CR02245-2024

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A, AS AMENDED

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

Dec 31, 2023
2. SEC Identification Number
142312
3. BIR Tax Identification No.
000-083-856-000
4. Exact name of issuer as specified in its charter
GINEBRA SAN MIGUEL INC.
5. Province, country or other jurisdiction of incorporation or organization
Philippines
6. Industry Classification Code(SEC Use Only)

7. Address of principal office

3rd and 6th Floors, San Miguel Properties Centre, St. Francis Street, Ortigas Center,
Mandaluyong City
Postal Code
1550

8. Issuer's telephone number, including area code

(+632) 8841-5100
9. Former name or former address, and former fiscal year, if changed since last report
N/A
10. Securities registered pursuant to Sections 8 and 12 of the SRC or Sections 4 and 8 of the RSA
Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding
COMMON STOCK 286,327,841
11. Are any or all of registrant's securities listed on a Stock Exchange?
Yes No
If yes, state the name of such stock exchange and the classes of securities listed therein:
The Philippine Stock Exchange, Inc. - Common Shares
12. Check whether the issuer:

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 (a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1
thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141
of The Corporation Code of the Philippines during the preceding twelve (12) months (or for such
shorter period that the registrant was required to file such reports)

Yes No

(b) has been subject to such filing requirements for the past ninety (90) days
Yes No
13. State the aggregate market value of the voting stock held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within sixty (60) days prior to
the date of filing. If a determination as to whether a particular person or entity is an affiliate cannot be
made without involving unreasonable effort and expense, the aggregate market value of the common
stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the
circumstances, provided the assumptions are set forth in this Form

as of December 31, 2023 & March 31, 2024 were at 11,629,392,026.70 &
11,443,100,606.00, respectively

APPLICABLE ONLY TO ISSUERS INVOLVED IN

INSOLVENCY SUSPENSION OF PAYMENTS PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

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

Yes No

DOCUMENTS INCORPORATED BY REFERENCE

15. If any of the following documents are incorporated by reference, briefly describe them and identify
the part of SEC Form 17-A into which the document is incorporated:

(a) Any annual report to security holders

None

(b) Any information statement filed pursuant to SRC Rule 20

None

(c) Any prospectus filed pursuant to SRC Rule 8.1

None

The Exchange does not warrant and holds no responsibility for the veracity of the facts and representations contained in all corporate
disclosures, including financial reports. All data contained herein are prepared and submitted by the disclosing party to the Exchange,
and are disseminated solely for purposes of information. Any questions on the data contained herein should be addressed directly to
the Corporate Information Officer of the disclosing party.

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 Ginebra San Miguel, Inc.
GSMI

PSE Disclosure Form 17-1 - Annual Report

References: SRC Rule 17 and
Section 17.2 and 17.8 of the Revised Disclosure Rules

For the fiscal year

ended
Dec 31, 2023

Currency Php (in thousands)

Balance Sheet
Year Ending Previous Year Ending
Dec 31, 2023 Dec 31, 2022
Current Assets 20,359,399 14,565,515
Total Assets 27,767,805 21,612,113
Current Liabilities 8,456,000 6,458,542
Total Liabilities 9,367,493 7,170,068
Retained
Earnings/(Deficit)
19,771,818 15,589,230

Stockholders' Equity 18,400,312 14,442,045

Stockholders' Equity - Parent 17,580,398 13,679,286
Book Value Per Share 64.26 50.44

Income Statement
Year Ending Previous Year Ending
Dec 31, 2023 Dec 31, 2022
Gross Revenue 53,638,569 47,340,746
Gross Expense 46,803,761 41,354,182
Non-Operating Income 2,591,120 130,537
Non-Operating Expense 61,041 58,850
Income/(Loss) Before Tax 9,364,887 6,058,251
Income Tax Expense 2,319,020 1,511,029
Net Income/(Loss) After Tax 7,045,867 4,547,222
Net Income/(Loss) Attributable to Parent
Equity Holder
6,974,497 4,447,847

Earnings/(Loss) Per Share (Basic) 24.61 15.88

Earnings/(Loss) Per Share (Diluted) 24.61 15.88

Financial Ratios
Fiscal Year Ended Previous Fiscal Year
Formula
Dec 31, 2023 Dec 31, 2022

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 Liquidity Analysis Ratios:
Current Ratio or Current Assets / Current
Working Capital Ratio Liabilities
2.41 2.26
(Current Assets - Inventory -
Quick Ratio Prepayments) / Current 1.36 1.04
Liabilities
Solvency Ratio Total Assets / Total Liabilities 2.96 3.01
Financial Leverage Ratios
Debt Ratio Total Debt/Total Assets 0.34 0.33
Total Debt/Total Stockholders'
Debt-to-Equity Ratio
Equity
0.51 0.5
Earnings Before Interest and
Interest Coverage Taxes (EBIT) / Interest 119.78 113.84
Charges
Total Assets / Total
Asset to Equity Ratio
Stockholders' Equity
1.51 1.5
Profitability Ratios
Sales - Cost of Goods Sold or
Gross Profit Margin
Cost of Service / Sales
0.24 0.24

Net Profit Margin Net Profit / Sales 0.11 0.1

Return on Assets Net Income / Total Assets 0.21 0.21
Net Income / Total
Return on Equity
Stockholders' Equity
0.36 0.31
Price Per Share / Earnings
Price/Earnings Ratio
Per Common Share
6.85 6.61

Other Relevant Information

Please see attached SEC Form 17-A together with the audited Consolidated Financial Statements and the Sustainability
Report (collectively, the “Report”) of Ginebra San Miguel Inc. (“GSMI”), which we filed with the Securities and Exchange
Commission ("SEC") today, April 12, 2024, through email. The audited Consolidated Financial Statements was likewise
filed today via SEC eFAST.

In addition, GSMI also filed today, April 12, 2024 its audited Separate/Parent Financial Statements with the SEC eFAST.
A copy of which is hereto attached.

Filed on behalf by:

Name Francis Joseph Cruz
Designation General Counsel and Assistant Corporate Secretary

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 COVER SHEET

1 4 2 3 1 2
S. E. C. Registration Number

G I N E B R A

S A N M I G U E L

I N C .

(Company’s Full Name)

3rd & 6th F L R S . S A N M I G U E L

P R O P E R T I E S C E N T R E ,

S T . F R A N C I S S T R E E T ,

O R T I G A S C E N T E R ,

M A N D A L U Y O N G C I T Y
(Business Address: No. Street City/Town/Province)

FRANCIS JOSEPH A. CRUZ 8841-5100

Contact Person Company Telephone Number

1 2 3 1 SEC Form 17-A

Month Day FORM TYPE Month Day
Annual Meeting

Secondary License Type, If Applicable

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

------------------------------------------------------------------------------------------------------------
To be accomplished by SEC Personnel concerned

____________________________
File Number LCU

____________________________
Document I. D. Cashier

------------------
STAMPS
------------------
Remarks = pls. use black ink for scanning purposes
 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, 2023.

2. SEC Identification Number 142312 3. BIR Tax Identification No. 000-083-856-00

4. Exact name of issuer as specified in its charter GINEBRA SAN MIGUEL INC.

5. Philippines 6. _________ (SEC Use Only)

Province, Country or other jurisdiction of incorporation or organization
Industry Classification Code:

7. 3rd & 6th Floors, San Miguel Properties Centre 1550

St. Francis Street, Ortigas Center Postal Code
Mandaluyong City, Philippines
Address of principal office

8. (632) 8841-5100
Issuer's telephone number, including area code

9. N/A
Former name, former address, and former fiscal year, if changed since last report

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

Title of Each Class Number of Shares of Stock Outstanding

and Outstanding Debt
as of December 31, 2023

Common 286,327,841
Preferred -
286,327,841

Short term borrowings 1,000,000,000

Long term borrowings none

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

Yes [ √ ] No [ ]

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

The Philippine Stock Exchange, Inc. Common

1
12. Check whether the issuer:

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

Yes [ √ ] No [ ]

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

Yes [ √ ] No [ ]

13. The aggregate market value of the common voting stock held by non-affiliates of the Company as
of December 31, 2023 and March 31, 2024 were at 11,629,392,026.70 and 11,443,100,606.00,
respectively.

DOCUMENTS INCORPORATED BY REFERENCE

14. The following documents are incorporated by reference:

2
 PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

Business Development

Ginebra San Miguel Inc. (the “Company” or “GSMI”) was formed on July 10, 1987 as the legal
entity for the acquisition by San Miguel Corporation (“SMC”) of the production assets of a liquor
production company that has been in operation since 1902. The Company now operates three (3)
liquor bottling facilities located in the following areas: (1) Mandaue City, Cebu; (2) Sta. Barbara,
Pangasinan; and (3) Cabuyao, Laguna.

The Company is a public company under Section 17.2 of the Securities Regulation Code and
its common shares are listed with The Philippine Stock Exchange, Inc. (the “PSE”).

The (“Company” or “GSMI”), previously a majority-owned direct subsidiary of San Miguel

Corporation (“SMC”), whose ultimate parent company is Top Frontier Investment Holdings, Inc. (“Top
Frontier”), has been engaged in the manufacture and sale of liquor products. The Company by itself, or
through its subsidiary, also toll-manufactures for third parties for the production of the latter’s alcoholic
beverages.

In order to rationalize its businesses, SMC consolidated its food and beverage business under
San Miguel Food and Beverage, Inc. (“SFMB”, formerly San Miguel Pure Foods Company, Inc.) through
the execution of a Deed of Exchange dated April 5, 2018, executed between SMC and SMFB, whereby
SMC agreed to convey and transfer to SMFB 216,972,000 common shares held by SMC in the
Company and 7,859,319,270 common shares in San Miguel Brewery Inc. In consideration of the said
transfer and upon compliance with government requirements, SMFB issued 4,242,549,130 common
shares in favor of SMC. Consequently, the ownership by SMFB of the common shares previously held
by SMC in the Company has been registered in the books of the Company on November 5, 2018. Thus,
the Company is now a majority-owned subsidiary of SMFB.

Domestic Subsidiaries and Operations

Of the Company’s domestic subsidiaries, the operating ones are Distileria Bago, Inc. (“DBI”),
East Pacific Star Bottlers Phils Inc. (“EPSBPI”) and Agricrops Industries Inc. (“Agricrops”), hereinafter
collectively referred to as the “Domestic Operating Subsidiaries”.

DBI became a wholly-owned subsidiary of the Company in 1996. On August 14, 2009, DBI
amended its Articles of Incorporation to include among its primary purposes, the manufacture,
production and tolling of not only distilled alcohol but also other types of alcohol and their co-products.
It owns a distillery located in Bago City, Negros Occidental that converts sugar cane molasses into
alcohol.

EPSBPI, on the other hand, is principally engaged in the toll-manufacture and bottling of
alcoholic beverages. It was purchased by the Company on January 27, 2012. The acquisition forged
synergies with the Company’s on-going operations and provided additional capacity to fulfill the
expansion plans of the Company. EPSBPI owns bottling facilities in Cauayan, Isabela and in Ligao
City, Albay, which are currently being used principally in connection with the Company’s liquor business.

Agricrops was incorporated on September 14, 2000. It is currently primarily engaged in the
manufacture, sale and distribution of liquid fertilizer from various agro-industrial waste.

The Company has other non-operating domestic subsidiaries, which are Healthy Condiments,
Inc. and Crown Royal Distillers, Inc.

International Subsidiaries/Affiliates and Operations

To fast-track entry into regional markets, the Company in November 2004 entered into a Share
Purchase Agreement (“SPA”) with the Thai Life Group of Companies (the “Thai Life”) for the purchase
of 40% ownership of the outstanding shares of C.N.T. Wine and Liquor Company Limited (“CNT”), a

3
limited company organized under the laws of Thailand. CNT possesses a license in Thailand to engage
in the business of manufacturing alcohol and manufacturing, selling and distributing brandy, wine and
distilled spirits products both for domestic and export markets. Also, on the same date, the Company
and Thai Life entered into a Joint Venture Agreement (“JVA”). The JVA established the terms and
conditions regarding the ownership and operation of CNT and the joint control rights, obligations and
responsibilities of the Company and Thai Life, as stockholders. The Company likewise incorporated
Ginebra San Miguel International Ltd. (“GSMIL”) and subsequently assigned its rights and obligations
under the SPA and the JVA to GSMIL, including its right to purchase 40% ownership of the outstanding
shares of CNT. The acquisition of CNT was completed in December of the same year. CNT was later
renamed Thai San Miguel Liquor Company Limited (“TSML”).

On June 29, 2007, the Company incorporated GSM International Holdings Limited (“GSMIHL”),
a wholly-owned subsidiary in Thailand. GSMIHL holds 40% of the shares of Thai Ginebra Trading
Company Limited (“TGT”), another joint venture company formed with Thai Life. TGT functions as the
selling and distribution arm of TSML.

On August 27, 2008 and September 11, 2008, the Company incorporated Global Beverages
Holdings Limited (“GBHL”) and Siam Holdings Limited (“SHL”), respectively, as its wholly-owned
subsidiaries. Both are entities established as holding companies for the acquisition of additional
investment in TSML and TGT.

On October 14, 2008, SHL acquired 49% ownership of the outstanding shares of Siam Wine
and Liquor Limited (“SWL”), a limited company organized under the laws of Thailand. On the same
date, SWL acquired 10% ownership of the outstanding capital stock of TSML and TGT. Accordingly,
the share in TSML and TGT of the Company and its subsidiaries was increased from 40% to 44.9%.

The Company and its subsidiaries, domestic and otherwise, and their respective interests in
joint ventures shall be collectively referred to as “Group”. Interests in joint venture is limited to the
amount of investment and equity in net earnings only.

Other than the foregoing, there was no bankruptcy, receivership or similar proceeding or
material reclassification, merger, consolidation, purchase or sale of a significant amount of assets by
the Group which was not in the ordinary course of business during the past three (3) years. Other
developments are also discussed in the Management Discussion and Analysis attached hereto as
Annex “C”.

Products

Products and operations of the Group are further discussed in the Management’s Discussion
and Analysis attached as Annex “C”.

The Company’s products are listed in Annex “A” of this report.

The Company has a diverse product portfolio that caters to the varied preference of the local
market. Core brands Ginebra San Miguel, GSM Blue and Vino Kulafu, the leading brands in the gin and
Chinese wine categories, accounted for 99% of the Group’s total revenues. The other products that
complete the liquor business of the Group comprise about 1% of its total revenues. These products are
available nationwide while some are exclusively exported to select countries.

Distribution methods of the products

The Company primarily distributes majority of its products nationwide to consumers through
territorial distributorship by a network of dealers and through the Company’s sales offices strategically
situated across the country. Furthermore, some off-premise outlets such as supermarkets, grocery
stores, sari-sari stores and convenience stores, as well as on-premise outlets such as bars, restaurants
and hotels are directly served by the Company through its Key Accounts Group. The Company has
ninety-two (92) dealer sites who are responsible for distributing and selling the Company’s products
within a geographical area consisting of specified outlets and fifteen (15) sales offices as of year-end
2023. For areas where there are no appointed dealers, the Company’s sales offices directly serve the

4
wholesalers or retailers. The Company has also made its products available in popular e-commerce
selling platforms to further widen distribution reach and channel.

Meanwhile, the Logistics Group of the Company is responsible for planning, coordination and
delivery of products from the plants to various sales offices, dealers, wholesalers and select directly-
served retailers. Thereafter, products are sold by trade partners to a multitude of retail touch points and
eventually to consumers nationwide and to a limited extent, internationally.

Most product deliveries to dealers are made through third-party haulers while Company-owned
routing trucks are generally utilized for directly-served outlets. The Company also engages third-partly
service providers to handle warehouse management and delivery to various destination points as the
need arises.

Status of any publicly-announced new products

In February 2023, a new-look GSM Premium Gin made its way to the market. The upgraded
bottle, label and cap designs uplifted the overall perception of the product. This was also intended to
target more upscale outlets.

The contemporized bottle and label designs of GSM Blue in October 2023 were intended to
further boost appeal to young drinkers. Moreover, its Mojito in 1-liter format continued commercial
expansion in select areas nationwide as trend for group drinking continues to grow.

Competition

The local hard liquor industry is segmented by category and geographically among the major
players. GSMI is the leader in the gin market catering mostly the northern and southern provinces of
Luzon. The Greater Manila Area and key urban centers across the country are being shared mostly by
Emperador Light Brandy locally produced by Emperador Distillers, Inc., and Ginebra San Miguel of
GSMI. Recently, value-priced imported Alfonso Light Brandy, distributed by Montosco, Inc., has likewise
been gaining popularity.

The Visayas and Mindanao regions prefer Tanduay Rhum Dark 5 Years and recently the low-
proof alcohol Tanduay Light, both products of Tanduay Distiller’s Inc. Moreover, there is a market for
Chinese wine in various islands in the region with GSMI’s Vino Kulafu as the top choice in this category.

These major players compete in their development of brand equity, as the industry’s consumers
generally develop affinity and loyalty to the brands that they patronize. The Company effectively takes
the lead as it continues to build upon the brand legacy that it has established in over a hundred years
of operation thru effective advertising and promotional programs.

Even as the industry continues to evolve, major players also compete by adopting a product portfolio
that potentially caters to shifting consumer preferences. The Company is very receptive to these shifts,
which, coupled with the Company’s ample resources, enables it to develop and mobilize new product
variants for consumers to keep up with competition.

The elastic demand for mainstream liquor products also leads major players to compete on the
basis of pricing. In this area, the Company employs rational pricing policies that are in line with prevailing
consumer purchasing power and current operating cost levels. Also, the Company ensures that its
products provide utmost value for money to its consumers.

The liquor industry is dependent on the supply of molasses, the raw material for alcohol
production. While the molasses supply has remained stable, the steady increase in demand for fuel
alcohol since the implementation of the Biofuel Act of 2006 has resulted in a deficiency of supply for
beverage alcohol production. This led to GSMI’s multi-continent sourcing and diversification of alcohol
supply to ensure supply security and partly offset higher raw material costs.

Liquor manufacturers also compete in terms of production efficiencies, as the price-sensitive

nature of the industry’s consumers makes them more reliant on cost improvements than on price
increases to brace against profit squeezes from an inflationary operating environment. The Company

5
continues to implement strategies to maximize the retrieval of its second-hand bottles, the usage of
which in production, may result to significant improvements in the Company’s cost structure.

Lastly, manufacturers compete in the breadth of their distribution network. The Company’s
distribution network of ninety-two (92) dealer sites, fifteen (15) sales offices, three (3) Company-owned
liquor bottling plants and two (2) subsidiary-owned bottling plants are strategically dispersed throughout
the country, ensuring that consumers are immediately served with high-quality liquor products.

Raw Materials and Supplies

The Company uses the following materials in its products:

A. Alcohol

The alcohol used in the Company’s products is distilled alcohol produced from the fermentation
of molasses which is a by-product in the manufacture of raw sugar from sugarcane. Generally, the
Company purchases molasses from Philippines (majority in Negros), Indonesia, India, and Thailand
which is then delivered to its wholly-owned subsidiary, DBI, in Negros Occidental. After converting the
molasses into alcohol, DBI then delivers the distilled alcohol back to the Company’s facilities as part of
the raw materials for liquor. The Company pays a corresponding fee to DBI in the toll-processing of the
Company’s molasses.

To ensure that the supply of alcohol is secured, the Company keeps optimum physical inventory
in storage and engages in purposive multi-continent sourcing. The Company sources its total local
alcohol requirement from DBI. Of its total alcohol usage in 2023, 38% came from DBI.

B. Sugar

The Company uses sugar in the production of its products. Majority of the Company’s sugar
requirements are sourced from All Asian Countertrade, Inc.

C. Flavoring

Gin essences and other flavoring agents are used in the production of gin. In 2023, the
Company purchased ingredients mainly from the following suppliers: Firmenich Asia PTE LTD, Symrise
Asia Pacific PTE LTD, Givaudan Singapore PTE LTD, and PT Mane Indonesia.

D. Bottles

The Company’s products are packaged in glass bottles, majority of which are manufactured by
San Miguel Yamamura Packaging Corporation (“SMYPC”), an SMC subsidiary. Glass bottles account
for a significant portion of the cost of goods sold for the Company’s products. The cost is managed by
maintaining a network of second-hand territorial bottle suppliers (“TBS”) across the country thru San
Miguel Shipping and Lighterage Corporation. These TBS retrieve, sort and pre-wash the bottles from
the market for the Company’s use. Upon delivery in the bottling plants, the bottles further undergo
stringent quality inspection protocols to monitor and address safety concerns in the use of recycled
bottles. Due to the Company’s retrieval programs, second-hand bottles account for 65% of total bottles
used in 2023.

Customers

The Company has various customers: dealers, wholesalers, retailers, off-premise outlets such
as supermarkets, grocery stores, sari-sari stores and convenience stores and on-premise outlets such
as bars, restaurants and hotels.

The Group, which includes the Company, is not dependent upon a single or few customers, the
loss of any of which will have a material adverse effect on the Group taken as a whole.

6
Transactions with and /or dependence on related parties

The Group, in the normal course of business, has significant transactions with related parties
such as those pertaining to the purchases of raw materials, containers, bottles and other packaging
materials as well as the sale of liquor and co-products. The sales to and purchases from related parties
are made at normal market prices.

The Group’s transactions with related parties are described in Note 27 of the 2023 Audited
Consolidated Financial Statements attached hereto as Annex “D”.

Intellectual Property

Intellectual property comes in various formats, including but not limited to trademarks,
copyrights and patents. It also covers different areas - from products, logos, and advertising materials
- which serves as a valuable means of distinguishing one’s business and products from others,
indicating the source and origin of the goods and serving to guarantee that the entity’s products are of
a certain standard of quality. With this in mind, the Company ensures that the trademarks, patents,
industrial designs and copyrights that are being used or are intended to be used in its business,
products, and in its marketing and advertising activities are protected by registration with the Intellectual
Property Office of the Philippines (the “IPOPHL”) and its equivalent government regulatory agencies in
other countries and jurisdictions. The Company also sees to it that such registrations are maintained
pursuant to pertinent laws, rules and regulations.

All trademarks used by the Company for its products that were sold in the Philippines and in
relevant foreign markets, as well as those used for its other business operations, are either registered
or with pending applications for registration in its name or in the name of SMC. The Company has
applied for registration or has existing registrations in its name, among others, the trademarks Ginebra
San Miguel, Vino Kulafu, Primera Light Brandy, 1834 Premium Distilled Gin, G&T Ultralight and San
Miguel Ethyl Alcohol, including their label designs, as well as the trademarks of products that are
planned to be released in 2024. The Company maintains the registration of the industrial design of the
various Ginebra San Miguel bottles. The trademarks and label designs of G.S.M. Blue, and Antonov
Vodka are likewise continued to be registered in the name of SMC, the use of which by the Company
is still duly authorized by SMC. The Company has likewise registered, among others, “Ngiting Ginebra”,
“Iba ang Ngiti Ngayon sa One Ginebra Nation”, “Ka-Mommyhan”, and “Ginebra Tayo” for its advertising
and marketing initiatives.

Trademarks used by the Company for its products that are distributed or sold abroad are
continued to be registered in various countries including Albania, Bulgaria, Canada, China, Hong Kong,
Hungary, India, Italy, Kuwait, Malaysia, Monaco, New Zealand, Singapore, South Korea, Spain, Sri
Lanka, Taiwan, Thailand, United States of America, and Vietnam.

The Company also has existing copyright certificates of registration over certain pictorial
illustrations and radio materials that are being used to advertise Vino Kulafu.

The Company, whenever necessary, files complaints for trademark infringement and unfair
competition, as well as opposes applications for registration of marks of other parties that are similar to
that of the Company, for the purpose of protecting its rights and interests. In 2024, the Company will
continue to exert efforts to put a stop to the widespread unauthorized use of its bottles by various
individuals and entities.

Government Approval and Regulations and Regulatory Bodies in the Philippines

The Group, in so far as its presence and/or operations in the Philippines is concerned, is
regulated by various government agencies and regulatory bodies to ensure compliance with relevant
laws, rules and regulations in the Philippines, which are discussed in detail hereunder.

As may be required for the conduct of its various businesses, the Group has obtained all the
permits, licenses and government approvals, such as but not limited to those required by the relevant
local government units, including the Food and Drug Administration (“FDA”), the Bureau of Internal
Revenue (“BIR”), the Bureau of Customs (“BOC”), the Department of Environment and Natural

7
Resources (“DENR”), and the various local government units where all of its offices, plants and other
installations are located.

With respect to the manufacture, sale and distribution of its domestic and for export products,
the Group is governed, among others, by the Food, Drug and Cosmetic Act, as amended by the FDA
Act of 2009, the provisions of which with respect to food products are principally enforced by the FDA,
a governmental agency under the Department of Health.

As regards labor and employment, the Group complies with the Labor Code of the Philippines,
as amended (the “Labor Code”), its implementing rules and regulations, issuances of the Department
of Labor and Employment (“DOLE”), and other labor-related legislations. The Group ensures that the
rights of its workers are protected and mandated benefits are provided to them through compliance with
the Occupational Health and Safety Law, the Social Security Act of 1997, as amended, the National
Health Insurance Act of 1995, as amended, the Anti-Age Discrimination in Employment Act, Anti Sexual
Harassment Act, Safe Spaces Act, and the 105-Day Expanded Maternity Leave Law, among other
relevant legislations. With respect to its engagement of Third-Party service providers, the Group
ensures that its service providers are compliant with the provisions of the Labor Code and other
issuances of the DOLE, more specifically Department Order No. 174, Series of 2017 and the Rules
Implementing Articles 106 to 109 of the Labor Code, as amended, relative to contracting or
subcontracting arrangements.

On matters relating to the operations of the Group which affect the environment, it ensures
compliance with the provisions of the Philippine Clean Water Act of 2004, The Water Code of the
Philippines of 1976, The Philippine Clean Air Act of 1999, Toxic Substances and Hazardous and
Nuclear Wastes Control Act of 1990, Ecological Solid Waste Management Act of 2000, and Extended
Producers Responsibility Act of 2022, including their implementing rules and regulations, among others,
all of which are implemented and enforced by the DENR and its related and/or attached agencies.

Anent its corporate registration, the Group is governed by the Revised Corporation Code of the
Philippines, the provisions of which are principally enforced by the Securities and Exchange
Commission (“SEC”). The Group also ensures compliance with the memorandum circulars and other
issuances of the SEC, whenever applicable.

Given that GSMI’s shares of stocks are listed with the PSE, it also complies with the Securities
Regulations Code (“SRC”) and its Implementing Rules and Regulations, as well as relevant issuances
of both the Philippine Stock Exchange (“PSE”) and SEC.

Regarding the matter of taxation, the Group is subject to the applicable provisions under the
National Internal Revenue Code of 1997 (“NIRC”), as amended, primarily on income tax and value
added tax. In addition, the Group is subject to local taxes and/or fees based on the prevailing revenue
ordinances in the areas where the Group has established its offices, plants and other facilities. As the
Group imports raw materials, machineries equipment and other goods from foreign countries, it is
likewise subject to duties, taxes and other charges, as provided under Philippine customs and tariff
laws, mainly Republic Act No. 10863, and implementing rules and regulations issued by the Bureau of
Customs (BOC).

GSMI products, given its nature as alcohol beverages, are specifically subject to excise tax on
distilled spirits as provided under the NIRC and its implementing rules, regulations, circulars and orders
issued by the Bureau of Revenue (BIR) and concurred by the Department of Finance.

On matters relating to personal data that is acquired by the Group in the course of its business
operations, it ensures compliance with the Data Privacy Act of 2012 and its Implementing Rules and
Regulations, as well as the issuances of the National Privacy Commission (the “Privacy Laws”), all of
which are intended to protect the fundamental human right of privacy of communication while ensuring
free flow of information to promote innovation and growth. Conformably with the Privacy Laws, GSMI
adopted a Personal Data Privacy Policy and appointed a Data Protection Officer and individual
Compliance Officers for Privacy for DBI and EPSBPI.

With respect to other laws that may impact on the way the Group operates, the Group is
cognizant of the provisions of the Philippine Competition Act, which lays down a consolidated framework

8
on competition policy, and prohibits and penalizes all forms of anti-competitive agreements, abuse of
dominant position and anti-competitive mergers and acquisitions, all with the objective of protecting
consumer welfare and advancing domestic and international trade and economic development.

Research and Development

Part of the key focus area of the Group is continuous research and development to stay attuned
to evolving market preferences. As for GSMI, a dedicated R&D team, which maintains well-equipped
laboratory, closely collaborates with the market research group to constantly develop and formulate
innovative products. The R&D team’s mandate is to enhance and further expand the Company’s
product library that will allow timely product launches as the need arises.

Research and development costs of GSMI, DBI and EPSBPI amounted to P50.3, P48.3 million,
and P43.4 million 2023, 2022, and 2021, respectively. Spending on research and development are
mostly for new product development and various market research, which is less than 1% of the total
revenue during each of the last three (3) fiscal years.

Costs and Effects of Compliance with Environmental Laws

As part of the Group’s continuing compliance with and adherence to environmental laws, GSMI,
DBI and EPSBPI have spent P 66.0 million, P 44 million, and P 21.0 million in 2023, 2022, and 2021
respectively, in order to implement the following initiatives:
• Emission quality improvement by performing regular emission testing and ambient air quality
monitoring; boiler, generator and air pollution control devices preventive maintenance,
recalibration and repairs; and periodic cleaning of smokestacks;
• Wastewater effluent quality improvement by conducting intensive water quality monitoring
through DENR recognized third-party laboratories and in-house QA laboratories; optimizing
processes to reduce water usage and discharge; and performing repairs, maintenance and
further improvement of wastewater treatment facilities and discharge pipelines;
• Solid wastes management by implementing information and education campaigns on solid
waste management and waste minimization; mandating segregation at source practices; and
upgrading and maintaining composting, garbage collection with garbage compactors, and
material recovery facilities;
• Reduction of the company’s packaging footprint through the redesign of its packaging materials
which decreases plastics and paper waste generation throughout the products’ lifecycle;
• Recovery of at least 20% of the company’s plastic footprint through offsetting with plastic credits
from plastic waste diverters. Plastic credits were obtained from the recycling of rigid plastic
wastes and diversion of flexible plastic wastes thru cement co-processing, thus effectively
avoiding plastic wastes from leaking into the environment; and
• Improvement of the quality of environment by planting trees and cleaning rivers and coastlines,
which benefited both the operations of the company and the well-being of the immediate
environment and communities.

The domestic companies within the Group also implemented programs that support SMC’s
Water-for-All 50X2025 program. In line with the conglomerate’s goal to integrate sustainability into its
business strategy, GSMI is currently putting in place water reduction projects and programs that
consistently educate its employees on water stewardship.

Water reduction projects amounting to P 2.2 million, P 3.6 million, and P 2.0 million in 2023,
2022, and 2021, respectively. Modification of existing bottle washers and installation of water recovery
equipment and pipelines that promote recycling of used water within the process were prioritized by the
company in 2023. These efforts have resulted to 39.85% reduction in scarce non-product water usage
in manufacturing plants aligned with the conglomerate's goal of achieving 50% water reduction by year
2025.

Human Resources and Labor Matters

As of December 31, 2023, GSMI has a total of nine hundred seventy-four (974) regular
employees, DBI has a total of one hundred fifty-six (156) and EPSBPI has a total of one hundred twenty-
eight (128) regular employees. As for the operations of Agricrops, it is supported by DBI employees,

9
the cost for which is being billed by DBI thru management fees. There is no expected increase of
manpower for the said companies for the year 2024.

Details of the regular employee of GSMI, DBI and EPSBPI are as follows:

Description ADMINISTRATIVE OPERATIONS TOTAL

GSMI DBI EPSBPI TOTAL GSMI DBI EPSBPI TOTAL
No. of employees 410 17 9 436 564 139 119 822 1,258
Under CBA 0 0 0 0 229 93 0 322 322
Non-CBA 410 17 9 436 335 46 119 500 936

Some of the aforementioned companies is a party to a Collective Bargaining Agreement

(“CBA”) with the monthly-paid and daily-paid employees.

The Company has CBA for monthly-paid and daily-paid employees of its plant in Sta. Barbara,
Pangasinan (“Sta. Barbara Plant”), the daily-paid employees of its plant in Subangdaku, Mandaue City
(“Mandaue Plant”) and the daily-paid employees of its Cabuyao, Laguna Plant (“Cabuyao Plant”).

As for DBI, it has a CBA with the monthly-paid employees of its plant in Bago City, Negros
Occidental (“DBI Plant”).

The status of the respective CBAs of GSMI and DBI as of December 31, 2023 is summarized
in the table below:

BUSINESS UNION AFFILIATION EXPIRATION REMARKS

UNIT / PLANT OF ECONOMIC
PROVISION
GSMI - GSMI - FREEWAS December 31, The Union is composed of twenty-six
Mandaue Daily Paid Employees 2024 (26) members. The three (3)-year
Plant (Dailies) Union CBA for Economic provision covers
the period from January 1, 2022 to
December 31, 2024.

GSMI – United Independent December 31, The Union is composed of ninety-six

Cabuyao Plant Union of GSMI 2023 (96) members. CBA negotiation for
(Dailies) Cabuyao Plant Economic provision covering January
1, 2024 to December 31, 2026 has
been concluded last December 21,
2023.

GSMI - Sta. La Tondeña Distillers, December 31, The Union is composed of twenty (20)
Barbara Plant Inc. Workers Union – 2025 members. The three (3)-year CBA for
(Monthlies) Sta. Barbara Plant Economic provision covers the period
(LATODIWU) Monthly from January 1, 2023 to December 31,
Paid Independent 2025.
Union
GSMI - Sta. GSMI Sta. Barbara December 31, The Union is composed of eighty-
Barbara Plant Plant Daily-paid 2025 seven (87) members. The three (3)-
(Dailies) Workers Independent year CBA for Economic provision
Union covers the period from January 1,
2023 to December 31, 2025.
DBI Plant (CIO - DBEU) - December 31, The Union is composed of ninety-
(Monthlies) Congress of 2025 three (93) members. The three (3)-
Independent year CBA for Economic provision
Organizations covers the period from January 1,
Distileria Bago 2023 to December 31, 2025.
Employees Union

10
 There have been no strikes or threatened strikes in the Company and its Domestic Operating
Subsidiaries for the past three (3) years.

The Company, DBI and EPSBPI maintains a retirement plan pursuant to which all regular
monthly-paid and daily-paid employees of the Company are eligible members.

The retirement plan is described in Note 29 of the 2023 Audited Consolidated Financial
Statement of the company attached hereto as Annex “D”.

Major Risks

Competitor Risk

With the industry continuing to evolve, major players compete by adopting a product portfolio
that caters to shifting consumer preferences. Over the years, the Group, with respect to its liquor
operations, has expanded its product portfolio to include not only gin but also variants thereof (low-
proof, ready mixed or flavored and distilled gin), Chinese wine, brandy, vodka and rum products.

Regulatory Risk

Changes in regulations and actions by national or local regulators in the Philippines can result
in increased competitive pressures, such as the excise tax increases for alcoholic beverages. The
Group cushions the effect of these increases through equity building of its brands, price increases in its
products and improvements in manufacturing cost.

Raw Material Supply/Price Risk

The Group, with respect to its molasses-related operations, still faces volatility of local supply
and prices of molasses since the current demand-supply situation may not be sustainable. When there
is volatility in supply, the Group addresses this through regular monitoring of its molasses and alcohol
requirements and covering them with forward supply contracts. The Group also imports molasses and
alcohol requirements the local supply cannot meet.

Currency Risk

The Group’s exposure to foreign exchange risk resulted from its business transactions
denominated in foreign currencies. It is the Group’s policy to ensure that capabilities exist for active and
prudent management of its foreign exchange.

Credit Risk

Credit risk, or the risk of counterparties defaulting, is controlled by the application of credit
approvals, limits and monitoring procedures. It is the Group’s policy to enter into transactions with a
diversity of creditworthy parties to mitigate any significant concentration of credit risk. The Group
ensures that sales of products are made to customers with appropriate credit history. It maintains an
internal mechanism to monitor the granting of credit and management of credit exposures. The Group
has made provisions, where necessary, for potential losses on credits extended. Where appropriate,
the Group obtains collateral or arranges master netting agreements.

The Group’s exposure to credit risk arises from default of the counterpart with a maximum
exposure equal to the carrying amount of these instruments, net of the value of collaterals, if any.

The Group does not expect any counterparty to default in its obligations. Specifically, the
Company has no significant concentration of credit risk with any counterparty. Further, in 2018, many
of the Company’s customers have shifted to cash transactions, thereby resulting in a reduction in credit
risk.

For other risks material to the Group’s operations, see Note 31 of the 2023 Audited
Consolidated Financial Statement attached hereto as Annex “D”.

11
Item 2. Properties

A summary of information on the general condition and location of the principal properties of
the Company and its relevant subsidiaries, including those properties they are leasing is attached to as
Annex “B”.

The Group has no principal properties, which are subject to a lien or mortgage or are subject
to specific limitations in usage or ownership.

Item 3. Legal Proceedings

The following are the material pending legal proceedings to which the Company is a party to:

A. Tax Cases Pending with the Court of Tax Appeals ("CTA”)

Ginebra San Miguel Inc. vs. Commissioner of Internal Revenue

CTA Case No. 11052
CTA Third Division

This case is a judicial claim for refund of alleged deficiency taxes paid under protest by
GSMI in connection with its removals of alcohol products for the period covering 23 January 2020
to 9 February 2020, in the aggregate amount of Sixty-Six Million Three Hundred Seventy Thousand
One Hundred Twenty-Five and 28/100 Pesos (Php 66,370,125.28).

On 22 July 2020, GSMI received a Notice of Discrepancy dated 6 July 2020 issued by the
BIR (the “Original NOD”), which enjoined GSMI to pay alleged deficiency excise taxes in the
amount of Php39,578,563.97, inclusive of interests, for the period covering 27 January 2020 to 9
February 2020.

On 6 August 2020, GSMI submitted to the BIR its Letter-Reply to the Original NOD, where
it emphasized that it is not liable to pay the alleged deficiency excise tax liability, and thus,
requested its cancellation and withdrawal.

On 13 October 2020, GSMI received from the BIR a Letter dated 18 September 2020 with
an attached Amended Notice of Discrepancy, which modified the amount of the alleged deficiency
excise tax liability to Php71,710,429.11, inclusive of interests, for the period covering 23 January
2020 to 9 February 2020.

On 28 October 2020, GSMI submitted to the BIR its Letter-Reply to the Amended NOD,
where it reiterated its position that it is not liable for the alleged deficiency excise taxes.

On 11 November 2020, GSMI received from the BIR a Letter dated 6 November 2020
which reiterated the finding of alleged deficiency excise tax under the Amended NOD.

On 29 December 2020, GSMI paid under protest the amount of Php66,370,125.28,

representing the deficiency excise tax portion under the Amended NOD, through the BIR Electronic
Filing and Payment System (eFPS).

On 8 January 2021, GSMI submitted to the BIR a Letter-Reply to the BIR’s Letter dated 6
November 2020. GSMI reiterated its position that it is not liable for the alleged deficiency excise
tax liability under the Amended NOD and informed the BIR that it paid under protest the amount of
Php66,370,125.28 through eFPS on 29 December 2020. In the same Letter-Reply, GSMI
explained that with respect to the assessed penalties from the alleged late payment of the
deficiency excise tax, it would avail the remedies available under Revenue Regulations No. 13-
2001, as amended.

On 16 July 2021, GSMI received a copy of Letter of Authority (LOA) No. LOA-121-2021-
00000109 dated 1 July 2021 issued by the BIR, authorizing its revenue officers to examine GSMI’s

12
books of accounts and other accounting records for all internal revenue taxes except for value-
added tax for TY 2020.

On 3 August 2021, GSMI filed with the CIR an administrative claim for refund of the
erroneously or illegally collected deficiency excise tax for the period covering 23 January 2020 to
9 February 2020, in the amount of Php66,370,125.28, which GSMI paid under protest on 29
December 2020.

On 7 March 2022, the BIR issued a letter notifying GSMI on the transmittal of the entire
docket to CIR’s Legal Service Division for its resolution and issuance of a clarificatory ruling on the
administrative claim for refund.

Prior to the expiry of the two-year statutory period to file judicial action for the recovery of
erroneously or illegally collected internal revenue taxes, GSMI filed a Petition for Review with the
CTA on 28 December 2022 pursuant to Section 204(C) and 229, Tax Code, and Section 3(a), Rule
8, Revised Rules of the Court of Tax Appeals (RRCTA) in order to preserve its right to claim by
judicial action its claims for refund of its erroneously or illegally collected deficiency excise taxes,
in connection with its removals of alcohol products for the period covering 23 January 2020 to 9
February 2020.

