group reviews investment in associates. This includes considering certain indicators ofimpairment such as the following:

· Significant or prolonged decline in the fair value of the asset;· Significant changes with an adverse effect that have taken place in the technological, market,

economic or legal environment;· Significant changes in the manner of use of the acquired assets or the strategy for overall

business.

No impairment loss was recognized in 2015, 2014 and 2013. The carrying amount of investmentsin associates of the Group amounted to US$0.12 million as of December 31, 2015 and 2014 (seeNote 11).

Impairment testing of goodwillThe recoverable amount of goodwill has been determined based on the value in use calculationsusing cash flow projections from financial budgets approved by the BOD covering a five yearperiod and assumptions for the terminal value. Financial budgets are based on actual customerorders and those anticipated orders that are close to finalization.

The pretax discount rate applied to cash flow projections is 9.02% and 11.09% in 2015 and 2014,respectively, and cash flows beyond the 5-year period are extrapolated using 0% growth rate. The

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discount rate was derived using weighted average cost of capital in consideration of comparablecompanies within the same industry of the subject entities.

The carrying amount of goodwill as of December 31, 2015 and 2014 amounted toUS$0.22 million. There was no impairment loss recognized on goodwill in 2015, 2014 and 2013.

Recognition of deferred income tax assetsThe Group reviews the carrying amounts of deferred income tax assets at each reporting date andreduces the deferred income tax assets to the extent that it is no longer probable that sufficienttaxable income will be available to allow all or part of the deferred income tax assets to beutilized. Significant management judgment is required to determine the amount of deferredincome tax assets that can be recognized, based upon the likely timing and level of future taxableincome together with future tax planning strategies.

In 2015 and 2014, the Group recognized net deferred tax assets amounting toUS$0.02 million.

The Group did not recognize deferred tax assets from temporary difference amounting toUS$3.02 million and US$3.09 million as of December 31, 2015 and 2014, respectively, sincemanagement believes that it is reasonably probable that sufficient taxable profit and provision fornormal tax will not be available against which the deductible temporary differences can be utilized(see Note 26).

4. Financial Risk Management Objectives and Policies

Risk Management StructureAll policy directions, business strategies and management initiatives emanate from the BODwhich strives to provide the most effective leadership for the Group. The BOD endeavors toremain steadfast in its commitment to provide leadership, direction and strategy by regularlyreviewing the Group’s performance. For this purpose, the BOD convenes in quarterly meetingsand in addition, is available to meet in the interim should the need arise.

The Group has adopted internal guidelines setting forth matters that require BOD approval. Underthe guidelines, all new investments, any increase in investment in business and subsidiary and anydivestments require BOD approval.

The normal course of the Group’s business exposes it to a variety of financial risks such as creditrisk, liquidity risk and market risks which include interest rate risk, equity price risk and foreigncurrency risk exposures.

The Group has various financial assets such as cash and cash equivalents, receivables, AFSinvestments and refundable deposits. The Group’s principal financial liabilities consist ofaccounts payable and accrued expenses, bank loans, and security deposits. The main purpose ofthese financial liabilities is to raise funds for the Group’s operatio ns.

Credit RiskCredit risk is the risk of loss resulting from the failure of a borrower or counterparty to perform itsobligations during the life of the transaction. This includes the risk of non-payment by banks andcustomers, failed settlement of transactions and default on contracts. Management has a creditpolicy in place and the exposures to these credit risks are monitored on an ongoing basis. TheGroup’s credit risk management involves entering into arrangements only with counterparties withacceptable credit standing and that are duly approved by the BOD. The Group’s receivables are

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monitored on a regular basis resulting to insignificant exposure to bad debts.

The Group does not hold any collateral from its customers thus, the carrying amounts of cash andcash equivalents, receivables, AFS investments and refundable deposits approximate the Group’smaximum exposure to credit risk. No other financial assets carry a significant exposure to creditrisk.

The Group performs ongoing credit evaluation of its customers’ financial condition and providesfor impairment losses based on the outcome of its credit evaluations.

Risk concentration of credit riskAn industry sector analysis of the Group’s exposure to credit risk is as follows:

2015 2014Telecommunications (Telecom) US$12,410 US$13,655Banks and financial intermediaries 10,374 7,049Consumer electronics 1,835 1,276Automotive 986 729Computer peripherals 816 1,448Real estate 196 91Others 972 1,007Total US$27,589 US$25,255

The Group has concentration of credit risk due to sales to significant customers. One customeraccounted for approximately 42.99% and 29.68% of net sales in 2015 and 2014, respectively. In2015, the financial assets of the Group were more concentrated to the telecom, banks and financialintermediaries and consumer electronics which accounted for 89.23% of the total financial assets.In 2014, it is more concentrated to the telecom, banks and financial intermediaries and computerperipherals which accounted for 87.71% of the total financial assets. The Group’s financialinstruments are broadly diversified along industry, product and geographic lines, and transactionsare entered into with a range of counterparties, thereby mitigating any significant concentration ofcredit risk.

The following tables below summarize the credit quality of the Group’s financial assets (gross ofallowance for credit and impairment losses amounting to US$0.05 million) as at December 31,2015 and 2014:

2015

Neither Past Due nor Individually ImpairedPast Due

but not IndividuallyMinimal Risk Average Risk High Risk Impaired Impaired Total

Cash and cash equivalents* US$10,180 US$− US$− US$− US$− US$10,180Receivables Trade receivables 9,794 − − 2,019 50 11,863 Other receivables from customers 548 − − 790 − 1,338 Rent receivables 189 − − − − 189 SSS claims receivables 22 − − − − 22 Advances to managers and employees** 29 − − − − 29 Others 552 − − 107 2 661AFS investments Quoted 50 − − − − 50 Unquoted 2,829 − − − − 2,829Refundable deposits 420 − − − − 420

US$24,613 US$− US$− US$2,916 US$52 US$27,581*Excludes cash on hand amounting to US$0.10 million**Excludes non-financial assets amounting to US$0.06 million

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2014

Neither Past Due nor Individually ImpairedPast Due

but not IndividuallyMinimal Risk Average Risk High Risk Impaired Impaired Total

Cash and cash equivalents* US$7,037 US$− US$− US$− US$− US$7,037Receivables Trade receivables 10,747 − − 2,746 − 13,493 Other receivables from customers 564 − − 277 − 841 Rent receivables 85 − − − − 85 SSS claims receivables 25 − − − − 25 Advances to managers and employees** 14 − − − − 14 Others 388 − − − − 388AFS investments − − − − Quoted 68 − − − − 68 Unquoted 2,829 − − − − 2,829Refundable deposits 437 − − − − 437

US$22,194 US$− US$− US$3,023 US$− US$25,217*Excludes cash on hand amounting to US$0.01 million**Excludes non-financial assets amounting to US$0.03 million

The Group classifies credit quality risk as follows:

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

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

High risk - accounts with low probability of collection and can be considered impaired based onhistorical experience, where counterparties exhibit a recurring tendency to default despite constantreminder and communication, or even extended payment terms.

The Group maintains cash and cash equivalents with various financial institutions thatmanagement believes to be of high credit quality. The Group’s policy is to invest with financialinstitution from which it has outstanding loans and loan facilities.

The tables below show the analysis of receivables that are past due but not impaired as atDecember 31, 2015 and 2014, respectively:

2015<30

days30-60days

61-90days

91-120days

>120days Total

Trade receivables US$1,763 US$89 US$30 US$28 US$109 US$2,019Other receivables from customers 337 217 104 60 72 790Others − − − − 107 107

US$2,100 US$306 US$134 US$88 US$288 US$2,916

2014<30

days30-60days

61-90days

91-120days

>120days Total

Trade receivables US$978 US$1,628 US$17 US$50 US$73 US$2,746Other receivables from customers 193 30 3 8 43 277

US$1,171 US$1,658 US$20 US$58 US$116 US$3,023

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Liquidity RiskLiquidity risk is the risk of not being able to meet funding obligations such as the repayment ofliabilities or payment of asset purchases. Short-term funding is obtained to finance cashrequirements for capital expenditures and operations. Amount of credit lines are obtained fromdesignated banks duly approved by the BOD. Surplus funds are placed with reputable banks towhich the Group has outstanding loans and loan facilities. The Group’s policy is to regularlymonitor its liquidity requirements and its compliance with lending covenants, to ensure that itmaintains sufficient reserves of cash and highly liquid marketable securities and adequatecommitted lines of funding from major financial institutions to meet the short and longer termliquidity requirements of the Group.

The tables below show the maturity profile of the financial assets and liabilities, based on itsinternal methodology that manages liquidity based on remaining contractual maturities:

2015

On demandLess than3 months

3 to 12months

1 to 5years Total

Financial assetsCash and cash equivalents US$10,284 US$− US$− US$− US$10,284Receivables 3,286 10,710 114 − 14,110AFS investments 2,879 − − − 2,879

16,449 10,710 114 − 27,273Financial liabilitiesAccounts payable and accrued

expenses* 585 9,775 1 33 10,394Bank loans** 63 52 475 1,058 1,648Security deposits − − − 1,127 1,127

648 9,827 476 2,218 13,169Liquidity gap US$15,801 US$883 (US$362) (US$2,218) US$14,104

*Excluding cash advances from an investee for future dividend declaration amounting to US$0.06 million.**Including future interest payable amounting to US$0.08 million

2014

On demandLess than3 months

3 to 12months

1 to 5years Total

Financial assetsCash and cash equivalents US$7,049 US$− US$− US$− US$7,049Receivables 3,023 11,608 242 − 14,873AFS investments 2,897 − − − 2,897

12,969 11,608 242 − 24,819Financial liabilitiesAccounts payable and accrued

expenses* 947 11,024 31 − 12,002Bank loans** − 40 278 143 461Security deposits − − − 1,079 1,079

947 11,064 309 1,222 13,542Liquidity gap US$12,022 US$544 (US$67) (US$1,222) US$11,277

*Excluding cash advances from an investee for future dividend declaration amounting to US$0.06 million.**Including future interest payable

The Group has standby loan facility amounting US$5.00 million and will apply for additionalcredit lines as the need arises.

Market RiskMarket risk is the risk of loss to future earnings, to fair value or future cash flows of a financialinstrument as a result of changes in its price, caused by changes in interest rates, equity prices andforeign currency exchange rates and other market factors.

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Interest rate riskInterest rate risk is the risk that the value of a financial instrument will fluctuate because ofchanges in interest rates. The Group follows a prudent policy in managing its assets and liabilitiesso as to ensure that exposure to fluctuation in interest rates are kept within acceptable limits.

Sensitivity analysisThe Group does not perform sensitivity analysis on its cash and cash equivalents and bank loanssince the Group expects that the effect of the change in interest rates will have insignificant effecton the Group’s operations.