The case was docketed as CTA Case No. 11052, and was raffled to the CTA’s First
Division. In a Resolution dated 29 May 2023, the CTA First Division ordered the transfer of the
case to the CTA Third Division.

Upon service of Summons to the CIR and the filing of the CIR’s Answer dated 24 March
2023, pre-trial conference was held on 26 July 2023. Pursuant to the CTA’s Order, the parties filed
their Joint Stipulation of Facts and Issues on 29 August 2023. Pre-trial was terminated upon the
issuance of the CTA’s Pre-Trial Order on 5 September 2023.

GSMI presented its lone witness during the hearing on October 4, 2023. At the same
hearing, the CTA ordered GSMI to file its Formal Offer of Evidence (FOE) within 10 days therefrom,
or not later than October 13, 2023.

GSMI filed its FOE on 13 October 2023. Respondent CIR filed his Comment with
Manifestation on GSMI’s FOE on 17 November 2023. Respondent CIR’s counsel manifested that
they will no longer present testimonial evidence since there was no report of the investigation on
GSMI’s refund claim forwarded to their office.

On 25 January 2024, GSMI received the CTA’s Resolution dated 23 January 2024, which
admitted its Exhibits “P-1” to “P-17” and “P-19” to “P-21”, inclusive of sub-markings. Moreover, the
CTA’s Resolution noted the manifestation of Respondent CIR that he will no longer present
evidence, constraining the CTA to direct the parties to submit their respective memorandum within
thirty (30) days from receipt of the Resolution.

GSMI filed its Memorandum on 23 February 2024. The case is now submitted for
resolution.

B. Tax Cases Pending with the Supreme Court (“SC”)

Ginebra San Miguel Inc. vs. Commissioner of Internal Revenue

SC G.R. No. 271363
CTA En Banc Case No. 2544 and 2555 (Consolidated)
CTA Case Nos. 8953 and 8954 (Consolidated)

These cases pertain to GSMI’s Claims for Refund with the BIR, in the amount of P581.7
million in Case No. 8953, and P133.6 million in Case No. 8954, or in the total amount of P715.3
million, representing payments of excise tax erroneously, excessively, illegally, and/or wrongfully
assessed on and collected from GSMI by the BIR on removals of its distilled spirits or finished
products for the periods from January 1, 2013 up to May 31 2013 in Case No. 8953, and from
January 8, 2013 up to March 31, 2013 in Case No. 8954.

13
 The aforementioned assessment and collection arose from the imposition and collection
of excise taxes on GSMI’s finished products processed and produced exclusively from its inventory
of ethyl alcohol, notwithstanding that excise taxes had already been previously paid by GSMI on
said ethyl alcohol.

After several hearings and presentation of evidence, both parties filed their respective
Formal Offers of Evidence.

On July 28, 2020, The CTA Third Division rendered its Decision and denied GSMI’s
Petition for Review. GSMI received the said Decision on 24 August 2020, for which it timely filed a
Motion for Reconsideration on the aforementioned Decision on 02 September 2020, to which the
Commissioner of Internal Revenue filed its Opposition.

The CTA Third Division issued an Amended Decision dated 1 February 2021 which
partially granted GSMI’s Motion for Reconsideration and ruled that GSMI is entitled to a partial
refund of its erroneously and excessively paid excise taxes in the amount of Php 319,755,320.98
out of its original claim of Php 715,258,843.38.

GSMI and CIR subsequently filed Motions for Reconsideration on the aforesaid Amended
Decision and Oppositions to each other’s Motion for Reconsideration. In a Resolution dated 28
October 2021, the CTA Third Division denied for lack of merit GSMI’s Motion for Reconsideration
and CIR’s Motion for Partial Reconsideration of the Amended Decision.

On 4 January 2022, GSMI elevated to the CTA En Banc the Decision dated 28 July 2020,
Amended Decision dated 1 February 2021, and Resolution dated 28 October 2021 of the CTA
Third Division, by way of a Petition for Review, which was docketed as CTA E.B. No. 2555.

Earlier, the CIR also filed a Petition for Review with the CTA En Banc elevating thereto the
Amended Decision dated 1 February 2021 and Resolution dated 28 October 2021 of the CTA Third
Division. and the same was docketed as CTA E.B. No. 2544.

On 28 March 2022, the CTA En Banc ordered the Parties to file their respective
Comments/Oppositions to the Petitions for Review. On 7 April 2022, GSMI filed a Motion for
Extension of Time To File Comment on the Petition for Review in CTA EB No. 2544.

On 21 April 2022, GSMI filed its Comment on the Petition for Review in CTA EB No. 2544.
On May 30, 2022, the Court En Banc promulgated a Resolution which denied GSMI’s Motion for
Extension and submitted the Petitions for Review for decision. On 13 June 2022, GSMI filed its
Motion for Reconsideration assailing the said Resolution.

On 4 October 2022, the CTA En Banc promulgated a Resolution which set aside the May
30, 2022 Resolution insofar as the Petitions for Review were submitted for decision. The
Resolution likewise directed the CIR to file a Comment to GSMI’s Motion for Reconsideration, to
which the CIR failed despite due notice.

On 18 January 2023, the CTA En Banc granted GSMI’s Motion for Extension of Time to
File Comment on the Petition for Review in CTA E.B. No. 2544 and admitted GSMI’s Comment as
part of the records of the case.

In a Decision dated 18 January 2024 received by GSMI on 23 January 2024, the CTA En
Banc denied both the Petitions for Review of GSMI and the CIR, and affirmed the Amended
Decision of the CTA Third Division dated 28 October 2021 awarding GSMI a partial refund of
Php319,755,320.82 only.

GSMI had fifteen (15) days from 23 January 2024, or until 7 February 2024, within which
to file a Petition for Review on Certiorari with the Supreme Court. On 30 January 2024, GSMI filed
a Motion for Extension of Time to File Petition for Review on Certiorari, praying for an extension of
thirty (30) days from 7 February 2024, or until 8 March 2024 within which to file a Petition for
Review on Certiorari.

14
 On 4 March 2024, GSMI filed with the Supreme Court a Petition for Review on Certiorari
dated 1 March 2024, and the same was docketed as SC G.R. No. 271363.

Ginebra San Miguel Inc. vs. Commissioner of Internal Revenue

SC G.R. No. 25839
CTA En Banc Case No. 2308
CTA Case No. 9059

This case pertains to GSMI’s Claim for Refund with the BIR, in the total amount of P26.2
million, representing payments of excise tax erroneously, excessively, illegally, and/or wrongfully
assessed on and collected from GSMI by the BIR on removals of its distilled spirits or finished
products for the period from June 1, 2013 up to July 31, 2013.

The aforementioned assessment and collection arose from the imposition and collection
of excise taxes on GSMI’s finished products processed and produced exclusively from its inventory
of ethyl alcohol, notwithstanding that excise taxes had already been previously paid by GSMI on
the said ethyl alcohol.

After presentation of its testimonial and documentary evidence, GSMI filed its Formal Offer
of Evidence and Supplemental Offer of Evidence, which were all admitted by the CTA. BIR’s
presentation of evidence was set to January 23, 2019.

In a decision dated February 6, 2020, the CTA denied GSMI’s Claim for refund for
insufficiency of evidence. On February 20, 2020, GSMI filed a Motion for Reconsideration of the
said Decision. However, the Motion for Reconsideration was denied by the CTA on June 9, 2020.
On August 28, 2020, GSMI elevated the case to the CTA En Banc by way of a Petition for Review.

In a Decision dated 10 November 2021, the CTA En Banc denied the Petition for Review
filed by GSMI. The Decision dated 6 February 2020 and the Resolution dated 9 June 2020 of the
CTA Second Division were affirmed.

On 10 December 2021, GSMI elevated the Decision of the CTA En Banc to the Supreme
Court by way of a Petition for Review, which was docketed as SC G.R. No. 257839.

C. Intellectual Property Cases Pending with the Supreme Court

Ginebra San Miguel Inc. vs. Director General of the Intellectual Property Office
G.R. No. 196372
SC En Banc

This case pertains to GSMI’s application for the registration of the trademark “GINEBRA”
under Class 33 covering gin with the Intellectual Property Office of the Philippines (IPOPHL). The
IPOPHL rejected GSMI’s application on the ground that “GINEBRA” is a Spanish word for gin, and
is a generic term incapable of appropriation.

When the Court of Appeals (CA) affirmed the IPOPHL’s ruling, GSMI filed a Petition for
Review on Certiorari (the “Petition”) with the SC. The SC denied GSMI’s Petition. GSMI moved
for a reconsideration thereof, and likewise filed a Motion to Refer its Motion for Reconsideration to
the SC En Banc. The SC denied GSMI’s Motion for Reconsideration with finality, as well as GSMI’s
Motion to Refer to its Motion for Reconsideration to the SC En Banc.

Subsequently, GSMI filed a Manifestation with Motion for Relief from Judgment (the
“Manifestation”) and invoked the case of “League of Cities vs. Commission of Elections” (G.R. Nos.
176951, 177499 and 178056) to invite the SC En Banc to re-examine the case. The Office of the
Solicitor General filed its Comment Opposition to the Manifestation.

On June 26, 2018, the SC En Banc Issued a Resolution which resolves to: (a) Accept the
subject case which was referred to it by the Third Division in the latter’s resolution dated August 7,

15
2017; (b) Treat as a Second Motion for Reconsideration (of the resolution dated June 22, 2011)
GSMI’s Manifestation with Motion for Relief from Judgment dated November 28, 2011; (c)
Reinstate the Petition; and (d) Require the respondents to Comment on the Petition within a non-
extendible period of ten (10) days from notice thereof.

Respondents, through the OSG, filed their Comment dated July 31, 2018 while GSMI filed
its Reply with Leave on August 20, 2018.

On 04 January 2019, the SC Third Division issued a Resolution ordering the consolidation
of the previously consolidated cases (G.R. Nos. 216104, 210224 and 219632) with the En Banc
case (G.R. No. 196372), stating that “considering that all these cases involve identical parties and
raise interrelated issues which ultimately stemmed from the registration of trademark of [TDI] and
[GSMI] before the [IPO].”

On 3 February 2020, GSMI filed a Manifestation with the Supreme Court Third Division,
informing the Court that on 27 January 2020, it received a copy of a Decision dated 27 December
2019 rendered by the IPO Director General in the consolidated appealed cases involving GSMI’s
Oppositions to TDI’s applications for the registration of the marks “Ginebra Lime & Device,”
“Ginebra Orange & Device,” “Ginebra Especial & Device” and “Ginebra Pomelo & Device”, for use
on gin products. In the joint Decision, the IPO Director General ruled in favor of GSMI and held
that despite being generic or descriptive, the term “GINEBRA” had already attained a secondary
meaning in relation to the gin products of GSMI. The Manifestation was filed to inform the Supreme
Court Third Division of the status of cases in IPOPHL which involve GSMI’s claim over “GINEBRA”.

In a Resolution dated 10 March 2020, the Supreme Court En Banc resolved to transfer the
consolidated cases from the Third Division to the En Banc, where this case which has the lowest
docket number, i.e. G.R. No. 196372, was originally assigned, hence, all four cases are now
consolidated and pending before the Supreme Court En Banc. Furthermore, the Supreme Court
En Banc also noted GSMI’s Manifestation dated 3 February 2020 on the IPO Director General’s
Decision dated 27 December 2019.

On 9 August 2022, the Supreme Court En Banc promulgated a Decision in the four (4)
consolidated Petitions. For G.R. No. 196372, GSMI’s Petition for Review was granted. The Director
of the Bureau of Trademarks was directed to reinstate GSMI’s trademark application for
“GINEBRA”, cause its publication and give it due course.

On 17 April 2023, GSMI received a copy of TDI’s Motion for Reconsideration of the
Decision dated 9 August 2022. On 29 August 2023, the Supreme Court En Banc issued a
Resolution which denied with finality the Motion for Reconsideration filed by TDI in the consolidated
Petitions.

Tanduay Distillers, Inc. vs. Ginebra San Miguel Inc.

G.R. Nos. 210224 and 219632
SC – En Banc

These cases pertain to GSMI’s Complaint for Unfair Competition, Trademark Infringement
and Damages against Tanduay Distillers, Inc. (TDI) filed with the Regional Trial Court (RTC), arising
from TDI’s distribution and sale of its gin product bearing the trademark “Ginebra Kapitan” and use of
a bottle design, which general appearance was nearly identical and confusingly similar to GSMI’s
product. The RTC dismissed GSMI’s complaint.

When GSMI elevated the case to the CA, due to technicalities, two (2) cases were lodged
in the CA: 1.) Petition for Review (CA-G.R. SP No. 127255), and 2.) Appeal (CA-G.R. SP No.
100332).

Acting on GSMI’s Petition for Review, the CA reversed, set aside the RTC’s Decision, and
ruled that “GINEBRA” is associated by the consuming public with GSMI. Giving probative value
to the surveys submitted by GSMI, the CA ruled that TDI’s use of “GINEBRA” in “Ginebra Kapitan”
produces a likelihood of confusion between GSMI’s “Ginebra San Miguel” gin product and TDI’s
“Ginebra Kapitan” gin product. The CA likewise ruled that “TDI knew fully well that GSMI has been

16
using the mark/word “GINEBRA” in its gin products and that GSMI’s “Ginebra San Miguel” has
already obtained, over the years, a considerable number of loyal customers who associate the
mark “GINEBRA” with GSMI.

On the other hand, upon GSMI’s Appeal, the CA also set aside the RTC’s Decision and
ruled that “GINEBRA” is not a generic term there being no evidence to show that an ordinary
person in the Philippines would know that “GINEBRA” is a Spanish word for “gin”. According to
the CA, because of GSMI’s use of the term in the Philippines since the 1800s, the term “GINEBRA”
now exclusively refers to GSMI’s gin products and to GSMI as a manufacturer. The CA added that
“the mere use of the word “GINEBRA” in “Ginebra Kapitan” is sufficient to incite an average person,
even a gin-drinker, to associate it with GSMI’s gin product,” and that TDI “has designed its bottle
and label to somehow make a colorable similarity with the bottle and label of Ginebra S. Miguel”.

TDI filed separate Petitions for Review on Certiorari with the SC, docketed as G.R. Nos.
210224 and 219632, which were eventually consolidated by the SC on April 18, 2016.

On October 26, 2016, GSMI filed its Comment on TDI’s Petition for Review on Certiorari.

On 17 December 2018, the SC consolidated this case with Ginebra San Miguel Inc. vs.
Court of Appeals, Director General of the Intellectual Property Office, and Director of the Bureau
of Trademarks (G.R. No. 196372).

On 3 February 2020, GSMI filed a Manifestation with the Supreme Court Third Division,
informing the Court that on 27 January 2020, it received a copy of a Decision dated 27 December
2019 rendered by the IPO Director General in the consolidated appealed cases involving GSMI’s
Oppositions to TDI’s applications for the registration of the marks “Ginebra Lime & Device,”
“Ginebra Orange & Device,” “Ginebra Especial & Device” and “Ginebra Pomelo & Device”, for use
on gin products. In the joint Decision, the IPO Director General ruled in favor of GSMI and held
that despite being generic or descriptive, the term “GINEBRA” had already attained a secondary
meaning in relation to the gin products of GSMI. The Manifestation was filed to inform the Supreme
Court Third Division of the status of cases in IPOPHL which involve GSMI’s claim over “GINEBRA”.

In a Resolution dated 10 March 2020, the Supreme Court En Banc resolved to transfer the
consolidated cases from the Third Division to the En Banc. Furthermore, the Supreme Court En
Banc also noted GSMI’s Manifestation dated 3 February 2020 on the IPO Director General’s
Decision dated 27 December 2019.

On 9 August 2022, the Supreme Court En Banc promulgated a Decision in the four (4)
consolidated Petitions. For G.R. Nos. 210224 and 219632, TDI’s Petitions for Review were denied,
with modification, such that TDI shall pay GSMI temperate damages of Php 300,000.00 and
attorney’s fees of Php 200,000.00; other awards of damages against TDI are deleted.

On 17 April 2023, GSMI received a copy of TDI’s Motion for Reconsideration of the
Decision dated 9 August 2022. On 29 August 2023, the Supreme Court En Banc issued a
Resolution which denied with finality the Motion for Reconsideration filed by TDI in the consolidated
Petitions.

Tanduay Distillers, Inc. vs. Ginebra San Miguel Inc.

G.R. No. 216104
SC – En Banc

This case pertains to TDI’s application for the registration of the trademark “GINEBRA
KAPITAN” for Class 33 covering gin with the IPOPHL.

GSMI opposed TDI’s application, alleging that it would be damaged by the registration of
“GINEBRA KAPITAN” because the term “GINEBRA” has acquired a secondary meaning and is
now exclusively associated with GSMI’s gin products. GSMI argued that the registration of
“GINEBRA KAPITAN” for use in TDI’s gin products will confuse the public and cause damage to
GSMI. TDI countered that “GINEBRA” is generic and incapable of exclusive appropriation, and
that “GINEBRA KAPITAN” is not identical or confusingly similar to GSMI’s mark.

17
 The IPOPHL ruled in favor of TDI and held that: (a) “GINEBRA” is generic for “gin”; (b)
GSMI’s products are too well known for the purchasing public to be deceived by a new product like
“GINEBRA KAPITAN”; and (c) TDI’s use of “GINEBRA” would supposedly stimulate market
competition.

On July 23, 2014, the CA reversed and set aside the IPOPHL’s ruling and disapproved the
registration of “GINEBRA KAPITAN”. The CA ruled that “GINEBRA” could not be considered as a
generic word in the Philippines considering that, to the Filipino gin-drinking public, it does not relate
to a class of liquor/alcohol but rather has come to refer specifically and exclusively to the gin
products of GSMI.

TDI filed a Petition for Review on Certiorari with the SC, which was subsequently
consolidated with the case of “Tanduay Distillers, Inc. vs. Ginebra San Miguel Inc.”, docketed as
G.R. No. 210224 on August 5, 2015.

On October 26, 2016, GSMI filed its Comment on TDI’s Petition for Review on Certiorari.

On 17 December 2018, the SC consolidated this case with Ginebra San Miguel Inc. vs.
Court of Appeals, Director General of the Intellectual Property Office, and Director of the Bureau
of Trademarks (G.R. No. 196372).

On 3 February 2020, GSMI filed a Manifestation with the Supreme Court Third Division,
informing the Court that on 27 January 2020, it received a copy of a Decision dated 27 December
2019 rendered by the IPO Director General in the consolidated appealed cases involving GSMI’s
Oppositions to TDI’s applications for the registration of the marks “Ginebra Lime & Device,”
“Ginebra Orange & Device,” “Ginebra Especial & Device” and “Ginebra Pomelo & Device”, for use
on gin products. In the joint Decision, the IPO Director General ruled in favor of GSMI and held
that despite being generic or descriptive, the term “GINEBRA” had already attained a secondary
meaning in relation to the gin products of GSMI. The Manifestation was filed to inform the Supreme
Court Third Division of the status of cases in IPOPHL which involve GSMI’s claim over “GINEBRA”.

In a Resolution dated 10 March 2020, the Supreme Court En Banc resolved to transfer the
consolidated cases from the Third Division to the En Banc. Furthermore, the Supreme Court En
Banc also noted GSMI’s Manifestation dated 3 February 2020 on the IPO Director General’s
Decision dated 27 December 2019.

On 9 August 2022, the Supreme Court En Banc promulgated a Decision in the four (4)
consolidated Petitions. For, G.R. No. 216104, TDI’s Petition for Review for the rejection of TDI’s
trademark application for “GINEBRA KAPITAN” was denied.

On 17 April 2023, GSMI received a copy of TDI’s Motion for Reconsideration of the
Decision dated 9 August 2022. On 29 August 2023, the Supreme Court En Banc issued a
Resolution which denied with finality the Motion for Reconsideration filed by TDI in the consolidated
Petitions.

D. Case Pending with the SEC

Josefina Multi-Ventures Corporation vs. San Miguel Corporation,

San Miguel Food and Beverage, Inc. and Ginebra San Miguel Inc.
SEC Case No. 05-18-468

Josefina Multi-Ventures Corporation (the “Petitioner”), one of the stockholders of GSMI,

filed a petition against SMC, SMFB and GSMI, docketed as SEC Case No. 05-18-468 (the
“Petition”), questioning the share swap transaction between SMFB and SMC relative, among
others to, the transfer of SMC’s common shares in GSMI in exchange of SMFB’s common shares.

The Petition sought (I) to declare null and void: (a) the share swap transaction between
SMFB and SMC involving the transfer of SMC’s common shares in SMB and GSMI and in
consideration therefor, the issuance of new SMFB common shares from the increase in SMFB’s

18
 capital stock; and, (b) SMFB’s Certificate of Approval of Increase of Capital Stock and Certificate
of Filing of Amended Articles of Incorporation (amending Article VII thereof) issued by the SEC on
June 29, 2018; or (ii) in the alternative, for SMFB to be directed to conduct a mandatory tender
offer under Section 19 of the Securities Regulation Code for the benefit of the remaining
shareholders of GSMI.

In a decision dated February 19, 2019, the SEC dismissed the Petition and ruled, among
others, that the share swap transaction is not subject to the mandatory tender offer rule since there
was no acquisition of control between SMC and its subsidiaries SMB and GSMI. The Petitioner
filed a Motion for Reconsideration of the said decision, which was denied on May 30, 2019.

The Petitioner filed an Appeal Memorandum dated June 18, 2019 with the SEC En Banc,
which is still pending resolution. In a Decision dated September 14, 2020, the SEC En Banc denied
the Appeal Memorandum filed by Josefina for lack of merit.

As there was no appeal filed by Josefina to the Court of Appeals, the Decision of the SEC
En Banc is already considered as final.

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

There were no matters submitted to a vote of security holders during the fourth quarter of the
fiscal year covered by this report.

19
 PART II – OPERATIONAL AND FINANCIAL INFORMATION

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

The Company’s common equity is traded in the PSE.

The Company’s high and low closing prices for each quarter of the last three (3) fiscal years
are as follows:

2024 2023 2022

Quarter High Low High Low High Low
1st 178.00 155.60 183.90 103.60 126.00 105.00
2nd - - 163.80 140.10 112.00 98.00
3rd - - 170.00 149.80 108.10 96.00
4th - - 171.40 153.00 108.90 98.00

The closing price of the Company’s common shares as of March 31, 2024 the latest practicable
date, is P166.00 per share.

The approximate number of shareholders of common shares as of December 31, 2023 is 618.

The top 20 stockholders, as of December 31, 2023, of the Company are as follows:

Rank Name of Stockholders Common Preferred Total No. of % of

Shares Total O/S
1 San Miguel Food and Beverage, 216,972,000 0 216,972,000 75.78%
Inc.
2 PCD Nominee Corporation
(Filipino) 43,232,002 0 43,232,002 15.1%
3 PCD Nominee Corporation (Non- 24,068,095 0 24,068,095 8.41%
Filipino)
4 La Suerte Cigar & Cigarette 200,000 0 200,000 0.07%
Factory
5 Lim Tay 80,000 0 80,000 0.03%
6 Roman T. Yap 50,000 0 50,000 0.02%
7 Emmanuel B. Macalalag 46,500 0 46,500 0.02%
8 Isabel C. Suntay 31,000 0 31,000 0.01%
9 Monina N. Cortez 30,000 0 30,000 0.01%
10 Lucia C. Unsay 30,000 0 30,000 0.01%
11 FMF Development Corporation 30,000 0 30,000 0.01%
12 Cynthia M. Baroy 30,000 0 30,000 0.01%
13 Estrella M. Tamayo 30,000 0 30,000 0.01%
14 Edan Corporation 26,100 0 26,100 0.01%
15 Rolando B. Bisana 25,000 0 25,000 0.01%
16 Sysmart Corporation 24,702 0 24,702 0.01%
17 Luzviminda C. Santos &/or 21,000 0 21,000 0.01%
Cynthia S. Santos
18 Elisea P. Tan 20,000 0 20,000 0.01%
19 Jane P. Panganiban 20,000 0 20,000 0.01%
20 Angela B. Marzona 20,000 0 20,000 0.01%

As of December 31, 2023, as reflected in the Public Ownership Report filed with the PSE, the
Company’s public float or public ownership percentage is 24.08%, computed in accordance with the
Revised Listing Rules dated June 9, 2004 issued by the PSE as well as the SEC-approved Amended
Rule on Minimum Public Ownership under Memorandum Circular CN-No. 2012-003 dated January 3,
2012 issued by the PSE.

20
Dividends Per Share

The Company’s Articles of Incorporation (‘’AOI’’) provides for the right of shareholders to
dividends as and when declared by the Board of Directors (the “Board”) at such rate or amount and
period as may be fixed by the Board. AOI also provides that holders of preferred shares are entitled to
receive, to the fullest extent allowable under the law, dividends at the rate of P1.50 per annum per
preferred share, subject to certain adjustment. It shall be paid in priority to any dividend or distribution
in favor of holders of common shares. Dividends on the preferred shares shall be fully cumulative.

On August 8, 2018, the Board passed and approved a Dividend Policy, which is quoted
hereunder:

“Subject to the relevant provisions of applicable laws and regulations,

holders of common shares shall be entitled to receive annual cash dividends at
such amounts up to 50% of the prior year’s recurring net income starting 2019, as
may be determined by the Company’s Board of Directors (“Board”). “Recurring net
income” shall mean net income calculated without respect to extraordinary events
that are not expected to recur. Any dividend declaration and distribution may be
made over the four (4) quarters of the year.

In considering dividend declarations, the Board shall, in the exercise of its

discretion and authority, take into consideration dividend payments on the
preferred shares, debt covenant and restrictions, debt servicing requirements,
implementation of business plans, operating expenses, budgets, appropriate
reserves and working capital, major capital expenditure requirements, and funding
of new investments.

This policy may be amended or modified by the GSMI’s Board at any time.”

The BOD of the Group approved the declaration and payment of the following cash dividends to
common stockholders:

2023
Class of Dividend
Shares Date of Declaration Date of Record Date of Payment Per Share
Common-
regular March 8, 2023 March 24, 2023 April 12, 2023 P0.750
May 9, 2023 May 24, 2023 June 7, 2023 0.750
August 2, 2023 August 16, 2023 September 1, 2023 0.750
November 8, 2023 November 22, 2023 December 7, 2023 0.750
Common-
special March 8, 2023 March 24, 2023 April 12, 2023 1.750
May 9, 2023 May 24, 2023 June 7, 2023 1.750
August 2, 2023 August 16, 2023 September 1, 2023 1.750
November 8, 2023 November 22, 2023 December 7, 2023 1.750

2022
Class of Dividend
Shares Date of Declaration Date of Record Date of Payment Per Share
Common-
regular March 9, 2022 March 25, 2022 April 8, 2022 P0.375
April 27, 2022 May 18, 2022 June 3, 2022 0.375
August 3, 2022 August 19, 2022 September 2, 2022 0.375
November 9, 2022 November 24, 2022 December 9, 2022 0.375
Common-
special March 9, 2022 March 25, 2022 April 8, 2022 1.000
April 27, 2022 May 18, 2022 June 3, 2022 1.000
August 3, 2022 August 19, 2022 September 2, 2022 1.000
November 9, 2022 November 24, 2022 December 9, 2022 1.000

21
 2021
Class of Dividend
Shares Date of Declaration Date of Record Date of Payment Per Share
Common March 10, 2021 March 25, 2021 April 8, 2021 P0.250
May 5, 2021 May 21, 2021 June 3, 2021 0.250
August 4, 2021 August 19, 2021 September 2, 2021 0.250
November 10, 2021 November 25, 2021 December 9, 2021 0.250
Preferred May 5, 2021 May 21, 2021 June 3, 2021 1.000
August 4, 2021 August 19, 2021 September 2, 2021 1.000
November 10, 2021 November 25, 2021 December 9, 2021 1.000

On December 1, 2020, the BOD declared cash dividends to all preferred shareholders of
record as of December 18, 2020 amounting to P0.375 per preferred share conformably
with the Enabling Resolution of the Board pursuant to the authority granted to it under the
Company’s Articles of Incorporation. On January 4, 2021, cash dividends paid on pro-rated
basis amounted to P0.5 million.

Description of the following securities of the Company may be found in the indicated Notes to
the 2023 Audited Consolidated Financial Statements, attached herein as Annex “D”:

Equity Note 19

The Company has not sold any unregistered securities or exempt securities, including issuance
of securities constituting an exempt transaction, within the past three (3) fiscal years. Previously,
common shares were issued by the Company under its Employee Stock Purchase Plan (the “Plan”),
which as confirmed by the SEC in its Resolution dated January 21, 2008, to be exempt from the
registration requirement of the SRC. The shares covered by the Plan are no longer available for
subscription as the offering period provided under the Plan expired on January 21, 2013.

Item 6. Management’s Discussion and Analysis or Plan of Operation

The information required by Item 6 is attached hereto as Annex “C”.

Item 7. Financial Statements (FS) and Other Documents Required to be filed with the FS
under SRC Rule 68, as Amended

The 2023 Audited Consolidated Financial Statements of the Company, including its Statement
of Management’s Responsibility and Auditor’s Report, are attached as Annex “D” hereto. The
Supplementary Schedules (including report of auditors on Supplementary Schedules) are attached as
Annexes “68-J-1” to “68-J-7” hereof.

The other documents together with their corresponding separate report required to be filed with
the FS under SRC Rule 68, as amended are hereto attached to Annex “D” as follows:

Reconciliation of Retained Earnings Available for Dividend Schedule 1

Declaration (Part1,4 (c))
A map of the conglomerate or group of companies showing the Schedule 2
relationships between and among the company and its ultimate
parent company, middle parent, subsidiaries or co-
subsidiaries, and associates (Par 4(h))
Financial soundness indicators Schedule 3

22
Item 8. Information on Independent Accountants and Other Related Matters

The Company’s external auditor for fiscal year 2023 is R.G. Manabat & Co, whose appointment
as such was approved by the stockholders, upon the favorable recommendation of the Company’s
Audit and Risk Oversight Committee, during the Regular Stockholders’ Meeting held on May 25, 2023.
The Audit and Risk Oversight Committee also reviewed and approved the terms of engagement of the
external auditor.

Fees for the services rendered by the external auditor to the Company and its subsidiaries in
connection with the Company’s annual financial statements and other statutory and regulatory filings
(inclusive of retainer fees and out-of-pocket expenses) amounted to P8.8 million, P8.2 million and P7.4
million in 2023, 2022 and 2021, respectively.

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer

The Company’s Board, conformably with its Amended By-Laws, is composed of nine (9)
directors, two (2) of whom are independent directors. The 2023 members of the Board were elected
during the Regular Stockholders’ Meeting held on May 25, 2023.

The names, age, gender, citizenship and position of the directors and senior executive officers
of the Company as of December 31, 2023 are shown in the table below:

Name Age Gender Citizenship Type/Position

Directors:
Ramon S. Ang 70 Male Filipino President
Leo S. Alvez 81 Male Filipino Director
Gabriel S. Claudio 69 Male Filipino Director
Francisco S. Alejo III 75 Male Filipino Director
Aurora T. Calderon 69 Female Filipino Director
Francis H. Jardeleza 74 Male Filipino Director
Ana Leah V. Rodriguez 45 Female Filipino Director
Martin S. Villarama, Jr. 78 Male Filipino Independent Director
Aurora S. Lagman 85 Female Filipino Independent Director
Officers:
Virgilio S. Jacinto 67 Male Filipino Corporate Secretary and
Compliance Officer
Emmanuel B. Macalalag 58 Male Filipino General Manager
Cynthia M. Baroy 60 Female Filipino Chief Finance
Officer/Treasurer
Allan P. Mercado 58 Male Filipino National Sales and Marketing
Manager

Detailed information relative to the aforementioned directors including their directorships for the
past five (5) years, as well as information on the Company’s officers are discussed hereunder.

Directors:

Ramon S. Ang is the President of the Company and has been a Director of the Company since
April 4, 2000. He is the Chairman of the Executive Compensation Committee and a member of the
Executive Committee of the Company. He currently holds the following positions in the various
subsidiaries and affiliates of the Company: Chairman and President of Distileria Bago, Inc.; Chairman
of Ginebra San Miguel International Ltd. and GSM International Holdings Limited; and Director in Thai
San Miguel Liquor Company Limited. He also holds positions in the following PSE-listed companies:
Vice Chairman, President and Chief Executive Officer of San Miguel Corporation and San Miguel Food
and Beverage, Inc.; Chief Executive Officer and President of Petron Corporation, Northern Cement

23
Corporation and Top Frontier Investment Holdings, Inc. His other current positions, include, among
others, the following: Chairman, Chief Executive Officer, President and Chief Operating Officer of San
Miguel Global Power Holdings, Corp.; Chairman, Chief Executive Officer and President of SMC TPLEX
Corporation, Chairman and President of Integrated Geosolutions Inc., San Miguel Beverages, Inc,, San
Miguel Properties, Inc., Malita Power Inc., San Miguel Infrastructure Corporation, San Miguel Holdings
Corp. and San Miguel Aerocity Inc.; Chairman and Chief Executive Officer of SMC Asia Cars
Distributors Corp.; Chairman of San Miguel Brewery Inc., San Miguel Brewery Hong Kong Limited
(listed in the Hong Kong Stock Exchange), Magnolia Inc., San Miguel Foods, Inc., The Pure Foods
Hormel Company, Inc., San Miguel Yamamura Packaging Corporation, SMC Tollways Corporation,
Anchor Insurance Brokerage Corp., Sea Refinery Corporation, Eagle Cement Corporation, Petron
Malaysia Refining and Marketing Bhd (a company publicly listed in Malaysia), Philippine Diamond Hotel
& Resort Inc. and Manila North Harbour Port, Inc. Mr. Ang was previously the President and Chief
Operating Officer of PAL Holdings, Inc. and Philippine Airlines, Inc., Director of Air Philippines
Corporation, and Vice Chairman of Manila Electric Company. He has held directorships in various
companies, including domestic and international subsidiaries of San Miguel Corporation in the last five
years. He has a Bachelor of Science degree in Mechanical Engineering from Far Eastern University.

Francisco S. Alejo III is a Director of the Company since May 28, 2015 and is a member of
the Company’s Executive Committee and Audit and Risk Oversight Committee. He is also the Director
and Chief Operating Officer – Food of the San Miguel Food and Beverage, Inc., a company listed with
the PSE. He also holds the following positions: President of Magnolia Inc, The Purefoods-Hormel
Company Inc., San Miguel Foods, Inc. and San Miguel Mills, Inc; Chairman of San Miguel Purefoods
(Vn) Co. Ltd., Golden Food Management, Inc., Golden Bay Grain Terminal Corporation, Golden Avenue
Corp. and San Miguel Foods International Limited; and Director of the following private companies: San
Miguel Super Coffeemix Co., Inc., San Miguel Foods & Beverage International Limited (BVI) and San
Miguel Pure Foods Investment (BVI) Ltd. He is also the President Commissioner of PT San Miguel
Purefoods Indonesia. He is also a Board Member of San Miguel Foundation, Inc. He was previously
the President of The Purefoods-Hormel Company, Inc. Mr. Alejo holds a Bachelor’s Degree in Business
Administration from De La Salle University, and is a graduate of the Advanced Management Program
of Harvard Business School.

Aurora T. Calderon, is a Director of the Company since November 9, 2017 and is a member
of the Company’s Executive Committee, Executive Compensation Committee, Corporate Governance
Committee and the Company’s Retirement Plan - Board of Trustees. She currently holds the following
positions in the various subsidiaries and affiliates of the Company: Chairman and President of East
Pacific Star Bottler Phils Inc., Agricrops Industries Inc., Crown Royal Distillers, Inc. and Healthy
Condiments, Inc.; Chairman of Global Beverage Holdings Limited and Siam Holdings Limited; and
Director of Distilera Bago, Inc., Thai San Miguel Liquor Company Limited, Siam Wine and Liquor
Limited, Ginebra San Miguel International Ltd. and GSM International Holdings Limited. She is a
Director and Senior Vice President and Senior Executive Assistant to the President and Chief Executive
Officer of San Miguel Corporation. She is also Director and Treasurer of Top Frontier Investment
Holdings, Inc. and SMC Asia Car Distributors Corp and a Director of the following PSE-listed
companies: San Miguel Food and Beverage, Inc. and Petron Corporation. Her other current positions,
include, among others, the following: Director of SMITS, Inc., San Miguel Yamamura Packaging Corp.,
San Miguel Consolidated Power Corporation, SMC Tollways Corporation, San Miguel Infrastructure
Corporation and Trans Aire Development Holdings Corp; Chairman and President of Florenza Estates
Development Corporation and Ruzena Estates Development Corporation; and Board Advisor of Bank
of Commerce. She was formerly a director of Philippine Holdings, Inc., Philippine Airlines, Inc. and
Manila Electric Company, to name a few. Ms. Calderon is a certified public accountant who graduated
magna cum laude from the University of the East with a degree in Business Administration major in
Accounting. She is a member of the Financial Executives and the Philippine Institute of Certified Public
Accountants.

Leo S. Alvez has been a Director of the Company since April 24, 2002. He is also a member
of the Audit and Risk Oversight Committee, Executive Compensation Committee and Corporate
Governance Committee of the Company. He was previously the Chairman of the Company’s
Nominations and Hearing Committee. He is also a former Director of San Miguel Corporation, a
company listed with the PSE and San Miguel Purefoods Company, Inc. He has also held various
positions in the government. He earned his Bachelor of Science Degree from the Philippine Military

24
Academy and Masters in Business Administration from the University of the Philippines. He also
attended various military education courses.

Gabriel S. Claudio has been a Director of the Company since November 11, 2010 and a
Member of the Company’s Corporate Governance Committee. He is presently the Vice Chairman of
Risks and Opportunities Assessment Management, Inc.; Independent Director of Rizal Commercial
Banking Corporation; and a Member of the Board of Trustees of Conflict Resolution Group Foundation,
Inc., and TOBY’s Sports and Youth Foundation, Inc. He was formerly a Director of the Philippine
Amusement and Gaming Corporation, Chairman of the Board of Trustees of Metropolitan Waterworks
and Sewerage System and Conflict Resolution Group Foundation, Inc., Director of the Development
Bank of the Philippines and Member of the Board of Directors of the Philippine Charity Sweepstakes
Office. He also occupied several cabinet positions: Presidential Political Adviser to Presidents Fidel V.
Ramos and Gloria Macapagal Arroyo, Presidential Legislative Adviser, Chief of the Presidential
Legislative Liaison Office, Cabinet Officer for Regional Development (CORD) for Eastern Visayas and
Acting Executive Secretary. He obtained his degree in AB Communication Arts from the Ateneo de
Manila University and is a recipient of the Most Outstanding Graduating Communications Arts Major
award.

Francis H. Jardeleza is a Director of the Company since August 5, 2020. He is currently a

director of San Miguel Food and Beverage, Inc., and Petron Corporation, both are companies listed
with the PSE. He is also an Independent Director of MORE Electric and Power Corporation. He is
currently a professorial lecturer at the University of the Philippines College of Law and a Member of the
Philippine Judicial Academy. He has previously held the following positions in the government:
Associate Justice of the Supreme Court, Solicitor General and Deputy Ombudsman for Luzon. He was
the former Senior Vice President and General Counsel of San Miguel Corporation and has been a
partner in several law firms including the law firm of Angara Abello Concepcion Regala and Cruz and
was also an Independent Director of EastWest Bank. He obtained his law degree from the University
of the Philippines where he was class salutatorian and cum laude and placed third in the 1974 Bar
Examinations. He holds a Master of Laws degree from Harvard University.

Ana Leah V. Rodriguez is a Director of the Company since May 26, 2022 and is a member of
the Corporate Governance Committee. She is currently the Head of Out of Home Business of San
Miguel Holdings Corporation and the Channel Marketing and Standards Manager of the Company. She
was previously the Head of Marketing and Ancillary Sales for Philippine Airlines, Inc. She also held the
following positions in Shangri-La Hotels and Resorts: Assistant Director of Sales and Senior Business
Development Manager in Shangri-La Hotel, Dubai and Room Sales Manager in Makati Shangri-La,
Manila. She obtained her Bachelor of Science in Hotel and Restaurant Administration at University of
the Philippines, Diliman and has attended various trainings and seminars which include among others,
the training on Developing the GM Mindset, the Seven Habits of Highly Effective People, San Miguel
Corporation -Leadership and Management Development Program (Batch 20) at the Ateneo Graduate
School of Business-Center for Continuing Education and Corporate Governance Seminars held in
October and November 2022.

Aurora S. Lagman is an Independent Director of the Company since March 15, 2017 and is
the Lead Independent Director, Chairperson of the Corporate Governance Committee and a Member
of the Audit and Risk Oversight Committee of the Company. She is also an Independent Director of
San Miguel Food and Beverage, Inc., a company listed with the PSE. She is a part-time faculty member
of the College of Law, Bulacan State University (currently on leave), a faculty member of Manuel L.
Quezon University, Member of the Board of Trustees of Society for Judicial Excellence, and adviser of
RTC Judges Association of Bulacan, Inc. Among others, she previously held the following positions:
Member, Judicial and Bar Council; Associate Justice, Court of Appeals; and Judge, Regional Trial
Court, Branch 77, Malolos, Bulacan. She obtained her law degree at the College of Law of Lyceum of
the Philippines and attended special studies and short courses abroad such as Program of Instruction
for Lawyers, Harvard Law School, Cambridge, Massachusetts, U.S.A. and Special Course on Evidence,
National Judicial College, University of Nevada, Reno, U.S.A. She also attended various domestic and
foreign trainings, seminars and conferences.

Martin S. Villarama, Jr., is an Independent Director of the Company since March 9, 2022 and
is the Chairperson of the Company’s Audit and Risk Oversight Committee and member of the

25
Company’s Executive Compensation Committee and Corporate Governance Committee. He currently
serves as an Independent Director for the following Companies: SMC Tollways Corporation; SMC SLEX
Inc.; and Eagle Cement Corporation. He is also a Court Appointed Liquidator for Uniwide Group of
Companies and a Member of the Board of Advisors of San Miguel Brewery Hongkong Ltd. He was
previously an Associate Justice, Supreme Court, a Justice of the Court of Appeals, and a Judge at the
Regional Trial Court-Pasig City. He obtained his degree in Bachelor of Science in Business
Administration at the De La Salle University and his Bachelor of Laws degree at the Manuel L. Quezon
University. He has attended various seminars and programs including the 36 th Program on Instruction
for Lawyers conducted by the Harvard Law School’s Faculty at Cambridge, Massachusetts, U. S.A.

Officers:

Virgilio S. Jacinto is the Company’s Corporate Secretary and Compliance Officer since
November 11, 2010. He also holds, among others, the following positions in the following PSE-listed
companies: Senior Vice-President, General Counsel, Corporate Secretary and Compliance Officer of
San Miguel Corporation; Corporate Secretary and Compliance Officer of Top Frontier Investment
Holdings, Inc., and Director of Petron Corporation. He is also a Director and Corporate Secretary of
various domestic and international subsidiaries of the San Miguel Corporation group. He has served as
a Director and Corporate Secretary of United Coconut Planters Bank, Director of San Miguel Brewery
Inc. and a Partner of Villareal Law Offices, to name a few. He is an Associate Professor VII at the
University of the Philippines, College of Law. Atty. Jacinto obtained his law degree from the University
of the Philippines where he was class salutatorian and placed sixth in the 1981 Bar Examinations. He
holds a Master of Laws degree from Harvard University and a member of the International Honor
Society of the PHI KAPPA PHI and Harvard Club (Philippines).

Emmanuel B. Macalalag is a Senior Vice President and General Manager of the Company.
He currently holds the following positions in the various subsidiaries and affiliates of the Company:
Director and General Manager of Distileria Bago, Inc. and East Pacific Star Bottlers Phils Inc; and
Director of Agricrops Industries Inc., Crown Royal Distillers, Inc., Healthy Condiments, Inc., Thai San
Miguel Liquor Company Limited, and GSM International Holdings Limited. He is also a Director and
Chief Operating Officer – Liquor of San Miguel Food and Beverage, Inc., a PSE-listed company. He
previously held the following positions in the Company: Manufacturing Group Manager, Manufacturing
Operations Group, Planning and Management Services Manager, Business Planning and Development
Manager and Business Planning and Investor Relations Manager. Mr. Macalalag obtained his Bachelor
of Science Degree, major in Applied Mathematics from De La Salle University (DLSU), where he
graduated cum laude. He also holds a Master’s degree in Mathematics from DLSU and a PhD degree
in Operations Research from the University of Melbourne, Australia.

Cynthia M. Baroy is a Vice President and Chief Finance Officer/Treasurer of the Company.
She is also a Director and Treasurer of all the wholly-owned domestic subsidiaries of the Company,
which are Distileria Bago, Inc.(“DBI”), East Pacific Star Bottlers Phils Inc., Agricrops Industries Inc.,
Crown Royal Distillers, Inc. and Healthy Condiments, Inc. She is also an incumbent Director of the
following foreign subsidiaries and affiliates of the Company: GSM International Holdings Limited, Siam
Holdings Limited, Global Beverage Holdings Limited, Siam Wine and Liquor Limited, and Thai Ginebra
Trading Company Limited. She is also a Member of the Board of Trustees of the Retirement Plan of
the Company and DBI. She previously held the following positions: Financial Planning and Analysis
Manager of San Miguel Yamamura Packaging Corporation; Finance Manager of Metal Closures &
Lithography Business; and, Finance Manager of San Miguel Rengo Packaging Corporation. Ms. Baroy
obtained her B.S. Commerce major in Accounting from the University of Sto. Tomas where she
graduated cum laude. She is a Certified Public Accountant.

Allan P. Mercado is a Vice President and the National Sales and Marketing Manager of the
Company. He is also a Director of Siam Holdings Limited, Agricrops Industries Inc., Crown Royal
Distillers, Inc. and Healthy Condiments, Inc. He previously held the following positions: National Sales
Manager and Sales and Marketing Support Group Manager of the Company, National Sales Manager
of San Miguel Beverages, Inc. and Selling Systems and Training Manager of Coca-Cola Bottlers Phils.,
Inc. He obtained his Bachelor of Science Degree in Management and Industrial Engineering at the
Mapua Institute of Technology.

26
Independent Directors

The Company has two (2) Independent Directors who, apart from their fees and shareholdings,
have no business or relationship with the Company, which could or could reasonably be perceived to
materially interfere with the exercise of their independent judgment in carrying out their responsibilities
as directors. The Independent Directors of the Company in 2023 are Aurora S. Lagman and Martin S.
Villarama, Jr.

Significant Employees

The Company has no employee who is not an executive officer but who is expected to make a
significant contribution to the business.

Family Relationships

There are no family relationships up to the fourth civil degree either by consanguinity or affinity
among the directors, executive officers, or nominees for election as directors.

Parent Company

As of December 31, 2023, San Miguel Food and Beverage, Inc. owns 75.78% of the shares of
the Company.

Involvement in Certain Legal Proceedings

None of the directors, nominees for election as director, executive officers or control persons
of the Company have been involved in the following legal proceedings, including being the subject of
any (a) bankruptcy petition, (b) conviction by final judgment in a criminal proceeding, domestic or
foreign, excluding traffic violations and other minor offenses, (c) order, judgment or decree of any court
of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his/her involvement in any type of business, securities, commodities
or banking activities, which is not subsequently reversed, suspended or vacated, or (d) judgment of
violation of a securities or commodities law or regulation by a domestic or foreign court of competent
jurisdiction (in a civil action), the SEC or comparable foreign body, or a domestic or foreign exchange
or other organized trading market or self-regulatory organization, which has not been reversed,
suspended or vacated, for the past five (5) years up to the latest date that is material to the evaluation
of his/her ability or integrity to hold the relevant position in the Company.

Item 10. Executive Compensation

The following table summarizes the aggregate compensation (in Millions) paid or incurred
during the last two (2) fiscal years and estimated to be paid in the ensuing fiscal year to the Company’s
General Manager and senior executive officers:

27
NAME YEAR SALARY BONUS OTHERS TOTAL

Total Compensation of the 2024 (estimated) P47.7 P14.3 P12.2 P74.2

General Manager and 2023 P46.8 P20.5 P11.5 P78.8
Senior Executive Officers 1 2022 P41.4 P20.6 P10.5 P72.5

All other officers and 2024 (estimated) P34.5 P10.4 P10.4 P55.3
directors as a group 2023 P36.4 P16.7 P10.8 P63.9
unnamed 2022 P34.9 P17.0 P11.2 P63.1

TOTAL 2024 (estimated) P82.2 P24.7 P22.6 P129.5

2023 P83.2 P37.2 P22.3 P142.7
2022 P76.3 P37.6 P21.7 P135.6

Article II, Section 9 of the Amended By-Laws of the Company provides that the members of the
Board shall receive such compensation as may be approved by a majority vote of the stockholders at
a regular or special meeting duly called, subject to such limitations as may be imposed by law.

In 2023, each director received a per diem of Ten Thousand Pesos (P10,000.00), during the
March and May meetings, and a per diem of Twenty Thousand Pesos (P20,000.00) during the August
and November meetings, per attendance at Board and Board Committee meetings of the Company.
There were five (5) Board, four (4) Audit and Risk Oversight Committee, and one (1) Corporate
Governance Committee meetings held in 2023.

There were no other arrangements pursuant to which any of the directors was compensated or
is to be compensated, directly or indirectly, during the last fiscal year, and the ensuing fiscal year.

There were no employment contracts between the Company and a named executive officer.

There were neither compensatory plans nor arrangements with respect to a named executive
officer.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Owners of record of more than 5% of the Company’s voting securities as of December 31, 2023
were as follows:

Title of Name, Address of Name of Beneficial Citizenship No. of Percent

Class Record Owner and Owner and Shares Held
Relationship with Relationship with
Issuer Record Owner
Common San Miguel Food and San Miguel Filipino 216,972,000 75.78%
Beverage, Inc.2 Corporation
40 San Miguel Avenue
Mandaluyong City

1
For 2023 to present, the General Manager and senior officers of the Company are as follows: Emmanuel B. Macalalag, Cynthia
M. Baroy, Allan P. Mercado, Monina N. Cortez and Ronald Molina. Mr. Ramon S, Ang, the President of the Company, does not
receive compensation from the Company other than the per diem for attendance in Board meetings.
2
The Board of Directors of San Miguel Food and Beverage, Inc. (“SMFB”) authorizes any one Group A signatory, or any two
Group B signatories to act and vote in person or by proxy, shares held by SMFB in other corporations. The Group A signatories
of SMFB are Ramon S. Ang, Ferdinand K. Constantino, Francisco S. Alejo III, Joseph N. Pineda, Virgilio S. Jacinto, Aurora T.
Calderon, Carlos Antonio M. Berba, Emmanuel B. Macalalag, Elizabeth R. Bay, Bella O. Navarra and Monica L. Ang. The Group
B signatories of SMFB are Almira C. Dalusung, Eileen P. Ratilla, Ildefonso B. Alindogan, Daniel T. De Castro, Jr., Rita Imelda B.
Palabyab, Joseph Francis M. Cruz, Florence P. Pavon, Nina Frances Therese B. Tenorio and Rogelio G. Lui.

28
 Common PCD Nominee Corp. Various Filipino 43,232,002 15.10%
(Filipino)
Grd. Flr., Makati Stock
Exchange Ayala Ave.,
Makati City
Common PCD Nominee Corp. Various Non- 24,068,095 8.41%
(Non-Filipino) Filipino
Grd. Flr., Makati Stock
Exchange Ayala Ave.,
Makati City

The following are the number of shares of the Company’s capital stock (all of which are voting
shares) owned of record by the directors of the Company, as of December 31, 2023.

(1) Title (2) Name of Record (3) Amount and (4) Citizenship (5) Percent of
of Class Owner Nature of Class
Ownership
Common Ramon S. Ang 5,000 (Direct) Filipino 0.00%
Common Francisco S. Alejo III 5,000 (Direct) Filipino 0.00%
Common Gabriel S. Claudio 5,000 (Direct) Filipino 0.00%
Common Aurora T. Calderon 5,000 (Direct) Filipino 0.00%
Common Leo S. Alvez 5,000 (Direct) Filipino 0.00%
Common Francis H. Jardeleza 5,000 (Direct) Filipino 0.00%
Common Ana Leah V. Rodriguez 5,000 (Direct) Filipino 0.00%
Common Aurora S. Lagman 5,000 (Direct) Filipino 0.00%
Common Martin S. Villarama, Jr. 5,000 (Direct) Filipino 0.00%

The aggregate number of shares owned of record by the directors as a group as of December
31, 2023, is 45,000 shares or approximately 0.0157% of the Company’s outstanding capital stock.

The aggregate number of shares owned of record by all officers and directors (as a group) of
the Company as of December 31, 2023 is 194,500 shares or approximately 0.0679% of the Company’s
outstanding capital stock.

The foregoing beneficial or record owners have no right to acquire additional shares within thirty
(30) days from options, warrants, conversion privileges or similar obligations or otherwise.

There is no person holding more than 5% of the Company’s voting securities under a voting
trust or similar agreement.

With the consolidation of the SMC’s food and beverage business under SMFB, the Company’s
common shares previously owned by SMC are now owned and registered in the name of SMFB in the
books of the Company.3

Item 12. Certain Relationships and Related Transactions

See Note 27 (Related Party Disclosures) to the 2023 Audited Consolidated Financial
Statements attached hereto as Annex “D”.

There were no transactions with directors, officers or any principal stockholders (owning at least
10% of the total outstanding shares of the Company) not in the ordinary course of business. The
Company observes an arm’s length policy in its dealings with related parties.

3
As disclosed by the Company through SEC Form 17-C filed in 2018 dated April 6, August 22, October 15 and November 5.

29
 PART IV – CORPORATE GOVERNANCE AND SUSTAINABILITY REPORT

Item 13.A. Corporate Governance

The Company is committed to good corporate governance and recognizes that the same plays
a vital role in creating and sustaining shareholder value and in safeguarding shareholders’ rights and
interest. The Company’s Board , Management and employees adhere to the highest standards of
corporate governance as a vital component of sound business management. In line with this, the
Company on August 6, 2002, institutionalized the principles of good corporate governance in the entire
organization by establishing and implementing the Company’s Manual on Corporate Governance (the
“Manual”). Since its adoption, the Manual has been amended a number of times in order to align the
provisions thereof with the prevailing issuances, rules and circulars of the SEC, the most recent of which
is the SEC issued Memorandum Circular No. 19, Series of 2016 (the “Circular”) on the Code of
Corporate Governance for Publicly-Listed Companies (“CG for PLCs”), which Code took effect on
January 1, 2017. Conformably with the Circular, the Company formally approved and adopted an
amended or new Manual on May 9, 2017.

As for the Company’s Integrated Annual Corporate Governance Report (‘’I-ACGR”) for 2023, it
will be submitted to the SEC not later than May 30, 2024 and shall be made available in its website.

Item 13.B. Sustainability Report

The Company’s 2023 Sustainability Report is submitted together with this Annual Report (SEC
Form 17-A) and shall also be made available in the Company’s website.

PART V – EXHIBITS AND SCHEDULES

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

(a) Exhibits

The 2023 Audited Consolidated Financial Statements are attached as Annex “D” and the
Supplementary Schedules (including the report of the auditors on the Supplementary Schedules) are
attached as Annexes “68-J-1” to “68-J-7”. The other Schedules as indicated in the Index to
Schedules are either not applicable to the Company or require no answer.

The other documents together with their corresponding separate report required to be filed with
the FS under SRC Rule 68, as amended are hereto attached to Annex “D” as “Schedules 1 to 3”.

(b) Reports on SEC Form 17-C

Reports on Form 17-C filed during the last twelve (12)-month period covered by this report are
attached as Annex “E”.

[The space below is intentionally left blank]

30
 SEC eFast Initial Acceptance
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SEC Registration No: 0000142312

Company Name: GINEBRA SAN MIGUEL, INC.
Document Code: AFS

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 GINEBRA SAN MIGUEL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2023 AND 2022
(In Thousands)

Note 2023 2022

ASSETS
Current Assets
Cash and cash equivalents 4, 5, 31, 32 P9,881,018 P5,457,277
Trade and other receivables -
net 4, 6, 22, 26, 27, 31, 32 1,577,836 1,235,779
Inventories 4, 7 8,083,201 7,003,478
Prepaid expenses and other
current assets 8, 27, 31, 32 817,344 868,981
Total Current Assets 20,359,399 14,565,515
Noncurrent Assets
Investments in joint ventures 4, 9 - -
Investment in debt instruments at
amortized cost 4, 10, 27, 31, 32 1,500,000 1,500,000
Property, plant and equipment - net 4, 11 5,092,142 4,730,803
Right-of-use assets - net 4, 12, 27, 28 50,778 97,751
Goodwill - net 4, 13 126,863 126,863
Deferred tax assets - net 4, 18 562,775 524,963
Other noncurrent assets - net 4, 14, 27, 31, 32 75,848 66,218
Total Noncurrent Assets 7,408,406 7,046,598
P27,767,805 P21,612,113

LIABILITIES AND EQUITY

Current Liabilities
Loans payable 16 P1,000,000 P-
Accounts payable and accrued
expenses 15, 27, 31, 32 5,694,109 5,540,299
Income and other taxes payable 1,736,095 719,846
Lease liabilities - current portion 4, 27, 28, 31 25,796 32,967
Current maturities of long-term debt -
net of debt issue costs 17, 25, 31, 32 - 165,430
Total Current Liabilities 8,456,000 6,458,542
Noncurrent Liabilities
Retirement liabilities 4, 29 880,891 635,751
Lease liabilities - net of current portion 4, 27, 28, 31 30,602 75,775
Long-term debt - net of current
maturities and debt issue costs 17, 31, 32 - -
Total Noncurrent
Liabilities 911,493 711,526
Total Liabilities 9,367,493 7,170,068
Forward
 Note 2023 2022
Equity 19
Capital stock P399,063 P399,063
Additional paid-in capital 2,539,454 2,539,454
Equity reserves (640,050) (415,729)
Retained earnings:
Appropriated 3,512,000 3,512,000
Unappropriated 16,259,818 12,077,230
Treasury stock (3,669,973) (3,669,973)
Total Equity 18,400,312 14,442,045
P27,767,805 P21,612,113

See Notes to the Consolidated Financial Statements.

 GINEBRA SAN MIGUEL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
(In Thousands, Except Per Share Data)

Note 2023 2022 2021

SALES 27 P53,638,569 P47,340,746 P42,534,124
COST OF SALES 20 40,834,816 35,862,785 31,760,865
GROSS PROFIT 12,803,753 11,477,961 10,773,259
SELLING AND MARKETING
EXPENSES 21 (3,715,966) (3,397,473) (3,100,609)
GENERAL AND
ADMINISTRATIVE EXPENSES 22 (2,252,979) (2,093,924) (2,379,745)
INTEREST EXPENSE
AND OTHER
FINANCING
CHARGES 11, 16, 17, 25, 28, 29 (61,041) (52,779) (48,210)
INTEREST INCOME 5, 10, 27 552,354 130,537 38,471
GAIN (LOSS) ON
DISPOSAL/RETIREMENT OF
NONCURRENT ASSETS - Net 11, 14 784 (1,040) 5,583
OTHER INCOME (CHARGES) -
Net 26 2,037,982 (5,031) 271,922
INCOME BEFORE INCOME
TAXES 9,364,887 6,058,251 5,560,671
INCOME TAX EXPENSE 18 2,319,020 1,511,029 1,381,732
NET INCOME P7,045,867 P4,547,222 P4,178,939
Basic and Diluted Earnings Per
Share 30 P24.61 P15.88 P14.59

See Notes to the Consolidated Financial Statements.

 GINEBRA SAN MIGUEL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
(In Thousands)

Note 2023 2022 2021

NET INCOME P7,045,867 P4,547,222 P4,178,939
OTHER COMPREHENSIVE
INCOME (LOSS)
Item that may be reclassified to
profit or loss
Share in other comprehensive loss
of joint ventures 9 - - (4,451)
Item that will not be reclassified
to profit or loss
Equity reserve for retirement plan 29 (299,094) (65,845) 89,633
Income tax 18 74,773 16,461 (51,312)
OTHER COMPREHENSIVE
INCOME (LOSS) - Net of tax (224,321) (49,384) 33,870
TOTAL COMPREHENSIVE
INCOME - Net of tax P6,821,546 P4,497,838 P4,212,809

See Notes to the Consolidated Financial Statements.

 GINEBRA SAN MIGUEL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
(In Thousands)

Equity Reserves
Additional Reserve for Cumulative
Capital Stock Paid-in Retirement Translation Retained Earnings Treasury Stock
Note Common Preferred Capital Plan Adjustments Appropriated Unappropriated Common Preferred Total
As at January 1, 2023 P345,625 P53,438 P2,539,454 (P415,729) P - P3,512,000 P 12,077,230 (P1,947,198) (P1,722,775) P 14,442,045
Net income - - - - - - 7,045,867 - - 7,045,867
Other comprehensive loss:
Share in other comprehensive loss of joint
ventures 9 - - - - - - - - - -
Equity reserve for retirement plan 29 - - - (224,321) - - - - - (224,321)
Total comprehensive income - - - (224,321) - - 7,045,867 - - 6,821,546
Cash dividends and distribution on common
shares 19 - - - - - - (2,863,279) - - (2,863,279)
As at December 31, 2023 19 P345,625 P53,438 P2,539,454 (P640,050) P - P3,512,000 P16,259,818 (P1,947,198) (P1,722,775) P18,400,312

Forward
 Equity Reserves
Additional Reserve for Cumulative
Capital Stock Paid-in Retirement Translation Retained Earnings Treasury Stock
Note Common Preferred Capital Plan Adjustments Appropriated Unappropriated Common Preferred Total
As at January 1, 2022 P345,625 P53,438 P2,539,454 (P366,345) P - P3,512,000 P9,104,812 (P1,947,198) (P1,722,775) P11,519,011
Net income - - - - - - 4,547,222 - - 4,547,222
Other comprehensive loss:
Share in other comprehensive loss of joint
ventures 9 - - - - - - - - - -
Equity reserve for retirement plan 29 - - - (49,384) - - - - - (49,384)
Total comprehensive income - - - (49,384) - - 4,547,222 - - 4,497,838
Cash dividends and distribution on common
shares 19 - - - - - - (1,574,804) - - (1,574,804)
As at December 31, 2022 19 P345,625 P53,438 P2,539,454 (P415,729) P - P3,512,000 P12,077,230 (P1,947,198) (P1,722,775) P14,442,045

As at January 1, 2021 P345,625 P53,438 P2,539,454 (P404,666) P4,451 P2,500,000 P7,083,730 (P1,947,198) (P722,775) P9,452,059
Net income - - - - - - 4,178,939 - - 4,178,939
Other comprehensive income (loss):
Share in other comprehensive loss of joint
ventures 9 - - - - (4,451) - - - - (4,451)
Equity reserve for retirement plan 29 - - - 38,321 - - - - - 38,321
Total comprehensive income - - - 38,321 (4,451) - 4,178,939 - - 4,212,809
Redemption of preferred shares - - - - - - - - (1,000,000) (1,000,000)
Appropriations (reversal of appropriations) - - - - - 1,012,000 (1,012,000) - - -
Cash dividends and distribution:
Common 19 - - - - - - (1,145,311) - - (1,145,311)
Preferred 19 - - - - - - (546) - - (546)
As at December 31, 2021 19 P345,625 P53,438 P2,539,454 (P366,345) P - P3,512,000 P9,104,812 (P1,947,198) (P1,722,775) P11,519,011

See Notes to the Consolidated Financial Statements.

 GINEBRA SAN MIGUEL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
(In Thousands)

Note 2023 2022 2021

CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax P9,364,887 P6,058,251 P5,560,671
Adjustments for:
Depreciation and
amortization 11, 12, 14, 20, 21, 22, 23 666,063 677,239 679,606
Retirement expense 24, 29 94,998 98,437 469,921
Interest expense and
other financing
charges 11, 16, 17, 25, 28, 29 61,041 52,779 48,210
Net provision (reversal) of
impairment losses for write-
down of inventories to net
realizable value 7, 20 30,098 (10,325) -
Net provision (reversal) of
impairment losses on trade and
other receivables 6, 22 (292) 10,325 83,126
Loss (gain) on disposal/retirement
of noncurrent assets - net 11, 14 (784) 1,040 (5,583)
Gain on lease modification 26 (8,014) (10,159) (10,677)
Net derivative loss (gain) 26, 32 (2,000) 241,801 96,759
Net unrealized foreign
exchange loss (gain) 26, 31 (33,905) 28,131 (2,659)
Interest income 5, 10 (552,354) (130,537) (38,471)
Operating income before working
capital changes 9,619,738 7,016,982 6,880,903
Decrease (increase) in:
Trade and other receivables (325,961) (199,903) (165,026)
Inventories (1,155,381) 1,529,566 (2,820,854)
Prepaid expenses and other
current assets (435,413) (198,488) (411,033)
Increase (decrease) in:
Accounts payable and accrued
expenses 179,404 287,349 (37,910)
Other taxes payable 820,160 130,043 115,507
Cash generated from operations 8,702,547 8,565,549 3,561,587
Contribution to retirement plan 29 (189,785) (178,323) (178,323)
Interest and other financing charges
paid (17,822) (18,219) (25,061)
Income taxes paid (1,668,233) (1,111,845) (866,239)
Net cash flows provided by
operating activities 6,826,707 7,257,162 2,491,964
Forward
 Note 2023 2022 2021
CASH FLOWS FROM INVESTING
ACTIVITIES
Interest received P537,061 P 117,648 P37,313
Proceeds from disposal of property
and equipment 11 784 3,270 6,383
Additions to advances to suppliers 14 (12,007) (11,839) (9,272)
Additions to property, plant and
equipment 11 (966,026) (990,333) (588,643)
Additions to investment in debt
instruments at amortized cost 10 - (1,500,000) -
Increase in other noncurrent assets (10,274) (20) (33,562)
Net cash flows used in investing
activities (450,462) (2,381,274) (587,781)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from loans payable 16 998,747 - -
Payments of:
Lease liabilities 28 (41,820) (80,670) (70,571)
Long-term borrowings 17 (166,666) (166,667) (166,667)
Cash dividends (2,774,093) (1,524,714) (1,110,178)
Redemption of preferred shares 19 - - (1,000,000)
Net cash flows used in financing
activities (1,983,832) (1,772,051) (2,347,416)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND
CASH EQUIVALENTS 31,328 (25,726) 2,825
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 4,423,741 3,078,111 (440,408)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 5 5,457,277 2,379,166 2,819,574
CASH AND CASH EQUIVALENTS
AT END OF YEAR 5 P9,881,018 P5,457,277 P2,379,166

See Notes to the Consolidated Financial Statements.

 GINEBRA SAN MIGUEL INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands, Except Per Share Data and Number of Shares)

1. Reporting Entity

Ginebra San Miguel Inc. (GSMI or the Company), a subsidiary of San Miguel Food
and Beverage, Inc. (SMFB or Parent Company), was incorporated in the Philippines
on July 10, 1987. SMFB is a subsidiary of San Miguel Corporation (SMC or
Intermediate Parent Company). Top Frontier Investment Holdings, Inc. (Top Frontier)
is the ultimate parent company of GSMI.

GSMI is engaged in the manufacture and sale of alcoholic beverages, and all
business activities incidental or related to carrying out these activities.

The Company is a public company under Section 17.2 of the Securities Regulation
Code and its common shares are listed on The Philippine Stock Exchange, Inc.

The accompanying consolidated financial statements comprise the financial

statements of the Company and its Subsidiaries and the Group's interests in joint
ventures (collectively referred to as the “Group”).

The Group is engaged in the manufacture and sale of alcoholic beverages, tolling,
marketing, distillation of alcohol, and bottling of alcohol and nonalcoholic beverages.

The Company and its domestic subsidiaries have a corporate life of 50 years
pursuant to their Articles of Incorporation. However, under the Revised Corporation
Code of the Philippines which took effect on February 23, 2019, existing and future
corporations have been granted perpetual corporate life. Thus, the Company and its
domestic subsidiaries shall have a perpetual corporate life.

The registered office address of the Company is 3rd and 6th Floor, San Miguel
Properties Centre, St. Francis Street, Ortigas Center, Mandaluyong City.

2. Basis of Preparation

Statement of Compliance
The accompanying consolidated financial statements have been prepared in
compliance with Philippine Financial Reporting Standards (PFRS). PFRS are based
on International Financial Reporting Standards issued by the International
Accounting Standards Board (IASB). PFRS consist of PFRS, Philippine Accounting
Standards (PAS) and Philippine Interpretations issued by the Philippine Financial
and Sustainability Reporting Standards Council (FSRSC).

The consolidated financial statements were approved and authorized for issue in
accordance with a resolution by the Board of Directors (BOD) on March 6, 2024.
Basis of Measurement
The consolidated financial statements of the Group have been prepared on a
historical cost basis except for the following items which are measured on an
alternative basis on each reporting date:

Items Measurement Basis

Financial assets at fair value through profit Fair value
or loss (FVPL)
Defined benefit retirement asset (liability) Fair value of the plan assets less
the present value of the defined
benefit retirement obligation

Functional and Presentation Currency

The consolidated financial statements are presented in Philippine peso, which is the
functional currency of the Company. All financial information are rounded off to the
nearest thousand (000), except when otherwise indicated.

Basis of Consolidation
The consolidated financial statements include the accounts of the Group and the
following wholly-owned subsidiaries:

Name of Subsidiary Country of Incorporation

Distileria Bago, Inc. (DBI) Philippines
East Pacific Star Bottlers Phils Inc. (EPSBPI) Philippines
Agricrops Industries Inc. (AII) Philippines
Healthy Condiments, Inc. (HCI) Philippines
Crown Royal Distillers, Inc. (CRDI) Philippines
Ginebra San Miguel International Ltd. (GSMIL) British Virgin Islands (BVI)
GSM International Holdings Limited (GSMIHL) BVI
Global Beverages Holdings Limited (GBHL) BVI
Siam Holdings Limited (SHL) BVI

A subsidiary is an entity controlled by the Group. The Group controls an entity when
it is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity.
The Group reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three elements
of control.

When the Group has less than majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether it has
power over an investee, including the contractual arrangement with the other vote
holders of the investee, rights arising from other contractual arrangements and the
Group’s voting rights and potential voting rights.

-2-
3. Material Accounting Policies

The material information of the principal accounting policies set out below have been
applied consistently to all periods presented in the financial statements, except for
the changes in accounting policies as explained below.

The FSRSC approved the adoption of amendments to standards as part of PFRS.

Adoption of Amendments to Standards

The Group has adopted the following amendments to standards effective

January 1, 2023 and accordingly, changed its accounting policies in the following
areas:

▪ Definition of Accounting Estimates (Amendments to PAS 8, Accounting Policies,

Changes in Accounting Estimates and Errors). The amendments clarify that
accounting estimates are monetary amounts in the financial statements that are
subject to measurement uncertainty. The amendments also clarify the
relationship between accounting policies and accounting estimates by specifying
that an accounting estimate is developed to achieve the objective set out by an
accounting policy. Developing an accounting estimate includes both selecting a
measurement technique (estimate or valuation technique) and choosing the
inputs to be used when applying the chosen measurement technique. The
effects of changes in the inputs or measurement techniques are changes in
accounting estimates. The definition of accounting policies remains unchanged.
The amendments also provide examples on the application of the new definition.

▪ Disclosure of Accounting Policies (Amendments to PAS 1, Presentation of

Financial Statements, and PFRS Practice Statement 2, Making Materiality
Judgments). The key amendments to PAS 1 include requiring entities to disclose
material accounting policies rather than significant accounting policies; clarifying
that accounting policies related to immaterial transactions, other events or
conditions are immaterial and as such need not be disclosed; and clarifying that
not all accounting policies that relate to material transactions, other events or
conditions are material to the financial statements.

The amendments to PFRS Practice Statement 2 provide guidance and examples

on the application of materiality to accounting policy information that users need
to understand other information in the financial statements

The amendments require the disclosure of 'material', rather than 'significant',

accounting policies. The amendments also provide guidance on the application
of materiality disclosure of accounting policies, assisting entities to provide
useful, entity-specific accounting policy information that users need to
understand other information in the financial statements.

Management reviewed the accounting policies and made updates to the

information disclosed in Note 3 Material Accounting Policies in certain instances
in line with the amendments.

-3-
▪ Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
(Amendments to PAS 12, Income Taxes). The amendments clarify that the initial
recognition exemption does not apply to transactions that give rise to equal
taxable and deductible temporary differences such as leases and
decommissioning obligations. For leases and decommissioning liabilities, the
associated deferred tax assets and liabilities will be recognized from the
beginning of the earliest comparative period presented, with any cumulative
effect recognized as an adjustment to retained earnings or other appropriate
component of equity at that date. For all other transactions, the amendments
apply to transactions that occur after the beginning of the earliest period
presented.

The adoption of the amendments to standards did not have a material effect on the
consolidated financial statements.

New and Amendments to Standards Not Yet Adopted

A number of new and amendments to standards are effective for annual reporting
periods beginning after January 1, 2023 and have not been applied in preparing the
consolidated financial statements. None of these are expected to have a significant
effect on the consolidated financial statements.

The Group will adopt the following new and amendments to standards on the
respective effective dates:

▪ Classification of Liabilities as Current or Noncurrent - 2020 Amendments and

Noncurrent Liabilities with Covenants - 2022 Amendments (Amendments to
PAS 1). To promote consistency in application and clarify the requirements on
determining whether a liability is current or noncurrent, the amendments:

o removed the requirement for a right to defer settlement of a liability for at

least 12 months after the reporting period to be unconditional and instead
require that the right must have substance and exist at the reporting date;

o clarified that only covenants with which the entity must comply on or before
the reporting date affect the classification of a liability as current or
noncurrent and covenants with which the entity must comply after the
reporting date do not affect a liability’s classification at that date;

o provided additional disclosure requirements for noncurrent liabilities subject

to conditions within 12 months after the reporting period to enable the
assessment of the risk that the liability could become repayable within
12 months; and

o clarified that settlement of a liability includes transferring an entity’s own

equity instruments to the counterparty, but conversion options that are
classified as equity do not affect classification of the liability as current or
noncurrent.

The amendments apply retrospectively for annual reporting periods beginning on

or after January 1, 2024, with early application permitted.

Deferral of the local implementation of Amendments to PFRS 10, Consolidated

Financial Statements, and PAS 28, Investments in Associates and Joint Ventures:
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture.

-4-
▪ The amendments address an inconsistency in the requirements in PFRS 10 and
PAS 28 in dealing with the sale or contribution of assets between an investor and
its associate or joint venture. The amendments require that a full gain or loss is
recognized when a transaction involves a business (whether it is housed in a
subsidiary or not). A partial gain or loss is recognized when a transaction
involves assets that do not constitute a business, even if these assets are
housed in a subsidiary.

Originally, the amendments apply prospectively for annual reporting periods

beginning on or after January 1, 2016, with early adoption permitted. However,
on January 13, 2016, the FSRSC decided to postpone the effective date of these
amendments until the IASB has completed its broader review of the research
project on equity accounting that may result in the simplification of accounting for
such transactions and of other aspects of accounting for associates and joint
ventures.

Financial Instruments
Recognition and Initial Measurement. A financial instrument is any contract that gives
rise to a financial asset of one entity and a financial liability or equity instrument of
another entity.

The Group recognizes a financial asset or a financial liability in the consolidated

statements of financial position when it becomes a party to the contractual provisions
of the instrument.

A financial asset (unless it is a trade receivable without a significant financing

component) or financial liability is initially measured at the fair value of the
consideration given or received. The initial measurement of financial instruments,
except for financial assets and financial liabilities at FVPL, includes transaction costs.
A trade receivable without a significant financing component is initially measured at
the transaction price.

Financial Assets
The Group classifies its financial assets, at initial recognition, as subsequently
measured at amortized cost, fair value through other comprehensive income
(FVOCI) and FVPL. The classification depends on the contractual cash flow
characteristics of the financial assets and the business model of the Group for
managing the financial assets.

Subsequent to initial recognition, financial assets are not reclassified unless the
Group changes the business model for managing financial assets. All affected
financial assets are reclassified on the first day of the reporting period following the
change in the business model.

The business model refers to how the Group manages the financial assets in order
to generate cash flows. The business model determines whether cash flows will
result from collecting contractual cash flows, selling the financial assets, or both.

For purposes of subsequent measurement, financial assets are classified in the

following categories: financial assets at amortized cost, financial assets at FVOCI
(with or without recycling of cumulative gains and losses) and financial assets at
FVPL.

The Group has no financial assets at FVOCI as at December 31, 2023 and 2022.

-5-
Financial Assets at Amortized Cost. A financial asset is measured at amortized cost
if it meets both of the following conditions and is not designated as at FVPL:

▪ it is held within a business model with the objective of holding financial assets to
collect contractual cash flows; and

▪ its contractual terms give rise on specified date to cash flows that are solely
payments of principal and interest on the principal amount outstanding.

Financial assets at amortized cost are subsequently measured using the effective
interest method and are subject to impairment. Gains and losses are recognized in
the consolidated statements of income when the financial asset is derecognized,
modified or impaired.

The Group’s cash and cash equivalents, trade and other receivables, investment in
debt instruments at amortized cost and security deposit are included under this
category (Notes 5, 6, 10, 14, 31 and 32).

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash and are
subject to an insignificant risk of changes in value.

Financial Assets at FVPL. All financial assets not classified as measured at

amortized cost or FVOCI are measured at FVPL. This includes derivative financial
assets that are not designated as cash flow hedge. Financial assets that are held for
trading or are managed and whose performance is evaluated on a fair value basis
are measured at FVPL.

At initial recognition, the Group may irrevocably designate a financial asset as at

FVPL if the designation eliminates or significantly reduces an accounting mismatch
that would otherwise arise from measuring assets or liabilities or recognizing the
gains and losses on different bases.

The Group carries financial assets at FVPL using their fair values. Attributable
transaction costs are recognized in the consolidated statements of income as
incurred. Changes in fair value and realized gains or losses are recognized in the
consolidated statements of income.

The Group’s derivative assets that are not designated as cash flow hedge are
classified under this category (Notes 8, 31 and 32).

Financial Liabilities
The Group determines the classification of its financial liabilities, at initial recognition,
in the following categories: financial liabilities at FVPL and other financial liabilities.
All financial liabilities are recognized initially at fair value and, in the case of loans
and borrowings, net of directly attributable transaction costs.

Financial Liabilities at FVPL. Financial liabilities are classified under this category
through the fair value option. Derivative instruments (including embedded
derivatives) with negative fair values, except those covered by hedge accounting
relationships, are also classified under this category.

-6-
The Group carries financial liabilities at FVPL using their fair values and reports fair
value changes in the consolidated statements of income. Fair value changes from
derivatives accounted for as part of an effective cash flow hedge are recognized in
other comprehensive income and presented in the consolidated statements of
changes in equity. Any interest expense incurred is recognized as part of “Interest
expense and other financing charges” account in the consolidated statements of
income.

The Group’s derivative liabilities that are not designated as cash flow hedge are
classified under this category (Notes 15, 31 and 32).

Other Financial Liabilities. This category pertains to financial liabilities that are not
designated or classified as at FVPL. After initial measurement, other financial
liabilities are carried at amortized cost using the effective interest method. Amortized
cost is calculated by taking into account any premium or discount and any directly
attributable transaction costs that are considered an integral part of the effective
interest rate of the liability. The effective interest rate amortization is included in
“Interest expense and other financing charges” account in the consolidated
statements of income. Gains and losses are recognized in the consolidated
statements of income when the liabilities are derecognized as well as through the
amortization process.

Debt issue costs are considered as an adjustment to the effective yield of the related
debt and are deferred and amortized using the effective interest method. When a
loan is paid, the related unamortized debt issue costs at the date of repayment are
recognized in the consolidated statements of income.

The Group’s liabilities arising from its trade transactions or borrowings such as loans
payable, accounts payable and accrued expenses, long-term debt and lease
liabilities are included under this category (Notes 15, 16, 17, 28, 31 and 32).

Impairment of Financial Assets

The Group recognizes allowance for expected credit loss (ECL) on financial assets
at amortized cost.

ECLs are probability-weighted estimates of credit losses. Credit losses are measured
as the present value of all cash shortfalls (i.e., the difference between the cash flows
due to the Group in accordance with the contract and the cash flows that the Group
expects to receive), discounted at the effective interest rate of the financial asset,
and reflects reasonable and supportable information that is available without undue
cost or effort about past events, current conditions and forecasts of future economic
conditions.