Equity price riskThe Group’s equity price risk exposure at year-end relates to financial assets whose values willfluctuate as a result of changes in market prices, principally, quoted equity securities classified asAFS investments.

Quoted AFS investments are subject to price risk due to changes in market values of instrumentsarising either from factors specific to individual instruments or their issuers or factors affecting allinstruments traded in the market.

The analysis below is performed for reasonably possible movements in the market index with allother variables held constant, showing the impact on equity both in 2015 and 2014.

2015 2014

% reasonablypossible change

Effect onother

comprehensiveincome

% reasonablypossible change

Effect onother

comprehensiveincome

US NASDAQ +26% US$3 +24% US$16-26% (3) -24% (16)

The Group assessed that investments in Philippines Stock Exchange is exposed to insignificantchanges in market values.

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in foreign exchange rates. The Group is exposed to currencyrisk primarily through purchases that are denominated in a currency other than the functionalcurrency of the Group. The currency giving rise to this risk is primarily Philippine Peso (P=) andJapanese Yen (¥). It is the Group’s policy not to trade in derivative contracts. In addition, theGroup believes that its profile of foreign currency exposure on its assets and liabilities is withinconservative limits in the type of business in which the Group is engaged.

The table below details the Group’s exposure at the reporting date to currency risk arising fromforecasted transactions or recognized assets or liabilities denominated in a currency other than thefunctional currency of the Group.

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Philippine Peso

2015 2014

In US DollarIn Philippine

Peso In US DollarIn Philippine

PesoCash and cash equivalents US$868 P=40,856 US$3,800 P=169,916Receivables 946 43,985 389 17,389AFS investments 981 46,174 982 43,903Refundable deposits 469 22,053 495 22,137

3,264 153,068 5,666 253,345Less: Accounts payable and accrued expenses 1,892 88,899 7,126 318,672Net exposure arising from recognized

assets and liabilities US$1,372 P=64,169 (US$1,460) (P=65,327)

Japanese yen

2015 2014

In US DollarIn Japanese

Yen In US DollarIn Japanese

YenGross exposure arising from

recognized liabilities (US$758) (¥91,300) (US$1,196) (¥144,080)

The exchange rates used to restate the Group’s foreign currency-denominated assets and liabilitiesfollow:

Currency Source 2015 2014Philippine Peso Philippine Dealing & Exchange Corp.

closing rate US$0.021249 US$0.022361Japanese Yen Bangko Sentral ng Pilipinas (BSP)

closing rate ¥0.008311 ¥0.008306

Sensitivity analysisThe following table indicates the approximate change in the Group’s income (loss) before incometax in response to reasonably possible changes in the foreign exchange rates to which the Grouphas significant exposure at the reporting date:

2015 2014Changes in foreign currency exchange rates

Philippine Peso 4.97% (4.97%) 0.44% (44%)Japanese Yen 0.06% (0.06%) 12.63% (12.63%)

Effect on income (loss) before taxPhilippine Peso US$68 (US$68) US$6 (US$6)Japanese Yen US$0.45 (US$0.45) US$151 (US$151)

The Group based the percentage of increase and decrease in foreign exchange rate on percentagechange of the foreign exchange rates as of the reporting date and year-end forecasted closing ratefor 2015 from third party forecast.

Other than the potential impact on income (loss) before income tax, there is no other effect onequity.

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The sensitivity analysis has been determined assuming that the change in foreign currencyexchange rates has occurred at the reporting date and has been applied to each of the Groupentities’ exposure to currency risk for financial instruments in existence at that date, and that allother variables, interest rates in particular, remain constant. The Group does not expect the impactof the volatility on other currencies to be material.

The stated changes represent management’s assessment of reasonably possible changes in foreigncurrency exchange rates over the period until the next annual reporting date. Results of theanalysis as presented in the above table represent an aggregation of the effects on each of theentities’ income (loss) before income tax measured in the respective functional currencies,translated into US dollars at the exchange rate ruling at the reporting date for presentationpurposes.

5. Fair Value Measurement

The Group’s financial instruments consist of cash and cash equivalents, receivables, refundabledeposits, AFS investments, accounts payable and accrued expenses, bank loans and finance leaseliability and security deposits.

The carrying values of cash and cash equivalents, receivables, accounts payable and accruedexpenses approximate their respective fair values due to the short term maturities of theseinstruments.

The carrying value of bank loans approximates fair value because these bank loans are subject tomonthly/quarterly interest repricing.

The estimated fair values of refundable deposits and security deposits represents the present valueof the amount of estimated future cash flows expected to be collected or paid derived using theincremental borrowing rate of the Group for a similar loan. The fair value of the Group’s securitydeposit amounted to US$1.15 million and US$1.08 million as of December 31, 2015 and 2014.

The fair value of AFS investments is determined by using the market prices of the listed sharesand the price of the most recent transaction for non-listed shares. Where the fair value ofunquoted equity securities could not be reliably determined, the AFS investment is carried at costsubject to impairment.

AFS investments measured at fair value based on the quoted market bid prices are included withinthe Level 1 of the fair value hierarchy.

In 2015 and 2014, there were no transfer between Level 1 and Level 2 of the fair value hierarchy,and no transfer into and out of the Level 2 category.

6. Capital Management

The Group’s primary objective in managing capital is to provide returns for shareholders andbenefits for other stakeholders, by pricing products and services commensurately with the level ofrisk and by securing access to finance at a reasonable cost.

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The Group monitors capital using a leverage ratio, which is net debt divided by the sum of totalequity and net debt. Net debt includes bank loans, security deposits and accounts payable andaccrued expenses less cash and cash equivalents. The Group’s policy is for its leverage ratio notto exceed 75%.

The leverage ratio as at December 31, 2015 and 2014 follows:

2015 2014Current liabilitiesAccounts payable and accrued expenses* US$10,394 US$12,002Bank loans and finance lease liability 548 294

10,942 12,296Noncurrent liabilitiesSecurity deposits 1,127 1,079Bank loans and finance lease liability 1,024 136

2,151 1,215Total debt 13,093 13,511Less cash and cash equivalents 10,284 7,049Net debt 2,809 6,462Equity 39,918 37,281Total equity and net debt US$42,727 US$43,743Leverage ratio 6.57% 14.77%*Excluding cash advances from an investee amounting to US$0.06 million as of December 31, 2015 and 2014,

for future dividend declaration.

The Group has no externally imposed capital requirements as of December 31, 2015 and 2014.

7. Cash and Cash Equivalents

This account consists of:

2015 2014Cash on hand US$104 US$12Cash in banks and cash equivalents 10,180 7,037

US$10,284 US$7,049

Cash in banks earns interest at the respective bank deposit rates. Cash equivalents representmoney market placements made for varying periods of up to three months depending on theimmediate cash requirements of the Group. Cash equivalents represent US dollar money marketplacements with annual interest rates ranging from 0.12% to 0.25% in 2015.

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8. Receivables


2015 2014Trade receivables US$11,863 US$13,493Other receivables from customers 1,338 841Rent receivables 189 85Advances to managers and employees 89 41SSS claims receivables 22 25Others 661 388

14,162 14,873Less allowance for impairment losses 52 −

US$14,110 US$14,873

Trade and non-trade receivables related to customers are due within 30-120 days from the date ofbilling.

The Group has directly written-off trade receivables amounting to US$0.02 million,US$0.15 million and US$0.01 million in 2015, 2014 and 2013, respectively and recognizedimpairment loss on receivables amounting to US$0.05 million in 2015. The write off andallowance were recorded under “Receivables written-off” account (see Note 21).

9. Inventories


2015 2014At NRV:

Finished goods (Note 19) US$159 US$324Work-in-process (Note 19) 254 258

413 582At cost:

Raw materials 10,627 11,720Spare parts and supplies 774 946

11,401 12,666Less allowance for inventory obsolescence 157 4

US$11,657 US$13,244

The related cost of inventories at NRV follows:

2015 2014Finished goods US$174 US$352Work in process 344 308

The Group recognizes write-down whenever the net realizable value of existing inventories islower than the cost. Inventory write-down pertaining to finished goods and work-in-processamounted to US$0.11 million and US$0.08 million in 2015 and 2014, respectively. Theseinventory write-downs are reported under cost of sales.

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In 2015, the Group recognized allowance for inventory obsolescence and damages amounting toUS$0.16 million and has directly written off inventories amounting to US$0.04 million(see Note 19).

10. Available-for-Sale Investments


2015 2014Quoted US$50 US$68Unquoted 2,829 2,829

US$2,879 US$2,897

The Parent Company’s quoted AFS investments include investment listed in US NASDAQstock market.

The movements in net unrealized losses on AFS investments follow:

2015 2014Balance at beginning of year (US$218) (US$404)Change in fair value of available-for-sale

investments (15) 186Balance at end of year (US$233) (US$218)

In 2015, the Group has impaired its investments in Eagle Ridge Golf and Country Club amountingto US$0.003 million due to management’s assessment that it is not probable to recover all the costof investment (Note 21).

In 2014, the Group made additional investments in Pacific Synergies IV amounting toUS$0.30 million.

In 2013, the Group recognized a return of capital from its investments in Tech Ventures IIIamounting to US$0.40 million.

The Group recognized dividends from Tech Venture II, Ltd. amounting to US$0.02 million in2015 and US$0.02 million in 2014, and US$0.04 million from Beacon Property Venture, Inc. in2014 (Note 18).

In the third quarter of 2014, the Group has recognized impairment in its investments in PacificSynergies IV and Astute Networks amounting to US$0.20 million and US$0.50 million,respectively due to prolonged decline in the investment’s value and management’s assessment thatit is not probable to recover all the cost of investment. In the last quarter of 2014, the Groupreversed a portion of the impairment loss in Pacific Synergies IV amounting to US$0.18 milliondue to significant improvement in the financial performance of the latter. Such reversal wasrecorded under “Unrealized losses on available-for-sale investments” account in the consolidatedstatement of financial position.

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In 2013, the Group has recognized impairment in its investments in Alphion, Pacific Synergies IV,and Eagle Ridge Golf and Country Club amounting to US$1.73 million, US$0.04 million, andUS$0.004 million, respectively, due to prolonged decline in the investment’s value andmanagement has assessed that it is not probable to recover all the cost of investment.