The Group recognizes an allowance for impairment based on either 12-month or

lifetime ECLs, depending on whether there has been a significant increase in credit
risk since initial recognition.

When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Group considers
reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis,
based on the Group’s historical experience and informed credit assessment and
including forward-looking information.

-7-
The Group recognizes lifetime ECLs for receivables that do not contain significant
financing component. The Group uses provision matrix that is based on the Group’s
historical credit loss experience, adjusted for forward-looking factors specific to the
borrowers and the economic environment.

At each reporting date, the Group assesses whether these financial assets at
amortized cost are credit-impaired. A financial asset is credit-impaired when one or
more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred. Evidence that a financial asset is credit-impaired
include observable data about the following events:

▪ significant financial difficulty of the issuer or the borrower;

▪ a breach of contract, such as a default or past due event;
▪ the restructuring of a financial asset by the Group on terms that the Group would
not consider otherwise;
▪ it is becoming probable that the borrower will enter bankruptcy or other financial
reorganization; or
▪ the disappearance of an active market for that financial asset because of
financial difficulties.

The Group considers a financial asset to be in default when a counterparty fails to

pay its contractual obligations, or there is a breach of other contractual terms, such
as covenants.

The Group directly reduces the gross carrying amount of a financial asset when
there is no reasonable expectation of recovering the contractual cash flows on a
financial asset, either partially or in full. This is generally the case when the Group
determines that the borrower does not have assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write-off. However,
financial assets that are written off could still be subject to enforcement activities in
order to comply with the Group’s procedures for recovery of amounts due.

The ECLs on financial assets at amortized cost are recognized as allowance for
impairment losses against the gross carrying amount of the financial asset, with the
resulting impairment losses (or reversals) recognized in the consolidated statements
of income.

Inventories
Finished goods and materials and supplies are valued at the lower of cost and net
realizable value.

Costs incurred in bringing each inventory to its present location and condition are
accounted for as follows:

Finished goods - at cost, which includes direct materials and labor and
a proportion of manufacturing overhead costs based
on normal operating capacity but excluding borrowing
costs; costs are determined using the moving-
average method.
Materials and supplies - at cost, using the moving-average method.

Finished Goods. Net realizable value is the estimated selling price in the ordinary
course of business, less the estimated costs necessary to make the sale.

Materials and Supplies. Net realizable value is the current replacement cost.

-8-
Any write-down of inventories to net realizable value and all losses of inventories are
recognized as expense in the year of write-down or loss occurrence. The amount of
reversals of write-down of inventories arising from an increase in net realizable
value, if any, are recognized as reduction in the amount of inventories recognized as
expense in the year in which the reversal occurs.

Investments in Joint Ventures

A joint venture is a type of joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the joint venture.
Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control.

The considerations made in determining joint control is similar to those necessary to

determine control over subsidiaries.

The Group’s investments in joint ventures are accounted for using the equity method.

Under the equity method, the investment in joint venture is initially recognized at
cost. The carrying amount of the investment is adjusted to recognize the changes in
the Group’s share of net assets of the joint venture since the acquisition date.
Goodwill relating to the joint venture is included in the carrying amount of the
investment and is neither amortized nor individually tested for impairment.

The Group’s share in profit or loss of joint venture is recognized as “Equity in net
losses of joint ventures” account in the consolidated statements of income.
Adjustments to the carrying amount may also be necessary for changes in the
Group’s proportionate interest in the joint venture arising from changes in the joint
venture’s other comprehensive income. The Group’s share on these changes is
recognized as “Share in other comprehensive income of joint ventures” account in
the consolidated statements of comprehensive income. Unrealized gains and losses
resulting from transactions between the Group and the joint venture are eliminated to
the extent of the interest in the joint venture.

After application of the equity method, the Group determines whether it is necessary
to recognize an impairment loss on its investment in joint venture. At each reporting
date, the Group determines whether there is objective evidence that the investment
in joint venture is impaired. If there is such evidence, the Group calculates the
amount of impairment as the difference between the recoverable amount and
carrying amount of the investment in joint venture and then recognizes the loss as
part of “Equity in net losses of joint ventures” account in the consolidated statements
of income.

Upon loss of joint control over the joint venture, the Group measures and recognizes
any retained investment at fair value. Any difference between the carrying amount of
the investment in joint venture upon loss of joint control, and the fair value of the
retained investment and proceeds from disposal is recognized in the consolidated
statements of income.

The financial statements of the joint venture are prepared for the same reporting
period as the Group. When necessary, adjustments are made to bring the
accounting policies in line with those of the Group.

-9-
Property, Plant and Equipment
Property, plant and equipment, except for land, are stated at cost less accumulated
depreciation and any accumulated impairment in value. Such cost includes the cost
of replacing part of the property, plant and equipment at the time the cost is incurred,
if the recognition criteria are met, and excludes the costs of day-to-day servicing.
Land is stated at cost less impairment in value, if any.

The initial cost of property, plant and equipment comprises its construction cost or
purchase price, including import duties, taxes and any directly attributable costs in
bringing the asset to its working condition and location for its intended use. Cost also
includes related asset retirement obligation (ARO) and capitalizable borrowing cost,
if any. Expenditures incurred after the asset has been put into operation, such as
repairs, maintenance and overhaul costs, are normally recognized as expense in the
period the costs are incurred. Major repairs are capitalized as part of property, plant
and equipment only when it is probable that future economic benefits associated with
the items will flow to the Group and the cost of the items can be measured reliably.

Capital projects in progress (CPIP) represents the amount of accumulated

expenditures on unfinished and/or ongoing projects. This includes the costs of
construction and other direct costs. Borrowing costs that are directly attributable to
the construction of plant and equipment are capitalized during the construction
period. CPIP is not depreciated until such time that the relevant assets are ready for
use.

Depreciation, which commence when the assets are available for their intended use,
are computed using the straight-line method over the following estimated useful lives
of the assets:

Number of Years
Land improvements 5 - 10
Buildings and improvements 20 - 50
Transportation equipment 5
Machinery and equipment 3 - 40
Furniture, fixtures and other equipment 2-5
Leasehold improvements 10 - 30
or term of the lease,
whichever is shorter

The remaining useful lives, residual values, and depreciation methods are reviewed
and adjusted periodically, if appropriate, to ensure that such periods and methods of
depreciation are consistent with the expected pattern of economic benefits from the
items of property, plant and equipment.

The carrying amounts of property, plant and equipment are reviewed for impairment
when events or changes in circumstances indicate that the carrying amounts may
not be recoverable.

Fully depreciated assets are retained in the accounts until they are no longer in use.

An item of property, plant and equipment is derecognized when either it has been
disposed of or when it is permanently withdrawn from use and no future economic
benefits are expected from its use or disposal. Any gain or loss arising from the
retirement and disposal of an item of property, plant and equipment (calculated as
the difference between the net disposal proceeds and the carrying amount of the
asset) is recognized in the consolidated statements of income in the period of
retirement and disposal.

- 10 -
Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a
lease. A contract is, or contains, a lease if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset
for a period of time, the Group assesses whether, throughout the period of use:

▪ the Group has the right to obtain substantially all the economic benefits from use
of the identified asset; and

▪ the Group has the right to direct the use of the identified asset.

Group as Lessee
The Group recognizes a right-of-use asset and a lease liability at the lease
commencement date (i.e., the date the underlying asset is available for use).
The right-of-use asset is initially measured at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to
dismantle and remove the underlying asset or to restore the underlying asset or the
site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method

from the commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term, as follows:

Number of Years
Land and land improvements 12 - 14
Building and improvements 2 - 15

In addition, the right-of-use asset is periodically reduced by impairment losses, if any,

and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its incremental borrowing rate
as the discount rate.

Lease payments included in the measurement of the lease liability comprise the
following:

▪ fixed payments, including in-substance fixed payments, less any lease incentives
receivable;
▪ variable lease payments that depend on an index or a rate, initially measured
using the index or rate as at the commencement date;
▪ amounts expected to be payable under a residual value guarantee; and
▪ the exercise price under a purchase option that the Group is reasonably certain
to exercise, lease payments in an optional renewal period if the Group is
reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not to terminate
early.

- 11 -
The lease liability is measured at amortized cost using the effective interest method.
The carrying amount of the lease liability is remeasured when there is a change in
future lease payments arising from a change in an index or rate, a change in the
estimate of the amount expected to be payable under a residual value guarantee, or
a change in the assessment of whether a purchase or extension option is reasonably
certain to be exercised or a termination option is reasonably certain not to be
exercised.

When the lease liability is remeasured, a corresponding adjustment is made to the

carrying amount of the right-of-use asset, or is recognized in profit or loss if the
carrying amount of the right-of-use asset has been reduced to zero.

The Group has elected not to recognize right-of use assets and lease liabilities for
short-term leases (i.e., leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option) and leases of low-value
assets (i.e., office equipment). The Group recognizes the lease payments associated
with these leases as expense on a straight-line basis over the lease term.

Group as Lessor
The Group determines at lease inception whether each lease is a finance lease or an
operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease
transfers substantially all of the risks and rewards incidental to ownership of the
underlying asset. If this is the case, the lease is classified as a finance lease; if not, it
is classified as an operating lease. As part of the assessment, the Group considers
certain indicators such as whether the lease is for the major part of the economic life
of the asset.

When the Group is an intermediate lessor, it accounts for the head lease and the
sublease separately. It assesses the lease classification of a sublease with reference
to the right-of-use asset arising from the head lease. If a head lease is a short-term
lease to which the Group applies the recognition exemption, it classifies the sublease
as an operating lease.

If an arrangement contains lease and non-lease components, the Group applies

PFRS 15 to allocate the consideration in the contract.

The Group recognizes lease payments received under operating leases as rent
income on a straight-line basis over the lease term.

Impairment of Non-financial Assets

The carrying amounts of investments in joint ventures, property, plant and
equipment, right-of-use assets, intangible assets with finite lives and deferred
containers are reviewed for impairment when events or changes in circumstances
indicate that the carrying amount may not be recoverable. Goodwill is tested for
impairment annually either individually or at the cash-generating unit level. If any
such indication exists, and if the carrying amount exceeds the estimated recoverable
amount, the assets or cash-generating units are written down to their recoverable
amounts. The recoverable amount of the asset is the greater of fair value less costs
to sell and value in use. The fair value less costs to sell is the amount obtainable
from the sale of an asset in an arm’s length transaction between knowledgeable,
willing parties, less costs of disposal. Value in use is the present value of estimated
future cash flows expected to arise from the continuing use of an asset and from its
disposal at the end of its useful life.

- 12 -
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For an asset that does
not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs. Impairment
losses are recognized in the consolidated statements of income in those expense
categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication

that previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the recoverable amount is estimated.
A previously recognized impairment loss is reversed only if there has been a change
in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognized. If that is the case, the carrying amount of the asset
is increased to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation and
amortization, had no impairment loss been recognized for the asset in prior years.
Such reversal is recognized in the consolidated statements of income. After such a
reversal, the depreciation and amortization charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic
basis over its remaining useful life. An impairment loss with respect to goodwill is not
reversed.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either: (a) in the principal market
for the asset or liability; or (b) in the absence of a principal market, in the most
advantageous market for the asset or liability. The principal or most advantageous
market must be accessible to the Group.

The fair value of an asset or liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their best economic interest.

The Group uses valuation techniques that are appropriate in the circumstances and
for which sufficient data are available to measure fair value, maximizing the use of
relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the
consolidated financial statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:

Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly; and

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

- 13 -
For assets and liabilities that are recognized in the consolidated financial statements
on a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by re-assessing the categorization at the end of each
reporting period.

For the purpose of fair value disclosures, the Group has determined classes of
assets and liabilities on the basis of the nature, characteristics and risks of the asset
or liability and the level of the fair value hierarchy.

Capital Stock and Additional Paid-in Capital

Common Shares
Common shares are classified as equity. Incremental costs directly attributable to the
issue of common shares and share options are recognized as a deduction from
equity, net of any tax effects.

Preferred Shares
Preferred shares are classified as equity if they are non-redeemable, or redeemable
only at the option of the Company, and any dividends thereon are discretionary.
Dividends thereon are recognized as distributions within equity upon approval by the
BOD of the Company.

Preferred shares are classified as a liability if they are redeemable on a specific date
or at the option of the shareholders, or if dividend payments are not discretionary.
Dividends thereon are recognized as interest expense in the consolidated
statements of income as accrued.

Additional Paid-in Capital

When the shares are sold at premium, the difference between the proceeds and the
par value is credited to the “Additional paid-in capital” account. When shares are
issued for a consideration other than cash, the proceeds are measured by the fair
value of the consideration received. In case the shares are issued to extinguish or
settle the liability of the Company, the shares are measured either at the fair value of
the shares issued or fair value of the liability settled, whichever is more reliably
determinable.

Retained Earnings
Retained earnings represent the accumulated net income or losses, net of any
dividend distributions and other capital adjustments. The Company considers the
requirements of Section 42 of the Revised Corporation Code for its retained
earnings. It addresses any excess over paid-in capital stock after permissible
appropriations or restrictions under the said section, in the current or succeeding
periods. Appropriated retained earnings represent that portion which is restricted and
therefore not available for any dividend declaration.

Treasury Shares
Own equity instruments which are reacquired are carried at cost and deducted from
equity. No gain or loss is recognized on the purchase, sale, reissuance or
cancellation of the Company’s own equity instruments. When the shares are retired,
the capital stock account is reduced by its par value and the excess of cost over par
value upon retirement is debited to additional paid-in capital to the extent of the
specific or average additional paid-in capital when the shares were issued and to
retained earnings for the remaining balance.

- 14 -
Revenue
The Group recognizes revenue from contracts with customers when control of the
goods or services are transferred to the customer at an amount that reflects the
consideration to which the Group expects to be entitled in exchange for those goods
or services, excluding amounts collected on behalf of third parties.

The transfer of control can occur over time or at a point in time. Revenue is
recognized at a point in time unless one of the following criteria is met, in which case
it is recognized over time: (a) the customer simultaneously receives and consumes
the benefits as the Group performs its obligations; (b) the Group’s performance
creates or enhances an asset that the customer controls as the asset is created or
enhanced; or (c) the Group’s performance does not create an asset with an
alternative use to the Group and the Group has an enforceable right to payment for
performance completed to date.

The Group assesses its revenue arrangements to determine if it is acting as principal

or agent. The Group has concluded that it acts as a principal as it controls the goods
or services before transferring to the customer.

The following specific recognition criteria must also be met before revenue is
recognized:

Revenue from Sale of Goods

Revenue from sale of goods is recognized at the point in time when control of the
goods is transferred to the customer, which is normally upon delivery of the goods.
Trade discounts are determined at inception of the contract and is not subject to
variability. Trade returns do not result to significant variable consideration and are
generally determined based on concluded sales transaction as at the end of each
period.

Income from Other Sources

Tolling Fee. Tolling fee is recognized when the performance of contractually agreed
task has been rendered and control over the service has been transferred to the
customer. General payment terms is on an average of 30 days from invoice date.

Interest Income. Interest income is recognized using the effective interest method. In
calculating interest income, the effective interest rate is applied to the gross carrying
amount of the asset.

Dividend Income. Dividend income is recognized when the Group’s right to receive
the payment is established.

Others. Other income is recognized when earned.

Employee Benefits
Short-term Employee Benefits
Short-term employee benefits are expensed as the related service is provided.
A liability is recognized for the amount expected to be paid if the Group has a
present legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.

- 15 -
Retirement Costs
The net defined benefit retirement liability or asset is the aggregate of the present
value of the amount of future benefit that employees have earned in return for their
service in the current and prior periods, reduced by the fair value of plan assets
(if any), adjusted for any effect of limiting a net defined benefit asset to the asset
ceiling. The asset ceiling is the present value of economic benefits available in the
form of reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit retirement plan is actuarially
determined using the projected unit credit method. Projected unit credit method
reflects services rendered by employees to the date of valuation and incorporates
assumptions concerning projected salaries of employees. Actuarial gains and losses
are recognized in full in the period in which they occur in other comprehensive
income. Such actuarial gains and losses are also immediately recognized in equity
and are not reclassified to profit or loss in subsequent period.

Defined benefit costs comprise the following:

▪ Service costs;
▪ Net interest on the defined benefit retirement liability or asset; and
▪ Remeasurements of defined benefit retirement 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 the consolidated
statements of income. Past service costs are recognized when plan amendment or
curtailment occurs. These amounts are calculated periodically by independent
qualified actuary.

Net interest on the net defined benefit retirement liability or asset is the change
during the period as a result of contributions and benefit payments, which is
determined by applying the discount rate based on the government bonds to the net
defined benefit retirement liability or asset. Net interest on the net defined benefit
retirement liability or asset is recognized as expense or income in the consolidated
statements of income.

Remeasurements of net defined benefit retirement liability or asset comprising

actuarial gains and losses, return on plan assets, and any change in the effect of the
asset ceiling (excluding net interest) are recognized immediately in other
comprehensive income in the period in which they arise. Remeasurements are not
reclassified to consolidated statements of income in subsequent periods.

When the benefits of a plan are changed, or when a plan is curtailed, the resulting
change in benefit that relates to past service or the gain or loss on curtailment is
recognized immediately in the consolidated statements of income. The Group
recognizes gains and losses on the settlement of a defined benefit retirement plan
when the settlement occurs.

Foreign Currency
Foreign Currency Translations
Transactions in foreign currencies are initially recorded in the respective functional
currencies of the Group entities at exchange rates at the dates of the transactions.

Monetary assets and monetary liabilities denominated in foreign currencies are

translated to the functional currency at exchange rate at the reporting date.

- 16 -
Non-monetary assets and non-monetary liabilities denominated in foreign currencies
that are measured at fair value are translated to the functional currency at the
exchange rate when the fair value was determined. Non-monetary items
denominated in foreign currencies that are measured based on historical cost are
translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on translation are recognized in the

consolidated statements of income, except for differences arising on the translation
of monetary items that in substance form part of a net investment in a foreign
operation and hedging instruments in a qualifying cash flow hedge or hedge of a net
investment in a foreign operation which are recognized in other comprehensive
income.

Foreign Operations
The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated to Philippine peso at exchange
rates at the reporting date. The income and expenses of foreign operations are
translated to Philippine peso at average exchange rates for the period.

Foreign currency differences are recognized in other comprehensive income and

presented in the “Cumulative translation adjustments” account in the consolidated
statements of changes in equity. When a foreign operation is disposed of such that
control, significant influence or joint control is lost, the cumulative amount in the
translation related to that foreign operation is reclassified to the consolidated
statements of income as part of the gain or loss on disposal.

When the Group disposes of only part of its investment in joint venture that includes
a foreign operation while retaining joint control, the relevant proportion of the
cumulative amount is reclassified to consolidated statements of income.

When the settlement of a monetary item receivable from or payable to a foreign

operation is neither planned nor likely to occur in the foreseeable future, foreign
exchange gains and losses arising from such a monetary item are considered to
form part of a net investment in a foreign operation and are recognized in other
comprehensive income and presented in the “Cumulative translation adjustments”
account in the consolidated statements of changes in equity.

The functional currency of GSMIL, GSMIHL, GBHL and SHL is United States Dollar
(USD), while that of Thai San Miguel Liquor Co. Limited (TSML) and Thai Ginebra
Trading (TGT) is the Thailand Baht (THB). The assets and liabilities of GSMIL,
GSMIHL, GBHL, SHL, TSML and TGT are translated into the presentation currency
of the Group at the rate of exchange ruling at the reporting date and their income and
expenses are translated at the average exchange rates for the year.

Taxes
Current tax and deferred tax are recognized in the consolidated statements of
income except to the extent that it relates to a business combination, or items
recognized directly in equity or in other comprehensive income.

Current Tax. Current tax is the expected tax payable or receivable on the taxable
income or loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years.

Current tax relating to items recognized directly in equity is recognized in equity and
not in consolidated statements of income. The Group periodically evaluates positions
taken in the tax returns with respect to situations in which applicable tax regulations
are subject to interpretations and establishes provisions where appropriate.

- 17 -
Deferred Tax. Deferred tax is recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

▪ where the deferred tax liability arises from the initial recognition of goodwill or of
an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, (i) affects neither the accounting profit nor taxable profit
or loss and (ii) does not give rise to equal taxable differences; and

▪ with respect to taxable temporary differences associated with investments in

shares of stock of subsidiaries and interests in joint ventures, where the timing of
the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences,
carryforward benefits of unused tax credits - Minimum Corporate Income Tax (MCIT)
and unused tax losses - Net Operating Loss Carry Over (NOLCO), to the extent that
it is probable that taxable profit will be available against which the deductible
temporary differences, and the carryforward benefits of MCIT and NOLCO can be
utilized, except:

▪ where the deferred tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, (i) affects neither the
accounting profit nor taxable profit or loss and (ii) does not give rise to equal
taxable differences; and

▪ with respect to deductible temporary differences associated with investments in

shares of stock of subsidiaries and interests in joint ventures, deferred tax assets
are recognized only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilized.

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

The measurement of deferred tax reflects the tax consequences that would follow
the manner in which the Group expects, at the end of the reporting period, to recover
or settle the carrying amount of its assets and liabilities.

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

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same taxation authority.

- 18 -
 Value-added Tax (VAT). Revenues, expenses and assets are recognized net of the
amount of VAT, except:

▪ where the tax incurred on a purchase of assets or services is not recoverable

from the taxation authority, in which case the tax is recognized as part of the cost
of acquisition of the asset or as part of the expense item as applicable; and

▪ receivables and payables that are stated with the amount of tax included.

The net amount of tax recoverable from, or payable to, the taxation authority is
included as part of “Prepaid expenses and other current assets” or “Income and
other taxes payable” accounts in the consolidated statements of financial position.

Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in
making financial and operating decisions. Parties are also considered to be related if
they are subject to common control. Related parties may be individuals or corporate
entities.

Operating Segment
The reporting format of the Group’s operating segment is determined based on the
Group’s risks and rates of return which are affected predominantly by differences in
the products and services produced. The Group has a single segment which is the
alcoholic beverages segment.

4. Use of Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements in accordance with PFRS

requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the amounts of assets, liabilities, income and
expenses reported in the consolidated financial statements at the reporting date.
However, uncertainty about these judgments, estimates and assumptions could
result in an outcome that could require a material adjustment to the carrying amount
of the affected asset or liability in the future.

Judgments and estimates are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Revisions are recognized in the
period in which the judgments and estimates are revised and in any future period
affected.

Judgments
In the process of applying the accounting policies, the Group has made the following
judgments, apart from those involving estimations, which have an effect on the
amounts recognized in the consolidated financial statements:

Operating Lease Commitments - Group as Lessor. The Group has entered into
various lease agreements as a lessor. The Group had determined that it retains all
significant risks and rewards of ownership of the property leased out on operating
leases.

Rent income recognized as part of “Other income (charges) - net” account in the
consolidated statements of income, amounted to P172 in 2023, 2022 and 2021
(Notes 26, 27 and 28).

- 19 -
Determining the Lease Term of Contracts with Renewal Options - Group as Lessee.
The Group determines the lease term as the non-cancellable term of the lease,
together with any periods covered by an option to extend the lease if it is reasonably
certain to be exercised.

The Group has several lease contracts that include extension options. At lease
commencement date, the Group applies judgment in evaluating whether it is
reasonably certain to exercise the option to renew the lease by considering all
relevant factors that create an economic incentive for it to exercise the renewal
option. The Group reassesses whether it is reasonably certain to exercise the
options if there is a significant event or change in circumstances within its control.

Classification of Joint Arrangements. The Group has determined that it has rights
only to the net assets of the joint arrangements based on the structure, legal form,
contractual terms and other facts and circumstances of the arrangement. As such,
the Group classified its joint arrangements in TSML and TGT as joint ventures
(Note 9).

Classification of Financial Instruments. The Group exercises judgments in classifying

financial instrument, or its component parts, on initial recognition as a financial asset,
a financial liability, or an equity instrument in accordance with the substance of the
contractual arrangement and the definitions of a financial asset, a financial liability or
an equity instrument. The substance of a financial instrument, rather than its legal
form, governs its classification in the consolidated statements of financial position.

Estimates and Assumptions

The key estimates and assumptions used in the consolidated financial statements
are based upon the Group’s evaluation of relevant facts and circumstances as at the
date of the consolidated financial statements. Actual results could differ from such
estimates.

Assessment of ECL on Trade Receivables. The Group, in applying the simplified

approach in the computation of ECL, initially uses a provision matrix based on
historical default rates for trade receivables for at least three years. The Group also
uses appropriate groupings if its historical credit loss experience shows significantly
different loss patterns for different customers. The Group then adjusts the historical
credit loss experience with forward-looking information on the basis of current
observable data affecting each customer to reflect the effects of current and
forecasted economic conditions.

The Group has assessed that the forward-looking default rate component of its ECL
on trade receivables is not material because substantial amount of trade receivables
are normally collected within one year. Moreover, based on management’s
assessment, current conditions and forward-looking information does not indicate a
significant increase in credit risk exposure of the Group from its trade receivables.

Trade receivables written-off amounted to P3,897 and nil in 2023 and 2022,
respectively. The Group recognized provision for impairment losses amounted to nil
and P10,325 in 2023 and 2022, respectively. The allowance for impairment losses
on trade receivables amounted to P9,768 and P18,254 as at December 31, 2023
and 2022, respectively (Note 6). The net carrying amount of trade receivables
amounted to P1,348,927 and P962,099 as at December 31, 2023 and 2022,
respectively (Notes 6, 31 and 32).

- 20 -
Assessment of ECL on Other Financial Assets at Amortized Cost. The Group
determines the allowance for ECL using general approach based on the probability-
weighted estimate of the present value of all cash shortfalls over the expected life of
financial assets at amortized cost. ECL is provided for credit losses that result from
possible default events within the next 12 months unless there has been a significant
increase in credit risk since initial recognition in which case ECL is provided based
on lifetime ECL.

When determining if there has been a significant increase in credit risk, the Group
considers reasonable and supportable information that is available without undue
cost or effort and that is relevant for the particular financial instrument being
assessed such as, but not limited to, the following factors:

▪ actual or expected external and internal credit rating downgrade;

▪ existing or forecasted adverse changes in business, financial or economic
conditions; and
▪ actual or expected significant adverse changes in the operating results of the
borrower.

The Group also considers financial assets at day one to be the latest point at which
lifetime ECL should be recognized unless it can demonstrate that this does not
represent a significant risk in credit risk such as when non-payment was an
administrative oversight rather than resulting from financial difficulty of the borrower.

The Group has assessed that the ECL on other financial assets at amortized cost is
not material because the transactions with respect to these financial assets were
entered into by the Group only with reputable banks and companies with good credit
standing and relatively low risk of defaults. Accordingly, no provision for ECL on
other financial assets at amortized cost was recognized in 2023 and 2022.

The carrying amounts of other financial assets at amortized cost are as follows:

Note 2023 2022

Other Financial Assets at Amortized
Cost
Cash and cash equivalents 5 P9,881,018 P5,457,277
Non-trade receivables - net of allowance
for impairment losses* (included under
“Trade and other receivables - net”
account)** 6 213,915 211,343
Investment in debt instruments at
amortized cost 10 1,500,000 1,500,000
Security deposit (included under “Trade
and other receivables - net” and
“Other noncurrent assets - net”
accounts) 14 503 503
*Allowance for impairment losses on non-trade receivables amounted to P672,799 and P673,039 as at
December 31, 2023 and 2022, respectively (Note 6).
** Excluding tax certificate receivables amounted to P14,984 and P62,327 as at December 31, 2023 and 2022,
respectively and security deposit amounting to P10 as at December 31, 2023 and 2022 (Note 6).

- 21 -
Variable Consideration under Revenue. Revenue from sales is recognized based on
the price specified in the contract, net of the estimated volume discounts and returns.
Accumulated experience is used to estimate and provide for the discounts, using the
expected value method, and revenue is only recognized to the extent that it is highly
probable that a significant reversal will not occur. A provision for sales discount is
recognized for expected volume discounts payable to customers in relation to sales
made until the end of the reporting period. No element of financing is deemed
present as the sales are made through cash on delivery or with credit terms of 30 to
60 days, which is consistent with market practice.

It is the Group's policy to sell its products to the customer with a right of return.
Accumulated experience is used to estimate such returns at the time of sale at a
portfolio level (expected value method). Because the number of products returned
has been steady for years, it is highly probable that a significant reversal in the
cumulative revenue recognized will not occur. The validity of this assumption and the
estimated amount of returns are reassessed at each reporting date.

Fair Value Measurements. A number of the Group’s accounting policies and

disclosures require the measurement of fair values for both financial and
non-financial assets and liabilities.

The Group has an established control framework with respect to the measurement of
fair values. This includes a valuation team that has the overall responsibility for
overseeing all significant fair value measurements, including Level 3 fair values.
The valuation team regularly reviews significant unobservable inputs and valuation
adjustments. If third party information is used to measure fair values, then the
valuation team assesses the evidence obtained to support the conclusion that such
valuations meet the requirements of PFRS, including the level in the fair value
hierarchy in which such valuations should be classified.

The Group uses market observable data when measuring the fair value of an asset
or liability. Fair values are categorized into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques (Note 3).

If the inputs used to measure the fair value of an asset or a liability can be
categorized in different levels of the fair value hierarchy, then the fair value
measurement is categorized in its entirety in the same level of the fair value
hierarchy based on the lowest level input that is significant to the entire
measurement.

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

The methods and assumptions used to estimate the fair values for both financial and
non-financial assets and liabilities are discussed in Notes 8, 9, 11, 12, 13, 15, 29
and 32.

Write-down of Inventory. The Group writes-down the cost of inventory to net

realizable value whenever net realizable value becomes lower than cost due to
damage, physical deterioration, obsolescence, changes in price levels or other
causes.

Estimates of net realizable value are based on the most reliable evidence available
at the time the estimates are made of the amount the inventories are expected to be
realized. These estimates take into consideration fluctuations of price or cost directly
relating to events occurring after the reporting date to the extent that such events
confirm conditions existing at the reporting date.

- 22 -
The write-down of inventories amounted to P141,665 and P118,353 as at
December 31, 2023 and 2022, respectively (Note 7).

The carrying amount of inventories amounted to P8,083,201 and P7,003,478 as at

December 31, 2023 and 2022, respectively (Note 7).

Estimated Useful Lives of Property, Plant and Equipment, Right-of-Use Assets,

Deferred Containers and Intangible Asset with Finite Useful Life. The Group
estimates the useful lives of property, plant and equipment, right-of-use assets,
deferred containers and intangible asset with finite useful life based on the period
over which the assets are expected to be available for use. The estimated useful
lives of property, plant and equipment, right-of-use assets, deferred containers and
intangible asset with finite useful life are reviewed periodically and are updated if
expectations differ from previous estimates due to physical wear and tear, technical
or commercial obsolescence and legal or other limits on the use of the assets.

In addition, estimation of the useful lives of property, plant and equipment,

right-of-use assets, deferred containers and intangible asset with finite useful life is
based on collective assessment of industry practice, internal technical evaluation and
experience with similar assets. It is possible, however, that future financial
performance could be materially affected by changes in estimates brought about by
changes in factors mentioned above. The amounts and timing of recorded expenses
for any period would be affected by changes in these factors and circumstances. A
reduction in the estimated useful lives of property, plant and equipment, right-of-use
assets, deferred containers and intangible asset with finite useful life would increase
the recorded cost of sales and selling and administrative expenses and decrease
noncurrent assets.

There are no changes in the estimated useful lives of property, plant and equipment,
right-of-use assets, deferred containers and intangible asset with finite useful life as
at December 31, 2023 and 2022.

Property, plant and equipment, net of accumulated depreciation and impairment

losses amounted to P5,092,142 and P4,730,803 as at December 31, 2023 and 2022,
respectively. Accumulated depreciation of property, plant and equipment amounted
to P9,922,509 and P9,328,669 as at December 31, 2023 and 2022, respectively
(Note 11).

Right-of-use assets, net of accumulated depreciation and amortization amounted to

P50,778 and P97,751 as at December 31, 2023 and 2022, respectively.
Accumulated depreciation and amortization of right-of-use assets amounted to
P84,562 and P92,001 as at December 31, 2023 and 2022, respectively (Note 12).

Deferred containers, net of accumulated depreciation, included as part of “Other

noncurrent assets - net” account in the consolidated statements of financial position
amounted to nil and P1,764 as at December 31, 2023 and 2022, respectively.
Accumulated depreciation of deferred containers amounted to nil and P373,245 as at
December 31, 2023 and 2022, respectively (Note 14).

Intangible assets, net of accumulated amortization, included as part of “Other

noncurrent assets - net” account in the consolidated statements of financial position
amounted to P27,792 and P28,420 as at December 31, 2023 and 2022, respectively.
Accumulated amortization of intangible assets amounted to P25,729 and P14,842 as
at December 31, 2023 and 2022, respectively (Note 14).

- 23 -
Estimating the Incremental Borrowing Rate. The Group cannot readily determine the
interest rate implicit in the leases. Therefore, it uses its relevant incremental
borrowing rate to measure lease liabilities. The incremental borrowing rate is the rate
of interest that the Group would have to pay to borrow over a similar term, and with a
similar security, the funds necessary to obtain an asset of a similar value to the
right-of-use asset in a similar economic environment. The incremental borrowing
rate, therefore, reflects what the Group would have to pay, which requires estimation
when no observable rates are available and to make adjustments to reflect the terms
and conditions of the lease. The Group estimates the incremental borrowing rate
using observable inputs (such as market interest rates) when available and is
required to consider certain contract and entity-specific estimates.

The Group’s lease liabilities amounted to P56,398 and P108,742 as at

December 31, 2023 and 2022, respectively (Notes 27, 28, and 31).

Impairment of Goodwill. The Group determines whether goodwill is impaired at least

annually. This requires the estimation of value in use of the cash-generating units to
which the goodwill is allocated. Estimating value in use requires management to
make an estimate of the expected future cash flows from the cash-generating unit
and to choose a suitable discount rate to calculate the present value of those cash
flows.

The carrying amount of goodwill amounted to P126,863 as at December 31, 2023

and 2022 (Note 13).

Realizability of Deferred Tax Assets. The Group reviews its deferred tax assets at
each reporting date and reduces the carrying amount to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the
deferred tax assets to be utilized. The Group’s assessment on the recognition of
deferred tax assets on deductible temporary differences and carryforward benefits of
MCIT and NOLCO is based on the projected taxable income in the following periods.

The net deferred tax assets amounted to P562,775 and P524,963 as at

December 31, 2023 and 2022, respectively (Note 18).

Impairment of Non-financial Assets. PFRS requires that an impairment review be

performed on investments in joint ventures, property, plant and equipment, intangible
assets with finite useful lives, deferred containers, and right-of-use assets when
events or changes in circumstances indicate that the carrying amount may not be
recoverable. Determining the recoverable amounts of these assets requires the
estimation of cash flows expected to be generated from the continued use and
ultimate disposition of such assets. While it is believed that the assumptions used in
the estimation of fair values reflected in the consolidated financial statements are
appropriate and reasonable, significant changes in these assumptions may
materially affect the assessment of recoverable amounts and any resulting
impairment loss could have a material adverse impact on the financial performance.

Accumulated impairment losses on investments in joint ventures and property, plant

and equipment amounted to P551,399 as at December 31, 2023 and 2022
(Notes 9 and 11).

The combined carrying amounts of investments in joint ventures, property, plant and
equipment, right-of-use assets, deferred containers and intangible assets with finite
useful lives amounted to P5,170,712 and P4,858,738 as at December 31, 2023 and
2022, respectively (Notes 9, 11, 12 and 14).

- 24 -
 Present Value of Defined Benefit Retirement Obligation. The present value of the
defined benefit retirement obligation depends on a number of factors that are
determined on an actuarial basis using a number of assumptions. These
assumptions are described in Note 29 to the consolidated financial statements and
include discount rate and salary increase rate.

The Group determines the appropriate discount rate at the end of each reporting
period. It is the interest rate that should be used to determine the present value of
estimated future cash outflows expected to be required to settle the retirement
obligations. In determining the appropriate discount rate, the Group considers the
interest rates on government bonds that are denominated in the currency in which
the benefits will be paid. The terms to maturity of these bonds should approximate
the terms of the related retirement obligation.

Other key assumptions for the defined benefit retirement obligation are based in part
on current market conditions.

While it is believed that the assumptions of the Group are reasonable and
appropriate, significant differences in actual experience or significant changes in
assumptions may materially affect the defined benefit retirement obligation of the
Group.

The present value of defined benefit retirement obligation amounted to P2,267,495

and P1,812,853 as at December 31, 2023 and 2022, respectively (Note 29).

5. Cash and Cash Equivalents

Cash and cash equivalents consist of:

Note 2023 2022

Cash in banks and on hand P787,855 P1,945,277
Short-term investments 9,093,163 3,512,000
31, 32 P9,881,018 P5,457,277

Cash in banks earn interest at bank deposit rates. Short-term investments include
demand deposits which can be withdrawn at any time depending on the immediate
cash requirements of the Group and earn interest at short-term investment rates.

Interest income earned from cash in banks and short-term investments amounted to
P434,790, P125,206 and P38,471 in 2023, 2022 and 2021, respectively.

- 25 -
6. Trade and Other Receivables

Trade and other receivables consist of:

Note 2023 2022

Trade:
Third parties P1,343,360 P973,441
Related parties 27 15,335 6,912
Non-trade:
Third parties 153,927 219,319
Related parties 27 747,781 727,400
2,260,403 1,927,072
Less allowance for impairment losses 682,567 691,293
31, 32 P1,577,836 P1,235,779

Trade receivables are non-interest bearing and are generally on a 30 to 60-day term.
Allowance for impairment losses pertaining to trade receivables amounted to P9,768
and P18,254 as at December 31, 2023 and 2022,respectively.

Non-trade receivables from third parties consist of the following: (i) receivable from
employees amounting to P22,770 and P22,361 as at December 31, 2023 and 2022,
respectively; (ii) tax certificate receivables amounting to P14,969 and 62,327 as at
December 31, 2023 and 2022, respectively; and (iii) miscellaneous receivables
amounting to P116,188 and P134,631 as at December 31, 2023 and 2022,
respectively. These are generally collectible on demand. Allowance for impairment
losses for non-trade receivables from third parties amounted to P380 and P620 as at
December 31, 2023 and 2022, respectively.

Allowance for impairment losses pertaining to non-trade receivables from related

parties amounted to P672,419 as at December 31, 2023 and 2022, respectively.

The movements in allowance for impairment losses for trade and other receivables
are as follows:

Note 2023 2022

Balance at beginning of year P691,293 P681,070
Provision 22 4,297 10,325
Reversal of impairment loss 22 (4,589) -
Recovery for the year 26 - (102)
Amounts written off (8,434) -
Balance at end of year 4 P682,567 P691,293

The reversal and recovery of impairment loss amounting to P4,589 and P102 in 2023
and 2022, respectively, is included as part of “Net provision (reversal) for impairment
losses” under “General and administrative expenses” account and “Others” under
“Other income (charges) - net” account, respectively, in the consolidated statements
of income (Notes 22 and 26).

- 26 -
7. Inventories

Inventories consist of:

2023 2022
At cost:
Finished goods and goods in process P4,785,850 P4,034,046
At net realizable value:
Materials and supplies 3,297,351 2,969,432
P8,083,201 P7,003,478

The cost of materials and supplies amounted to P3,439,016 and P3,087,785 as at

December 31, 2023 and 2022, respectively.

The amount of inventories charged to cost of sales amounted to P15,454,336,

P13,967,463 and P12,638,837 in 2023, 2022 and 2021, respectively (Note 20).

The movements in allowance for write-down of inventories to net realizable value at

the beginning and end of 2023 and 2022 follow:

Note 2023 2022

Balance at beginning of year P118,353 P141,792
Provision 20, 22 38,503 -
Write-off (6,786) (13,114)
Reversal 20 (8,405) (10,325)
Balance at end of year 4 P141,665 P118,353

Provision for write-down of inventories to net realizable value amounted to P38,503

and nil in 2023 and 2022, respectively.

The Company adjusted the allowance for write-down of inventories to net realizable
value based on the recent computed net realizable value. This resulted to reversal of
allowance for write-down of inventories amounting to P8,405 and P10,325 in 2023
and 2022, respectively, and has been recognized as part of “Net provision (reversal)
for write-down of inventories to net realizable value” under “Cost of sales” account in
the consolidated statements of income (Note 20).

8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of:

Note 2023 2022

Prepaid taxes P747,096 P819,251
Derivative assets 31, 32 14,572 2,638
Others 27 55,676 47,092
P817,344 P868,981

Prepaid taxes represent prepayments of excise taxes on alcohol and income taxes.

Others include prepaid insurance, prepaid rental and advances to employees.

Prepaid insurance includes amounts owed by a related party amounting to P45,002
and P40,390 as at December 31, 2023 and 2022, respectively (Note 27).

- 27 -
 The methods and assumptions used to estimate the fair value of derivative assets
are discussed in Note 32.

9. Investments in Joint Ventures

a. TSML

GSMI, through GSMIL, has an existing joint venture with Thai Life Group of
Companies (Thai Life) covering the ownership and operations of TSML. TSML is
a limited company organized under the laws of Thailand in which the Group
owns 44.9% effective ownership interest. TSML holds a license in Thailand to
engage in the business of manufacturing alcohol and manufacturing, selling and
distributing brandy, wine and distilled spirits products both for domestic and
export markets.

TSML 2023 2022 2021

Current assets (including cash and cash equivalents -
2023: P218,817; 2022: P344,797 P331,755 P603,948 P772,124
and 2021: P140,734)
Noncurrent assets 683,238 732,657 828,246
Current liabilities (including financial liabilities - 2023:
P1,281,459; 2022: P1,277,193; and 2021: P1,206,014) (1,320,303) (1,379,120) (1,281,317)
Net assets (liabilities) (305,310) (42,515) 319,053
Percentage of ownership 44.9% 44.9% 44.9%
Amount of investment in joint venture - - 143,255
Carrying amount of investment in joint venture - net P - P - P -

TSML 2023 2022 2021

Sales P3,279 P397,212 P874,925
Cost of sales (including depreciation - 2023: P46,347;
2022: P136,602 and 2021: P128,281) (61,016) (563,196) (976,316)
Operating expenses (including depreciation - 2023:
P3,237; 2022: P3,353 and 2021: P3,452) (170,876) (160,133) (79,510)
Other charges (including interest expense - 2023:
P31,616; 2022: P30,727 and 2021: P30,450) (31,263) (35,414) (30,925)
Net loss (259,876) (361,531) (211,826)
Percentage of ownership 44.9% 44.9% 44.9%
Share in net loss (116,684) (162,327) (95,110)
Share in other comprehensive loss - - (4,451)
Total comprehensive loss (P116,684) (P162,327) (P99,561)

In 2019, the Group assessed that its investment in TSML is impaired. The
recoverable amount of investment in TSML has been determined based on a
valuation using cash flow projections covering a five-year period based on long
range plans approved by management. Cash flows beyond the five-year period
are extrapolated using a constant growth rate determined per individual
cash-generating unit. The determined growth rate is 2% and is consistent with
the long-term average growth rate for the industry. The discount rate applied to
after tax cash flow projections is 9% and also imputes the risk of the
cash-generating units compared to the respective risk of the overall market and
equity risk premium. Accumulated impairment losses amounted to P243,799 as
at December 31, 2023 and 2022.

The recoverable amount of investment in TSML has been categorized as Level 3

in the fair value hierarchy based on the inputs used in the valuation technique
(Note 4).

- 28 -
 The Group discontinued recognizing its share in the net losses of TSML since
the cumulative losses already exceeded the cost of investment. If TSML reports
profits subsequently, the Group resumes recognizing its share of those profits
after its share of the profits equals the share of net losses not recognized. Total
unrecognized share in net losses amounted to P412,289 and P295,605 as at
December 31, 2023 and 2022, respectively.

b. TGT

The Group also has an existing 44.9% effective ownership interest in TGT, which
was formed as another joint venture with Thai Life. TGT functions as the selling
and distribution arm of TSML.

The details of the Group’s investments in joint ventures which are accounted for
using the equity method are as follows:

TGT 2023 2022 2021

Current assets (including cash and cash equivalents -
2023: P7,168; 2022: P7,135 and 2021: P9,575) P18,203 P18,216 P23,233
Noncurrent assets 214 431 683
Current liabilities (989,278) (986,056) (938,379)
Net liabilities (970,861) (967,409) (914,463)
Percentage of ownership 44.9% 44.9% 44.9%
Carrying amount of investment in joint venture P - P - P -

TGT 2023 2022 2021

Sales P126 P12,166 P39,584
Cost of sales (115) (9,895) (32,574)
Operating expenses (including depreciation - 2023: P201;
2022: P202 and 2021: P190) (243) (1,413) (22,850)
Other income 14 118 642
Net income (loss) (218) 976 (15,198)
Percentage of ownership 44.9% 44.9% 44.9%
Share in net income (loss) (98) 438 (6,824)
Share in other comprehensive loss - - (60,003)
Total comprehensive income (loss) (P98) P438 (P66,827)

The Group discontinued recognizing its share in the net losses of TGT since the
cumulative losses already exceeded the cost of investment. If TGT reports profits
subsequently, the Group resumes recognizing its share of those profits after its
share of the profits equals the share of net losses not recognized. Total
unrecognized share in net losses amounted to P295,290 and P295,192
respectively.

10. Investments in Debt Instruments at Amortized Cost

On December 12, 2022, the Company entered into investment agreement with Bank
of Commerce. The Company invested in debt instruments amounting to a total of
P1,500,000 which bear an annual average interest rate of 6.90% and maturities up to
seven years (Notes 4, 27, 31 and 32).

Interest income earned from investments in debt instruments at amortized cost

amounted to P117,564 and P5,331 in 2023 and 2022, respectively.

- 29 -
11. Property, Plant and Equipment

Property, plant and equipment consist of:

Land Furniture, Capital

and Land Buildings and Transportation Machinery and Fixtures and Leasehold Projects in
Improvements Improvements Equipment Equipment Other Equipment Improvements Progress Total
Cost
January 1, 2022 P1,133,104 P2,310,440 P426,597 P8,605,711 P620,669 P63,680 P336,165 P13,496,366
Additions 108,551 515,384 17,927 153,510 32,592 12,168 219,539 1,059,671
Disposals/retirement (912) (3,610) (18,485) (160,850) (6,113) (2,776) - (192,746)
Reclassifications 422 (220,677) 12,385 442,894 6,556 12,506 (250,305) 3,781
December 31, 2022 1,241,165 2,601,537 438,424 9,041,265 653,704 85,578 305,399 14,367,072
Additions 1,580 86,947 29,348 214,666 220,727 21,898 390,860 966,026
Disposals/retirement - - (3,464) (3,794) (900) (13,443) - (21,601)
Reclassifications 15,923 (4,822) 12,395 177,290 37,343 42,466 (269,841) 10,754
December 31, 2023 1,258,668 2,683,662 476,703 9,429,427 910,874 136,499 426,418 15,322,251
Accumulated Depreciation
January 1, 2022 282,171 1,341,266 280,051 6,559,349 470,932 18,749 - 8,952,518
Depreciation 10,837 84,187 50,719 351,369 61,937 5,539 - 564,588
Disposals/retirement (912) (3,610) (18,484) (158,953) (6,115) (363) - (188,437)
Reclassifications - (3,580) - (3,818) (782) 8,180 - -
December 31, 2022 292,096 1,418,263 312,286 6,747,947 525,972 32,105 - 9,328,669
Depreciation 11,032 89,667 45,900 378,208 73,698 16,936 - 615,441
Disposals/retirement - - (3,464) (3,794) (900) (13,443) - (21,601)
Reclassifications 637 (23,724) - 32,965 (2,394) (7,484) - -
December 31, 2023 303,765 1,484,206 354,722 7,155,326 596,376 28,114 - 9,922,509
Accumulated Impairment
Losses
December 31, 2022 and
2023 - - - 307,600 - - - 307,600
Carrying Amount
December 31, 2022 P949,069 P1,183,274 P126,138 P1,985,718 P127,732 P53,473 P305,399 P4,730,803

December 31, 2023 P954,903 P1,199,456 P121,981 P1,966,501 P314,498 P108,385 P426,418 P5,092,142

- 30 -
The recoverable amount of unutilized machinery and equipment was determined by
an independent property appraiser having appropriate recognized professional
qualifications and recent experience in the category of the property being valued.
The fair value of the property being appraised was determined using the replacement
cost model. This approach considers the cost to reproduce or replace in new
condition the assets appraised in accordance with current market prices of materials,
labor, contractor’s overhead, profit and fees, and all other attendant’s costs
associated with its acquisition and installation in place. Adjustment is then made for
accrued depreciation as evidenced by the observed condition and present and
prospective serviceability in comparison with the new similar units. The accumulated
impairment losses of unutilized machinery and equipment amounted to P307,600 as
at December 31, 2023 and 2022.

The fair value of the distillation equipment has been categorized as Level 3 in the fair
value hierarchy based on the inputs used in the valuation techniques (Note 4).

The Group has fully depreciated assets with cost amounting to P3,721,892 and
P3,439,643 as at December 31, 2023 and 2022, respectively, which are still used in
operations.

The Group sold various equipment for P784, P3,270 and 6,383 in 2023, 2022 and
2021, respectively. Accordingly, the Group recognized gains amounting to P784,
P1,373 and P2,122 included as part of “Gain (loss) on disposal/retirement of
noncurrent assets - net” account in the consolidated statements of income in 2023,
2022, and 2021, respectively.

The carrying amount of certain property and equipment retired from use amounted to
nil, P2,413 and P67 as at December 31, 2023, 2022, and 2021, respectively, and
accordingly recognized a loss for the same amount, included as part of “Gain (loss)
on disposal/retirement of noncurrent assets - net” account in the consolidated
statements of income.

Total depreciation recognized in the consolidated statements of income amounted to

P615,441, P564,588 and P577,584 in 2023, 2022 and 2021, respectively (Notes 20,
21, 22 and 23). These amounts include annual amortization of capitalized interest
amounting to P6,933, P6,825 and P6,779 in 2023, 2022 and 2021, respectively.

The Group has interest amounting to P10,754, P3,781 and P4,393 which was
capitalized to machinery and equipment in 2023, 2022 and 2021, respectively
(Note 25). The capitalization rates used to determine the amount of interest eligible
for capitalization were 3.87%, 4.47% and 7.03% in 2023, 2022 and 2021,
respectively. The capitalization rates are computed as the weighted average of the
borrowing costs applicable to the borrowings of the Group that are outstanding
during the period.

- 31 -
12. Right-of-Use Assets

The movements in right-of-use assets are as follows:

Land and Land Buildings and

Note Improvements Improvements Total
Cost
January 1, 2022 P15,610 P264,748 P280,358
Additions 28 - 63,017 63,017
Retirement - (153,623) (153,623)
December 31, 2022 15,610 174,142 189,752
Additions 28 11,315 31,430 42,745
Retirement - (97,157) (97,157)
December 31, 2023 26,925 108,415 135,340
Accumulated Depreciation
January 1, 2022 3,546 100,729 104,275
Depreciation 23 1,182 77,066 78,248
Retirement - (90,522) (90,522)
December 31, 2022 4,728 87,273 92,001
Depreciation 23 2,753 35,218 37,971
Retirement - (45,410) (45,410)
December 31, 2023 7,481 77,081 84,562
Carrying Amount
December 31, 2022 P10,882 P86,869 P97,751
December 31, 2023 P19,444 P31,334 P50,778

The Group recognized right-of-use assets for leases of office space, warehouse,
factory facilities and parcels of land. The leases typically run for a period of 2 to
15 years. Some leases contain an option to renew the lease at the end of the lease
term and are being subjected to reviews to reflect current market rentals. The
renewal option provides operational flexibility in managing the leased asset portfolio
and aligns the business needs of the Group. The Group retired some of the leased
assets in which it recognized gain on termination of lease amounted to P8,014 and
P10,159 in 2023 and 2022, respectively which is included in “Others” in “Other
income (charges) - net” account in the consolidated statements of income (Notes 26,
27 and 28).

- 32 -
13. Goodwill

GSMI acquired 100% of the outstanding capital stock of EPSBPI in 2012. EPSBPI,
which is considered a cash-generating unit, is a company primarily engaged in the
manufacturing and bottling of alcoholic and non-alcoholic beverages. The acquisition
resulted in the recognition of goodwill amounting to P226,863.

The recoverable amount of goodwill has been determined based on a valuation

using cash flow projections covering a five-year period based on long range plans
approved by management. Cash flows beyond the five-year period are extrapolated
using a constant growth rate determined per individual cash-generating unit. The
determined growth rate is 3% and 2% in 2023 and 2022, respectively. This growth
rate is consistent with the long-term average growth rate for the industry. The
discount rates applied to after tax cash flow projections is 8.6% and 11% in 2023 and
2022, respectively. The discount rate also imputes the risk of the cash-generating
units compared to the respective risk of the overall market and equity risk premium.
As a result of decline in operations resulting in lower sales forecast compared with
previous years, the Group recognized impairment loss amounting to P100,000 in
2015. Due to improvements in the operations of EPSBPI starting 2016 and the
growth in volume requirements of GSMI, no additional impairment loss was
recognized.

The recoverable amount of goodwill has been categorized as Level 3 in the fair value
hierarchy based on the inputs used in the valuation technique (Note 4).

The calculations of value in use are most sensitive to the following assumptions:

▪ Gross Margins. Gross margins are based on average values achieved in the
period immediately before the budget period. These are increases over the
budget period for anticipated efficiency improvements. Values assigned to key
assumptions reflect past experience, except for efficiency improvement.

▪ Discount Rates. The Group uses the weighted-average cost of capital as the
discount rate, which reflects management’s estimate of the risk specific to each
unit. This is the benchmark used by management to assess operating
performance and to evaluate future investments proposals.

▪ Raw Material Price Inflation. Consumer price forecast is obtained from indices
during the budget period from which raw materials are purchased. Values
assigned to key assumptions are consistent with external sources of information.

- 33 -
14. Other Noncurrent Assets

Other noncurrent assets consist of:

Note 2023 2022

Intangible assets - net P27,792 P28,420
Security deposit 27, 31, 32 493 493
Deferred containers - net - 1,764
Others 27 47,563 35,541
P75,848 P66,218

The movements in intangible assets - net pertaining to computer software are as

follows:

Note 2023 2022

Cost
Balance at beginning of year P43,262 P110,942
Additions 10,259 -
Retirement - (67,680)
Balance at end of year 53,521 43,262
Accumulated Amortization
Balance at beginning of year 14,842 73,746
Amortization 23 10,887 8,776
Retirement - (67,680)
Balance at end of year 25,729 14,842
Carrying Amount P27,792 P28,420

Amortization expense, included as part of “General and administrative expenses”

account in the consolidated statements of income, amounted to P10,887, P8,776,
and P6,084 in 2023, 2022 and 2021, respectively (Notes 22 and 23).

The movements in deferred containers - net are as follows:

Note 2023 2022

Cost
Balance at beginning of the year P375,009 P375,009
Retirement (375,009) -
Balance at end of year - 375,009
Accumulated Depreciation
Balance at beginning of year 373,245 347,618
Depreciation 23 1,764 25,627
Retirement (375,009) -
Balance at end of year - 373,245
Carrying Amount P - P1,764

Depreciation of deferred containers, included as part of “General and administrative

expenses” account in the consolidated statements of income, amounted to P1,764,
P25,627 and P32,743 in 2023, 2022 and 2021, respectively (Notes 22 and 23).

- 34 -
 “Others” include advances to suppliers amounting to P47,286 and P35,279 as at
December 31, 2023 and 2022, respectively, and lease receivables from related party
amounting to P275 and P262 as at December 31, 2023 and 2022, respectively
(Note 27).

In 2021, the Group disposed non-financial noncurrent assets and recognized a gain
amounting to P3,528, included as part of “Gain (loss) on disposal/retirement of
noncurrent assets - net” account in the consolidated statements of income.

15. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of:

Note 2023 2022

Trade:
Third parties P4,272,722 P3,728,638
Related parties 27 1,330,005 1,649,641
Non-trade:
Third parties 89,720 90,775
Related parties 27 1,186 1,180
Derivative liabilities 31, 32 476 70,065
31, 32 P5,694,109 P5,540,299

Trade payables are non-interest bearing and are generally on a 30 to 45-day term.

Non-trade payables to third parties consist of accrued vacation and sick leave,
payroll, interest and dividends.

The methods and assumptions used to estimate the fair value of derivative liabilities
are discussed in Note 32.

16. Loans Payable

On November 29, 2023, the Company obtained unsecured short-term

peso-denominated borrowing from local bank for working capital requirements
amounting to P1,000,000. The loan will mature on January 30, 2024 and bear an
interest rate of 6.40%. On January 30, 2024, the loan was fully paid by the Company.

The interest expense on loans payable amounting to P5,511 in 2023 was capitalized
to machinery and equipment (Note 11).

The Group’s exposure to interest rate and liquidity risks are discussed in Note 31.

- 35 -
17. Long-term Debt

Long-term debt consists of:

Note 2023 2022

Fixed interest rate of 4.21% with
maturities up to 2023 P - P165,430
Less current maturities - 165,430
31, 32 P - P -

The amount represents drawdown by the Company on December 28, 2020 from its
three-year credit facility with a local bank amounting to P500,000. The loan is carried
at amortized cost and payable semi-annually commencing in June 2021. The
proceeds were used for general corporate requirements. On December 28, 2023, the
loan was fully paid by the Company.

Unamortized debt issue costs amounted to nil and P1,236 as at December 31, 2023
and 2022, respectively.

The Company is in compliance with the covenants of the debt agreement as at

December 31, 2022 (Note 31).

Changes in liabilities arising from financing activities and amortization of debt issue
cost are as follows:

Note 2023 2022

Balance at beginning of year P165,430 P330,847
Changes from Financing Cash Flows
Capitalized borrowing cost 11 5,243 3,781
Interest expense 25 - 8,626
Interest paid (5,243) (12,407)
Payments of borrowings (166,666) (166,667)
Total Changes from Financing Cash
Flows (166,666) (166,667)
Amortization of debt issue cost 1,236 1,250
Balance at end of year P - P165,430

The movements in debt issue costs are as follows:

Note 2023 2022

Balance at beginning of year P1,236 P2,486
Amortization 25 (1,236) (1,250)
Balance at end of year P - P1,236

Interest expense on existing and settled long-term debt amounted to nil, P8,626 and
P15,219 in 2023, 2022 and 2021, respectively which is included as part of “Interest
expense and other financing charges” account in the consolidated statements of
income (Note 25).

Contractual terms of the Group’s interest-bearing loans and exposure to interest rate
and liquidity risks are discussed in Note 31.

- 36 -
18. Income Taxes

The components of income tax expense are shown below:

2023 2022 2021

Current P2,282,059 P1,519,957 P1,349,811
Deferred 36,961 (8,928) 31,921
P2,319,020 P1,511,029 P1,381,732

The movements of deferred tax assets and liabilities are accounted for as follows:

Recognized
Recognized in Other
Balance at in Profit Comprehensive Balance at
2023 January 1 or Loss Income December 31
Provision for impairment losses P185,016 (P2,182) P - P182,834
Past service costs 73,363 8,024 - 81,387
Leases 36,264 295 - 36,559
Allowance for write-down of inventories 29,873 5,633 - 35,506
Net defined benefit retirement surplus 21,398 (13,070) - 8,328
Various accruals 20,061 1,244 - 21,305
Derivative liabilities - net 16,857 (20,381) - (3,524)
Unrealized foreign exchange loss (gain) -
net 7,028 (15,509) - (8,481)
NOLCO 121 31 - 152
MCIT 65 (23) - 42
Unamortized capitalized borrowing costs (3,660) (1,023) - (4,683)
Equity reserve for retirement plan 138,577 - 74,773 213,350
P524,963 (P36,961) P74,773 P562,775

Recognized
Recognized in Other
Balance at in Profit Comprehensive Balance at
2022 January 1 or Loss Income December 31
Provision for impairment losses P182,475 P2,541 P - P185,016
Past service costs 67,868 5,495 - 73,363
Leases 34,881 1,383 - 36,264
Allowance for write-down of inventories 35,732 (5,859) - 29,873
Net defined benefit retirement surplus 33,968 (12,570) - 21,398
Various accruals 19,064 997 - 20,061
Derivative liabilities - net 8,237 8,620 - 16,857
Unrealized foreign exchange loss (gain) -
net (665) 7,693 - 7,028
NOLCO 246 (125) - 121
MCIT 73 (8) - 65
Unamortized capitalized borrowing costs (4,421) 761 - (3,660)
Equity reserve for retirement plan 122,116 - 16,461 138,577
P499,574 P8,928 P16,461 P524,963

The movements of the net deferred tax assets are accounted for as follows:

2023 2022
Amount charged to profit or loss (P36,961) P8,928
Amount charged to other comprehensive income 74,773 16,461
P37,812 P25,389

- 37 -
As at December 31, 2023, the NOLCO of the Group that can be claimed as
deduction from future taxable income are as follows:

Year Expiry
Incurred NOLCO Expired Utilized Balance Year
2022 P604 P - P - P604 2025
2023 156 - - 156 2026
P760 P - P - P760

As at December 31, 2023, the MCIT of the Group that can be claimed as deduction
from corporate income tax due are as follows:

Year Expiry
Incurred MCIT Expired Utilized Balance Year
2020 P36 (P36) P - P- 2023
2021 24 - - 24 2024
2022 5 - - 5 2025
2023 13 - - 13 2026
P78 (P36) P - P42

The reconciliation between the statutory income tax rate on income before income
tax and the Group’s effective income tax rate is as follows:

2023 2022 2021

Statutory income tax rate 25.00% 25.00% 25.00%
Increase (decrease) in income tax
rate resulting from:
Change in tax rate - - (2.56%)
Interest income subject to final
tax (0.27%) (0.10%) (0.04%)
Others (0.01%) 0.04% 2.45%
Effective income tax rate 24.72% 24.94% 24.85%

Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act

The CREATE Act, which seeks to reduce the corporate income tax rates and to
rationalize the current fiscal incentives by making it time-bound, targeted and
performance-based, was passed into law on March 26, 2021. One of the key
provisions of the CREATE Law is an immediate 5%-10% point cut in the corporate
income tax rate starting July 2020. As a result, the Group has taken up in the books
the effect of the application of reduced corporate income tax rate from 30% to 25%.

- 38 -
 The impact on the consolidated financial statements of the Group based on balances
as at and for the year ended December 31, 2020, which was taken up in 2021 are as
follows:

Increase
(Decrease)
ASSET
Deferred tax asset (P97,323)
(P97,323)
LIABILITY AND EQUITY
Income and other taxes payable (P103,838)
Equity reserves (28,904)
Retained earnings 35,419
(P97,323)
INCOME TAX EXPENSE
Current (P103,838)
Deferred 68,419
(35,419)
NET INCOME P35,419

19. Equity

a. Capital Stock

Common Shares
The Company has 460,000,000 authorized common shares with par value of
P1.00 per share.

The holders of common shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share at meetings of the Company.

The Company has a total of 618 and 622 stockholders as at December 31, 2023
and 2022, respectively.

The number of issued and outstanding shares of common stock are as follows:

2023 2022
Issued shares 345,625,332 345,625,332
Less treasury shares 59,297,491 59,297,491
Outstanding shares 286,327,841 286,327,841

- 39 -
 Preferred Shares
The Company has 100,000,000 authorized preferred shares with par value of
P1.00 per share.

The holders of preferred shares are entitled to participate and receive annual
dividends of P1.50 per share which may be cumulative and payable in arrears on
December 31 of each year. In addition, the holders of preferred shares may
receive a special annual dividend equal to the excess of the aggregate dividends
paid or to be paid to common shareholders over P1.50 per preferred share per
annum. The holders of preferred shares are entitled to vote in the same manner
as the holders of common shares. The said preferred shares were not listed in
the Philippine Stock Exchange.

On December 1, 2020, as approved by the BOD of GSMI, GSMI redeemed all

32,786,885 preferred shares held by SMC at a redemption price of P30.50 per
share, plus all accumulated unpaid cash dividends, on January 4, 2021.

The number of issued and outstanding shares of preferred stock are as follows:

2023 2022
Issued shares 53,437,585 53,437,585
Less treasury shares 53,437,585 53,437,585
Outstanding shares - -

b. Treasury Shares

Treasury shares consist of:

2023 2022 2021

Common 59,297,491 59,297,491 59,297,491
Preferred 53,437,585 53,437,585 53,437,585
112,735,076 112,735,076 112,735,076

Total number of preferred shares held in treasury increased by 32,786,885,

representing the redeemed preferred shares held by SMC in 2021.

There were no movements in the number of shares held in treasury in 2023 and
2022.

c. Unappropriated Retained Earnings

The unappropriated retained earnings of the Company amounting to P3,669,973

in 2023 and 2022, representing the cost of common and preferred shares held in
treasury is restricted for appropriation.

The Company’s adjusted unrestricted retained earnings per SEC Revised

Securities Regulation Code Rule 68 exceeds its paid-in capital as at
December 31, 2023.

d. Appropriated Retained Earnings

On November 10, 2021, the BOD approved the appropriation of P3,512,000

retained earnings of the Company. Of the said amount, P3,000,000 will be used
for expansion of capacity to support increase in demand and P512,000 will be
used for rehabilitation of the Company’s existing facilities until 2027.

- 40 -
 As at December 31, 2020, the remaining appropriation of retained earnings from
previous years amounted to P2,500,000. The purpose of this appropriation is for
capital investment for the expansion of the plant facilities, including but not
limited to equipment rehabilitation, to accommodate new product line and the
increase in volume requirements until 2021. Such appropriation was reversed in
2021 since the project has been completed.

The Company has not made any other appropriation or restriction of its excess
retained earnings as at December 31, 2023 and 2022.

e. Dividend Declaration

The BOD of the Company approved the declaration and payment of the following
cash dividends to common stockholders as follows:

2023

Class of Dividend
Shares Date of Declaration Date of Record Date of Payment Per Share
Common-
regular March 8, 2023 March 24, 2023 April 12, 2023 P0.75
May 9, 2023 May 24, 2023 June 7, 2023 0.75
August 2, 2023 August 16, 2023 September 1, 2023 0.75
November 8, 2023 November 22, 2023 December 7, 2023 0.75
Common-
special March 8, 2023 March 24, 2023 April 12, 2023 1.75
May 9, 2023 May 24, 2023 June 7, 2023 1.75
August 2, 2023 August 16, 2023 September 1, 2023 1.75
November 8, 2023 November 22, 2023 December 7, 2023 1.75

2022

Class of Dividend
Shares Date of Declaration Date of Record Date of Payment Per Share
Common-
regular March 9, 2022 March 25, 2022 April 8, 2022 P0.375
April 27, 2022 May 18, 2022 June 3, 2022 0.375
August 3, 2022 August 19, 2022 September 2, 2022 0.375
November 9, 2022 November 24, 2022 December 9, 2022 0.375
Common-
special March 9, 2022 March 25, 2022 April 8, 2022 1.00
April 27, 2022 May 18, 2022 June 3, 2022 1.00
August 3, 2022 August 19, 2022 September 2, 2022 1.00
November 9, 2022 November 24, 2022 December 9, 2022 1.00

- 41 -
20. Cost of Sales

Cost of sales consist of:

Note 2023 2022 2021

Taxes and licenses P22,990,727 P19,919,823 P17,195,707
Inventories 7 15,454,336 13,967,463 12,638,837
Utilities and supplies 855,522 754,636 567,203
Personnel 24, 29 397,104 357,342 392,313
Depreciation and
amortization 11, 12, 14, 23 371,854 292,698 290,128
Repairs and maintenance 269,847 175,737 265,058
Outside services 253,062 218,730 209,751
Tolling fees 178,735 150,574 154,135
Net provision (reversal) for
write-down of inventories
to net realizable value 7 29,586 (10,325) -
Insurance 3,989 3,353 9,079
Rent 28 2,096 5,006 653
Freight, trucking and
handling 686 5,899 19,457
Others 27,272 21,849 18,544
P40,834,816 P35,862,785 P31,760,865

21. Selling and Marketing Expenses

Selling and marketing expenses consist of:

Note 2023 2022 2021

Advertising and promotions P1,559,420 P1,479,808 P1,381,775
Delivery and marketing 1,149,900 967,880 797,918
Personnel 24, 29 418,885 407,377 500,918
Rent 28 116,639 117,119 98,605
Outside services 95,051 76,152 61,716
Repairs and maintenance 93,813 68,127 41,195
Depreciation and
amortization 11, 12, 23 79,800 92,056 73,909
Utilities and supplies 69,884 73,551 48,856
Travel and transportation 44,060 30,520 21,282
Corporate special program 36,881 26,150 22,255
Research 27,812 40,428 31,682
Insurance 11,970 9,339 12,473
Others 11,851 8,966 8,025
P3,715,966 P3,397,473 P3,100,609

- 42 -
22. General and Administrative Expenses

General and administrative expenses consist of:

Note 2023 2022 2021

Personnel 24, 29 P1,002,892 P956,362 P1,070,330
Outside services 27 346,672 325,830 312,026
Depreciation and
amortization 11, 12, 14, 23 214,409 292,485 315,569
Taxes and licenses 191,585 171,080 211,702
Corporate special program 134,964 94,557 119,505
Repairs and maintenance 130,174 73,671 83,856
Insurance 93,651 84,245 87,536
Utilities and supplies 60,046 50,952 44,608
Rent 28 33,208 14,078 34,677
Travel and transportation 30,499 15,025 10,461
Research 13,242 1,475 5,040
Net provision (reversal) for
impairment losses 6 (292) 10,325 83,126
Others 1,929 3,839 1,309
P2,252,979 P2,093,924 P2,379,745

23. Depreciation and Amortization

Depreciation and amortization consist of:

Note 2023 2022 2021

Property, plant and
equipment 11 P615,441 P564,588 P577,584
Right-of-use assets 12 37,971 78,248 63,195
Intangible assets 14 10,887 8,776 6,084
Deferred containers 14 1,764 25,627 32,743
P666,063 P677,239 P679,606

Depreciation and amortization are distributed as follows:

Note 2023 2022 2021

Cost of sales 20 P371,854 P292,698 P290,128
Selling and marketing
expenses 21 79,800 92,056 73,909
General and administrative
expenses 22 214,409 292,485 315,569
P666,063 P677,239 P679,606

- 43 -
24. Personnel Expenses

Personnel expenses consist of:

Note 2023 2022 2021

Salaries and wages P1,126,363 P1,052,744 P987,510
Retirement costs 29 94,998 98,437 469,921
Other employee benefits 597,520 569,900 506,130
P1,818,881 P1,721,081 P1,963,561

Personnel expenses are distributed as follows:

Note 2023 2022 2021

Cost of sales 20 P397,104 P357,342 P392,313
Selling and marketing
expenses 21 418,885 407,377 500,918
General and administrative
expenses 22 1,002,892 956,362 1,070,330
P1,818,881 P1,721,081 P1,963,561

25. Interest Expense and Other Financing Charges

Interest expense and other financing charges consist of:

Note 2023 2022 2021

Interest on defined benefit
obligation - net 29 P40,833 P27,872 P15,158
Interest on loans payable 16 5,511 - -
Interest on long-term debt 17 5,243 12,407 19,522
Interest on lease liabilities 28 5,218 9,259 11,231
Capitalized borrowing costs 11 (10,754) (3,781) (4,393)
Other financing charges 17 14,990 7,022 6,692
P61,041 P52,779 P48,210

Amortization of debt issue costs included in “Other financing charges” amounted to

P1,236 in 2023 and P1,250 in 2022 and 2021 (Note 17).

26. Other Income (Charges) - Net

Other income (charges) consist of:

Note 2023 2022 2021

Income from transfer of rights P1,530,295 P - P -
Tolling fees - net 327,089 200,491 265,526
Sale of scrap materials 47,357 48,360 42,958
Rent income 28 172 172 172
Net foreign exchange gain
(loss) 31 31,568 (28,131) 2,659
Net derivative gain (loss) 32 2,000 (241,801) (96,759)
Others 6, 12 99,501 15,878 57,366
P2,037,982 (P5,031) P271,922

- 44 -
 The Group recognized income from transfer of intellectual property rights on Don
Papa to a third party amounting to P1,530,295 in 2023.

Others consists of gain on lease modifications, insurance claims and collection of

miscellaneous receivables previously provided with allowance and refunds from
electricity service provider.

27. Related Party Disclosures

The Group, certain subsidiaries and their shareholders, associates and joint ventures
purchase products and services from one another in the normal course of business.
The Group requires approval of the BOD for related party transactions amounting to
at least ten percent (10%) of the total consolidated assets based on its latest audited
financial statements.

Amounts owed by/owed to related parties are collectible/will be settled in cash. An

assessment is undertaken at each financial year by examining the financial position
of the related party and the market in which the related party operates.

The following are the transactions with related parties and the outstanding balances
as at December 31:
Revenue Purchases Amounts Amounts
from from Owed by Owed to
Related Related Related Related
Year Parties Parties Parties Parties Terms Conditions
Ultimate Parent 2023 P - P - P5 P - On demand; Unsecured;
Company 2022 - - 5 - non-interest no impairment
2021 - - 5 - bearing
Intermediate 2023 12,201 485,309 8,690 28,457 On demand; Unsecured;
Parent Company 2022 48,370 250,306 5,298 14,278 non-interest no impairment
2021 22,851 254,215 13,801 33,148 Bearing
Parent Company 2023 150 - 9 - On demand; Unsecured;
2022 150 - 7 - non-interest no impairment
2021 170 - 7 - Bearing
Under Common 2023 301,252 8,790,094 140,876 1,348,616 On demand; Unsecured;
Control 2022 326,585 6,600,721 111,069 1,695,910 non-interest with impairment
2021 315,450 6,501,815 65,745 1,010,546 bearing
Joint Venture 2023 39,740 - - 1,934 On demand; Unsecured;
2022 - 201,821 - 1,951 Interest with impairment
2021 - 335,495 - 1,640 bearing
Associate of the 2023 117,960 - 1,500,040 - 5 to 7 years Unsecured;
Intermediate Interest bearing no impairment
Parent Company 2022 363 - 1,500,006 - On demand; Unsecured;
2021 608 - 83 - non-interest no impairment
bearing
Others 2023 521 - 1,184 - On demand; Unsecured;
2022 1,714 - 269 - non-interest no impairment
2021 1,624 - 1,522 - bearing
Total 2023 P471,824 P9,275,403 P1,650,804 P1,379,007

Total 2022 P377,182 P7,052,848 P1,616,654 P1,712,139

Total 2021 P340,703 P7,091,525 P81,163 P1,045,334

a. The Group, in the normal course of business, has significant transactions with
related parties pertaining to purchases of containers and other packaging
materials and sale of liquor and by-products. The sales to and purchases from
related parties are made at normal market prices. There have been no
guarantees provided or received for any amounts owed by and owed to related
parties.

- 45 -
b. The Group has entered into various lease agreements with related parties as a
lessor and lessee (Notes 12 and 28). Right-of-use assets and lease liabilities to
related parties amounted to P42,238 and P47,816, respectively as at
December 31, 2023 and P51,954 and P61,318, respectively as at December 31,
2022. Rent expense to related parties for short-term leases and leases of low-
value assets recognized in the consolidated statements of income amounted to
P41,254, P41,892 and P35,455 in 2023, 2022 and 2021, respectively. Amounts
owed to related parties pertaining to these leases amounted to P49,002 and
P62,498 as at December 31, 2023 and 2022, respectively, which includes
deferred rent income amounted to P1,186 and P1,180 as at December 31, 2023
and 2022, respectively. Amounts owed by related parties include lease
receivables presented under “Other noncurrent assets - net” account in the
statements of financial position which amounted to P275 and P262 as at
December 31, 2023 and 2022, respectively (Note 14).

c. Management fees paid to SMC amounting to P203,939, P202,654 and P192,154

in 2023, 2022 and 2021, respectively, are included in “Outside services” account
under “General and administrative expenses” (Note 22).

d. TSML executed various promissory notes in favor of the Company. The details
of which are as follows:

o Principal sum of THB250,000 together with interest of 5.50% per annum,

which interest shall accrue on March 13, 2014.

o Principal sum of THB50,000 together with interest of 5.0% per annum, which
interest shall accrue on September 2, 2013.

o Principal sum of THB25,000 together with interest of 5.0% per annum, which
interest shall accrue on June 14, 2013.

o Principal sum of THB75,000 together with interest of 3.0% per annum, which
interest shall accrue on September 6, 2011.

o Principal sum of THB75,000 together with interest of 3.0% per annum, which
interest shall accrue on April 7, 2011.

The principal sum is due and payable in full on demand of the Company and the
stipulated interest shall be payable every three months.

The receivables from TSML are included as part of “Non-trade receivables from
related parties” under “Trade and other receivables - net” account in the
consolidated statements of financial position (Note 6). Allowance for impairment
losses pertaining to these non-trade receivables amounted to P540,216 as at
December 31, 2023 and 2022.

The Company received interest amounting to P39,740 and nil in 2023 and 2022,
respectively.

e. Allowance for impairment losses pertaining to non-trade receivables of other

related parties amounted to P132,203 as at December 31, 2023 and 2022
(Note 6).

f. In 2022, the Group made investments in debt instruments at amortized cost to

Bank interest rate of 6.90% and maturities up to seven years. Interest income
earned from investments in debt instruments at amortized cost amounted to
P117,564 and P5,331 in 2023 and 2022, respectively (Notes 10, 31 and 32).

- 46 -
 g. The compensation of key management personnel of the Group, by benefit type,
follows:

Note 2023 2022 2021

Short-term employee
benefits P69,763 P63,707 P53,668
Retirement costs 29 16,045 14,650 47,823
P85,808 P78,357 P101,491

28. Leasing Agreements

Group as Lessee

The Group has the following lease agreements:

a. The Company leases various warehouse facilities and office spaces under
operating leases. These leases typically run for a period of 2 to 15 years. The
Company has the option to renew the lease after the expiration of the lease term.

b. EPSBPI has various lease agreements with related parties for the lease of
parcels of land located in Ligao City, Albay and Cauayan, Isabela for a period
ranging from 3 to 10 years and renewable upon mutual agreement of both
parties. Rental fees are payable monthly and subject to 5% escalation every
year. On December 18, 2019, EPSBPI has expressed its interest to acquire the
leased land in Cauayan, Isabela in which a 20% down payment was paid in
January 2020. The remaining balance shall be paid by EPSBPI in 12 equal
monthly amortizations which was fully paid as of January 31, 2021. On January
2021, EPSBPI has acquired the previously leased land in Ligao City, Albay in
which 20% down payment was paid and the remaining balance shall be paid in
ten (10) equal monthly amortizations which was fully paid as of December 31,
2021. The Group derecognized the carrying amount of right-of-use assets
following the acquisition of these parcels of land from a related party in which it
recognized gain on termination of lease amounted to P6,313 in 2021 which is
included in “Others” in “Other income (charges) - net” account in the consolidated
statements of income (Note 26).

The future minimum lease payments under non-cancellable leases are as follows:

December 31, 2023

Future Present Value
Minimum of Minimum
Lease Lease
Payments Interest Payments
Within one year P29,039 P3,243 P25,796
After one year but not more
than five years 26,799 5,087 21,712
More than five years 10,264 1,374 8,890
P66,102 P9,704 P56,398

- 47 -
 December 31, 2022
Future Present Value
Minimum of Minimum
Lease Lease
Payments Interest Payments
Within one year P38,430 P5,463 P32,967
After one year but not more
than five years 58,020 11,693 46,327
More than five years 34,636 5,188 29,448
P131,086 P22,344 P108,742

The Group recognized interest expense related to these leases amounting to

P5,218, P9,259 and P11,231 in 2023, 2022 and 2021, respectively (Note 25).

Changes in lease liabilities arising from financing activities are as follows:

2023 2022
Balance at beginning of year P108,742 P191,107
Changes from Financing Activities
Interest expense 5,218 9,259
Payments of lease liabilities (41,820) (80,670)
Total Changes from Financing Activities (36,602) (71,411)
Other Changes (15,742) (10,954)
Balance at end of year P56,398 P108,742

The Group also has certain leases of property and equipment with lease terms of
12 months or less and leases of equipment with low value. The Group has elected
not to recognize right-of-use assets and lease liabilities for these leases.

The rent expenses relating to short-term leases and leases of low-value assets
amounted to P151,943, P136,203 and P133,935 in 2023, 2022 and 2021,
respectively (Notes 20, 21 and 22).

Rent expense is recognized in the following line items in the consolidated statements
of income:

Note 2023 2022 2021

Cost of sales 20 P2,096 P5,006 P653
Selling and marketing expenses 21 116,639 117,119 98,605
General and administrative
expenses 22 33,208 14,078 34,677
P151,943 P136,203 P133,935

The Group had total cash outflows for above leases amounted to P193,763 and
P216,873 in 2023 and 2022, respectively.