11. Investments in Associates


2015 2014Acquisition cost:Balances at beginning of year US$116 US$116Additions 290 −Balances at end of year 406 116Accumulated equity in net earningsBalances at beginning of year 227 415Share in net losses (174) (188)Balances at end of year 53 227Reclass to other liabilities 110 −Equity in cumulative translation adjustment (453) (227)Net book values US$116 US$116

The investments in associate relate to the following associates:

Country of Incorporation andBusiness

Effective PercentageOwnership

2015 2014ICCP Ventures, Inc. (IVI) Philippines 24% 24%ICCP Ventures Partners, Inc. (IVPI) Philippines 30% 30%Tech Ventures Partners, Ltd. (TVPL) Cayman Islands 30% 30%ICCP Ventures Partners (Hong Kong), Ltd. (IVP-HK) Hong Kong 29% −

Below are the summarized financial information relating to the Group’s share in its associates:

2015IVI IVPI TVPL IVP-HK Total

Current assets US$49 US$1,261 US$273 US$284 US$1,867Noncurrent assets 388 606 888 (647) 1,235 Total assets US$437 US$1,867 US$1,161 (US$363) US$3,102Current liabilities US$66 US$398 US$26 US$17 US$507Noncurrent liabilities − 1,225 26 − 1,251 Total liabilities US$66 US$1,623 US$52 US$17 US$1,758Revenues US$14 US$873 US$772 (US$1,093) US$566Costs 8 785 33 103 929Gross profit (loss) US$6 US$88 US$739 (US$1,196) (US$363)Other expense on continuing operations - net − 73 − − 73Net income (loss) US$6 US$15 US$739 (US$1,196) (US$436)Other comprehensive loss (38) − − − (38)Total comprehensive income (loss) (US$32) US$15 US$739 (US$1,196) (US$474)

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2014IVI IVPI TVPL Total

Current assets US$45 US$930 US$261 US$1,236Noncurrent assets 467 673 125 1,365 Total assets US$512 US$1,603 US$386 US$2,501Current liabilities US$70 US$135 US$22 US$227Noncurrent liabilities − 1,279 − 1,279 Total liabilities US$70 US$1,414 US$22 US$1,506Revenues US$17 US$831 (US$262) US$586Costs − 722 390 1,112Gross profit (loss) US$17 US$109 (US$652) (US$526)Other expense on continuing operations - net 6 91 − 97Net income (loss) US$11 US$18 (US$652) (US$623)Other comprehensive income 27 29 − 56Total comprehensive income (loss) US$38 US$47 (US$652) (US$567)

In 2015, the Group invested in IVP-HK amounting to US$0.29 million representing 29%ownership.

Share in accumulated net losses of the investee in 2015, 2014 and 2013 amounted toUS$0.17 million, US$0.19 million and US$0.15 million, respectively. Share on equity losses ofIVP- HK amounted to US$0.40 million as of December 31, 2015, higher than the US$0.29 millioninterest of the Group in IVP-HK. The difference of US$0.11 million was reclassified to otherliabilities.

12. Property, Plant and Equipment

The rollforward analyses of this account follows:

2015

Land

Machineriesand

Equipment

Building,Building

Improvementsand LeaseholdImprovements

Toolsand Other

Equipment

PlantWater and

AirconditioningSystems

Furniture,Fixtures and

EquipmentTransportation

Equipment TotalCostBalances at beginning of year US$1,110 US$25,840 US$8,064 US$4,458 US$1,054 US$254 US$51 US$40,831Additions* 1,430 3,172 113 738 312 6 20 5,791Disposals* − (713) (42) (119) (17) (9) − (900)Transfers to investment

properties (622) − (472) − − − − (1,094)Balances at end of year 1,918 28,299 7,663 5,077 1,349 251 71 44,628Accumulated depreciationBalances at beginning of year − 20,488 5,949 3,058 534 245 29 30,303Depreciation**

(Notes 19 and 21) − 1,108 341 509 278 5 8 2,249Disposals** − (631) (44) (125) (17) (9) − (826)Transfers to investment

properties − − (166) − − − − (166)Balances at end of year − 20,965 6,080 3,442 795 241 37 31,560Net book values US$1,918 US$7,334 US$1,583 US$1,635 US$554 US$10 US$34 US$13,068*Includes various reclassifications amounting to US$0.18 million**Includes various reclassifications amounting to US$0.15 million

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2014

Land

Machineriesand

Equipment

Building,Building

Improvementsand LeaseholdImprovements

Toolsand Other

Equipment

PlantWater and

AirconditioningSystems

Furniture,Fixtures and

EquipmentTransportation

Equipment TotalCostBalances at beginning of year US$1,110 US$23,950 US$8,211 US$4,321 US$835 US$257 US$51 US$38,735Additions − 2,630 101 462 259 2 − 3,454Disposals − (740) (248) (325) (40) (5) − (1,358)Balances at end of year 1,110 25,840 8,064 4,458 1,054 254 51 40,831Accumulated depreciationBalances at beginning of year − 20,405 5,881 2,940 435 246 24 29,931Depreciation (Notes 19 and 21) − 814 307 344 139 4 5 1,613Disposals − (731) (239) (226) (40) (5) − (1,241)Balances at end of year − 20,488 5,949 3,058 534 245 29 30,303Net book values US$1,110 US$5,352 US$2,115 US$1,400 US$520 US$9 US$22 US$10,528

In September 2015, the Group purchased a land in Light Industry and Science Park II (LISP II),Calamba, Laguna amounting to US$1.43 million. The land is intended for future office and plantsite.

In 2015, the Group entered into a financing agreement to acquire machinery and equipmentamounting to US$1.86 million. Carrying amount of leased asset amounted to US$1.75 million asof December 31, 2015.

In 2015, 2014 and 2013, the Group disposed various property and equipment with a carrying valueof US$0.05 million, US$0.12 million and US$0.21 million, respectively. The gain on sale ofvarious property and equipment amounting to US$0.005 million, nil, and US$0.003 million wererecognized in profit or loss in 2015, 2014 and 2013, respectively (see Note 18).

Additions and disposals during the year include various reclassifications of property andequipment with cost totaling US$0.18 million and accumulated depreciation totaling US$0.15million.

The cost of fully depreciated machinery and equipment still in use amounted to US$25.5 millionand US$25.4 million as of December 31, 2015 and 2014, respectively.

Depreciation of property, plant and equipment included in the cost of sales and operating expensesamounted to US$1.98 million and US$0.10 million, respectively in 2015, US$1.46 million andUS$0.15 million, respectively in 2014, US$1.73 million and US$0.06 million, respectively in2013 (see Notes 19, 20 and 21).

Certain properties of IPI were used by EMS as collateral for its bank loans that matured in 2014.The carrying values of the mortgaged land and building amounted to US$0.62 million andUS$0.37 million, respectively, as of December 31, 2013 (see Note 16).

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13. Investment Properties

The rollforward analyses of this account follows:

2015

Land BuildingBuilding

Improvements TotalCostBalances at beginning of year US$1,559 US$4,550 US$2,743 US$8,852Additions − 236 75 311Reclass/ transfers 622 472 − 1,094Balances at end of year 2,181 5,258 2,818 10,257Accumulated DepreciationBalances at beginning of year − 1,775 2,650 4,425Depreciation (Notes 20 and 21) − 253 50 303Disposals − − − −Reclass/ transfers − 166 − 166Balances at end of year − 2,194 2,700 4,894Exchange Reserves (116) (161) − (277)Net Book Values US$2,297 US$3,225 US$118 US$5,640

2014

Land BuildingBuilding

Improvements TotalCostBalances at beginning of year US$2,372 US$6,802 US$2,686 US$11,860Additions − 259 57 316Disposals (813) (2,511) − (3,324)Balances at end of year 1,559 4,550 2,743 8,852Accumulated DepreciationBalances at beginning of year − 3,452 2,506 5,958Depreciation (Notes 20 and 21) − 250 144 394Disposals − (1,860) − (1,860)Impairment loss (Note 21) − (67) − (67)Balances at end of year − 1,775 2,650 4,425Exchange Reserves (116) (148) (2) (266)Net Book Values US$1,675 US$2,923 US$95 US$4,693

In 2015, the Group reclassified its property, plant and equipment to investment property withcarrying value of US$0.93 million. This property was previously used by EMS as plant site andwas subsequently leased out to a third party.

On July 18, 2014, the Group decided to dispose its land and building situated in Calamba City,Laguna. The sale resulted to a gain of US$0.16 million. These properties have been idle since theCompany ceased its operations.

The Group obtained an appraisal report from Royal Asia Corporation, a third party appraiser, as ofFebruary 20, 2014. Based on the appraisal report, the fair values of land and depreciableinvestment properties, excluding the properties sold in July 2014, amounted to US$1.92 millionand US$3.62 million, respectively. The fair value of the land and depreciable assets transferredfrom property, plant and equipment to investment properties in 2015 amounted to US$0.96 millionand US$0.98 million, respectively, based on the same appraisal report. Management believes thatthe fair values as of December 31, 2015 and 2014 are not materially different from that ofFebruary 20, 2014.

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The fair values of the land and depreciable investment properties were arrived at using the SalesComparison approach and Cost approach, respectively, which are included under the Level 3 ofthe fair value hierarchy. In the Sales Comparison approach, fair value is based on sales andlistings of comparable properties registered within the vicinity. In the Cost approach, an estimateis made of the cost of construction of the replaceable properties at current prices in accordancewith the prevailing market prices for materials, labor, overhead and all other attendant costsassociated with its acquisition, installation and construction in place. Adjustments, which includeconsideration of cost to cure improvements to become marketable, as well as market resistancefactors, are then made to reflect depreciation resulting from physical deterioration plus anyfunctional and economic obsolescence that may exist to arrive at a reasonable valuation.

Rent income earned from the investment properties amounted to US$2.40 million, US$2.53million and US$2.06 million in 2015, 2014 and 2013, respectively.

Cost of rental services from investment property amounted to US$0.36 million, US$0.43 millionand US$0.22 million in 2015, 2014 and 2013, respectively.

Depreciation of investment properties included under cost of rental services amounted to US$0.30million in 2015, US$0.35 million in 2014 and US$0.16 million in 2013 (see Note 20).

Depreciation included under operating expenses amounted to nil, US$0.04 million andUS$0.11 million in 2015, 2014 and 2013, respectively, pertaining to SI’s investment propertieswhich are not used in current operations and sold in 2014 (see Note 21).

14. Accounts Payable and Accrued Expenses


2015 2014Trade payables US$7,408 US$9,554Non-trade payables 198 214Accrued expenses 2,224 1,945Others 623 348

US$10,453 US$12,061

Others include the current portion of security deposit of US$0.02 million.

Accrued expenses consist of:

2015 2014Accrued salaries, wages and other benefits US$1,118 US$708Accrued utilities 404 419Accrued sales commission 231 349Accrued professional fees 152 170Accrued rent 107 128Accrued handling charges 82 82Accrued direct materials 44 12Others 86 77

US$2,224 US$1,945

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Trade payables are amounts primarily due to suppliers which are non-interest bearing and arenormally settled on 15- to 90-day terms. These are all payable within one year. The foregoingaccrued expenses and other financial liabilities are non-interest bearing and are normally settled ona 30-day term.

15. Advances from Customers

The account represents advanced payments for raw material purchases, amounting toUS$3.62 million and US$2.30 million as of December 31, 2015 and 2014, respectively. This willbe applied against future invoices and covers the cost of aging inventories of the Group.

16. Bank Loans and Finance Lease Liability


2015 2014Term loans

Current US$63 US$250Non-current − 62

Car loansCurrent 36 44Non-current 84 74

Finance leaseCurrent 449 −Non-current 940 −

US$1,572 US$430

Current US$548 US$294Non-current 1,024 136

US$1,572 US$430

The Group entered into short-term and long-term loan arrangements with domestic financialinstitutions for its various working capital requirements.

Term loans:· On March 12, 2013, IPI entered into a three year loan from Chinatrust (Phils) Commercial

Bank amounting to US$0.75 million which is subject to 3.625% annual interest rate and willmature on March 11, 2016. As of December 31, 2015 and 2014, the outstanding balance ofthe loan amounted to US$0.06 million and US$0.31 million.

· A three-year term loan with Asia United Bank (AUB) amounting to US$0.65 million with anannual interest of 6.5%, subject to monthly repricing. The loan was granted in May 2011 andmatured in May 2014. The outstanding balance of this loan amounted to US$0.09 million asof December 31, 2013. This loan was fully paid in 2014.

EMS used certain properties of IPI as collateral for its bank loans with AUB (see Note 12).

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Car loans:· In 2015 and 2014, EMS entered into credit loan agreements with RCBC and Metropolitan

Bank and Trust Company for the car loan fleet financing of certain employees. Theoutstanding balance of this loan amounted to US$0.12 million as of December 31, 2015 and2014.

Finance lease:· On July 22, 2015, EMS entered into a three year financing agreement with Sumitomo Mitsui

Finance and Leasing (Singapore), PTE, Ltd. amounting to US$1.39 million which is subject to2.98% semi-annual interest and will mature on July 14, 2018.

17. Equity

The Parent Company’s capital stock consists of 1,000,000,000 authorized common stock atP=1.00 par value per share, with 857,974,992 issued shares and 15,459,000 treasury shares as atDecember 31, 2015 and 2014. 14,059,000 of the treasury shares were acquired by IPI in 2012.

On February 7, 1995, the SEC approved the registration of 429,687,496 common shares with issueprice of P=17.00.

Below is the summary of the outstanding number of shares and holders of security as atDecember 31, 2015:

YearNumber

of Shares

Number ofHolders ofSecurities

at year endJanuary 1, 2013 842,515,992 1051Add/(Deduct) Movement − −December 31, 2013 842,515,992 1051Add/(Deduct) Movement − (159)December 31, 2014 842,515,992 892Add/(Deduct) Movement − (10)December 31, 2015 842,515,992 882

On March 16, 2012, the Parent Company’s BOD approved the declaration of 100% stockdividends, which was approved by the stockholders in the annual stockholders’ meeting onMay 18, 2012. Cost related to the registration of shares amounting to US$0.05 million wasrecognized directly in equity.

Other reserves of US$0.81 million in 2015 and US$0.71 million in 2014 pertain to remeasurementlosses on pension liability.

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18. Other Income


2015 2014 2013Foreign currency exchange

gains - net US$219 US$124 US$346Dividend income from available-

for-sale investments(Note 10) 18 58 168

Interest income 18 16 17Gain on sale of property and

equipment (Note 12) 5 − 3Gain on sale of investment

property (Note 13) − 163 −Miscellaneous 19 26 18

US$279 US$387 US$552

Miscellaneous income includes income from cash back received from the Group’s investment in2015, gain on sale of scrap and others in 2014 and reversal of long outstanding trade payables ofSI as the Group is not expecting to settle the obligations in 2013.

19. Cost of Sales


2015 2014 2013Raw materials and supplies used US$45,098 US$45,628 US$49,847Salaries, wages and benefits

(Notes 23 and 28) 7,471 7,429 7,259Occupancy cost and utilities 3,129 3,450 3,799Depreciation (Note 12) 1,978 1,461 1,730Handling and freight charges − 962 1,076Other expenses 1,569 858 829Total manufacturing cost 59,245 59,788 64,540Work-in-process (Note 9)

Beginning 258 314 354Ending (254) (258) (314)

Cost of goods manufactured 59,249 59,844 64,580Finished goods (Note 9)

Beginning 324 744 373Ending (159) (324) (744)

US$59,414 US$60,264 US$64,209

In 2015, the Group recognized allowance for inventory obsolescence and damages amounting toUS$0.16 million and directly written off inventories amounting to US$0.04 million (see Note 9).

Pension expense included in the salaries, wages and benefits account amounted toUS$0.27 million in 2015, US$0.26 million in 2014 and US$0.28 million in 2013 (see Note 28).

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20. Cost of Rental Services


2015 2014 2013Depreciation (Note 13) US$323 US$354 US$161Taxes and licenses 2 13 15Repairs and maintenance − 12 36Other expenses 31 46 3

US$356 US$425 US$215

21. Operating Expenses


2015 2014 2013Salaries, wages and benefits

(Note 28) US$1,331 US$1,258 US$1,193Selling expenses 954 922 1,160Professional fees 368 290 297Depreciation (Notes 12 and 13) 103 192 174Receivables written-off (Note 8) 71 146 11Insurance 53 51 50Occupancy cost and utilities

(Note 24) 35 16 147Taxes and licenses 25 117 66Impairment of available-for-sale

investment (Note 10) 3 705 1,766Impairment loss on investment

properties (Note 13) − 67 −Other expenses 81 149 71

US$3,024 US$3,913 US$4,935

Selling expenses represent sales commissions paid to foreign agents. Pension expense included inthe salaries, wages and benefits account amounted US$0.03 million in 2015 and US$0.01 millionin 2014 and 2013 (see Note 28).

Receivables written-off includes directly written-off trade receivables amounting toUS$0.02 million and US$0.15 million in 2015 and 2014, respectively and recorded allowance forimpairment losses amounting to US$0.05 million in 2015.

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22. Finance Costs


2015 2014 2013Interest on long-term bank loans US$ 24 US$29 US$47Other interests 17 − 1

US$41 US$29 US$48

23. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party or exercise significant influence over the other party in making financial and operatingdecisions. Parties are also considered to be related if they are subject to common control orcommon significant influence. Related parties may be individuals or corporate entities.

Disclosed below are the transactions and the related balances among related parties:

2015

CategoryAmount/Volume

Due from(Due to) Terms Conditions

Entity under common controla. Advances US$250 US$250 Due and demandable;

Non-interest bearingUnsecured; No

impairment

a. In 2015, the Parent Company advanced US$0.25 million to Ionics Products Solutions, Inc.(IPSI), entity under common control, which is intended for the subscription of the capitalstock of IPSI.

The key management personnel of the Group include executives and directors. The summary ofcompensation of the key management personnel follows:

2015 2014 2013Short-term employee benefits US$719 US$727 US$799Executive officers’ compensation 445 373 375Directors’ remuneration 324 320 320Post-employment benefits 68 56 65

US$1,556 US$1,476 US$1,559

24. Leases

The following are the lease agreements with third parties:

Iomni Precision, Inc. (Iomni) - as a Lessee· Iomni leases a parcel of land and a factory building from a third party lessor. The lease is for

a period of 10 years starting January 15, 2001. On September 6, 2011, the parties enteredinto an agreement to renew the lease contract for a period of 5 years commencing onJanuary 16, 2011. The lease covers the same property with a 5% annual escalation clausebeginning January 16, 2013.

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As of December 31, 2015 and 2014, Iomni’s future minimum rental payments on non-cancellable leases are as follow:

2015 2014Within one year US$14 US$338After one year but not more than five years − 14

US$14 US$352

Iomni Precision, Inc. - as a Lessor· Iomni leased out the available office space with a total floor area of 999.40 square meters (sq.

m.). to a third party. The lease agreement began on June 12, 2013 and shall continue for aperiod of two years until July 11, 2015, subject to one year extension. In 2015, the third partylessee waived the renewal of lease contract at the end of lease term. Iomni recognized rentincome pertaining to this lease amounting to US$0.04 million, US$0.07 million and US$0.03million in 2015, 2014 and 2013, respectively.

Iomni’s future minimum lease receivables under non-cancellable operating leases as ofDecember 31, 2015 and 2014 are as follows:

2015 2014Within one year US$− US$43After one year but not more than five years − −

US$− US$43

Ionics Properties, Inc. (IPI) - as a Lessor· IPI leased its two-storey building with a total floor area of 4,639.50 sq.m. to a third party. The

lease agreement covered dates from December 2009 to December 2013 and is subject to 5%escalation. On December 13, 2013, the contract was renewed for a three-year lease term tocommence on December 18, 2013 with an increase in monthly rental rate from US$3.50 toUS$3.65 per sq.m. without an escalation clause. IPI recognized rent income pertaining to thislease amounting to US$0.20 million in 2015, 2014 and 2013.

· In October 2004, IPI entered into a 10-year non-cancellable lease with a third party for the rentof its three-storey factory. The lease agreement provides for a 3.50% annual escalation. In2014, the contract was renewed upon the end of its lease term for another 10 years tocommence on October 1, 2014 to September 30, 2024. The monthly rate, however, wasdecreased from US$10.73 to US$8.90 per sq.m. without escalation. IPI recognized rentincome pertaining to this lease amounting to US$1.55 million, US$1.62 million and US$1.60million in 2015, 2014 and 2013, respectively.

· In 2006, IPI completed the construction of a warehouse building with a total floor area of3,140.00 sq.m. which was subsequently leased out to a third party. The original term of thelease agreement, which commenced on April 18, 2006, is five years. By the end of theoriginal term in April 2011, the lease agreement was subjected to a yearly renewal. The leaseagreement was no longer renewed upon expiration in April 17, 2015. IPI recognized rentincome pertaining to this lease amounting to US$0.06 million in 2015 and US$0.12 million in2014 and 2013.

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· In November 2015, IPI leased out the warehouse building to a third party for a period of threeyears. The lease agreement covered dates from November 2015 to November 2018 and issubject to 5% escalation. IPI recognized rental income pertaining to this lease amounting toUS$0.03 million in 2015.

· In 2013, the IPI entered into a five-year lease contract with a third party, for the rent of itsbuilding with an area of 7,432 sq.m. and of that certain parcel of land with an area of12,918 sq. meters. The lease shall begin on September 15, 2013 and shall continue for aperiod of five years, until September 14, 2018. IPI recognized rental income pertaining to thislease amounting to US$0.51 million in 2015 and 2014 and US$0.04 million in 2013.