Group as Lessor
DBI has a lease agreement with a related party for the lease of land in
Taloc, Bago City, Negros Occidental for a period of fifteen years from
September 4, 2017 to September 3, 2032.

- 48 -
 The future minimum lease receipts under non-cancellable operating leases are as
follows:

2023 2022
Within one year P168 P160
After one year but not more than five years 760 723
After five years 757 961
P1,685 P1,844

Rent income recognized in the consolidated statements of income amounted to P172

in 2023, 2022 and 2021 (Note 26).

29. Retirement Plans

The Company, DBI and EPSBPI have funded, noncontributory, defined benefit
retirement plans (collectively, the Retirement Plans) covering all of their permanent
employees. The Retirement Plans of the Group pay out benefits based on final pay.
In 2021, the Group made amendments to its Retirement Plan in terms of the
percentage of final pay based on the adjusted credited years of service.
Contributions and costs are determined in accordance with the actuarial studies
made for the Retirement Plans. Annual cost is determined using the projected unit
credit method. The Group’s latest actuarial valuation date is December 31, 2023.
Valuations are obtained on a periodic basis.

The Retirement Plans of the Company, DBI and EPSBPI are registered with the
Bureau of Internal Revenue (BIR) as tax-qualified plans under Republic Act No.
4917, as amended. The control and administration of the Group’s Retirement Plans
are vested in the Board of Trustees of each Retirement Plan. Two of the members of
the Board of Trustees of the Group’s Retirement Plan who exercises voting rights
over the shares and approve material transactions are an employee/officer of the
Group. The Retirement Plans’ accounting and administrative functions are
undertaken by the Retirement Funds Office of SMC.

The following table shows a reconciliation of the net defined benefit retirement
liability and its components:

Present Value of
Fair Value Defined Benefit Net Defined Benefit
of Plan Assets Retirement Obligation Retirement Liability
2023 2022 2023 2022 2023 2022
Balance at
beginning of year P1,177,102 P1,142,406 (P1,812,853) (P1,764,326) (P635,751) (P621,920)
Recognized in Profit
or Loss
Current service costs - - (94,998) (98,437) (94,998) (98,437)
Interest expense - - (130,489) (86,996) (130,489) (86,996)
Interest income 89,656 59,124 - - 89,656 59,124
89,656 59,124 (225,487) (185,433) (135,831) (126,309)
Forward

- 49 -
 Present Value of
Fair Value Defined Benefit Net Defined Benefit
of Plan Assets Retirement Obligation Retirement Liability
2023 2022 2023 2022 2023 2022
Recognized in Other
Comprehensive
Income
Remeasurements
Actuarial gains
(losses) arising
from:
Experience
adjustments P - P - (P143,947) (P94,031) (P143,947) (P94,031)
Changes in financial
assumptions - - (95,321) 170,020 (95,321) 170,020
Changes in
demographic
assumptions - - (42,708) (4,107) (42,708) (4,107)
Return on plan
assets excluding
interest income (17,118) (137,727) - - (17,118) (137,727)
(17,118) (137,727) (281,976) 71,882 (299,094) (65,845)
Others
Contributions 189,785 178,323 - - 189,785 178,323
Transfer to/ from
other plans - (1,988) - 1,988 - -
Benefits paid (52,821) (63,036) 52,821 63,036 - -
136,964 113,299 52,821 65,024 189,785 178,323
Balance at end
of year P1,386,604 P1,177,102 (P2,267,495) (P1,812,853) (P880,891) (P635,751)

The Group’s annual contribution to the Retirement Plans consists of payments

covering the current service cost plus amortization of unfunded past service liability.

Retirement costs recognized in the consolidated statements of income by GSMI

amounted to P120,838, P111,545 and P420,189 in 2023, 2022 and 2021,
respectively, while those charged by DBI amounted to P12,025, P11,555 and
P57,315 in 2023, 2022 and 2021, respectively, and for EPSBPI amounted to P2,968,
P3,209 and P7,575 in 2023, 2022 and 2021, respectively (Note 24).

The retirement costs are recognized in the following line items:

Note 2023 2022 2021

Cost of sales 20 20,275 P21,575 82,183
Selling and marketing
expenses 21 20,156 21,041 94,617
General and administrative
expenses 22 54,567 55,821 293,121
Interest expense and other
financing charges 25 40,833 27,872 15,158
24 P135,831 P126,309 P485,079

Retirement liabilities recognized by GSMI amounted to P807,908 and P576,389 as at

December 31, 2023 and 2022, respectively, while those recognized by DBI
amounted to P60,980 and P49,203 as at December 31, 2023 and 2022, respectively,
and by EPSBPI amounted to P12,003 and P10,159 as at December 31, 2023 and
2022, respectively.

The carrying amounts of the Group’s retirement plan approximate fair values as at
December 31, 2023 and 2022.

- 50 -
The Group’s plan assets consist of the following:

In Percentages
2023 2022
Investments in marketable securities 81.99 77.24
Investments in pooled funds:
Fixed income portfolio 7.96 13.34
Others 10.05 9.42
100.00 100.00

Investments in Marketable Securities

The Group’s Retirement Plans recognized gain (loss) on the investment in
marketable securities of SMC and its subsidiaries amounting to P25,439 and
(P122,562) in 2023 and 2022, respectively.

Dividend income from the investment in marketable securities amounted to P21,918

and P17,065 in 2023 and 2022, respectively.

Interest income from the investment in marketable securities amounted to P26,699

and P18,169 in 2023 and 2022, respectively.

Investments in Pooled Funds

Investments in pooled funds were established mainly to put together a portion of the
funds of the Retirement Plans of the Group to be able to draw, negotiate and obtain
the best terms and financial deals for the investments resulting from big volume
transactions.

The Board of Trustees approved the percentage of asset to be allocated to fixed

income instruments and equities. The Retirement Plans have set maximum exposure
limits for each type of permissible investments in marketable securities and deposit
instruments. The Board of Trustees may, from time to time, in the exercise of its
reasonable discretion and taking into account existing investment opportunities,
review and revise such allocation and limits.

No investments in pooled funds in stock trading portfolio were investments in shares

of stock of SMC and its subsidiaries in 2023 and 2022.

Approximately 12.30% and 12.44% of the Retirement Plans’ investments in pooled

funds in fixed income portfolio include investments in shares of stock of SMC and its
subsidiaries as at December 31, 2023 and 2022, respectively.

Others
Others include the Retirement Plans’ cash and cash equivalents and receivables
which earn interests.

The Group is not required to pre-fund the future defined benefits payable under the
Retirement Plans before they become due. For this reason, the amount and timing
of contributions to the Retirement Plans are at the Group’s discretion. However, in
the event a benefit claim arises and the Retirement Plans are insufficient to pay the
claim, the shortfall will then be due and payable from the Group to the Retirement
Plans.

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The Board of Trustees reviews the level of funding required for the retirement fund.
Such a review includes the asset-liability matching (ALM) strategy and investment
risk management policy. The Group’s ALM objective is to match maturities of the
plan assets to the defined benefit retirement obligation as they fall due. The Group
monitors how the duration and expected yield of the investments are matching the
expected cash outflows arising from the retirement benefit obligation. The Group is
expected to contribute P181,968 to the Retirement Plans in 2024.

The Retirement Plans expose the Group to actuarial risks such as investment risk,
interest rate risk, longevity risk and salary risk as follows:

Investment and Interest Rate Risks. The present value of the defined benefit
retirement obligation is calculated using a discount rate determined by reference to
market yields to government bonds. Generally, a decrease in the interest rate of a
reference government bond will increase the defined benefit retirement obligation.
However, this will be partially offset by an increase in the return on the Retirement
Plans’ investments and if the return on plan asset falls below this rate, it will create a
deficit in the Retirement Plans. Due to the long-term nature of the defined benefit
retirement obligation, a level of continuing equity investments is an appropriate
element of the long-term strategy of the Group to manage the Retirement Plans
efficiently.

Longevity and Salary Risks. The present value of the defined benefit retirement
obligation is calculated by reference to the best estimates of: (1) the mortality of the
plan participants, and (2) to the future salaries of the plan participants. Consequently,
increases in the life expectancy and salary of the plan participants will result in an
increase in the defined benefit retirement obligation.

The overall expected rate of return is determined based on historical performance of

the investments.

The principal actuarial assumptions used to determine retirement benefits are as

follows:

In Percentages
2023 2022
Discount rate 6.54 - 6.58 7.18 - 7.20
Salary increase rate 5.00 5.00

Assumptions for mortality and disability rates are based on published statistics and
mortality and disability tables.

The weighted average duration of defined benefit retirement obligation is 10.93 and
9.97 years as at December 31, 2023 and 2022, respectively.

As at December 31, 2023 and 2022, the reasonably possible changes to one of the
relevant actuarial assumptions, while holding all other assumptions constant, would
have affected the defined benefit retirement obligation by the amounts below,
respectively:

Defined Benefit Retirement Obligation

2023 2022
1 Percent 1 Percent 1 Percent 1 Percent
Increase Decrease Increase Decrease
Discount rate (P147,554) P169,553 (P116,301) P132,699
Salary increase rate 170,527 (150,951) 134,304 (119,647)

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 In 2023 and 2022, the Group’s transaction relating to the Retirement Plans pertain to
the contributions for the period. The Group has no outstanding payables with the
plan assets as at December 31, 2023 and 2022.

30. Basic and Diluted Earnings Per Share

Basic and Diluted Earnings Per Share is computed as follows:

2023 2022 2021

Net income P7,045,867 P4,547,222 P4,178,939
Less: Dividends on preferred shares - - 546
Net income available to common
shares (a) P7,045,867 P4,547,222 P4,178,393
Weighted average number of
common shares outstanding
(in thousands) - basic and diluted
(b) 286,328 286,328 286,328
Basic and Diluted Earnings Per
Share (a/b) P24.61 P15.88 P14.59

31. Financial Risk and Capital Management, Objectives and Policies

Objectives and Policies

The Group has significant exposure to the following financial risks primarily from its
use of financial instruments:

▪ Market Risk (Interest Rate Risk and Foreign Currency Risk)

▪ Liquidity Risk
▪ Credit Risk

This note presents information about the exposure to each of the foregoing risks, the
objectives, policies and processes for measuring and managing these risks, and for
management of capital.

The principal non-trade related financial instruments of the Group include cash and
cash equivalents, investment in debt instruments at amortized cost, loans payable,
long-term debt and derivative instruments. These financial instruments, except
derivative instruments, are used mainly for working capital management purposes.
The trade-related financial assets and financial liabilities of the Group such as trade
and other receivables and deposits, accounts payable and accrued expenses and
lease liabilities arise directly from and are used to facilitate its daily operations.

The accounting policies in relation to derivatives are set out in Note 3 to the
consolidated financial statements.

The BOD oversees that a sound enterprise risk management framework is in place
to effectively identify, monitor, assess and manage key business risks, which will
guide the BOD in identifying units/business lines and enterprise-level risk exposures,
as well as the effectiveness of risk management strategies.

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The risk management policies of the Group are established to identify and analyze
the risks faced by the Group, to set appropriate risk limits and controls, and to
monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and activities. The Group,
through its training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand
their roles and obligations.

The BOD constituted the Audit and Risk Oversight Committee (the “Committee”) to,
among others, enhance its oversight capability over the Group’s financial reporting,
internal control system, internal and external audit processes, and compliance with
applicable laws and regulations; and be responsible for the oversight of the Group’s
enterprise risk management system to ensure its functionality and effectiveness.

The Committee also has the responsibility to assist the BOD in ensuring that there is
an effective and integrated risk management process in place to guide the BOD in
arriving at well-informed decisions, having taken into consideration risks related to
significant business activities, plans and opportunities. In relation to this, the
Committee has the following duties and responsibilities, among others: a.) develop a
formal enterprise risk management plan which contains common language or
register of risks, well-defined risk management goals, objectives and oversight,
uniform processes of assessing risks and developing strategies to manage prioritized
risks, designing and implementing risk management strategies, and continuing
assessments to improve risk strategies, processes and measures; b.) oversee the
implementation of the enterprise risk management plan; c.) evaluate the risk
management plan to ensure its continued relevance, comprehensiveness and
effectiveness; d.) advise the BOD on its risk appetite levels and risk tolerance limits;
and e.) review at least annually the Group’s risk appetite levels and risk tolerance
limits based on changes and developments in the business, the regulatory
framework, the external economic and business environment, and when major
events occur that are considered to have major impacts on the Group.

The Committee is assisted in its oversight role by Internal Audit. Internal Audit
undertakes both regular and ad hoc reviews of risk management controls and
procedures, the results of which are reported to the Committee.

Interest Rate Risk

Interest rate risk is the risk that future cash flows from a financial instrument
(cash flow interest rate risk) or its fair value (fair value interest rate risk) will fluctuate
because of changes in market interest rates. The Group’s exposure to changes in
interest rates relates to borrowings and investment securities. Investment securities
acquired or borrowings issued at fixed rates expose the Group to fair value interest
rate risk. On the other hand, investment securities acquired or borrowings issued at
variable rates expose the Group to cash flow interest rate risk.

The Group manages its interest cost by using an optimal combination of fixed and
variable rate debt instruments. The management is responsible for monitoring the
prevailing market-based interest rate and ensures that the mark-up rates charged on
its borrowings are optimal and benchmarked against the rates charged by other
creditor banks.

In managing interest rate risk, the Group aims to reduce the impact of short-term
fluctuations on the earnings. Over the longer term, however, permanent changes in
interest rates would have an impact on profit or loss.

- 54 -
The management of interest rate risk is also supplemented by monitoring the
sensitivity of the Group’s financial instruments to various standard and non-standard
interest rate scenarios.

Interest Rate Risk Table

The terms and maturity profile of the interest-bearing financial instruments, together
with its gross amounts, are shown in the following tables:

1-2 >2 - 3 >3 - 4

December 31, 2023 <1 Year Years Years Years >4 - 7 Years
Financial Asset
Investment in debt instruments at
amortized cost P - P - P - P - P1,500,000
Interest rate - - - - 6.90%
Financial Liability
Loans payable 1,000,000 - - - -
Interest rate 6.40% - - - -

1-2 >2 - 3 >3 - 4

December 31, 2022 <1 Year Years Years Years >4 - 7 Years
Financial Asset
Investment in debt instruments at
amortized cost P - P - P - P - P1,500,000
Interest rate - - - - 6.90%
Financial Liability
Loans payable 166,666 - - - -
Interest rate 4.21% - - - -

Foreign Currency Risk

The functional currency is the Philippine peso, which is the denomination of the bulk
of the Group’s revenues. The exposure to foreign currency risk results from
significant movements in foreign exchange rates that adversely affect the foreign
currency-denominated transactions of the Group. The risk management objective
with respect to foreign currency risk is to reduce or eliminate earnings volatility and
any adverse impact on equity.

Information on the Group’s foreign currency-denominated monetary assets and their

Philippine peso equivalents is as follows:

December 31, 2023 December 31, 2022

US Peso US Peso
Dollar Equivalent Dollar Equivalent
Assets
Cash and cash equivalents $1,677 P92,870 $23,370 P1,302,982
Trade and other receivables 1,165 64,493 687 38,311
Liabilities
Accounts payable and
accrued expenses (2,113) (116,977) (458) (25,557)
Foreign currency-
denominated monetary
assets and liabilities $729 P40,386 $23,599 P1,315,736

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The Group reported net gain (losses) on foreign exchange amounting to P31,568,
(P28,131) and P2,659 in 2023, 2022 and 2021, respectively, with the translation of
its foreign currency-denominated assets (Note 26). These mainly resulted from the
movements of the Philippine peso against the US dollar as shown in the following
table:

US Dollar to Philippine Peso

December 31, 2023 55.370
December 31, 2022 55.755
December 31, 2021 50.999

The management of foreign currency risk is also supplemented by monitoring the

sensitivity of the Group’s financial instruments to various foreign currency exchange
rate scenarios.

The following table demonstrates the sensitivity to a reasonably possible change in

the US dollar exchange rate, with all other variables held constant, of the Group’s
profit before tax (due to changes in the fair value of monetary assets and liabilities)
and the Group’s equity:

P1 Decrease in the P1 Increase in the

US Dollar Exchange Rate US Dollar Exchange Rate
Effect on Effect on
Income before Effect on Income before Effect on
December 31, 2023 Income Tax Equity Income Tax Equity
Cash and cash
equivalents (P1,677) (P1,258) P1,677 P1,258
Trade and other
receivables (1,165) (873) 1,165 873
Accounts payable and
accrued expenses 2,113 1,584 (2,113) (1,584)
(P729) (P547) P729 P547

P1 Decrease in the P1 Increase in the

US Dollar Exchange Rate US Dollar Exchange Rate
Effect on Effect on
Income before Effect on Income before Effect on
December 31, 2022 Income Tax Equity Income Tax Equity
Cash and cash
equivalents (P23,370) (P17,527) P23,370 P17,527
Trade and other
receivables (687) (515) 687 515
Accounts payable and
accrued expenses 458 343 (458) (343)
(P23,599) (P17,699) P23,599 P17,699

Exposures to foreign exchange rates vary during the year depending on the volume
of overseas transactions. Nonetheless, the analysis above is considered to be
representative of the Group’s foreign currency risk.

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Liquidity Risk
Liquidity risk pertains to the risk that the Group will encounter difficulty to meet
payment obligations when they fall due under normal and stress circumstances.

The Group’s objectives to manage its liquidity risk are as follows: a) to ensure that
adequate funding is available at all times; b) to meet commitments as they arise
without incurring unnecessary costs; c) to be able to access funding when needed at
the least possible cost; and d) to maintain an adequate time spread of refinancing
maturities.

The Group constantly monitors and manages its liquidity position, liquidity gaps and
surplus on a daily basis. A committed stand-by credit facility from several local banks
is also available to ensure availability of funds when necessary.

The table below summarizes the maturity profile of the Group’s financial assets and
financial liabilities based on contractual undiscounted receipts and payments used
for liquidity management.
Carrying Contractual 1 Year > 1 Year - > 2 Years - Over
December 31, 2023 Amount Cash Flow or Less 2 Years 5 Years 5 Years
Financial Assets
Cash and cash equivalents P9,881,018 P9,881,018 P9,881,018 P - P - P -
Trade and other receivables -
net* 1,518,341 1,518,341 1,518,341 - - -
Derivative assets (included
under “Prepaid expenses and
other current assets” account) 14,572 14,572 14,572 - - -
Investment in debt instruments at
amortized cost 1,500,000 1,904,706 10,961 87,687 263,060 1,542,998
Security deposit (included
under “Trade and other
receivables” and “Other
noncurrent assets - net”
accounts) 503 503 10 493 - -
Financial Liabilities
Accounts payable and accrued
expenses (excluding
derivative liabilities, deferred
rent income** and payable to
a government agency***) 5,688,925 5,688,925 5,688,925 - - -
Derivative liabilities (included
under “Accounts payable and
accrued expenses” account) 476 476 476 - - -
Loans payable 1,000,000 1,005,156 1,005,156 - - -
Long-term debt (including
current maturities) - - - - - -
Lease liabilities (including
current portion) 56,398 66,102 28,724 14,097 13,017 10,264
* Excluding tax certificate receivables and security deposit amounted to P59,485 and P10, respectively as at December 31, 2023 and
2022 (Note 6).
**Deferred rent income amounted to P1,186 as at December 31, 2023 (Notes 15 and 27).
***Payable to a government agency amounted to P3,522 as at December 31, 2023 (Note 15).

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 Carrying Contractual 1 Year > 1 Year - > 2 Years - Over
December 31, 2022 Amount Cash Flow or Less 2 Years 5 Years 5 Years
Financial Assets
Cash and cash equivalents P5,457,277 P5,457,277 P5,457,277 P - P - P -
Trade and other receivables -
net* 1,173,442 1,173,442 1,173,442 - - -
Derivative assets (included
under “Prepaid expenses and
other current assets” account) 2,638 2,638 2,638 - - -
Investment in debt instruments at
amortized cost 1,500,000 1,992,393 87,687 87,687 263,060 1,553,959
Security deposit (included
under “Trade and other
receivables” and “Other
noncurrent assets - net”
accounts) 503 503 10 493 - -
Financial Liabilities
Accounts payable and accrued
expenses (excluding
derivative liabilities, deferred
rent income** and payable to
a government agency***) 5,467,186 5,467,186 5,467,186 - - -
Derivative liabilities (included
under “Accounts payable and
accrued expenses” account) 70,065 70,065 70,065 - - -
Long-term debt (including
current maturities) 165,430 171,930 171,930 - - -
Lease liabilities (including
current portion) 108,742 131,085 38,430 29,859 28,160 34,636
*Excluding tax certificate receivables and security deposit amounted to P62,327 and P10, respectively as at December 31, 2022 (Note 6).
**Deferred rent income amounted to P1,180 as at December 31, 2022 (Notes 15 and 27).
***Payable to a government agency amounted to P1,868 as at December 31, 2022 (Note 15).

Credit Risk
Credit risk is the risk of financial loss to the Group when a customer or counterparty
to a financial instrument fails to meet its contractual obligations and arises principally
from trade and other receivables. The Group manages its credit risk mainly through
the application of transaction limits and close risk monitoring. It is the Group’s policy
to enter into transactions with a wide diversity of creditworthy counterparties to
mitigate any significant concentration of credit risk.

The Group has regular internal control reviews to monitor the granting of credit and
management of credit exposures.

Trade and Other Receivables

The exposure to credit risk is influenced mainly by the individual characteristics of
each customer. However, management also considers the factors that may influence
the credit risk of the Group’s customer base.

The Group has established a credit policy under which each new customer is
analyzed individually for creditworthiness before the standard payment and delivery
terms and conditions are offered. The Group ensures that sales on account are
made to customers with appropriate credit history. The Group has detailed credit
criteria and several layers of credit approval requirements before engaging a
particular customer or counterparty. The review includes external ratings, when
available, and in some cases bank references. Purchase limits are established for
each customer and are reviewed on a regular basis. Customers that fail to meet the
benchmark creditworthiness may transact with the Group only on a prepayment
basis.

Investment in Debt Instruments

The Group limits its exposure to credit risk by investing only in liquid debt
instruments with counterparties that have high credit ratings. The Group monitors
changes in credit risk by tracking published external credit ratings. To determine
whether published ratings remain up to date and to assess whether there has been a
significant increase in credit risk at the reporting date that has not been reflected in
published ratings, the Group supplements this by reviewing changes in bond yields.

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Credit Quality
In monitoring and controlling credit extended to counterparty, the Group adopts a
comprehensive credit rating system based on financial and non-financial
assessments of its customers. Financial factors being considered comprised the
financial standing of the customer while the non-financial aspects include but are not
limited to the assessment of the customer’s nature of business, management profile,
industry background, payment habit and both present and potential business
dealings with the Group.

The credit quality of financial assets is being managed by the Group using internal
credit ratings. Credit quality of the financial assets were determined as follows:

▪ High grade includes deposits or placements to reputable banks and companies

with good credit standing. High grade financial assets include cash and cash
equivalents and derivative assets.

▪ Standard grade pertains to receivables from counterparties with satisfactory

financial capability and credit standing based on historical data, current
conditions and the Group's view of forward-looking information over the expected
lives of the receivables. Standard grade financial assets include trade and other
receivables and deposits.

Receivables with high probability of delinquency and default were fully provided with
allowance for impairment losses.

Financial information on the Group’s maximum exposure to credit risk, without

considering the effects of collaterals and other risk mitigation techniques, is
presented below.

Note 2023 2022

Cash and cash equivalents* 5 P9,878,439 P5,455,812
Trade and other receivables - net** 6 1,518,341 1,173,442
Investment in debt instruments at
amortized cost 10 1,500,000 1,500,000
Derivative assets 8 14,572 2,638
Security deposit 14 503 503
P12,911,855 P8,132,395
*Excluding cash on hand amounted to P2,579 and P1,465 as at December 31, 2023 and 2022, respectively.
** Excluding tax certificate receivables amounted to P59,485 and P62,327 as at December 31, 2023 and 2022,
respectively and security deposit amounted to P10 as at December 31, 2023 and 2022 (Note 6).

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The table below presents the Group’s exposure to credit risk and shows the credit
quality of the financial assets by indicating whether the financial assets are subjected
to 12-month ECL or lifetime ECL. Assets that are credit-impaired are separately
presented.

December 31, 2023

Financial Assets at Amortized Cost
Lifetime Lifetime
ECL - ECL - Financial
12-month not credit credit Assets
ECL impaired impaired at FVPL Total
Cash and cash
equivalents (excluding
cash on hand)* P9,878,439 P - P - P - P9,878,439
Trade and other
receivables** - 1,518,341 682,567 - 2,200,908
Derivative assets - - - 14,572 14,572
Investment in debt
instruments at amortized
cost 1,500,000 - - - 1,500,000
Security deposit - 503 - - 503
* Cash on hand amounted to P2,579 as at December 31, 2023 (Note 5).
**Excluding tax certificate receivables and security deposit amounted to P59,485 and P10, respectively as at
December 31, 2023 (Note 6).

December 31, 2022

Financial Assets at Amortized Cost
Lifetime Lifetime
ECL - ECL - Financial
12-month not credit credit Assets
ECL impaired impaired at FVPL Total
Cash and cash
equivalents (excluding
cash on hand)* P5,455,812 P - P - P - P5,455,812
Trade and other
receivables** - 1,173,442 691,293 - 1,864,735
Derivative assets - - - 2,638 2,638
Investment in debt
instruments at amortized
cost 1,500,000 - - - 1,500,000
Security deposit - 503 - - 503
* Cash on hand amounted to P1,465 as at December 31 2022 (Note 5).
**Excluding tax certificate receivables and security deposit amounted to P62,327 and P10, respectively as at
December 31, 2022 (Note 6).

The aging of receivables is as follows:

Amounts
Owed by
Related
December 31, 2023 Trade Non-trade Parties Total
Current P1,210,794 P115,186 P63,515 P1,389,495
Past due:
1 - 30 days 79,973 606 7,786 88,365
31 - 60 days 2,931 - 16,763 19,694
61 - 90 days 936 294 1,769 2,999
Over 90 days 4,224 22,862 673,269 700,355
P1,298,858 P138,948 P763,102 P2,200,908

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 Amounts
Owed by
Related
December 31, 2022 Trade Non-trade Parties Total
Current P880,900 P58,536 P60,088 P999,524
Past due:
1 - 30 days 79,113 109 14,585 93,807
31 - 60 days 2,506 190 226 2,922
61 - 90 days 2,417 188 157 2,762
Over 90 days 8,505 97,959 659,256 765,720
P973,441 P156,982 P734,312 P1,864,735

Various collaterals for trade receivables such as bank guarantees, cash bond, time
deposit and real estate mortgages are held by the Group for certain credit limits.

The Group believes that the unimpaired amounts that are past due by more than
30 days are still collectible based on historical payment behavior and analyses of the
underlying customer credit ratings. There are no significant changes in their credit
quality.

The Group computes impairment loss on receivables based on past collection

experience, current circumstances and the impact of future economic conditions, if
any, available at the reporting period (Note 4). There are no significant changes in
the credit quality of the counterparty during the year.

The Group’s cash and cash equivalents, derivative assets and investment in debt
instruments at amortized cost are placed with reputable entities with high quality
external credit ratings.

The Group’s exposure to credit risk arises from default of counterparty. Generally,
the maximum credit risk exposure of trade and other receivables and deposits is its
carrying amount without considering collaterals or credit enhancements, if any. The
Group has no significant concentration of credit risk since the Group deals with a
large number of homogenous counterparties.

The Group does not execute any credit guarantee in favor of any counterparty.

Capital Management
The Group maintains a sound capital base to ensure its ability to continue as a going
concern, thereby continue to provide returns to stockholders and benefits to other
stakeholders and to maintain an optimal capital structure to reduce cost of capital.

The Group manages its capital structure and makes adjustments in the light of
changes in economic conditions. To maintain or adjust the capital structure, the
Group may adjust the dividend payment to shareholders, pay-off existing debts,
return capital to shareholders or issue new shares.

The Group defines capital as paid-in capital stock, additional paid-in capital and
retained earnings, both appropriated and unappropriated. Other components of
equity such as treasury stock and equity reserves are excluded from capital for
purposes of capital management.

The Group monitors capital on the basis of debt-to-equity ratio, which is calculated
as total debt divided by total equity. Total debt is defined as total current liabilities
and total noncurrent liabilities, while equity is total equity as shown in the
consolidated statements of financial position.

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 The BOD has overall responsibility for monitoring capital in proportion to risk.
Profiles for capital ratios are set in the light of changes in the external environment
and the risks underlying the Group’s business, operation and industry.

The Company is required to comply with the capital requirements under the
interest-bearing loan drawn from a local bank on December 28, 2020 (Note 17). The
Company has to ensure that its debt-to-equity ratio will not exceed 3.5 times and
earnings before income taxes, depreciation, and amortization (EBITDA) to interest
coverage ratio will not fall below 2.0 times. This loan defined total debt as all
obligations evidenced by bonds, debentures, notes or other similar instruments while
equity is total equity as shown in the consolidated statements of financial position.
The Company complied with the above requirements in 2022 with a debt-to-equity
ratio of 0.011 as at December 31, 2022 and EBITDA to interest coverage ratio of
539.14 as at December 31, 2022.

The Company is also required to comply with non-financial covenants under the said
interest-bearing loan in which the Company complied with in 2022.

32. Financial Assets and Financial Liabilities

The table below presents a comparison by category of the carrying amounts and fair
values of the Group’s financial instruments:

December 31, 2023 December 31, 2022

Carrying Carrying
Amount Fair Value Amount Fair Value
Financial Assets
Cash and cash equivalents P9,881,018 P9,881,018 P5,457,277 P5,457,277
Trade and other receivables - net* 1,518,341 1,518,341 1,173,442 1,173,442
Derivative assets (included under “Prepaid
expenses and other current assets” account) 14,572 14,572 2,638 2,638
Investment in debt instruments at amortized
cost 1,500,000 1,500,000 1,500,000 1,500,000
Security deposit (included under “Trade and
other receivables - net” and “Other
noncurrent assets - net” accounts) 503 503 503 503
Financial Liabilities
Accounts payable and accrued expenses
(excluding derivative liabilities, deferred rent
income** and payable to a government
agency***) 5,688,925 5,688,925 5,467,186 5,467,186
Loans payable 1,000,000 1,000,000 - -
Derivative liabilities (included under
“Accounts payable and accrued expenses”
account) 476 476 70,065 70,065
Long-term debt (including current maturities)I - - 165,430 165,518
*Excluding tax certificate receivables amounted to P59,485 and P62,327 as at December 31, 2023 and 2022, respectively
and security deposit amounted to P10 as at December 31, 2023 and 2022 (Note 6).
**Deferred rent income amounted to P1,186 and P1,180 as at December 31, 2023 and 2022, respectively (Notes 15 and 27).
***Payable to a government agency amounted to P3,522 and P1,868 as at December 31, 2023 and 2022, respectively
(Note 15).

The following methods and assumptions are used to estimate the fair value of each
class of financial instruments:

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Cash and Cash Equivalents, Trade and Other Receivables, Investment in Debt
Instruments at Amortized Cost and Security Deposit. The carrying amount of cash
and cash equivalents and trade and other receivables approximates fair value
primarily due to the relatively short-term maturities of these financial instruments. In
the case of investment in debt instruments at amortized cost and security deposit,
the fair value is based on the present value of expected future cash flows using the
applicable discount rates based on current market rates of identical or similar quoted
instruments.

Derivatives. The fair values of forward exchange contracts are calculated by

reference to current forward exchange rates. Fair values for embedded derivatives
are based on valuation models used for similar instruments using both observable
and non-observable inputs.

Loans Payable, Accounts Payable and Accrued Expenses. The carrying amount of
loans payable and accounts payable and accrued expenses approximates fair value
due to the relatively short-term maturities of these financial instruments.

Long-term Debt. The fair value of interest-bearing fixed-rate loans is based on the
discounted value of expected future cash flows using the applicable market rates for
similar types of instruments as of reporting date. Discount rate used for Philippine
peso-denominated loans ranges from 4.22% to 5.21 as at December 31, 2022. The
carrying amounts of fixed rate approximate their fair values.

Derivative Financial Instruments

The Group’s derivative financial instruments according to the type of financial risk
being managed and the details of embedded derivative financial instruments are
discussed below.

Derivative Instruments Not Designated as Hedges

The Group enters into certain derivatives as economic hedges of certain underlying
exposures. These include embedded derivatives found in host contracts, which are
not designated as accounting hedges. Changes in fair value of these instruments are
accounted for directly in the consolidated statements of income. Details are as
follows:

Embedded Currency Forwards

The total outstanding notional amount of currency forwards embedded in
non-financial contracts amounted to US$27,939 and US$29,651 as of December 31,
2023 and 2022, respectively. These non-financial contracts consist mainly of foreign
currency-denominated purchase orders and sales agreements. The embedded
forwards are not clearly and closely related to their respective host contracts. The net
fair value of these embedded currency forwards amounted to P14,096 and (P67,427)
as at December 31, 2023 and 2022, respectively.

The Group recognized marked-to-market gains (losses) from embedded derivatives

amounting to P2,000, (P241,801) and (P96,759) in 2023, 2022 and 2021,
respectively (Note 26).

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 Fair Value Changes on Derivatives
The net movements in fair value of all derivative instruments are as follows:

Note 2023 2022

Balance at beginning of year (P67,427) (P32,949)
Net change in fair value of non-accounting
hedges 26 2,000 (241,801)
(65,427) (274,750)
Less fair value of settled instruments (79,523) (207,323)
Balance at end of year P14,096 (P67,427)

Fair Value Hierarchy

Financial assets and financial liabilities measured at fair value in the consolidated
statements of financial position are categorized in accordance with the fair value
hierarchy. This hierarchy groups financial assets and financial liabilities into three
levels based on the significance of inputs used in measuring the fair value of the
financial assets and financial liabilities (Note 3).

The table below analyzes financial instruments carried at fair value, by valuation
method:

December 31, 2023 December 31, 2022

Level 1 Level 2 Total Level 1 Level 2 Total
Financial Assets
Derivative assets P - P14,572 P14,572 P - P2,638 P2,638
Financial Liabilities
Derivative liabilities - (476) (476) - (70,065) (70,065)

The Group has no financial instruments valued based on Level 1 and Level 3 as at
December 31, 2023 and 2022. In 2023 and 2022, there were no transfers between
Level 1 and Level 2 fair value measurements, and no transfers into and out of
Level 3 fair value measurement.

33. Events After the Reporting Date

Declaration of Cash Dividends

On March 6, 2024, the BOD approved the declaration of regular and special cash
dividends to all common shareholders of record as of March 21, 2024 amounting to
P0.750 and P1.750 per common share, respectively. Cash dividends for common
shares, both regular and special are payable on April 11, 2024.

34. Other Matters

a. Contingencies

The Group is a party to certain lawsuits or claims (mostly labor related cases) filed
by third parties which are either pending decision by the courts or are subject to
settlement agreements. The outcome of these lawsuits or claims cannot be
presently determined. In the opinion of management and its legal counsel, the
eventual liability from these lawsuits or claims, if any, will not have a material
effect on the consolidated financial statements of the Group. No provision was
recognized as at December 31, 2023 and 2022.

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The following are the material pending legal proceedings to which the Company
is a party to:

▪ Case Pending with the SEC

Josefina Multi-Ventures Corporation vs. San Miguel Corporation,

San Miguel Food and Beverage, Inc. and Ginebra San Miguel Inc.
SEC Case No. 05-18-468

Josefina Multi-Ventures Corporation (the “Petitioner” or “JMVC”), one of the

stockholders of GSMI, filed a petition against SMC, SMFB and GSMI,
docketed as SEC Case No. 05-18-468 (the “Petition”), questioning the share
swap transaction between SMFB and SMC relative, among others to, the
transfer of SMC’s common shares in GSMI in exchange of SMFB’s common
shares.

The Petition sought (i) to declare null and void: (a) the share swap
transaction between SMFB and SMC involving the transfer of SMC’s
common shares in SMB and GSMI and in consideration therefore, the
issuance of new SMFB common shares from the increase in SMFB’s capital
stock; and, (b) SMFB’s Certificate of Approval of Increase of Capital Stock
and Certificate of Filing of Amended Articles of Incorporation (amending
Article VII thereof) issued by the SEC on June 29, 2018; or (ii) in the
alternative, for SMFB to be directed to conduct a mandatory tender offer
under Section 19 of the Securities Regulation Code for the benefit of the
remaining shareholders of GSMI.

In a decision dated February 19, 2019, the SEC dismissed the Petition and
ruled, among others, that the share swap transaction is not subject to the
mandatory tender offer rule since there was no acquisition of control between
SMC and its subsidiaries SMB and GSMI. The Petitioner filed a Motion for
Reconsideration of the said decision, which was denied on May 30, 2019.

The Petitioner filed an Appeal Memorandum dated June 18, 2019 with the
SEC En Banc, which is still pending resolution. In a Decision dated
September 14, 2020, the SEC En Banc denied the Appeal Memorandum
filed by Josefina for lack of merit.

As there was no appeal filed by Josefina to the Court of Appeals, the

Decision of the SEC En Banc is already considered as final.

▪ Tax Cases Pending with the Court of Tax Appeals (CTA)

Ginebra San Miguel Inc. vs. Commissioner of Internal Revenue

SC G.R. No. 271363
CTA En Banc Case No. 2544 and 2555 (Consolidated)
CTA Case Nos. 8953 and 8954 (Consolidated)

These cases pertain to GSMI’s Claims for Refund with the BIR, in the
amount of P581,708 in Case No. 8953, and P133,551 in Case No. 8954, or
in the total amount of P715,259, representing payments of excise tax
erroneously, excessively, illegally, and/or wrongfully assessed on and
collected from GSMI by the BIR on removals of its distilled spirits or finished
products for the periods from January 1, 2013 up to May 31 2013 in Case
No. 8953, and from January 8, 2013 up to March 31, 2013 in Case No. 8954.

- 65 -
The aforementioned assessment and collection arose from the imposition
and collection of excise taxes on GSMI’s finished products processed and
produced exclusively from its inventory of ethyl alcohol, notwithstanding that
excise taxes had already been previously paid by GSMI on said ethyl
alcohol.

After several hearings and presentation of evidence, both parties filed their
respective Formal Offers of Evidence.

On July 28, 2020, The CTA Third Division rendered its Decision and denied
GSMI’s Petition for Review. GSMI received the said Decision on August 24.
2020, for which it timely filed a Motion for Reconsideration on the
aforementioned Decision on September 2, 2020, to which the Commissioner
of Internal Revenue filed its Opposition.

The CTA Third Division issued an Amended Decision dated February 1,

2021 which partially granted GSMI’s Motion for Reconsideration and ruled
that GSMI is entitled to a partial refund of its erroneously and excessively
paid excise taxes in the amount of P319,755 out of its original claim of
P715,259.

GSMI and CIR subsequently filed Motions for Reconsideration on the

aforesaid Amended Decision and Oppositions to each other’s Motion for
Reconsideration. In a Resolution dated October 28, 2021, the CTA Third
Division denied for lack of merit GSMI’s Motion for Reconsideration and
CIR’s Motion for Partial Reconsideration of the Amended Decision.

On January 4, 2022, GSMI elevated to the CTA En Banc the Decision dated
July 28, 2020, Amended Decision dated February 1, 2021, and Resolution
dated 28 October 2021 of the CTA Third Division, by way of a Petition for
Review, which was docketed as CTA E.B. No. 2555.

Earlier, the CIR also filed a Petition for Review with the CTA En Banc
elevating thereto the Amended Decision dated February 1, 2021 and
Resolution dated October 28, 2021 of the CTA Third Division. and the same
was docketed as CTA E.B. No. 2544.

On March 28, 2022, the CTA En Banc ordered the Parties to file their
respective Comments/Oppositions to the Petitions for Review. On April 7,
2022, GSMI filed a Motion for Extension of Time to File Comment on the
Petition for Review in CTA EB No. 2544.

On April 21, 2022, GSMI filed its Comment on the Petition for Review in CTA
EB No. 2544. On May 30, 2022, the Court En Banc promulgated a
Resolution which denied GSMI’s Motion for Extension and submitted the
Petitions for Review for decision. On June 13, 2022, GSMI filed its Motion for
Reconsideration assailing the said Resolution.

On October 4, 2022, the Court En Banc promulgated a Resolution which set

aside the May 30, 2022 Resolution insofar as the Petitions for Review were
submitted for decision. The Resolution likewise directed the CIR to file a
Comment to GSMI’s Motion for Reconsideration, to which the CIR failed
despite due notice.

On January 18, 2023, the CTA En Banc granted GSMI’s Motion for
Extension of Time to File Comment on the Petition for Review in CTA E.B.
No. 2544 and admitted GSMI’s Comment as part of the records of the case.

- 66 -
In a Decision dated January 18, 2024 received by GSMI on January 23,
2024, the CTA En Banc denied both the Petitions for Review of GSMI and
the CIR, and affirmed the Amended Decision of the CTA Third Division dated
October 28, 2021 awarding GSMI a partial refund of P319,755 only.

GSMI had fifteen (15) days from January 23, 2024, or until February 7, 2024,
within which to file a Petition for Review on Certiorari with the Supreme
Court. On January 30, 2024, GSMI filed a Motion for Extension of Time to
File Petition for Review on Certiorari, praying for an extension of thirty (30)
days from February 7, 2024, or until March 8, 2024 within which to file a
Petition for Review on Certiorari.

On March 4, 2024, GSMI filed with the Supreme Court a Petition for Review
on Certiorari dated March 1, 2024, and the same was docketed as SC G.R.
No. 271363.

Ginebra San Miguel Inc. vs. Commissioner of Internal Revenue

CTA Case No. 11052
CTA Third Division

This case is a judicial claim for refund of alleged deficiency taxes paid under
protest by GSMI in connection with its removals of alcohol products for the
period covering January 23, 2020 to February 9, 2020, in the aggregate
amount of P66,370.

On July 22, 2020, GSMI received a Notice of Discrepancy dated July 6, 2020
issued by the BIR (the “Original NOD”), which enjoined GSMI to pay alleged
deficiency excise taxes in the amount of P39,579, inclusive of interests, for
the period covering January 27, 2020 to February 9, 2020.

On August 6, 2020, GSMI submitted to the BIR its Letter-Reply to the

Original NOD, where it emphasized that it is not liable to pay the alleged
deficiency excise tax liability, and thus, requested its cancellation and
withdrawal.

On October 13, 2020, GSMI received from the BIR a Letter dated
September 18, 2020 with an attached Amended Notice of Discrepancy,
which modified the amount of the alleged deficiency excise tax liability to
P71,710, inclusive of interests, for the period covering January 23, 2020 to
February 9, 2020.

On October 28, 2020, GSMI submitted to the BIR its Letter-Reply to the
Amended NOD, where it reiterated its position that it is not liable for the
alleged deficiency excise taxes.

On November 11, 2020, GSMI received from the BIR a Letter dated
November 6, 2020 which reiterated the finding of alleged deficiency excise
tax under the Amended NOD.

On December 29, 2020, GSMI paid under protest the amount of P66,370,
representing the deficiency excise tax portion under the Amended NOD,
through the BIR Electronic Filing and Payment System (eFPS).

- 67 -
On January 8, 2021, GSMI submitted to the BIR a Letter-Reply to the BIR’s
Letter dated November 6, 2020. GSMI reiterated its position that it is not
liable for the alleged deficiency excise tax liability under the Amended NOD
and informed the BIR that it paid under protest the amount of P66,370
through eFPS on December 29, 2020. In the same Letter-Reply, GSMI
explained that with respect to the assessed penalties from the alleged late
payment of the deficiency excise tax, it would avail the remedies available
under Revenue Regulations No. 13-2001, as amended.

On July 16, 2021, GSMI received a copy of Letter of Authority (LOA) No.
LOA-121-2021-00000109 dated July 1, 2021 issued by the BIR, authorizing
its revenue officers to examine GSMI’s books of accounts and other
accounting records for all internal revenue taxes except for value-added tax
for taxable year 2020.

On August 3, 2021, GSMI filed with the CIR an administrative claim for
refund of the erroneously or illegally collected deficiency excise tax for the
period covering January 23, 2020 to February 9, 2020, in the amount of
P66,370, which GSMI paid under protest on December 29, 2020.

On March 7, 2022, the BIR issued a letter notifying GSMI on the transmittal
of the entire docket to CIR’s Legal Service Division for its resolution and
issuance of a clarificatory ruling on the administrative claim for refund.

Prior to the expiry of the two-year statutory period to file judicial action for the
recovery of erroneously or illegally collected internal revenue taxes, GSMI
filed a Petition for Review with the CTA on December 28, 2022 pursuant to
Section 204(C) and 229, Tax Code, and Section 3(a), Rule 8, Revised Rules
of the Court of Tax Appeals (RRCTA) in order to preserve its right to claim by
judicial action its claims for refund of its erroneously or illegally collected
deficiency excise taxes, in connection with its removals of alcohol products
for the period covering January 23, 2020 to February 9, 2020.

The case was docketed as CTA Case No.11052, and was raffled to the
CTA’s First Division. In a Resolution dated May 29, 2023, the CTA First
Division ordered the transfer of the case to the CTA Third Division.

Upon service of Summons to the CIR and the filing of the CIR’s Answer
dated March 24, 2023, pre-trial conference was held on 26 July 2023.
Pursuant to the CTA’s Order, the parties filed their Joint Stipulation of Facts
and Issues on August 29, 2023. Pre-trial was terminated upon the issuance
of the CTA’s Pre-Trial Order on September 5, 2023.

GSMI presented its lone witness during the hearing on October 4, 2023. At
the same hearing, the CTA ordered GSMI to file its Formal Offer of Evidence
(FOE) within 10 days therefrom, or not later than October 13, 2023.

GSMI filed its FOE on October 13, 2023. Respondent CIR filed his Comment
with Manifestation on GSMI’s FOE on November 17, 2023. Respondent
CIR’s counsel manifested that they will no longer present testimonial
evidence since there was no report of the investigation on GSMI’s refund
claim forwarded to their office.

- 68 -
 On January 25, 2024, GSMI received the CTA’s Resolution dated
January 23, 2024, which admitted its Exhibits “P-1” to “P-17” and “P-19” to
“P-21”, inclusive of sub-markings. Moreover, the CTA’s Resolution noted the
manifestation of Respondent CIR that he will no longer present evidence,
constraining the CTA to direct the parties to submit their respective
memorandum within thirty (30) days from receipt of the Resolution.

GSMI filed its Memorandum on February 23, 2024. The case is now
submitted for resolution.

▪ Tax Cases Pending with the Supreme Court (SC)

Ginebra San Miguel Inc. vs. Commissioner of Internal Revenue

SC G.R. No. 25839
CTA En Banc Case No. 2308
CTA Case No. 9059

This case pertains to GSMI’s Claim for Refund with the BIR, in the total
amount of P26,243, representing payments of excise tax erroneously,
excessively, illegally, and/or wrongfully assessed on and collected from
GSMI by the BIR on removals of its distilled spirits or finished products for
the period from June 1, 2013 up to July 31, 2013.

The aforementioned assessment and collection arose from the imposition

and collection of excise taxes on GSMI’s finished products processed and
produced exclusively from its inventory of ethyl alcohol, notwithstanding that
excise taxes had already been previously paid by GSMI on the said ethyl
alcohol.

After presentation of its testimonial and documentary evidence, GSMI filed its
Formal Offer of Evidence and Supplemental Offer of Evidence, which were
all admitted by the CTA. BIR’s presentation of evidence was set to
January 23, 2019.

In a decision dated February 6, 2020, the CTA denied GSMI’s Claim for
refund for insufficiency of evidence. On February 20, 2020, GSMI filed a
Motion for Reconsideration of the said Decision. However, the Motion for
Reconsideration was denied by the CTA on June 9, 2020. On August 28,
2020, GSMI elevated the case to the CTA En Banc by way of a Petition for
Review.

In a Decision dated November 10, 2021, the CTA En Banc denied the
Petition for Review filed by GSMI. The Decision dated 6 February 2020 and
the Resolution dated June 9, 2020 of the CTA Second Division were
affirmed.

On December 10, 2021, GSMI elevated the Decision of the CTA En Banc to
the Supreme Court by way of a Petition for Review, which was docketed as
SC G.R. No. 257839.

- 69 -
▪ Intellectual Property Cases Pending with the Supreme Court (SC)

Ginebra San Miguel Inc. vs. Director General of the Intellectual Property
Office
G.R. No. 196372
SC En Banc

This case pertains to GSMI’s application for the registration of the trademark
“GINEBRA” under Class 33 covering gin with the Intellectual Property Office
of the Philippines (IPOPHL). The IPOPHL rejected GSMI’s application on
the ground that “GINEBRA” is a Spanish word for gin, and is a generic term
incapable of appropriation.

When the Court of Appeals (CA) affirmed the IPOPHL’s ruling, GSMI filed a
Petition for Review on Certiorari (the “Petition”) with the SC. The SC denied
GSMI’s Petition. GSMI moved for a reconsideration thereof, and likewise
filed a Motion to Refer its Motion for Reconsideration to the SC En Banc.
The SC denied GSMI’s Motion for Reconsideration with finality, as well as
GSMI’s Motion to Refer to its Motion for Reconsideration to the SC En Banc.

Subsequently, GSMI filed a Manifestation with Motion for Relief from

Judgment (the “Manifestation”) and invoked the case of “League of Cities vs.
Commission of Elections” (G.R. Nos. 176951, 177499 and 178056) to invite
the SC En Banc to re-examine the case. The Office of the Solicitor General
filed its Comment Opposition to the Manifestation.

On June 26, 2018, the SC En Banc Issued a Resolution which resolves to:
(a) Accept the subject case which was referred to it by the Third Division in
the latter’s resolution dated August 7, 2017; (b) Treat as a Second Motion for
Reconsideration (of the resolution dated June 22, 2011) GSMI’s
Manifestation with Motion for Relief from Judgment dated November 28,
2011; (c) Reinstate the Petition; and (d) Require the respondents to
Comment on the Petition within a non-extendible period of ten (10) days from
notice thereof.

Respondents, through the OSG, filed their Comment dated July 31, 2018
while GSMI filed its Reply with Leave on August 20, 2018.

On January 4, 2019, the SC Third Division issued a Resolution ordering the

consolidation of the previously consolidated cases (G.R. Nos. 216104,
210224 and 219632) with the En Banc case (G.R. No. 196372), stating that
“considering that all these cases involve identical parties and raise
interrelated issues which ultimately stemmed from the registration of
trademark of Tanduay Distillers, Inc. (TDI) and GSMI before the IPO.”

On February 3, 2020, GSMI filed a Manifestation with the Supreme Court

Third Division, informing the Court that on January 27, 2020, it received a
copy of a Decision dated December 27, 2019 rendered by the IPO Director
General in the consolidated appealed cases involving GSMI’s Oppositions to
TDI’s applications for the registration of the marks “Ginebra Lime & Device,”
“Ginebra Orange & Device,” “Ginebra Especial & Device” and “Ginebra
Pomelo & Device”, for use on gin products. In the joint Decision, the IPO
Director General ruled in favor of GSMI and held that despite being generic
or descriptive, the term “GINEBRA” had already attained a secondary
meaning in relation to the gin products of GSMI. The Manifestation was filed
to inform the Supreme Court Third Division of the status of cases in IPOPHL
which involve GSMI’s claim over “GINEBRA”.

- 70 -
In a Resolution dated March 10, 2020, the Supreme Court En Banc resolved
to transfer the consolidated cases from the Third Division to the En Banc,
where this case which has the lowest docket number, i.e. G.R. No. 196372,
was originally assigned, hence, all four cases are now consolidated and
pending before the Supreme Court En Banc. Furthermore, the Supreme
Court En Banc also noted GSMI’s Manifestation dated February 3, 2020 on
the IPO Director General’s Decision dated December 27, 2019.

On August 9, 2022, the Supreme Court En Banc promulgated a Decision in

the four (4) consolidated Petitions. For G.R. No. 196372, GSMI’s Petition for
Review was granted. The Director of the Bureau of Trademarks was directed
to reinstate GSMI’s trademark application for “GINEBRA”, cause its
publication and give it due course.

On April 17, 2023, GSMI received a copy of TDI’s Motion for Reconsideration
of the Decision dated August 9, 2022. On August 29, 2023, the Supreme
Court En Banc issued a Resolution which denied with finality the Motion for
Reconsideration filed by TDI in the consolidated Petitions.

Tanduay Distillers, Inc. vs. Ginebra San Miguel Inc.

G.R. Nos. 210224 and 219632
SC - En Banc

These cases pertain to GSMI’s Complaint for Unfair Competition, Trademark

Infringement and Damages against TDI filed with the Regional Trial Court
(RTC), arising from TDI’s distribution and sale of its gin product bearing the
trademark “Ginebra Kapitan” and use of a bottle design, which general
appearance was nearly identical and confusingly similar to GSMI’s product.
The RTC dismissed GSMI’s complaint.

When GSMI elevated the case to the CA, due to technicalities, two (2) cases
were lodged in the CA: 1.) Petition for Review (CA-G.R. SP No. 127255), and
2.) Appeal (CA-G.R. SP No. 100332).

Acting on GSMI’s Petition for Review, the CA reversed, set aside the RTC’s
Decision, and ruled that “GINEBRA” is associated by the consuming public
with GSMI. Giving probative value to the surveys submitted by GSMI, the
CA ruled that TDI’s use of “GINEBRA” in “Ginebra Kapitan” produces a
likelihood of confusion between GSMI’s “Ginebra San Miguel” gin product
and TDI’s “Ginebra Kapitan” gin product. The CA likewise ruled that “TDI
knew fully well that GSMI has been using the mark/word “GINEBRA” in its
gin products and that GSMI’s “Ginebra San Miguel” has already obtained,
over the years, a considerable number of loyal customers who associate the
mark “GINEBRA” with GSMI.

On the other hand, upon GSMI’s Appeal, the CA also set aside the RTC’s
Decision and ruled that “GINEBRA” is not a generic term there being no
evidence to show that an ordinary person in the Philippines would know that
“GINEBRA” is a Spanish word for “gin”. According to the CA, because of
GSMI’s use of the term in the Philippines since the 1800s, the term
“GINEBRA” now exclusively refers to GSMI’s gin products and to GSMI as a
manufacturer. The CA added that “the mere use of the word “GINEBRA” in
“Ginebra Kapitan” is sufficient to incite an average person, even a gin-
drinker, to associate it with GSMI’s gin product,” and that TDI “has designed
its bottle and label to somehow make a colorable similarity with the bottle and
label of Ginebra S. Miguel”.

- 71 -
TDI filed separate Petitions for Review on Certiorari with the SC, docketed as
G.R. Nos. 210224 and 219632, which were eventually consolidated by the
SC on April 18, 2016.

On October 26, 2016, GSMI filed its Comment on TDI’s Petition for Review
on Certiorari.

On December 17, 2018, the SC consolidated this case with GSMI vs. Court
of Appeals, Director General of the Intellectual Property Office, and Director
of the Bureau of Trademarks (G.R. No. 196372).

On February 3, 2020, GSMI filed a Manifestation with the Supreme Court

Third Division, informing the Court that on January 27, 2020, it received a
copy of a Decision dated December 27, 2019 rendered by the IPO Director
General in the consolidated appealed cases involving GSMI’s Oppositions to
TDI’s applications for the registration of the marks “Ginebra Lime & Device,”
“Ginebra Orange & Device,” “Ginebra Especial & Device” and “Ginebra
Pomelo & Device”, for use on gin products. In the joint Decision, the IPO
Director General ruled in favor of GSMI and held that despite being generic
or descriptive, the term “GINEBRA” had already attained a secondary
meaning in relation to the gin products of GSMI. The Manifestation was filed
to inform the Supreme Court Third Division of the status of cases in IPOPHL
which involve GSMI’s claim over “GINEBRA”.

In a Resolution dated March 10, 2020, the Supreme Court En Banc resolved
to transfer the consolidated cases from the Third Division to the En Banc.
Furthermore, the Supreme Court En Banc also noted GSMI’s Manifestation
dated February 3, 2020 on the IPO Director General’s Decision dated
December 27, 2019.

On August 9, 2022, the Supreme Court En Banc promulgated a Decision in

the four (4) consolidated Petitions. For G.R. Nos. 210224 and 219632, TDI’s
Petitions for Review were denied, with modification, such that TDI shall pay
GSMI temperate damages of P300 and attorney’s fees of P200; other
awards of damages against TDI are deleted.

On April 17, 2023, GSMI received a copy of TDI’s Motion for Reconsideration
of the Decision dated August 9, 2022. On August 29, 2023, the Supreme
Court En Banc issued a Resolution which denied with finality the Motion for
Reconsideration filed by TDI in the consolidated Petitions.

Tanduay Distillers, Inc. vs. Ginebra San Miguel Inc.

G.R. No. 216104
SC - En Banc

This case pertains to TDI’s application for the registration of the trademark
“GINEBRA KAPITAN” for Class 33 covering gin with the IPOPHL.

GSMI opposed TDI’s application, alleging that it would be damaged by the

registration of “GINEBRA KAPITAN” because the term “GINEBRA” has
acquired a secondary meaning and is now exclusively associated with
GSMI’s gin products. GSMI argued that the registration of “GINEBRA
KAPITAN” for use in TDI’s gin products will confuse the public and cause
damage to GSMI. TDI countered that “GINEBRA” is generic and incapable
of exclusive appropriation, and that “GINEBRA KAPITAN” is not identical or
confusingly similar to GSMI’s mark.

- 72 -
The IPOPHL ruled in favor of TDI and held that: (a) “GINEBRA” is generic for
“gin”; (b) GSMI’s products are too well known for the purchasing public to be
deceived by a new product like “GINEBRA KAPITAN”; and (c) TDI’s use of
“GINEBRA” would supposedly stimulate market competition.

On July 23, 2014, the CA reversed and set aside the IPOPHL’s ruling and
disapproved the registration of “GINEBRA KAPITAN”. The CA ruled that
“GINEBRA” could not be considered as a generic word in the Philippines
considering that, to the Filipino gin-drinking public, it does not relate to a
class of liquor/alcohol but rather has come to refer specifically and
exclusively to the gin products of GSMI.

TDI filed a Petition for Review on Certiorari with the SC, which was
subsequently consolidated with the case of “Tanduay Distillers, Inc. vs.
Ginebra San Miguel Inc.”, docketed as G.R. No. 210224 on August 5, 2015.

On October 26, 2016, GSMI filed its Comment on TDI’s Petition for Review
on Certiorari.

On December 17, 2018, the SC consolidated this case with Ginebra San
Miguel Inc. vs. Court of Appeals, Director General of the Intellectual Property
Office, and Director of the Bureau of Trademarks (G.R. No. 196372).

On February 3, 2020, GSMI filed a Manifestation with the Supreme Court

Third Division, informing the Court that on January 27, 2020, it received a
copy of a Decision dated December 27, 2019 rendered by the IPO Director
General in the consolidated appealed cases involving GSMI’s Oppositions to
TDI’s applications for the registration of the marks “Ginebra Lime & Device,”
“Ginebra Orange & Device,” “Ginebra Especial & Device” and “Ginebra
Pomelo & Device”, for use on gin products. In the joint Decision, the IPO
Director General ruled in favor of GSMI and held that despite being generic
or descriptive, the term “GINEBRA” had already attained a secondary
meaning in relation to the gin products of GSMI. The Manifestation was filed
to inform the Supreme Court Third Division of the status of cases in IPOPHL
which involve GSMI’s claim over “GINEBRA”.

In a Resolution dated March 10, 2020, the Supreme Court En Banc resolved
to transfer the consolidated cases from the Third Division to the En Banc.
Furthermore, the Supreme Court En Banc also noted GSMI’s Manifestation
dated February 3, 2020 on the IPO Director General’s Decision dated
December 27, 2019.

On August 9, 2022, the Supreme Court En Banc promulgated a Decision in

the four (4) consolidated Petitions. For, G.R. No. 216104, TDI’s Petition for
Review for the rejection of TDI’s trademark application for “GINEBRA
KAPITAN” was denied.

On April 17, 2023, GSMI received a copy of TDI’s Motion for Reconsideration
of the Decision dated 9 August 2022. On August 29, 2023, the Supreme
Court En Banc issued a Resolution which denied with finality the Motion for
Reconsideration filed by TDI in the consolidated Petitions.

- 73 -
b. Commitments

The outstanding purchase commitments of the Group amounted to P9,736,102

(US$175,837), P6,794,293 (US$121,860) and P4,698,981 (US$92,138) as at
December 31, 2023, 2022 and 2021, respectively.

c. Effect of COVID-19

The year 2022 was a year of economic recovery which saw business operations
once again opening up, while the challenges of COVID-19 still remained
throughout the year. Commercial activities have started to pick up as COVID-19
quarantine restrictions were relatively lighter compared to 2020.

The Group has not been significantly affected by the COVID-19 outbreak based
on the results of the Group’s financial performance for the years ended
December 31, 2023, 2022 and 2021.

d. Uncertainty Due to Russia-Ukraine Conflict

The ongoing conflict between Russia and Ukraine has no direct effect to the
Group. The extent to which the ongoing conflict will affect the Group will depend
on future developments, including the actions and decisions taken or not taken
by the Organization of the Petroleum Exporting Countries and other oil producing
countries, international community and the Philippine government, which are
highly uncertain and cannot be quantified nor determined as at March 6, 2024.

The Group’s total gas and oil is higher by 16% and 41% in 2023 and 2022,
respectively.

e. Foreign Exchange Rates

The foreign exchange rates used in translating the Thai Baht accounts of foreign
joint ventures to Philippine peso were closing rates of P1.622 and P1.617 in
2023 and 2022, respectively, for consolidated statements of financial position
accounts; and average rates of P1.601, P1.600 and P1.499 in 2023, 2022 and
2021, respectively, for income and expense accounts.

- 74 -
 Annex “E”
GINEBRA SAN MIGUEL INC.
2023 Reports on SEC Form 17-C

DATE REPORTED SUBJECT

March 8, 2023 We disclose that in the meeting of the Board of Directors of Ginebra San
Miguel Inc. (respectively, the “Board” and the “Company”) held on March 8,
2023:

Item 9. Other Events

1. With the favorable endorsement of the Audit and Risk

Oversight Committee, the Board approved the audited separate and
consolidated financial statements of the Company as at and for the year
ended December 31, 2022 and the submission thereof to the Securities and
Exchange Commission, The Philippine Stock Exchange, Inc. and Bureau of
Internal Revenue.

2. The Board approved the schedule, venue and agenda of the

2023 Regular Stockholders’ Meeting, as follows:

a. Schedule

Date and time of the 2023 Regular Stockholders’ Meeting: May 25,
2023 at 2:00 P.M.
Record date of stockholders entitled to vote at the said meeting:
April 21, 2023
Closing of stock and transfer books: April 22 to 26, 2023
Deadline for the submission of proxies: May 11, 2023
Validation of proxies: May 19, 2023

b. Venue

Via remote communication and livestreamed at the Company’s

website, http://www.ginebrasanmiguel.com.

c. Agenda

1. Call to Order/Certification of Notice and Quorum

2. Approval of the Minutes of the Regular Stockholders'
Meeting held on May 26, 2022
3. Presentation of the 2022 Annual Report
4. Ratification of Acts and Proceedings of the Board of
Directors and Corporate Officers
5. Election of Directors
6. Appointment of External Auditor
7. Other Matters
8. Adjournment

The Board also approved the grant of authority to the

stockholders to participate and vote in the Regular Stockholders
Meeting through remote communication or in absentia, as
circumstances may warrant, subject to the rules and regulations

GSMI 2023 Reports on SEC Form 17-C Page 1 of 9

 provided under SEC Memorandum Circular 6, Series of 2020, the
Revised Corporation Code, and other applicable laws and
regulations, in the light of the on-going public health concern
relating to the COVID-19 pandemic.

3. The Board approved the declaration of cash dividends to

holders of common shares as follows:

a) First Quarter regular dividend in the amount of

Php 0.75 per common share; and
b) Special dividend in the amount of Php 1.75 per
common share.

The foregoing cash dividends shall be paid on April 12, 2023, to all
holders of common shares of record as of March 24, 2023. The stock and
transfer book of the Company will be closed from March 25 to 29, 2023.

4. The Board also approved the recommendation of the Audit

and Risk Oversight Committee to re-appoint R.G. Manabat & Co. as External
Auditor of the Company for fiscal year 2023 during the Regular Stockholders’
Meeting scheduled on May 25, 2023.

5. Lastly, the Board likewise approved the 2023 Material

Related Party Transactions of the Company with San Miguel Yamamura
Corporation and SMC Shipping and Lighterage Corporation.

March 13, 2023 Please see attached press release entitled “GSMI net income up 9% to P4.5
billion, sustains lead in hard liquor market”.

April 19, 2023 Item 9. Other Events

Pursuant to the directive of the Securities and Exchange Commission

(“SEC”), we write to inform the Philippine Stock Exchange Inc. that we
received today, April 19, 2023, the letter of the Market and Securities
Regulation Department of the SEC (“SEC MSRD”) dated April 18, 2023
advising Ginebra San Miguel Inc. (the “Company”) that the SEC MSRD has
GRANTED the request of the Company for exemptive relief from the
requirement under Rule 68 of the Revised Securities Regulation Code
(“Revised SRC Rule 68”) that the interim financial statements of the Company
for the first quarter of 2023 (the “2023 Q1 Reports”) be attached to the
Definitive Information Statement (the “DIS”) for its 2023 Regular
Stockholders’ Meeting scheduled on May 25, 2023 and the release of the DIS
without the 2023 Q1 Reports.

The SEC MSRD found merit in the justification of the Company that
the 2023 Q1 Reports would not yet be available by the time of the mandated
dissemination of the DIS by May 4, 2023. The SEC MSRD also recognized that
the deadline for the filing of the 2023 Q1 Reports is on May 15, 2023 and the
Company was obliged to apply for exemption to ensure that it would not
violate applicable laws and rules and it would be able to distribute the DIS
within the period required by its By-Laws, 2015 SRC IRR and Manual of
Corporate Governance. The Company was however advised that a request for
a similar exemptive relief for any future annual stockholders’ meeting will no
longer be granted and was reminded to comply with the requirements of the
Revised SRC Rule 68.

GSMI 2023 Reports on SEC Form 17-C Page 2 of 9

 May 8, 2023 Item 9. Other Events

In compliance with the letter dated April 18, 2023 of the Markets and
Securities Regulation Department (“MSRD”) of the Securities and Exchange
Commission (“SEC”), we submit copies of the following Affidavits:

1. Affidavit of Publication from the Philippine Star with newspaper

clippings and screen captures of online publication dated May 2 and
May 3, 2023; and
2. Affidavit of Publication from Manila Bulletin with newspaper
clippings and screen captures of online publication dated May 2 and
May 3, 2023.

The aforementioned Affidavits pertain to the publication of the

Company’s Notice of the Regular Stockholders’ Meeting pursuant to SEC’s
Notice dated 13 March 2023.

May 9, 2023 We disclose that in the meeting of the Board of Directors of Ginebra San
Miguel Inc. (respectively, the “Board” and the “Company”) held on May 9,
2023:

Item 9. Other Events

The Board approved the declaration of cash dividends to holders of

common shares as follows:

a) Second Quarter regular dividend in the amount of Php 0.75

per common share; and
b) Special dividend in the amount of Php 1.75 per common share.

The foregoing cash dividends shall be paid on June 7,2023 to all

holders of common shares of record as of May 24, 2023. The stock and
transfer book of the Company will be closed from May 25 to 29, 2023.

May 15, 2023 Item 9. Other Events

Please see below financial highlights of Ginebra San Miguel Inc. (the
“Company”) for the first quarter of 2023:

The Company volumes declined by 5% from the previous year,

reflecting the effect of a temporary volume slowdown due to a price increase
last February 1, 2023. Revenues meanwhile increased by 3% to Php 12.9
billion. Net income ended at Php 2.5 billion for the first quarter, 81% higher
than 2022 on account of the one-time income cashflow generated in March
with the transfer of Don Papa’s product rights.

Further information on the above financial highlights may be found

in the Company’s Quarterly Report (SEC Form 17-Q) as at and for the period
ended March 31, 2023.

GSMI 2023 Reports on SEC Form 17-C Page 3 of 9

 May 16, 2023 Item 9. Other Events

As instructed by the Philippine Stock Exchange Inc., please see

attached disclosure dated today, May 16, 2023, in connection with Ginebra
San Miguel Inc.’s Employee Stock Purchase Plan approved on August 8, 2007.

May 25, 2023 We disclose that today, May 25, 2023, the following meetings of Ginebra San
Miguel Inc. (the “Company”) were held: Regular Stockholders’ Meeting and
Organizational Meeting of the Board of Directors (“Board”).

Regular Stockholders’ Meeting

Item 4. Resignation, Removal or Election of Registrant’s Directors or

Officers

1. The following directors were elected:

Ramon S. Ang
Francisco S. Alejo III
Aurora T. Calderon
Leo S. Alvez
Gabriel S. Claudio
Francis H. Jardeleza
Ana Leah V. Rodriguez
Aurora S. Lagman – Independent Director
Martin S. Villarama, Jr. – Independent Director

The foregoing directors currently have 5,000 common shares each in

the Company.

Item 9. Other Events.

2. The Minutes of the Regular Stockholders’ Meeting held on May 26,

2022 was approved.

3. All acts, resolutions and proceedings of the Board and corporate

officers of the Company since the Regular Stockholders’ Meeting held
on May 26, 2022 until May 25, 2023, the date of this year’s meeting,
as reflected in the minutes of the meetings of the Board, as well as
financial statements and records of the Company were approved,
confirmed and ratified.

4. Upon favorable recommendation of the Audit and Risk Oversight

Committee, the auditing firm of R. G. Manabat & Co. was appointed as
External Auditor of the Company for the fiscal year 2023.

Organizational Meeting of the Board of Directors

Item 4. Resignation, Removal or Election of Registrant’s Directors or

Officers

1. At the Organizational Meeting of the Board, the following Officers and

Lead Independent Director were elected.

Ramon S. Ang : President

GSMI 2023 Reports on SEC Form 17-C Page 4 of 9

 Emmanuel B. Macalalag : General Manager
Virgilio S. Jacinto : Corporate Secretary and
Compliance Officer
Cynthia M. Baroy : Treasurer/Chief Finance Officer
Francis Joseph A. Cruz : Assistant Corporate Secretary
Christine Angelica D. Felix : Assistant Corporate Secretary
Heinrici D. Legaspi : Internal Audit Group Head/
Chief Audit Executive

Director Aurora S. Lagman was also elected as Lead Independent

Director of the Company, in compliance with the Code of Corporate
Governance for Publicly-Listed Companies and the Company’s
Manual on Corporate Governance.

Of the aforementioned officers, Mr. Macalalag has 46,500 common

shares and Ms. Baroy has 30,000 common shares. On the other hand,
Atty. Jacinto, Atty. Cruz, Atty. Felix and Mr. Legaspi do not own shares
in the Company.

In the same meeting, the following were elected as Chairpersons and

members of the following Board Committees:

Executive Committee

1. Ramon S. Ang
2. Francisco S. Alejo III
3. Aurora T. Calderon
4. Ferdinand K. Constantino – Non-Director Member

Audit and Risk Oversight Committee

1. Martin S. Villarama, Jr. – Chairman

2. Francisco S. Alejo III
3. Leo S. Alvez
4. Aurora S. Lagman

Ferdinand K. Constantino – Advisor

Executive Compensation Committee

1. Ramon S. Ang – Chairman

2. Aurora T. Calderon
3. Leo S. Alvez
4. Martin S. Villarama, Jr.
5. Ferdinand K. Constantino – Non-Director Member

Corporate Governance Committee

1. Aurora S. Lagman – Chairman

2. Aurora T. Calderon
3. Leo S. Alvez
4. Gabriel S. Claudio
5. Ana Leah V. Rodriguez
6. Martin S. Villarama, Jr.
7. Joseph Francis M. Cruz – Ex Officio Member

GSMI 2023 Reports on SEC Form 17-C Page 5 of 9

 Item 9. Other Events.

1. The Board also approved the designation of depository banks,

authorized signatories and limits for corporate transactions of the
Company.

May 25, 2023 Item 9. Other Events

Please see attached press release entitled “Ginebra reports strong Q1

performance”.

August 2, 2023 We disclose that in the meeting of the Board of Directors of Ginebra San
Miguel Inc. (respectively, the “Board” and the “Company”) held on August 2,
2023:

Item 9. Other Events

The Board approved the declaration of cash dividends to holders of common

shares as follows:

a.) Third Quarter regular dividend in the amount of Php

0.75 per common share; and
b.) Special dividend in the amount of Php 1.75 per common
share.

The foregoing cash dividends shall be paid on September 1, 2023 to all

holders of common shares of record as of August 16, 2023. The Stock and
Transfer Books of the Company will be closed from August 17 to 23, 2023.

August 8, 2023 Item 9. Other Events

Please see below financial highlights of Ginebra San Miguel Inc. (the
“Company”) for the first semester of 2023:

The Company’s volumes reached 22.2 million cases, a 1%

improvement over the same period last year. With sustained volume growth,
sales revenues rose 10% to Php 25.4 billion, while gross profit improved 2%
to Php 6.2 billion. Income from operations went up 3% to Php 3.4 billion,
while EBITDA surged 53% to Php 5.5 billion. Net income for the first six
months of the year reached Php 4.1 billion, 64% more than the same period
last year.

The Company will submit its Quarterly Report (SEC Form 17-Q)
including its financial statements as at and for the period ended June 30,
2023, not later than the deadline on August 14, 2023.

August 10, 2023 Item 9. Other Events

We would like to inform the Securities and Exchange Commission

that in the case entitled “In the Matter of the Water Pollution Control and
Abatement Case vs. East Pacific Star Bottlers Phils Inc. - Ligao Plant, docketed
as DENR-PAB Case No. 05-F00138-16, the Department of Environment and

GSMI 2023 Reports on SEC Form 17-C Page 6 of 9

 Natural Resources-Pollution Adjudication Board (DENR-PAB) imposed on
East Pacific Star Bottlers Phils Inc. (EPSBPI), a wholly-owned subsidiary of
Ginebra San Miguel Inc. (GSMI), a fine amounting to Four Million Eight
Hundred Seventy Thousand Pesos (Php 4,870,000.00) for allegedly
discharging effluents which do not meet the DENR General Effluent
Standards as set out in DENR Department Administrative Order 2016-08, as
provided under Republic Act No. 9275 or the Philippine Clean Water Act of
2004 and its Implementing Rules and Regulations. EPSBPI has corrected
such finding and will file a Motion for Reconsideration of the DENR-PAB
Order, dated August 7, 2023, on or before August 24, 2023.

The DENR-PAB Order was received by GSMI today, August 10, 2023,
from the Plant Manager of EPSBPI’s Plant located in Ligao City, Albay. Based
on the copy that was sent to GSMI, the said Order was received by EPSBPI on
August 9, 2023.

September 15, 2023 Item 9. Other Events

In compliance with SEC Memorandum Circular No. 19, Series of 2016,

we advise that the following directors of Ginebra San Miguel Inc. (the
“Company”), have attended a seminar on Corporate Governance held on
September 8, 2023 that was conducted by SGV & Co (the “Seminar”).
Attached are copies of their Certificate of Attendance:

Name of Directors

1. Mr. Francisco S. Alejo III

2. Justice Francis H. Jardeleza

Mr. Ferdinand K. Constantino, advisor of the Audit and Risk Oversight

Committee and non-director member of the Executive Compensation
Committee and the Executive Committee of the Company, also attended the
Seminar. A copy of his Certificate of Attendance is likewise attached for your
reference.

September 27, 2023 Item 9. Other Events

In compliance with SEC Memorandum Circular No. 19, Series of 2016,

we advise that Atty. Virgilio S. Jacinto, Corporate Secretary and Compliance
Officer of Ginebra San Miguel Inc., has attended a seminar on Corporate
Governance held on September 20, 2023 that was conducted by SGV & Co.
Attached is a copy of his Certificate of Attendance.

October 27, 2023 Item 9. Other Events

In compliance with SEC Memorandum Circular No. 19, Series of 2016,

we advise that the following Directors and Officers/Managers of Ginebra San
Miguel Inc., have attended a Seminar on Corporate Governance that was
conducted by Risks, Opportunities, Assessment and Management (ROAM),
Inc. on October 20, 2023. Copies of the Certificates of Completion of the
following participants are attached for your reference.

GSMI 2023 Reports on SEC Form 17-C Page 7 of 9

 Name of Directors

1. Mr. Leo S. Alvez

2. Mr. Gabriel S. Claudio
3. Ms. Ana Leah V. Rodriguez
4. Justice Martin S. Villarama, Jr. (Ret.) – Independent Director
5. Justice Aurora S. Lagman (Ret.) – Independent Director

Name of Officers/Managers

1. Mr. Emmanuel B. Macalalag – General Manager

2. Ms. Cynthia M. Baroy – Chief Finance Officer
3. Atty. Francis Joseph A. Cruz – Assistant Corporate Secretary
4. Atty. Christine Angelica D. Felix – Assistant Corporate Secretary
5. Mr. Heinrici D. Legaspi - Internal Group Audit Manager
6. Mr. Allan P. Mercado
7. Mr. Jaime P. Factor
8. Mr. Ronald Rudolf C. Molina
9. Mr. Saturnino G. Pajarillo, Jr.
10. Ms. Eileen C. Miranda
11. Mr. Teodorico T. Lasin
12. Mr. Cris Philip S. Marquez
13. Mr. Delfin Jude G. Uy
14. Mr. Lewisito D. Leonillo
15. Ms. Monina N. Cortez
16. Ms. Estrella M. Tamayo
17. Ms. Rosalina A. Lioanag
18. Mr. Ariel I. Victoria
19. Atty. Ariel D. Gonzales
20. Atty. Marie Antoinette V. Pascua

November 8, 2023 We disclose that in the meeting of the Board of Directors of Ginebra San
Miguel Inc. (respectively, the “Board” and the “Company”) held on November
8, 2023:

Item 9. Other Events

The Board approved the declaration of cash dividends to holders of common

shares as follows:

a.) Fourth Quarter regular dividend in the amount of Php 0.75

per common share; and
b.) Special dividend in the amount of Php 1.75 per common share.

The foregoing cash dividends shall be paid on December 7, 2023, to all

holders of common shares of record as of November 22, 2023. The Stock and
Transfer Books of the Company will be closed from November 23 to 27, 2023.

November 13, 2023 Item 9. Other Events

Please see below financial highlights of Ginebra San Miguel Inc. (the
“Company”) for the third quarter of 2023:

The Company registered a robust performance in the third quarter of

2023, posting a 13% growth in revenues to Php38.9 billion. Income from

GSMI 2023 Reports on SEC Form 17-C Page 8 of 9

 operations ended at Php5.0 billion, up 10% over the same period last year.
Meanwhile, net income reached Php5.5 billion, 62% higher from the previous
year, including a one-time gain from the transfer of product rights for the Don
Papa brand.

The Company will submit its Quarterly Report (SEC Form 17-Q)
including its financial statements as at and for the period ended September
30, 2023, not later than the deadline on November 14, 2023.

November 17, 2023 Item 9. Other Events

In compliance with SEC Memorandum Circular No. 19, Series of 2016,

we advise that the following directors of Ginebra San Miguel Inc. (the
“Company”), have attended a seminar on Corporate Governance held on
November 10, 2023 that was conducted by Center for Global Best Practices
(the “Seminar”). Attached are copies of their Certificate of Attendance:

Name of Directors

1. Mr. Ramon S. Ang

2. Ms. Aurora T. Calderon

Mr. Ferdinand K. Constantino, advisor of the Audit and Risk Oversight

Committee and non-director member of the Executive Compensation
Committee and the Executive Committee of the Company, also attended the
Seminar. A copy of his Certificate of Attendance is likewise attached for your
reference.