IPI’s future minimum lease receivables under non-cancellable operating leases as ofDecember 31, 2015 and 2014 follow:

2015 2014Within one year US$2,450 US$2,309After one year but not more than five years 9,013 7,829

US$11,463 US$10,138

Ionics EMS, Inc. (EMS) - Finance lease - as a Lessee· In 2015, EMS entered into a three-year lease agreement to finance its acquisition of equipment

as discussed in Note 16. Total interest expense recognized on these lease during the yearamounted to US$0.02 million. The future minimum rental payments pertaining to this financelease are as follows:

2015 2014Within one year US$487 US$−After one year but not more than five years 975 −

US$1,462 US$−

25. Registrations with the Philippine Economic Zone Authority (PEZA)

EMS, Iomni and IPI are all PEZA-registered. Their registrations entitle them to certain incentivesand privileges including a lower corporate income tax rate subject to certain provisions andlimitations of Republic Act (RA) 7916 and each subsidiary’s registration agreement with PEZA.

Ionics EMS, Inc.

Product Line Date of Registration Type of RegistrationIncome Tax Holiday (ITH)/Gross Income Tax Incentive

1. LCD Projector w/ PowerSupply

May 13, 2015 New project Four-year ITH starting April2015

2. Wibutler May 13, 2015 New project Gross income tax incentivestarting May 2015

3. Electronic Door Lock System May 13, 2015 New project Gross income tax incentivestarting May 2015

(Forward)

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4. Manufacture of tracking device Oct. 07, 2014 New Project Three year ITH starting July2014 (based on incrementalsales)

5. Manufacturing of light curedevice

May 08, 2014 New Project Gross Income tax incentivestarting March 2014

6. Portable/mobile two-way radiocommunication equipment

July 23, 2013 New project Three year ITH starting July2013

7. XR3 Universal VSATTransceiver

September 27, 2012 New project Four year ITH startingJune 2012

8. Mobile Display Device* June 22, 2012 New project Four year ITH startingDec 2009

9. Dual Port Gigabit EthernetBypass Adapter*

May 31, 2011 New project Three year ITH startingJune 2011

10. Pole Cabinets* March 31, 2011 New project Four year ITH startingJune 2011

11. Video Conference System* March 1, 2011 New project Three year ITH startingMarch 2011

12. Optical Network Terminal* February 15, 2010 New project Four year ITH startingMarch 2010

13. Manufacturing of PlugComputer*

October 28, 2009 New project Four-year ITH startingDecember 2009

14. Electronic Communicator andController Module (ECCM)*

May 13, 2009 New project Four-year ITH startingMarch 2009

15. Digipass Security Software forMicrosoft pocket PC*

April 27, 2009 New project Four-year ITH startingMarch 2009

16. Internet Protocol Modem April 16, 2008 New project Gross income tax incentivestarting April 2008

17. Re-manufacture of MobilePhones*

November 28, 2008 New project Four-year ITH startingDecember 2008

18. PV-Max Master* March 13, 2008 New project Four-year ITH startingMay 2008

19. T2 Wi-Fi Tag* March 16, 2009 New project Four-year ITH startingOctober 2008

20. Optics Telecommunication* November 28, 2005 New project Four-year ITH startingJanuary 2006

21. ROHS Flex Cable Assembly* October 13, 2005 New project Four-year ITH startingOctober 2005

22. RF Tuners and Amplifiers* May 23, 2005 New project Four-year ITH startingJune 2005

23. Power Controller of BeardTrimmer with Saft NiCD andSanyo NiMH Re-chargeableBattery*

December 09, 2004 New project Four-year ITH startingDecember 2004

24. Wireless Broadband AccessUnit*

May 11, 2004 New project Four-year ITH startingMay 2004

25. Power Over LAN Assembly* September 30, 2003 New project Three-year ITH startingOctober 2003

(Forward)

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26. Electronic Car DashboardAssembly*

June 12, 2003 New project Four-year ITH startingJune 2003

27. Design and Development* July 28, 2003 New project Four-year ITH startingJuly 2003

28. Hi-Focus Asymmetrical DigitalSubscriber Line (ADSL)Broadband Access System*

September 21, 2000 New project Four-year ITH startingOctober 2000

*ITH incentive for these product lines have already expired as of December 31, 2015. Gross income from these product lines are nowbeing subjected to the 5% gross income tax from the date ITH incentive has expired.

The aforementioned registrations also entitle EMS to other incentives which include, amongothers, the duty-free importation of raw materials and capital equipment. EMS is negotiating withPEZA for additional bonus years for certain product lines with expired ITH.

Iomni Precision, Inc.

Product Line/Registered Activities Date of RegistrationIncome Tax Holiday (ITH)/Gross Income Tax Incentive

1. Manufacture of re-writable compact disk (CD) drivemechanical loader assembly*

October 17, 2000 Four-year ITH starting October2000

2. Plastic injection molding of high precision plasticparts and assembly*

September 17, 2001 Four-year ITH startingSeptember 2001

3. Fabrication of molds, dies, and printing of plasticparts*

March 28, 2003 Four-year ITH starting March2003

4. Manufacture of main base M, main frame and traydisc*

August 12, 2005 Four-year ITH starting August2005

5. Manufacture of plastic parts and assembly of supersolar cell*

September 24, 2007 Four-year ITH startingSeptember 2007

6. Lease out activity July 12, 2013 GIT Incentive

*ITH incentive for these product lines have already expired as of December 31, 2015. Gross income from these product lines are nowbeing subjected to the 5% gross income tax from the date ITH incentive has expired.

Ionics Properties, Inc.IPI is registered with PEZA as an Ecozone Facilities Enterprise pursuant to the provisions ofRA No. 7916. The registration entitles IPI to certain incentives and privileges includingexemption from payment of any and all local government imposts, fees, licenses or taxes and alower corporate tax rate of 5% subject to certain provisions and limitations of RA 7916 and IPI’sregistration agreement with PEZA.

26. Income Taxes

Provision for (benefit from) income tax consists of:

2015 2014 2013Current US$362 US$270 US$128Deferred (2) (10) (16)

US$360 US$260 US$112The Group recognized net deferred tax assets amounting to US$0.02 million in 2015 and 2014.

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Components of the Group’s net deferred income tax assets (liabilities) follow:

2015 2014Deferred income tax assets on advance rental US$29 US$28Deferred income tax liabilities on unrealized foreign

exchange gain (5) (6)US$24 US$22

The Group did not recognize certain deferred tax assets of certain subsidiaries since managementbelieves that it is probable that taxable profit will not be available against which the deductibletemporary differences and NOLCO can be utilized.

The components of the temporary differences where deferred tax assets were not recognized bythe Group follow:

2015 2014Pension liability US$2,055 US$2,026NOLCO 330 487Unamortized excess of contribution over the

normal cost 246 244Allowance for inventory obsolescence 225 107Straight-line recognition of rent expense 30 56MCIT 23 21Unrealized foreign currency exchange gain 40 −Others 71 149

US$3,020 US$3,090

The NOLCO can be carried forward as a deduction against taxable income as follows:

Year Incurred Amount Used/Expired Balance Expiry Date2012 US$164 US$164 US$− December 31, 20152013 197 − 197 December 31, 20162014 126 − 126 December 31, 20172015 7 − 7 December 31, 2018

US$494 US$164 US$330

The Group has the following excess MCIT over regular corporate income tax:

Year Incurred Amount Used/Expired Balance Expiry Date2012 US$7 US$7 US$− December 31, 20152013 7 − 7 December 31, 20162014 7 − 7 December 31, 20172015 9 − 9 December 31, 2018

US$30 US$7 US$23

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Reconciliation of the statutory income tax rate to the effective income tax rate follows:

2015 2014 2013Statutory income tax rate 30.00% 30.00% 30.00%Tax effect of:

Movement in unrecognized deferred tax assets (0.62%) 2.98% 36.35%Loss (income) from operations subject to lower preferential rate without NOLCO (35.92%) (21.19%) (57.93%)Income from operations under ITH - net (8.27%) (7.06%) (9.13%)Others 25.59% 14.82% 4.87%

Effective income tax rate 10.78% 19.55% 4.16%

Under RA No. 7916 on Special Zones and PEZA, a PEZA-registered enterprise is exempt fromnational and local taxes. In lieu of the said national and local taxes, 5% of the gross income earned byall businesses and enterprises within the ecozone shall be remitted to the local and nationalgovernment.

27. Earnings (Loss) Per Share

Earnings per share amounts attributed to ordinary equity holders of the Parent Company werecomputed as follows:

2015 2014 2013Net income (loss) attributable to

ordinary equity holders of theParent Company US$2,925 US$1,049 (US$2,740)

Weighted average number ofissued common shares 857,975 857,975 857,975

Less treasury shares (Note 17) 15,459 15,459 15,459Weighted average number of

outstanding common shares 842,516 842,516 842,516Basic/diluted earnings (loss) per

share US$0.0035 US$0.0012 (US$0.0033)

There were no potential dilutive shares in 2015, 2014 and 2013.

28. Pension Liability

The Group provides a noncontributory defined benefit pension plan for all regular employees.Benefits are based on the employee’s years of service and final plan salary. The trust fund, tocover the pension obligation, is administered by a trustee bank under the supervision of the Boardof Trustees of the plan. The Board of Trustees (BOT) is responsible for investment strategy of theplan. The Retirement Plan meets the minimum retirement benefit specified under RA No. 7641.

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Under the existing regulatory framework, RA No. 7641 requires a provision for retirement pay toqualified private sector employees in the absence of any retirement plan in the entity, providedhowever that the employee’s retirement benefits under any collective bargaining andother agreements shall not be less than those provided under the law.

The law does not require minimum funding of the plan.

The components of retirement costs included in “Salaries, wages and benefits” account under costof sales and operating expenses in the consolidated statements of income are as follows:

2015 2014 2013Current service cost US$205 US$175 US$195Net interest cost 90 94 90

US$295 US$269 US$285

The amount of remeasurement losses on retirement plan recognized in the consolidated statementsof comprehensive income are as follow:

2015 2014 2013Defined benefit obligation US$105 US$356 US$167Plan assets (3) 20 7

US$102 US$376 US$174

In 2015 and 2014 the Group recognized directly in other comprehensive income actuarial lossarising from the effects of changes in foreign exchange rates of the net pension obligationamounting to US$0.14 and US$0.04 million, respectively.

The amount included in the consolidated statements of financial position arising from the Group’sobligation in respect of its defined benefit plan is as follows:

2015 2014Present value of defined benefit obligation US$2,856 US$2,679Fair value of plan assets (341) (347)

US$2,515 US$2,332

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

2015 2014Balance at beginning of year US$2,679 US$2,252Current service cost 205 175Interest cost 106 109Benefits paid (93) (191)Remeasurement (gains) losses arising from:

Experience adjustments 439 2Changes in financial assumptions (114) 354Changes in demographic assumptions (220) −

Effect of changes in foreign exchange rates (146) (22)US$2,856 US$2,679

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Changes in the fair value of plan assets are as follows:

2015 2014Balance at beginning of year US$347 US$258Interest income 16 15Return on assets excluding amount included in net

interest cost 3 (20)Contributions 88 268Benefits paid (93) (191)Effect of changes in foreign exchange rates (20) 17

US$341 US$347

The movements in the net pension liability recognized in the consolidated statements of financialposition follow:

2015 2014Balance at beginning of year US$2,332 US$1,994Retirement cost 295 269Remeasurement losses 102 376Contributions (88) (268)Effect of changes in foreign exchange rates (126) (39)

US$2,515 US$2,332

The Group’s plan assets are comprised of cash and cash equivalents, investment in equityinstruments, debt instrument - government and other bonds and other assets. The RetirementTrust Fund assets are valued by the fund manager at fair value using the mark-to-market valuation.The fair value of plan assets by each class is as follows (in actual amounts):

2015 2014Cash in banks US$14,345 US$244Investment in common shares - Quoted 7,906 8,139Investment in Government Securities

Fixed rate treasury notes 146,520 64,916Retail treasury bonds 110,690 72,060

257,210 136,976Investment in other securities and debt instruments

EDC rated debt securities − 3,056Not rated debt securities 2,978 11,344

2,978 14,400Other receivables

Due from BSP-SDA Direct 55,595 184,868Interest receivable 2,735 2,263

US$340,769 US$346,890

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The composition of the fair value of the trust fund follows:

Investment in government securities - includes investment in Philippine Retail Treasury Bonds(RTBs) and Fixed Rate Treasury Notes (FXTNs);

Cash in bank - includes savings and time deposits with Bangko Sentral ng Pilipinas (BSP);

Investments in other securities and debt instruments - includes investments in Long-TermNegotiable Certificate of Deposits (LTNCD) and retail bonds;

Investments in equity securities - includes investment in common shares traded in the PhilippineStock Exchange (PSE);

Others - includes accrued interest on fixed income securities and special deposit account in BSP.

As at December 31, 2015 and 2014, the Fund has no investments in the securities (debt or equity)of any related party.

The plan assets do not include any of the Group’s own equity instruments nor any propertyoccupied by, or other assets used by the Group.

The costs of defined benefit pension plan as well as the present value of the pension obligation aredetermined using actuarial valuations. The actuarial valuation involves making variousassumptions.

The principal assumptions used in determining pension obligation for the defined benefit plan areas follows:

2015 2014 2013Retirement age 60 - 65 60 - 65 60 - 65Average remaining working life 11 - 18 11 - 18 11 - 18Discount rate

Beginning of year 5% 8% 6%End of year 5% 5% 8%

Salary increase rateBeginning of year 3.5% - 5% 4% - 5% 1% - 5%End of year 3.5% - 5% 3.5% - 5% 4% - 5%

The sensitivity analysis that follows has been determined based on reasonably possible changes ofthe assumption occurring as of the end of the reporting period, assuming if all other assumptionswere held constant.

2015 2014

Assumptions Changes

Increase (decrease) on presentvalue of defined benefit

obligation Changes

Increase (decrease) on presentvalue of defined benefit

obligationDiscount rate +1.0% (US$256) +1.0% (US$336)

-1.0% US$313 -1.0% US$424

Future salaryincrease +1.0% US$331 +1.0% US$407

-1.0% (US$275) -1.0% (US$331)

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The BOT of the Plan ensures that its plan assets are readily available to service the pensionobligation due. This is done by ensuring that its assets are easily disposable and can easily beconverted to cash. The 2015 allocation of the Group’s plan assets consists of 75.48% governmentsecurities, 16.31% receivables from special deposit accounts, 0.87% rated and not rated debtsecurities, 2.32% investment in quoted stocks, 4.21% cash and cash equivalents and 0.70% toothers such as receivables generated from interest.

The table below shows the maturity profile of the undiscounted pension payments as ofDecember 31, 2015 and 2014:

2015Less than

1 year1 to 5years

5 to 10years

10 to 15years

15 to 20years

More than20 years

Normal retirement US$505 US$191 US$207 US$178 US$1,709 US$5,782Other than normal retirement 164 614 728 740 637 800

US$669 US$805 US$935 US$918 US$2,346 US$6,582

2014Less than

1 year1 to 5years

5 to 10years

10 to 15years

15 to 20years

More than20 years

Normal retirement US$490 US$246 US$244 US$171 US$2,209 US$13,299Other than normal retirement 108 451 465 380 340 561

US$598 US$697 US$709 US$552 US$2,549 US$13,860

The Group does not expect to contribute to the pension plan in 2016.

29. Segment Information

The primary segment reporting format of the Group is by business segments as the Group’s risksand rates of return are affected predominantly by differences in the goods produced. Secondarysegment reporting information is reported geographically.

The operating businesses are organized and managed separately according to the nature of theproducts and services provided, with each segment representing a strategic business unit thatoffers different products and serves different markets.

The computer peripherals segment provides world-class design, build, ship, and logistics servicesto top computer equipment companies. The Group has been providing a broad range of serviceofferings to customers in the desktop personal computer (PC), peripheral, server, notebook PC,and storage devices industries.

The telecom segment specializes in the manufacture and delivery of carrier and enterprise-classcommunications equipment, as well as wireless, optical networking, wire line transmission, andenterprise networking equipment.

The Group works with the world’s leading telecommunications equipment companies, along withits TL9000 certification, to face the demand and manufacturing challenges of a fluctuating andtime-critical market segment.

The automotive segment understands and delivers to satisfy customers’ unique manufacturingrequirements. The automotive industry demands advanced technologies, high-end materials, andadvanced manufacturing processes and quality systems. The Group has experience in Product Part

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Approval Processes (PPAPs), Process Failure Mode & Effects Analysis (PFMEA) and DesignFailure Mode & Effects Analysis (DFMEA), and is ISO/TS 16949 certified.

The consumer electronics segment also provides design, build, ship and logistics services for itscustomers in the digital media devices, digital television capture and audio products industries.The consumer electronics segment builds the capability to serve these customers with everyelement that is required to deliver real products to the marketplace.

The real estate segment generates income from rentals of the Group’s building, includingwarehouse and factory area, and building improvements to third party lessees within the PEZAeconomic zone.

The revenues from major customers under the telecom industry amounted to US$35.80 million,US$31.13 million and US$36.06 million in 2015, 2014 and 2013, respectively. Total revenuesfrom these customers exceed 10% of the total revenues of the Group.

The Group’s segment information as of and for the year ended December 31, 2015, 2014 and2013, which present income and losses, revenues and certain assets and liabilities attributed toeach business segment, are summarized in the following tables:

2015

ComputerPeripherals Telecom Automotive

ConsumerElectronics Real Estate Others

Adjustmentsand

Eliminations TotalSales US$8,783 US$40,660 US$7,724 US$5,937 US$− US$696 (US$54) US$63,746Rental income − 97 − − 2,357 416 (474) 2,396Income (loss) from operations (215) 1,439 243 207 1,963 (629) − 3,008Foreign exchange gain (loss) - net 131 64 10 14 1 (1) − 219Dividend income − − − − − 1,118 (1,100) 18Non-controlling interests − − − − − − (54) (54)Income tax (48) (152) (30) (19) (102) (9) − (360)Gain on sale on property, plant and equipment − 3 − 2 − − − 5Equity in net losses − − − − − 177 (3) 174Interest – net (21) (1) (1) − 8 (8) − (23)Miscellaneous – net (3) (46) (4) (10) − 1 − (62)Net income (loss) (US$156) US$1,307 US$218 US$194 US$1,870 US$649 (US$1,157) US$2,925Identifiable assets US$7,775 US$21,198 US$1,993 US$4,393 US$8,241 US$51,119 (US$43,692) US$51,027Unallocated assets − − − 7,877 − 515 − 8,392Total assets US$7,775 US$21,198 US$1,993 US$12,270 US$8,241 US$51,634 (US$43,692) US$59,419Identifiable liabilities US$278 US$4,083 US$334 US$612 US$2,787 US$30,663 (US$47,319) (US$8,562)Unallocated liabilities − − − − − 28,063 − 28,063Total liabilities US$278 US$4,083 US$334 US$612 US$2,787 US$58,726 (US$47,319) US$19,501Capital expenditures US$356 US$3,126 US$246 US$253 US$1,741 US$200 US$− US$5,922Depreciation US$1,238 US$360 US$216 US$82 US$319 US$189 US$− US$2,404

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2014



Adjustmentsand

Eliminations TotalSales US$8,897 US$38,296 US$9,594 US$5,838 US$− US$790 (US$110) US$63,305Rental income − 97 − − 2,457 449 (476) 2,527Income (loss) from operations (81) (42) 275 288 1,926 (1,498) − 868Foreign exchange gain (loss) - net 65 36 17 6 − − − 124Dividend income − − − − − 2,058 (2,000) 58Non-controlling interests − − − − − − 21 21Income tax (42) (48) (30) (39) (101) − − (260)Gain on sale of investment properties − − − − 163 − − 163Equity in net losses − − − − − (122) (66) (188)Interest – net − (7) (1) (3) (2) − − (13)Miscellaneous – net (8) (30) (8) − − 322 − 276Net income (loss) (US$66) (US$91) US$253 US$252 US$1,986 US$760 (US$2,045) US$1,049Identifiable assets US$4,872 US$23,287 US$3,379 US$3,771 US$6,318 US$50,082 (US$42,027) US$49,682Unallocated assets − − − 3,889 − 1,960 − 5,849Total assets US$4,872 US$23,287 US$3,379 US$7,660 US$6,318 US$52,042 (US$42,027) US$55,531Identifiable liabilities US$313 US$2,939 US$220 US$92 US$2,173 US$30,404 (US$46,416) (US$10,275)Unallocated liabilities − − − − − 28,525 28,525Total liabilities US$313 US$2,939 US$220 US$92 US$2,173 US$58,929 (US$46,416) US$18,250Capital expenditures US$741 US$947 US$1,304 US$171 US$259 US$348 US$− US$3,770Depreciation US$896 US$357 US$248 US$64 US$282 US$160 US$− US$2,007

2013



Adjustmentsand

Eliminations TotalSales US$14,440 US$37,393 US$7,136 US$4,734 US$− US$860 (US$207) US$64,356Rental income US$− US$32 US$− US$− US$2,058 US$411 (US$446) US$2,055Income (loss) from operations (US$345) (US$1,744) (US$319) (US$16) US$1,740 (US$2,280) US$− (US$2,964)Foreign exchange gain (loss) – net 255 44 35 12 − − − 346Dividend income − − − − − 5,168 (5,000) 168Non-controlling interests − − − − − − 65 65Income tax − (15) − − (89) (8) − (112)Gain on sale of property and equipment − − − − − 3 − 3Equity in net losses − − − − − (142) (8) (150)Interest – net (5) (18) (1) (1) (33) 27 − (31)Miscellaneous - net (23) (62) (9) (21) (12) 62 − (65)Net income (loss) (US$118) (US$1,795) (US$294) (US$26) US$1,606 US$2,830 (US$4,943) (US$2,740)Identifiable assets US$10,336 US$22,075 US$3,021 US$3,546 US$6,301 US$50,747 (US$43,353) US$52,673Unallocated assets − − − 4,101 − 361 − 4,462Total assets US$10,336 US$22,075 US$3,021 US$7,647 US$6,301 US$51,108 (US$43,353) US$57,135Identifiable liabilities US$1,988 US$4,074 US$360 US$143 US$2,238 US$32,033 (US$49,098) (US$8,262)Unallocated liabilities − − − − − 29,106 − 29,106Total liabilities US$1,988 US$4,074 US$360 US$143 US$2,238 US$61,139 (US$49,098) US$20,844Capital expenditures US$1,167 US$72 US$201 US$1,146 US$300 US$465 US$− US$3,351Depreciation US$769 US$707 US$183 US$71 US$204 US$204 (US$73) US$2,065

The Group’s geographical markets refer only to the initial destination of the products. TheGroup’s products are intermediate products which are shipped to the customers’ plants forincorporation or further assembly into the final finished products. All assets of the Group, exceptfor equity investments in ICL, and assets attributed to Ionics-EMS (USA) are located in thePhilippines.

The Group’s geographical segments are based on the location of the Group’s assets. Sales toexternal customers disclosed in the geographical segments are based on the geographical locationof its customers.

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The following tables represent the Group’s total revenue and certain assets based on the Group’sgeographical segment:

Segment Revenue

2015 2014 2013Asia US$43,669 US$42,419 US$50,747Europe 14,750 12,428 9,148North America 5,327 8,458 4,461

US$63,746 US$63,305 US$64,356

Segment Assets

2015 2014 2013Asia US$57,883 US$53,729 US$48,637North America 1,536 1,802 8,498

US$59,419 US$55,531 US$57,135

30. Acquisition of Additional Shares of a Subsidiary

On September 25, 2009, Philippine SEC approved EMS’ equity restructuring. The equityrestructuring resulted to issuance of common and preferred shares to the Parent Company, whichconsequently increased the ownership of EMS by 15%. The non-controlling interests wereadjusted to reflect the increase in ownership in the amount of US$0.13 million.

On March 2, 2010, the Parent Company and EMS jointly announced the proposed voluntarydelisting of EMS from the Singapore Exchange. In compliance with the delisting proposal, theParent Company offered to purchase the common shares issued to the non-controllingshareholders of EMS. In 2010, the Parent Company acquired an additional 104,801,455 shares or6.72% ownership of EMS for a total consideration of US$1.17 million.

The difference between the amount by which the non-controlling interests were adjusted and theconsideration paid to the non-controlling shareholders amounted to US$0.64 million. Thetransaction costs of US$0.23 million incurred in relation to the equity transaction was recognizeddirectly in equity.

31. Notes to Statements of Cash Flows

In 2015, the Group acquired machineries and transportation equipment through bank financingamounting to US$1.86 million.

32. Prepayments and Other Current Assets

Prepayments and other current assets include restricted cash representing standby letter of creditamounting to US$0.09 million which the Group paid in 2015, to be applied as payment formachine acquisition and is expected to be released within twelve months after the balance sheetdate.

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IONICS, INC. AND SUBSIDIARIESSUPPLEMENTARY INFORMATION AND DISCLOSURES REQUIRED ONSRC RULE 68, AS AMENDED (2011)DECEMBER 31, 2015(Amounts in Thousands)

Below are the additional information and schedules required by SRC Rule 68, as Amended (2011),that are relevant to the Group. This information is presented for purposes of filing with the SEC and isnot required part of the basic financial statements. All values are rounded to the nearest thousand(US$000) except when otherwise indicated.

Schedule A. Financial Assets

Below is the schedule of financial assets of the Group as of December 31, 2015:

Name of issuing entity andassociation of each issue

%Ownership

Number of Shares ofPrincipal Amount of

Bonds and NotesAmount Shown inthe Balance Sheet

IncomeReceived

and AccruedAvailable-for-sale investments

Quoted:Rovi Corporation N/A 4,037 50 US$−

50 US$−Unquoted:

Pacific Synergies IV 6.08% − 967 −Beacon Property Ventures, Inc. 10.00% 50,000,000 900 −Tech Ventures III 9.99% − 881 −Sta. Elena Golf Course N/A 1 63 −Manila Southwoods Golf and Country Club 1 −N/A 16Export and Industry Bank N/A 16,000 − −Philippine Long Distance

Telephone Company -Communications andEnergy Ventures, Inc. N/A 8,000 2 −

Tech Ventures II 10.74% − − 182,829 US$18

US$2,879 US$18

The Group's quoted investments are valued at the latest market price available while unquotedinvestments are carried at cost less impairment losses, if any.

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Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Partiesand Principal Stockholders (other than related parties)

The Group has no amount receivable from directors, officers, employees, and principal stockholders(other than related parties) other than those arising from purchase subject to usual terms, for ordinarytravel and expense advances and for other such items arising in the ordinary course of business, fromwhom an aggregate indebtedness of more than P=100,000 or one percent of total assets, whichever islesser is owed in 2015.

Schedule C. Amounts Receivable from Related Parties which are Eliminated Duringthe Consolidation of Financial Statements

Below is the schedule of receivable with related parties, which are eliminated in the consolidatedfinancial statements as of December 31, 2015:

Debtor Volume of Transactions Receivables TermsIonics EMS, Inc. Purchases of goods US$53 US$3 Non-interest bearing;

no impairmentIntercompany advances − 15,464Rental expense 474 −

Ionics Properties, Inc. Intercompany advances 700 700 Non-interest bearing;no impairment

Iomni Precision, Inc. Intercompany advances 200 200 Non-interest bearing;no impairment

Synertronix, Inc. Other inter-company charges

− 791 Non-interest bearing;no impairment

US$1,427 US$17,158

The rollforward of receivables with related parties is as follows:

DebtorBeginning

Balance Additions Collection CurrentNon-

currentEnding

BalanceTrade receivables

Ionics EMS, Inc. US$17 US$53 US$67 US$3 US$− US$3Due from related parties

Ionics EMS, Inc. 15,464 − − 10,564 4,900 15,464Synertronix, Inc. 807 − 16 791 − 791Iomni Precision, Inc. − 200 − 200 − 200Ionics Properties, Inc. − 700 − 700 − 700

Interest receivablesIonics EMS, Inc. − − − − − −

Rent receivablesIonics EMS, Inc. 60 474 534 − − −

US$16,348 US$1,427 US$617 US$12,258 US$4,900 US$17,158

Intercompany transactions pertain to advances made by Ionics, Inc. to its subsidiaries in support fortheir working capital requirements. There were no amounts written off during the year and allamounts are expected to be settled /converted within the year.

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Schedule D. Intangible Asset

As of December 31, 2015, the Group has goodwill amounting to US$0.22 million from the acquisitionof the 30% share in Iomni Precision. There was no impairment loss recognized on goodwill during theyear.

Schedule E. Long term debt

Below is the schedule of long-term debt of the Group:

Type of Obligation

Amountauthorized by

indenture Current Noncurrent TotalTerm loans

Three-year loan payable in 36 monthlyinstallments beginning March 2013until March 2016. The loan carries aninterest rate of 3.63% per annum,subject to quarterly repricing. Not applicable US$63 US$− US$63

Car loans Not applicable 36 84 120

Finance lease Not applicable 449 940 1,389US$548 US$1,024 US$1,572

Schedule F. Indebtedness to Related Parties (Long Term Loans from Related Companies)

As of December 31, 2015, the Group has no long term loans from related companies.

Schedule G. Guarantees of Securities of Other Issuers

As of December 31, 2015, the Group has no guaranteed securities by other issuers.

Schedule H. Capital Stock

Number of shares held by*

Title of issue

Numberof shares

authorized*

Number ofshares issued

andoutstanding*

Numberof shares

reserved foroptions,

warrants,conversion and

other rights Affiliates

Directors,Officers

andEmployees Others

Common Stock 1,000,000 842,516 − 349,212 123,540 369,764*In thousands

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IONICS, INC. AND SUBSIDIARIESGROUP STRUCTURE

Below is a map showing the relationship between and among the Group, ultimate parent company andsubsidiary as of December 31, 2015:

IONICS, INC.Ultimate Parent Company

Ionics EMS, Inc.Parent Company

97%

Ionics EMS, USASubsidiary

100%

Tech VenturePartners, Ltd..

Associate30%

ICCP Ventures, Inc.Associate

24%

ICCP VenturePartners, Inc.

Associate30%

IomniPrecision Inc.

Subsidiary100%

IonicsProperties, Inc.

Subsidiary100%

Ionics Circuits, Ltd.

Subsidiary100%

Synertronix, Inc.Non-operating

Subsidiary100%

ICCP VenturesPartners (Hong

Kong), Ltd.Associate

29%

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IONICS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE REQUIRED UNDERSECURITIES REGULATION CODE RULE 68, AS AMENDED (2011)DECEMBER 31, 2015

Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation Code RuleSRC Rule 68 and 68.1 which consolidates the two separate rules and labeled in the amendment as “Part I” and“Part II”, respectively. It also prescribed the additional schedule requirements for large entities showing a list ofall effective standards and interpretations under Philippine Financial Reporting Standards (PFRS).

Below is the list of all effective PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations ofInternational Financial Reporting Interpretations Committee (IFRIC) as of December 31, 2015:

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31, 2015

Adopted NotAdopted

NotApplicable

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

3

PFRSs Practice Statement Management Commentary 3

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine Financial ReportingStandards

3

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

3

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

3

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

3

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

3

Amendments to PFRS 1: Government Loans 3

PFRS 2 Share-based Payment 3

Amendments to PFRS 2: Vesting Conditions andCancellations

3

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

3

Definition of Vesting Condition 3

PFRS 3(Revised)

Business Combinations 3

Accounting for Contingent Consideration in a BusinessCombination

3

Scope Exceptions for Joint Arrangements 3

PFRS 4 Insurance Contracts 3

Amendments to PFRS 4: Financial Guarantee Contracts 3

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Adopted NotAdopted

NotApplicable

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations

3

Changes in Methods of Disposal 3

PFRS 6 Exploration for and Evaluation of Mineral Resources 3

PFRS 7 Financial Instruments: Disclosures 3

Financial Instruments: Disclosures - Servicing Contracts 3

Amendments to PFRS 7: Reclassification of FinancialAssets

3

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

3

Amendments to PFRS 7: Improving Disclosures aboutFinancial Instruments

3

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets

3

Amendments to PFRS 7: Disclosures - Offsetting FinancialAssets and Financial Liabilities

3

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

3

Amendments to PFRS 9: Hedge Accounting (2014 or finalversion)

3

Applicability of the Amendments to PFRS 7 to CondensedInterim Financial Statements

3

PFRS 8 Operating Segments 3

Aggregation of Operating Segments and Reconciliation ofthe Total of the Reportable Segments’ Assets to theEntity’s Assets

3

PFRS 9 Financial Instruments 3

Financial Instruments (2014 or final version) 3

Financial Instruments: Classification and Measurement(2010 version)

3

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

3


3

PFRS 10 Consolidated Financial Statements: Sale or Contributionsof Assets between an Investor and its Associates or JointVenture

3

Amendments to PFRS 10: Investment Entities 3

Amendments to PFRS 10 Investment Entities: Applyingconsolidation exceptions

3

- 3 -

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Adopted NotAdopted

NotApplicable

PFRS 11 Joint Arrangements 3

Amendments to PFRS 11: Accounting for Acquisitions ofInterests in Joint Operations

3

PFRS 12 Disclosure of Interests in Other Entities 3

Amendments to PFRS 12: Investment Entities 3

PFRS 13 Fair Value Measurement 3

Portfolio Exception 3

PFRS 14 Regulatory Deferral Accounts 3

International Financial Reporting Standards

IFRS 15 Revenue from Contracts with Customers 3

IFRS 16 Leases 3

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements 3

Amendment to PAS 1: Capital Disclosures 3

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

3

Amendments to PAS 1: Presentation of Items of OtherComprehensive Income

3

Amendments to PAS 1: Presentation of financialstatements disclosure initiative

3

PAS 2 Inventories 3

PAS 7 Statement of Cash Flows 3

PAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors

3

PAS 10 Events after the Reporting Date 3

PAS 11 Construction Contracts 3

PAS 12 Income Taxes 3

Amendment to PAS 12 - Deferred Tax: Recovery ofUnderlying Assets

3

PAS 16 Property, Plant and Equipment 3

Revaluation Method: Proportionate Restatement ofAccumulated Depreciation and Amortization

3

Amendments to PAS 16: Clarification of AcceptableMethods of Depreciation

3

Amendments to PAS 16: Bearer Plants 3

PAS 17 Leases 3

PAS 18 Revenue 3

- 4 -

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Adopted NotAdopted

NotApplicable

PAS 19(Amended)

Employee Benefits 3

Amendments to PAS 19: Defined Benefit Plans: EmployeeContributions

3

Regional Market Issue Regarding Discount Rate 3

PAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance

3

PAS 21 The Effects of Changes in Foreign Exchange Rates 3

Amendment: Net Investment in a Foreign Operation 3

PAS 23 Borrowing Costs 3

PAS 24 Related Party Disclosures - Key Management Personnel 3

Related Party Disclosures - Key Management Personnel(Amended)

3

PAS 26 Accounting and Reporting by Retirement Benefit Plans 3

PAS 27(Amended)

Separate Financial Statements 3

Amendments to PAS 27: Equity Method in SeparateFinancial Statements

3

Amendments to PAS 27: Investment Entities 3

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

3

PAS 28(Amended)

Investments in Associates and Joint Ventures 3

Sale or Contribution of Assets between an Investor and itsAssociate or Joint Venture

3

Amendments to PAS 28: Investment Entities: Applyingconsolidation exceptions

3

PAS 29 Financial Reporting in Hyperinflationary Economies 3

PAS 32 Financial Instruments: Disclosure and Presentation 3

Amendments to PAS 32: Puttable Financial Instrumentsand Obligations Arising on Liquidation

3

Amendment to PAS 32: Classification of Rights Issues 3

Amendments to PAS 32: Offsetting Financial Assets andFinancial Liabilities

3

PAS 33 Earnings per Share 3

PAS 34 Interim Financial Reporting 3

Disclosure of Information ‘Elsewhere in the InterimFinancial Report’

3

PAS 36 Impairment of Assets 3

Amendments to PAS 36: Recoverable Amount Disclosuresfor Non-Financial Assets

3

- 5 -

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Adopted NotAdopted

NotApplicable

PAS 37 Provisions, Contingent Liabilities and Contingent Assets 3

PAS 38 Intangible Assets 3

Revaluation Method: Proportionate Restatement ofAccumulated Depreciation and Amortization

3

Amendments to PAS 38: Clarification of AcceptableMethods of Amortization

3

PAS 39 Financial Instruments: Recognition and Measurement 3

Amendments to PAS 39: Transition and Initial Recognitionof Financial Assets and Financial Liabilities

3

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

3

Amendments to PAS 39: The Fair Value Option 3

Amendments to PAS 39: Financial Guarantee Contracts 3

Amendments to PAS 39: Reclassification of FinancialAssets

3

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

3

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

3

Amendments to PAS 39: Embedded Derivatives 3

Amendment to PAS 39: Eligible Hedged Items 3

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

3


3

PAS 40 Investment Property 3

Investment Property: Clarification on Ancillary Services 3

PAS 41 Agriculture 3

Amendments to PAS 41: Bearer Plants 3

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration andSimilar Liabilities

3

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

3

IFRIC 4 Determining Whether an Arrangement Contains a Lease 3

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

3

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

3

- 6 -

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Adopted NotAdopted

NotApplicable

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

3

IFRIC 8 Scope of PFRS 2 3

IFRIC 9 Reassessment of Embedded Derivatives 3

Amendments to Philippine Interpretation IFRIC 9:Embedded Derivatives

3

IFRIC 10 Interim Financial Reporting and Impairment 3

IFRIC 11 PFRS 2- Group and Treasury Share Transactions 3

IFRIC 12 Service Concession Arrangements 3

IFRIC 13 Customer Loyalty Programmes 3

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

3

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

3

IFRIC 15 Agreements for the Construction of Real Estate 3

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

IFRIC 17 Distributions of Non-cash Assets to Owners 3

IFRIC 18 Transfers of Assets from Customers 3

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

3

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

IFRIC 21 Levies 3

SIC-10 Government Assistance - No Specific Relation toOperating Activities

3

SIC-12 Consolidation - Special Purpose Entities 3

Amendment to SIC - 12: Scope of SIC 12 3

SIC-13 Jointly Controlled Entities - Non-Monetary Contributionsby Venturers

3

SIC-15 Operating Leases - Incentives 3

SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable Assets

3

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

3

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

3

SIC-29 Service Concession Arrangements: Disclosures. 3

SIC-31 Revenue - Barter Transactions Involving AdvertisingServices

3

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Adopted NotAdopted

NotApplicable

SIC-32 Intangible Assets - Web Site Costs 3

International Accounting Standards Board

IFRS 15 Revenue from Contracts with Customers 3

In addition, the IASB has issued the following new standards that have not yet been adopted locally by the SECand FRSC. The Company is currently assessing the impact of these new standards and plans to adopt them ontheir required effective dates once adopted locally.

· IFRS 15, Revenue from Contracts with Customers (effective January 1, 2018)· IFRS 16, Leases (effective January 1, 2019)

Standards tagged as “Not applicable” have been adopted by the Company but have no significant coveredtransactions for the year ended December 31, 2015.

Standards tagged as “Not adopted” are standards issued but not yet effective as of December 31, 2015. TheCompany will adopt the Standards and Interpretations when these become effective.

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IONICS, INC. AND SUBSIDIARIESFINANCIAL SOUNDNESS INDICATORS

Below are the financial ratios that are relevant to the Group for the year ended December 31, 2015 and2014:

Financial ratios 2015 2014Liquidity ratios:Current ratio Current assets

Current liabilities 2:52:1 2:49:1

Quick asset ratio Current assets − inventories andprepayments and

other current assetsCurrent liabilities 1.66:1 1.49:1

Leverage ratio Net debtNet debt and equity 0.07:1 0.15:1

Debt to equity ratio Total debtTotal equity 0.49:1 0.49:1

Asset to equity ratio Total assetsTotal equity 1.49:1 1.49:1

Profitability ratios:Interest rate coverage ratio Income before income tax and

finance costsFinance Costs 81:51:1 46.76:1

Revenue Growth *CY revenue – **PY revenue**PY revenue 0.47% (0.87%)

Gross Profit Margins Gross profit***Revenue 9.63% 7.81%

Profit Margins Gross profit – operating expenses***Revenue 5.06% 1.87%

Net Income Margins Net income***Revenue 4.42% 1.59%

Return on Equity Net incomeTotal stockholder’s equity 7.35% 2.82%

*CY - current year**PY - prior year***Revenue includes sales and rental income

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IONICS, INC.RECONCILIATION OF RETAINED EARNINGS AVAILABLEFOR DIVIDEND DECLARATIONDECEMBER 31, 2015(Amounts in Thousands)

Unappropriated retained earnings, beginning US$15,697Adjustments: Provision for impairment losses −

Unappropriated retained earnings, as adjusted, beginning US$15,697

Net income based on the face of the audited financial statements 865

Less: Non-actual/unrealized income, net of tax Equity in net income of associate/joint payable − Unrealized foreign exchange gain - net (except attributable to cash) − Unrealized actuarial gain − Fair value adjustments (M2M gains) − Fair value adjustment of investment property − Adjustment due to deviation from PFRS/GAAP - gain − Other unrealized gains or adjustments to retained earnings Gain from recovery of impairment −

Add: Non-actual losses Depreciation on revaluation increment, after tax − Adjustment due to deviation from PFRS/GAAP - loss − Loss on fair value adjustment of investment property −

Net income actual/realized US$16,562Add (less): Dividend declarations during the period −

Treasury shares (240)

Unappropriated retained earnings, as adjusted, ending US$16,322

COVER SHEET - [email protected] (049) 508-1111 0917-869-5688 No. of Stockholders...

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Transcript of COVER SHEET - [email protected] (049) 508-1111 0917-869-5688 No. of Stockholders...