GSMI 2023 Reports on SEC Form 17-C Page 9 of 9

GINEBRA SAN MIGUEL INC.
SUSTAINABILITY REPORT
Ginebra San Miguel Inc.
Contextual Information
Company Details

Name of Organization Ginebra San Miguel Inc. (“GSMI” or “Company”)

Location of Headquarters 3rd and 6th Floors, San Miguel Properties Centre
St. Francis Street, Ortigas Center, Mandaluyong City

Location of Operations With operations in Metro Manila, North and South

Luzon, Visayas, and Mindanao, by itself or through its
subsidiaries, enumerated hereunder:

● GSMI Head Office (Mandaluyong City, Metro Manila)

● GSMI Sta. Barbara Plant (Sta. Barbara, Pangasinan)
● GSMI Cabuyao Plant (Cabuyao, Laguna)
● East Pacific Star Bottlers Phils Inc. Cauayan Plant
(Cauayan, Isabela)
● East Pacific Star Bottlers Phils Inc. Ligao Plant (Ligao
City, Albay)
● GSMI Mandaue Plant (Mandaue City, Cebu)
● Distileria Bago, Inc. (Bago City, Negros Occidental)
● Agricrops Industries Inc. (Bago City, Negros Occidental)

Report Boundary: Legal entities Report includes the following legal entities:
(e.g. subsidiaries) included in ● Ginebra San Miguel Inc. (“GSMI”)
this report* ● Distileria Bago, Inc. (“DBI”)
● East Pacific Star Bottlers Phils lnc. (“EPSBPI”)
● Agricrops Industries Inc. (“Agricrops”)
●
● DBI, EPSBPI, and Agricrops, which are wholly-owned
subsidiaries of GSMI, are collectively referred to as the
“Domestic Operating Subsidiaries”.

Business Model, GSMI is the spirits division of San Miguel Food and
including Primary Beverage, Inc. (“SMFB”), the latter being the food and
Activities, Brands, beverage arm of San Miguel Corporation (“SMC”), the
Products, and Services largest and most diverse conglomerate in the
Philippines.

GSMI has produced some of the most recognizable

brands in the Philippine liquor market including the
world’s no. 1 selling gin, Ginebra San Miguel, Vino Kulafu
(market leader in the Chinese wine category), GSM Blue,

1
 GSM Premium Gin, Antonov Vodka, Primera Light
Brandy, Añejo Gold Rum, 1834 Distilled Premium Gin,
Tondeña Manila Rum (for export only), and G&T
Ultralight Spirit Drink.

The Company also produces San Miguel Ethyl Alcohol

which was first introduced in 2020 in response to the
COVID-19 global pandemic outbreak.

(https://www.ginebrasanmiguel.com/about-ginebra/)

Reporting Period January 1 to December 31, 2023

Highest Ranking Person Emmanuel B. Macalalag

responsible for this report General Manager

Materiality Process
Explain how you applied the materiality principle (or the materiality process) in
identifying your material topics.

GSMI and its Domestic Operating Subsidiaries held an overview session with their senior
management in August 2019. It was conducted to create a mutual understanding of the
sustainability concepts and identify material topics that determined the environmental,
social, and economic impacts of the Company’s products and operations.

The Company gathered metrics that defined and measured the material topics under the
guidance of relevant and globally recognized reporting standards, specifically the Global
Reporting Initiative (GRI) reporting standards and the Sustainability Accounting Standards
Board’s (SASB) Industry Standard for the Alcoholic Beverage Industry.

Relevant data answering the identified metrics were collected from various departments
of the Company and its Domestic Operating Subsidiaries. This was followed by a series of
deep dive sessions in order to finalize material sustainability topics most significant to
GSMI and its Domestic Operating Subsidiaries.

Important note: As GSMI and its Domestic Operating Subsidiaries persist to improve their
processes, enhance their policies, and develop responsive products and services, the
Company and its Domestic Operating Subsidiaries’ materiality processes and topics shall
be reviewed and updated accordingly to ensure topics remain valid and relevant at the
publication of this report.

In the second half of 2022, GSMI and its Domestic Operating Subsidiaries participated in
San Miguel Corporation’s (SMC) group-wide materiality assessment exercise. A list of
possible material topics was developed through peer analysis and review of globally

2
recognized Environmental, Social, and Governance (ESG) standards and frameworks. This
provided us with a perspective of ESG issues deemed relevant by companies of similar
size, operations and portfolio.

Thereafter, the material issues of our stakeholders were shortlisted through a series of
engagement sessions to determine ESG issues most significant to them. This list was
further prioritized through a Materiality Validation Workshop attended by SMC and GSMI
management.

3
 ECONOMIC
Economic Performance
Direct Economic Value Generated and Distributed

Disclosure* 2023 2022 Units

Direct economic value generated (revenue) 54,192 47,471 Mn PhP

Direct economic value distributed:

a. Operating costs (including payments to 20,721 19,930 Mn PhP

suppliers)

b. Employee wages and benefits 1,819 1,721 Mn PhP

c. Dividends given to stockholders and 2,792 1,543 Mn PhP

interest payments to loan providers

d. Taxes given to government 25,399 20,529 Mn PhP

e. Investments to community (e.g. 14 12 Mn PhP

donations, CSR)
*Figures herein can be validated with the GSMI’s 2023 Audited Consolidated Financial Statement.

Impacts and Risks

The Company recognizes the significant impacts of the economic value that it, together with
its Domestic Operating Subsidiaries, is generating through its respective product lines. This
economic value is distributed to different stakeholders such as the government, employees,
stockholders and investors, suppliers, and various communities. This enables economic
growth and contributes to national and institutional development.

Good economic performance of the Company enables it to sustain its business and
operations, fairly compensate its employees, pay taxes due to the government, and distribute
value to other stakeholders. Of the total economic value generated by the Company, 93.6%
is distributed to its various stakeholders, while the remaining 6.4% is retained and reinvested
for the next fiscal year for the overall operations of the Company.

Allocation for operating cost is at 38.2% of the total economic value generated. In addition,
3.4% went to the wages and benefits of employees, 5.2% paid to providers of capital, and
0.03% apportioned to partner communities through donations and Corporate Social
Responsibility (CSR) programs.

Being a responsible Company, GSMI remitted to the government around 46.9% of its total
economic value generated by means of taxes.

4
The ability of the Company and its Domestic Operating Subsidiaries to generate and distribute
economic value is threatened by major risks, enumerated as follows:

● Competitor risks
● Regulatory risks
● Raw material supply/price risks
● Currency risks
● Credit risks

The Company and its Domestic Operating Subsidiaries established and implemented policies
and protocols to make sure that these risks are monitored and controlled. More details of
these risks and specific management policies can be found in the Company’s SEC Form 17-A.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risk

Risk management is critical to the overall sustainability of any business operation. Major risks
should be identified and assessed, and the measures to mitigate these risks should be
integrated in the planning and decision-making of the Company and its Domestic Operating
Subsidiaries.

The liquor industry is highly dynamic, with preferences of its consumers shifting constantly.
Over the years, the Company has managed to remain competitive in terms of brand equity,
product portfolio, quality, and price by sustaining brand relevance, keeping attuned to
market trends, and pursuing product innovation.

Change in government regulations can also affect both operations and profitability. This is
managed by adhering to applicable laws and regulations, while pressure on profitability is
cushioned by appropriately increasing prices of products and improving manufacturing
efficiency through streamlining of production process and new technology adoption.

Meanwhile, the local supply and prices of molasses remain volatile given the current demand-
supply situation. These risks are addressed through close monitoring of raw material
requirements, covering purchases with forward supply contracts, and continuous broadening
of supply sources which includes importation of molasses and alcohol to augment shortages.
Currency risk from imported materials is minimized by active and prudent management of its
foreign exchange.

While most of the Company’s customers are on cash basis, programs to control risk of default
include the application of credit approvals, limits, and monitoring procedures. This is an
internal mechanism to monitor the granting of credit and management of credit exposures.
Where appropriate, the Company also obtains collateral or arranges master netting
agreements.

5
 Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries continuously look forward to various
strategies and management approaches that can be applied in order to maximize its ability
to generate revenue/economic value, thus sustaining yearly revenue growth. This will have
more economic impact to all the stakeholders of the Company and its Domestic Operating
Subsidiaries.

Climate-related risks and opportunities

The Company highly relies on raw materials sourced from agricultural crops, especially
molasses from sugarcane, which are vulnerable to climate-related risks such as typhoons and
drought. Since the Philippines is prone to typhoons, severe weather conditions can also result
in disruptions in logistics and supply chain operations.

Supply of raw materials is secured by keeping optimum physical inventory in storage and
engaging in purposive multi-continent sourcing. The Company also takes appropriate
procurement strategies to manage climate-related risks and ensure sustainability of its raw
materials.

In line with the SMFB Group's goal to further incorporate sustainability into its conduct of
business, the Company is studying how it can integrate more topics related to climate change
in Board and Management Committee agendas, risk frameworks, and strategies. As a
continuing commitment to this goal, the Corporate Governance Seminar attended by the
Board and the Company’s officers every year includes a discussion on sustainability reporting
which covers “Environment” as one of the key impacts.

Procurement Practices
Proportion of spending on materials from local suppliers

Disclosure 2023 2022 Units

Percentage of procurement budget 71 75 %

used for significant locations of
operations that is spent on local
suppliers

Impacts and Risks

GSMI and its Domestic Operating Subsidiaries operates in different regions and the presence
of their supply chain operations promotes inclusive growth, from materials procurement to
product distribution. The engagement of local suppliers and service providers in these areas
positively impact economic growth of local communities through employment and business
opportunities. However, unfavorable business conditions can also result to the contrary.

6
Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Local
Communities

Management Approach for Impacts and Risks

GSMI and its Domestic Operating Subsidiaries always endeavor to optimize sourcing of goods
and services at the local level. Contracting multiple local suppliers to ensure supply security
at most economical cost without compromising quality.

Furthermore, the Company constantly engages and communicates with its local suppliers to
create a venue to help them identify opportunities on how to expand their business and
improve their overall service. Through this collaborative approach, strong and long-term
partnerships have been cultivated with many of GSMI’s local suppliers.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue to seek more
opportunities to engage local suppliers and service providers to spur economic activity in
areas where they operate.

Anti-corruption
Training on Anti-corruption Policies and Procedures*

Disclosure 2023 2022 Units

Percentage of employees to whom the 100 100 %

organization’s anti-corruption policies and
procedures have been communicated

Percentage of business partners to whom the 100 100 %

organization’s anti-corruption policies and
procedures have been communicated

Percentage of directors and management 100 100 %

that have received anti-corruption training**

Percentage of employees that have received 100 100 %

anti-corruption training***
*GSMI Code of Conduct and Ethics contains anti-corruption policies. The policies have been cascaded across the
Company and its Domestic Operating Subsidiaries.
**The Corporate Governance Seminar attended virtually by GSMI directors and officers in 2023 includes a
discussion on Global and Local Economic, Political and Other Challenges which includes a discussion on risk
management.
***In 2023, all employees were required to attend the SMC People Related Policies Cascade wherein certain
policies including the Anti-Corruption and Sanctions Compliance Policy were thoroughly discussed.

7
Incidents of Corruption*

Disclosure 2023 2022 Units

Number of incidents in which directors were 0 0 Count

removed or disciplined for corruption

Number of incidents in which employees 0 0 Count

were dismissed or disciplined for corruption

Number of incidents when contracts with 0 0 Count

business partners were terminated due to
incidents of corruption
*The Company and its Domestic Operating Subsidiaries are not involved in any current proceedings, litigations,
claims, or arbitration that would materially affect its financial position or those of its subsidiaries or affiliates.

Impacts and Risks

Existence of corruption can compromise not only various aspects of business operations but
also its credibility towards its stakeholders. Corruption gives undue benefits and advantages
to unintended beneficiaries and also unsettles normal economic flows from the Company to
its stakeholders and vice versa.

Incidences of corruption may place the reputation of GSMI and the brands under its portfolio
at risk. This could lead to a weakened market position and strained relationship with its
various stakeholders.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risk

GSMI abides by its commitment to the value of “Malasakit” – in doing what is right. The
Company fully recognizes the importance of adhering to the highest standards of business
conduct in its overall growth and success.

As such, the Company is firmly committed to promoting a culture that fosters and maintains
the core values of fairness, transparency, accountability and integrity in the conduct of its
business and expects each of its directors, officers, managers and employees to observe with
zeal such core values in the performance of their duties, in their relationships with fellow
employees, and in all their dealings with shareholders, customers, suppliers, government,
and the general public. As expressed in the Company Code of Conduct and Ethics, GSMI has
established a fundamental standard of conduct and values consistent with the principles of
good governance and business ethics. These are disseminated to employees across the
organization to be embedded in the Company’s culture.

8
The Company Code of Conduct and Ethics can be found in this link:

https://www.ginebrasanmiguel.com/wp-content/uploads/2023/09/Code-of-Conduct-and-
Ethical-Business-Policy.pdf

The Company has in place policies and guidelines on Conflicts of Interest, Material Related
Party Transactions, Policy on Solicitation and Acceptance of Gifts, Anti-Corruption and
Sanctions Policy, Corporate Policy on Internal Control, and Whistleblowing. Grievance
channels on reporting concerns of employees and business partners are also available. This
ensures that occurrence of an inappropriate behavior that may compromise or undermine
the Company or any of its Domestic Operating Subsidiaries is avoided.

Details on these are published in GSMI’s official website via this link:

https://www.ginebrasanmiguel.com/policies-and-management/

Overall, the Company abides by its Corporate Governance Manual (CG Manual) that
institutionalizes the principles, policies, programs, and procedures of good corporate
governance in the entire organization. As stated in the CG Manual, “the Corporation does not
tolerate corrupt practices, as expressed in its Code of Ethics and various anti-corruption
policies and programs, which are disseminated to employees across the organization to
embed them in the Corporation’s culture.”

More details on the CG Manual can be found via this link:

https://www.ginebrasanmiguel.com/wp-content/uploads/2022/11/GSMI-Amended-
Manual-on-Corporate-Governance-2017.pdf

The foregoing values and policies are also made applicable to the Domestic Operating
Subsidiaries.

Opportunities and Management Approach

The Company imposes strict guidelines in its Code of Conduct and Ethics, and also requires
that “The Code shall be reviewed (annually) or as may be deemed necessary by the
Company.” The Company thus, recognizes the opportunity to regularly review and evaluate
guidelines, policies, and initiatives related to anti-corruption and its effectiveness. In addition,
more trainings and campaigns on anti-corruption are continuously being explored.

9
 ENVIRONMENT
Resource Management

Energy consumption within the organization

Disclosure 2023 2022 Units

Energy consumption (renewable sources) 563,524 520,819 GJ

Energy consumption (non-renewable) 755,699 732,802 GJ

Energy consumption (Electricity, Heating, 89,902 72,515 GJ

Cooling, Steam purchased)

Self-generated energy which are not 0 0 GJ

consumed

Sold Energy (Electricity, Heating, Cooling, 0 0 GJ

Steam)

Net Energy consumption 1,409,125 1,326,136 GJ

Reduction of energy consumption*

Disclosure 2023 2022 Units

Fuel Reduction 0 0 GJ

Electricity Reduction 1,858 167 GJ

Energy consumption (all sources) 1,858 167 GJ

*Accounts for projects newly implemented within the reporting year

Impacts and Risks

All facilities’ energy requirements for operations currently rely on liquid fuel and the electric
grid, with the exception of DBI. Aside from these sources, DBI, through its own wastewater
treatment plant, produces and harvests biogas, which is then used to displace and
significantly reduce its reliance on fossil-derived liquid fuels.

Although the Philippines is gradually increasing its clean energy capacity, the country is still
dominated by coal-fired power plants for energy generation. Thus, it is inevitable that
facilities indirectly generate greenhouse gases (GHG) emissions due to consumption of
electricity from the grid. In addition, expansion of business operations could result in an
increase in GHG emissions that could contribute to climate change.

10
Stakeholders: Local Communities, Regulators, Employees

Management Approach for Impacts and Risks

Energy saving programs were sustained and new initiatives have been implemented across
operations of the distillery and bottling plants. Examples of which are: (1) enhancement in
production efficiency that reduced energy consumption per liter of product produced, (2)
installation and usage of more energy-efficient machines and equipment, (3) replacement of
old and busted mercury-type and fluorescent bulbs with LED-type bulbs, (4) replacement of
old air-conditioning units with inverter types once old units have expired or have reached
their full-service life, (5) replacement of street lamps with solar powered alternatives, (6)
shifting to a more energy efficient controllers, and (7) automation of wastewater treatment
plant aeration system.

Higher production efficiency leads to more peso savings from lesser use of non-renewable
energy, thus, the Company and its Domestic Operating Subsidiaries prioritized projects and
programs that support it. Along with having production facilities well-maintained by a highly
trained production workforce, the programs implemented were intended and designed to
reduce equipment downtime and maximize production output.

Operation downtimes were minimized through the improvement in the operation of boilers,
installation of a biogas dryer that enhanced biogas quality in DBI, reconditioning of machines,
and effective preventive maintenance programs.

To maximize production output, DBI innovated in operating its fermentation facility to adapt
to the changing quality of molasses, consequently, increasing alcohol yield per metric ton of
molasses. In the bottling plants, there were machine improvements and automation of
processes that increased bottling capacity and efficiency.

In addition, various formal and informal trainings are provided to employees to ensure their
continuous career and personal development. Combined with years of experience and
expertise in their respective functions, these enable them to constantly apply operational and
machine improvements and innovations that can minimize downtime and increase the
efficiency of distillery and bottling operations.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries continue to closely monitor and
analyze their energy consumption to identify possible opportunities for innovations to further
improve energy efficiency. These include improvement in processes and investment in more
energy efficient machines, devices, and equipment. In addition, the Company and its
Domestic Operating Subsidiaries will continue to study the feasibility of investing in other
renewable energy sources (e.g. solar and wind) in order to further decrease the reliance on
non-renewable energy especially fossil-derived fuels.

11
Water consumption within the organization

Disclosure 2023 2022 Units

Water withdrawal 3,037 2,875 ML

Surface water 0 0 ML

Groundwater 2,695 2,591 ML

Seawater 0 0 ML

Rainwater 0.3 0 ML

Produced water 255 206 ML

Third-party water 88 78 ML

Water Discharged 2,319 2,278 ML

Stored Water 0 0 ML

Water Consumption 719 598 ML

Water Recycled and Reused 298 170 ML

% Water Recycled and Reused 10 6 %

Impacts and Risks

Water plays a vital role in the Company and its Domestic Operating Subsidiaries’ product
and non-product operations. Water for non-product mostly goes to domestic use,
maintenance of facilities, and cleaning of equipment, while a significant portion of water
consumption is discharged back to the environment, after being treated appropriately.

Although some of our bottling plants are located in water-stressed areas1, the Company and
its Domestic Operating Subsidiaries, ensures its operations are done sustainably and
continuously adhere to Philippine government water laws and regulations as guided by the
SMC Group's environmental policy and sustainability agenda.

Stakeholders: Local Communities, Regulators, Employees

1
https://neda.gov.ph/wp-content/uploads/2021/09/00-National-Databook-and-Roadmap_4June2021.pdf
12
 Management Approach for Impacts and Risks

The Company and its Domestic Operating Subsidiaries have implemented major water
conservation projects as early as 2015, which was reinforced by the SMC group’s launch of
the Water for All initiative 50 X 20252 back in 2017.

To support the project of the SMC group, the Company and its Domestic Operating
Subsidiaries established and strengthened their Water Resource Management (WRM)
Program in all facilities to identify and implement water reduction programs. This was
achieved through (1) elimination of water wastage across operations, (2) re-use and recycling
of more water, (3) harvest of rainwater, and (4) installation of more water-efficient
equipment. Management also identified key individuals to spearhead these initiatives and
monitor the reduction performance of each facility. Additional water meters were installed
in key areas of each facility in order to establish proper accounting of water usage for
baselining of data, which helped identify specific areas of water treatment and production
where water conservation and recycling programs could have a significant impact.

DBI, with its own WRM Program already in place prior to the implementation of SMC’s Water
for All initiative, achieved a 32% decrease in its plant water index (liter of water consumption
per liter of produced alcohol) since 2017. The decrease in overall water consumption was
because of the various programs implemented such as spent water recovery, balancing steam
production and power generation, rainwater harvesting, regular water monitoring and leak
audits, and water recycling and re-use. Meanwhile, in reference to SMC’s Water for All
targets, DBI is also at 33% achievement as of this reporting period.

In bottling facilities, the processes for washing and sanitation of bottles and equipment were
likewise reviewed. Equipment modification, revision to operational processes, and recovery
and re-use of water from other processes were applied in order to reduce water consumption
and the volume of wastewater to be treated. Continuous maintenance of the water
treatment facility and distribution lines likewise contributed to lesser water consumption.

Collectively, the Company and its Domestic Operating Subsidiaries have already achieved a
40% water reduction as of this reporting period versus their SMC Water for All target and is
aligned with SMC’s goal of achieving 50% water reduction by year 2025.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries are looking forward to have additional
rainwater harvesting facilities and a more efficient water recovery program that minimizes
the discharge of water and reduce overall water withdrawal.

Moreover, regular analysis of water consumption and quality trends will be continued in
order to come up with other opportunities for recycling and re-use. This includes conduct of

2
By 2025, SMC commits to reduce the total water consumption of water across the entire San Miguel Group
of Companies by 50%.
13
studies that aim to improve processes or replace equipment that consume significant
amounts of water.

Materials used by the organization

Disclosure 2023 2022 Units

Materials used by weight or volume 676,198 618,547 MT

Renewable 569,851 542,758 MT

Non-renewable 106,347 75,788 MT

Percentage of renewable material 84 88 %

Percentage of recycled input materials used 6 5 %

to manufacture

Recycled 37,586 31,935 MT

Impacts and Risks

DBI produces alcohol using molasses, a renewable material that comes from sugarcane and
a by-product of the sugar-making process. Molasses, which used to be a waste from the
sugar-making process, reduces the reliance on alternative agriculture-based feedstock like
cassava, corn and raw sugar. Since molasses is derived from sugarcane, supply availability
may be affected by natural calamities such as drought and flood. Furthermore, geopolitical
situations and new regulations can impact the importation of this raw material.

The Company also uses glass bottle containers for the packaging of its liquor products. Since
these are derived from non-renewable materials like sand and other minerals, the Company’s
use of these natural resources leads to depletion and consequently contributes to additional
GHG emissions to produce them.

Stakeholders: Local Communities, Suppliers, Regulators, Employees

Management Approach for Impacts and Risks

Demand forecasting across the supply chain is conducted regularly to enable production
planning for optimum operating efficiency and raw material sourcing. Furthermore, various
quality systems are implemented to ensure that raw materials from accredited suppliers pass
the quality parameters upon acceptance up to finished goods production.

In line with this, the Company addresses risks related to sourcing of its agriculture-based raw
materials (molasses) by closely monitoring both local and international markets, keeping
inventories at optimum level, and engaging in multi-continent sourcing. These ensure
14
continuous supply of raw materials for production requirements. More details on this risk can
be found in the main narrative in the Company’s SEC Form 17-A.

The Company also devotes considerable efforts to retrieve and re-use glass bottle containers
thereby significantly minimizing impact on the environment. Because of the nationwide
bottle retrieval programs, second-hand bottles accounted for 65% of total bottles used in
2023. Furthermore, collected bottles that are no longer apt for production are sold as glass
cullets to scrap buyers, for recycling into new ones. Through this cycle, glass bottle producers
decrease their reliance on virgin materials to create brand new bottles. Consequently, GHG
emissions are also reduced.

Opportunities and Management Approach

The Company will continue sourcing from multiple supply streams for molasses, and further
expand the supplier network of its other raw materials. For bottles, the Company will
continue to strengthen its retrieval activities and maximize re-use in production to save on
the use of new glass material. As a result, this initiative can contribute to lesser emissions and
mining activity due to production of new glass.

Ecosystems and biodiversity (whether in upland/watershed or coastal/marine)

Disclosure 2023 2022 Units

Operational sites owned, leased, managed in, 1 1 Count

or adjacent to, protected areas and areas of
high biodiversity value outside protected
areas*

Habitats protected or restored** 14 12 Hectares

IUCN Red List species and national 2 2 Species

conservation list species with habitats in Type
areas affected by operations***
*Distileria Bago, Inc. (DBI) is located along the coastal lines of Guimaras Strait.
**Mangrove Reforestation Area along the coastline of Guimaras Strait.
***Species inhabited in Guimaras Strait and categorized as (1) Critically Endangered as per International Union
for Conservation of Nature and Natural Resources (IUCN) Red List of Threatened Species 2018: Orcaella
brevirostris (Irrawaddy dolphin) (Iloilo-Guimaras Subpopulation); (2) Vulnerable as per IUCN Red List of
Threatened Species 2018: Dugong dugon (Dugong).

Impacts and Risks

DBI is located along the coast lines of Guimaras Strait, an identified Biodiversity Conservation
Site in Western Visayas by the Department of Environment and Natural Resources (DENR).
DBI recognizes that its operation, especially its air emissions and wastewater discharge, if
improperly managed, may pose a risk to the flora and fauna in the area.

15
Stakeholders: Local Communities, Regulators, Employees

Management Approach for Impacts and Risks

The Company, through DBI, ensures that its final treated effluent is always compliant with
DENR General Effluent Standard (GES) under DAO 2016-08 and the updated DAO 2021-19
discharged through a submarine pipeline to Guimaras Strait.

Sometime in the mid-1990s, DBI established a Mangrove Reforestation Area along the coast
lines where the distillery is located. It is now estimated to measure up to 14 hectares, with a
survival rate of 90% proving that the area has remained healthy. These mangroves were also
planted to contribute to the conservation of the natural biodiversity of Guimaras Strait and
reduce risk of flooding and soil erosion3. Regular tree planting within the vicinity is likewise
conducted every year.

Also, as part of its advocacy, DBI constantly monitors the coast line to ensure the surrounding
area is kept clean. This includes regular coastal cleanups conducted by DBI in collaboration
with the local government unit and volunteers from nearby communities. It is one of the
longest running corporate social responsibilities of GSMI, as part of its commitment to
environmental protection.

Opportunities and Management Approach

The Company, through DBI, continuously looks forward to possible expansion of its initiatives for
the conservation of Guimaras Strait as part of GSMI’s long-standing commitment of being a good
and responsible neighbor.

Environmental Impact Management

Air Emissions
GHG*

Disclosure 2023 2022 Units

Direct (Scope 1) GHG Emissions 54,055 52,414 Tonnes CO2e

Indirect (Scope 2) GHG Emissions 17,791 14,351 Tonnes CO2e

Emissions of ozone-depleting substances 0 0 Tonnes CO2e

(ODS)

3
https://blogs.worldbank.org/eastasiapacific/mighty-mangroves-of-the-hilippines-valuing-
wetland-enefits-for-risk-reduction-conservation
16
 Impacts and Risks

The Company and its Domestic Operating Subsidiaries recognize the prevalence of
greenhouse gases (GHG) as natural by-products of their overall operations. Their direct
(Scope 1) GHG emissions are derived from fuel combustion of generator sets and boilers,
while indirect (Scope 2) GHG emissions are derived from consumption of electricity
purchased from the national electric grid.

There are far-ranging effects of GHG emissions to the environment and health. These could
mainly translate to climate change. Extreme weather conditions could occur, affecting the
yield of agricultural crops used as raw materials and disrupt the transport of goods both local
and global.

Stakeholders: Local Communities, Regulators, Suppliers, Employees

Management Approach for Impacts and Risks

The distillery is able to reduce its GHG emissions through lesser consumption of fossil-derived
liquid fuel. While combustion of biogas and liquid fuels still has emissions, DBI’s generation
of biogas greatly lessens its use of petroleum fuels. DBI is also able to reduce its emissions
through capturing biogenic carbon dioxide (CO2) gas that is a by-product of fermentation in
alcohol-making. This gas is further processed into liquid CO2 and utilized by beverage
industries producing carbonated drinks.

In addition, bottling plants have also introduced various improvements in manufacturing

lines, leading to better operational efficiencies which translate into the reduction in energy
consumption and lower GHG emissions. In some facilities, boilers are fired using diesel fuel
which results in emissions with very low sulfur content, thus having lower GHG potential. For
other plants, fuel blending facilities and storage tanks have been installed to accommodate
the blending of low-sulfur fuel oil (LSFO).

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continuously explore available
technologies that could help improve the efficient use of energy. Through this, more energy-
saving initiatives could be explored to further reduce GHG emissions.

Air pollutants

Disclosure 2023 2022 Units

NOx 14 17 MT

SOx 213 103 MT

17
 Persistent organic Pollutants (POPs) 0 0 MT

Volatile organic Compounds (VOCs) 0 0 MT

Hazardous air pollutants (HAPs) 0 0 MT

Particulate Matter (PM) 11 10 MT

Carbon monoxide (CO) 9 8 MT

Impacts and Risks

Air pollutants, such as NOx and SOx, can emanate from the combustion of fuels used to power
the necessary machineries or equipment in various facilities. This could affect ambient air
quality and contribute to climate change. If not managed well and without the installation of
the proper equipment, emissions may also pose a health and safety risk to people and the
environment.

Stakeholders: Local Communities, Regulators, Employees

Management Approach for Impacts and Risks

The Company and its Domestic Operating Subsidiaries have placed necessary measures to
make sure that their air emissions are within relevant environmental standards. In
compliance with the requirements of the Department of Environment and Natural Resources
(DENR), they installed CCTV units to monitor the smoke emitted by the smokestacks from all
facilities. Boiler and generator emission monitoring, ambient air quality monitoring in all
bottling plants, and air sampling in DBI are also being conducted. In addition, other programs
to improve quality of air emission were implemented, to wit: (1) performing regular emission
testing and ambient air quality monitoring, (2) boiler, generator, and air pollution control
devices preventive maintenance and repairs (3) periodic cleaning of smokestacks, and (4)
desooting and hydro-testing procedures of boilers.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continuously explore available
technologies and analyze their air emission trends to come up with innovations in terms of
treatment and fuel consumption.

18
Solid and Hazardous Wastes
Solid Waste

Disclosure 2023 2022 Units

Total solid waste generated 11,619 11,298 MT

Reused 249 284 MT

Recycled 11,038 10,543 MT

Other Recovery Operations* 15 12 MT

Incineration (with energy recovery) 1 0 MT

Incineration (without energy recovery) 0 0 MT

Landfilling 308 311 MT

Other disposal Operations 8 148 MT

*Other recovery operations accounts for composted solid waste.

Impacts and Risks

Solid wastes are inherently generated from operations - from materials procurement to
disposal. Improper solid waste management could contribute to land and water pollution
while those transported to landfills could possibly cause land degradation, methane gas
production, and toxic substance leaching, among others. In addition, mismanagement of
waste may pose a potential risk to applicable health codes.

Stakeholders: Local Communities, Regulators, Employees

Management Approach for Impacts and Risks

To ensure reduction in solid waste disposal, systematic solid waste management procedures
are cascaded and implemented. All facilities have a Material Recovery Facility (MRF) to ensure
that wastes are properly segregated at source and recoverable wastes are prevented from
degrading. To enforce proper segregation, employees are oriented on the proper use of
garbage bins inside the facilities that are tagged and color-coded for easy identification. Solid
wastes are hauled and disposed of appropriately, while recoverable wastes such as cartons,
glass cullets and aluminum caps are sold to accredited scrap buyers, which are recycled or
reused, to lessen waste for disposal.

To support government initiative on waste reduction, the Company and its Domestic
Operating Subsidiaries has engaged a Producer Responsibility Organization and partnered
with a plastic waste diverter to recover at least 20% of its plastic footprint through offsetting.

19
Programs to reduce the plastic footprint of the Company’s products are currently being
explored to minimize environmental impact.

A purposive program is also on-going to expand digitalization of records and documents to

further reduce generation of paper waste. Employees are also highly encouraged to reduce
their carbon footprint. The Human Resources (HR) Department deploy various projects,
activities and learning sessions to create awareness and educate employees on the different
sustainable development initiatives of the business.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue to look for initiatives and
projects that aim to further maximize use of materials and by-products and the recovery of
recyclable materials, which will lead to lesser waste generated.

Hazardous Waste

Disclosure 2023 2022 Units

Total weight of hazardous waste generated 22 52 MT

Total weight of hazardous waste 33 25 MT

transported

Impacts and Risks

Apart from the solid wastes generated by facilities, some hazardous wastes are also
generated from daily operations. If not handled properly and mismanaged, these could pose
a risk to human health and the environment. Furthermore, improper disposal may lead to
regulatory penalties, sanctions and could undermine the Company’s reputation.

Stakeholders: Local Communities, Regulators, Employees

Management Approach for Impacts and Risks

Across all facilities of the Company and its Domestic Operating Subsidiaries, hazardous wastes
are collected, stored, and properly labelled in a Hazardous Waste Storage Facility, which is
regularly monitored and maintained by trained personnel. These are segregated with
secondary containment to ensure that no cross-contamination would occur. Furthermore, in
compliance with Republic Act 6969, otherwise known as the “Toxic Substances and
Hazardous and Nuclear Wastes Control Act of 1990, and its Implementing Rules and
Regulations, wastes are properly handled and treated by DENR-certified transporters and
treaters whose scope of work and responsibilities include the following:

● Conduct of laboratory analyses on the hazardous waste collected

20
 ● Joint-preparation of transport manifest form
● Processing, treatment, recycling or disposal within thirty (30) days from the time of
hauling
● Issuance of Certificate of Treatment/Recycle/Disposal after treatment of wastes

In addition, the distillery and bottling facilities have continuously looked for ways to lessen or
replace the use of hazardous materials in their operations. As an example, one initiative by
DBI in the past did not only eliminate the use of these chemicals, but also resulted in increased
efficiency of its distillation and fermentation processes.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries are always looking for ways to
eliminate or keep the use of hazardous materials at a minimum. These include adopting
innovations and technologies that can either reduce usage or further improve handling,
treatment and disposal of hazardous waste.

Effluents

Disclosure 2023 2022 Units

Total volume of water discharges 2,319 2,278 ML

Percent of Wastewater Recycled 10 6 %

Impacts and Risks

The wastewater discharges from facilities may contain contaminants, primarily organic
pollutants, that can affect the environment within the surrounding area. If left untreated,
these discharges can contribute to pollution and also alter the natural biodiversity bodies of
water where these are being discharged. Furthermore, non-compliance to these regulatory
standards may lead to possible penalties, sanctions and carry reputational risks for the
Company and its Domestic Operating Subsidiaries.

Stakeholders: Local Communities, Regulators, Employees

Management Approach for Impacts and Risks

The Company and its Domestic Operating Subsidiaries ensure that their water discharges are
compliant with all existing regulations. Compliance of effluent quality with the General
Effluent Standards of 2016 and 2021 is ensured through regular in-house and third-party
water sampling and analysis, which enable monitoring of plant’s wastewater treatment
performance and trigger adjustment to operations, if necessary. Pollution Control Officers
are also sent to external training to enable them to adopt the best practices in the industry.

21
In addition, some of the partially treated slops from the distillery are further processed and
fortified with additional nutrients to become liquid fertilizer. These, in turn, are used and
applied by local sugarcane farmers to optimize crop yields, thereby creating a cycle of
returning to soil the same nutrients that were depleted during sugarcane growth until
harvesting.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continuously monitor their
wastewater discharge quality and quantity. Proven post-treatment technologies are
continuously evaluated, recycling initiatives pursued and other water conservation projects
could be considered to lessen overall wastewater discharge. DBI’s wastewater, if further
treated using emerging technologies, could be re-used by nearby farming communities as
irrigation water.

Environmental Compliance
Non-compliance with Environmental Laws and Regulations

Disclosure 2023 2022 Units

Total amount of monetary fines for non- 0 0 PhP

compliance with environmental laws and/or
regulations

No. of non-monetary sanctions for non- 0 0 Count

compliance with environmental laws and/or
regulations

No. of cases resolved through dispute 0 0 Count

resolution mechanism

Impacts and Risks

The Company and its Domestic Operating Subsidiaries recognize that their operations are
subject to different environmental laws and regulations. The imposition of a new or more
stringent regulation by either the local or national government can likewise lead to additional
capital expenditures, operating expenses and potential delays in facility development and
construction. Non-compliance to existing and new laws may result in fines and/or sanctions
including monetary penalties and possible suspension of operations that may also
compromise the reputation of the Company for the inadvertent damage to the environment.

Stakeholders: Local Communities, Regulators, Employees, Investors

22
 Management Approach for Impacts and Risks

All facilities adhere to all applicable environmental laws and regulations to safeguard their
operations, including but not limited to the following:

● RA 9275 (Philippine Clean Water Act)

● PD 1067 (Water Code of the Philippines)
● RA 8749 (Philippine Clean Air Act)
● RA 6969 (Toxic Substances and Hazardous and Nuclear Waste Control Act)
● RA 9003 (Ecological Solid Waste Management Act).
● PD 1586 (Establishing an Environmental Impact Statement System, including other
environmental management related measures and for other purposes)
● Other applicable laws and DENR Administrative Orders (DAO)

Appropriate committees are in place and pollution control officers are assigned in each of the
facilities to ensure strict implementation of all pertinent environmental regulations in every
aspect of operations. And in the event that a violation occurs, all necessary actions, measures
and policy changes are immediately taken to address the issue. Furthermore, proper
investigation is conducted to determine the root cause to prevent any recurrence.

In addition, the Company is working to achieve full ISO 14001:2015 Environmental

Management System (EMS) certification for all its facilities. Currently, Cabuyao, Sta. Barbara,
Mandaue, and Ligao plants have secured their respective certifications while the other
facilities are continuing with their respective EMS journey.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries are always looking into the
improvement of their environmental practices and possibly for new and emerging
technologies and methodologies for better operational efficiencies. They will continue to
conduct strict monitoring and implementation of pertinent environmental laws and keep
themselves updated with any changes and revisions in applicable government regulations.

23
 SOCIAL
Employee Management
Employee Hiring and Benefits

Employee data

Disclosure 2023 2022 Units

Total number of employees 1258 1210 Headcount

a. Number of female employees 360 337 Headcount

b. Number of male employees 898 873 Headcount

Attrition rate 3% 1% Rate

Ratio of lowest paid employee against 1.07:1 1.08:1 Ratio

minimum wage

Employee Benefits
The Company and its Domestic Operating Subsidiaries provide all benefits mandated by law
to employees and do not discriminate based on gender.

List of Benefits Y/N % of female employees % of male employees

who availed for the year who availed for the year

SSS Y 100% 100%

PhilHealth Y 100% 100%

Pag-IBIG Y 100% 100%

Parental leaves* Y 3.84% 5.71%

Vacation leaves** Y % Overall Utilization Rate**** = 91.74%

Sick leaves*** Y % Overall Utilization Rate**** = 54.72%

*Maternity, paternity and solo parent leaves are covered in this item.
**The Company and its Domestic Operating Subsidiaries also offer commutation of leave credits as a benefit for
employees.
***% Overall Utilization Rate = (Total number of availed leave / Total number of entitled leave) x 100%

24
 Impacts and Risks

The Company and its Domestic Operating Subsidiaries as employers create a positive impact
on every employee, including their families, by providing fair compensation, appropriate
benefits and a healthy work environment where their careers and personal growth are
supported. However, as with any organization, there is always a risk of attrition by employees
due to voluntary or involuntary reasons, which could result in some disruption in business
operations.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risks

The Company and its Domestic Operating Subsidiaries believe in providing a healthy and
conducive work environment. Thus, a comprehensive remuneration and benefits package is
provided to help retain productive talents and maintain high employee satisfaction.
Moreover, periodic reviews are done to ensure that employee recruitment and retention
strategies are always aligned with business objectives.

Employees are entitled to benefits such as, but not limited to, leaves, loans and financial
programs, personal and group insurance programs, burial assistance for employees and
dependents, and medical benefits through HMO coverage consisting of annual physical
examinations, physician consultations, diagnostic procedures, and hospitalization. For
vacation and sick leaves, the Company and its Domestic Operating Subsidiaries also offer a
commutation option to their employees.

The Company manages attritions through (1) various employee engagement and work-life
integration programs, (2) specialized training and leadership programs geared towards
enhancing employee competence, (3) clear communication channels for employees to raise
their concerns and give feedback, and (4) a safe and healthy work environment conducive for
individual and collective growth.

In line with COVID-19 restrictions easing in 2023, GSMI and its Domestic Operating
Subsidiaries continued with its mitigation of the COVID-19 virus by implementing the health
and safety protocols as needed.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue to monitor and comply
with applicable labor laws as well as adjust and improve their employee compensation
packages based on benchmarks with the industry.

25
Diversity and Equal Opportunity

Disclosure 2023 2022 Units

% of female workers in the workforce 29 28 %

% of male workers in the workforce 71 72 %

Number of employees from indigenous Not being tracked as of the Headcount

communities and/or vulnerable sector* moment
*Systems are being put in place for data gathering in subsequent reporting cycles.

Impacts and Risks

The Company and its Domestic Operating Subsidiaries are equal opportunity employers who
promote diversity and inclusion. They recognize that the organization can benefit more from
a workforce with diverse backgrounds because it cultivates creativity, innovation and
collaboration in achieving business objectives. Employee hiring is based on a clear set of
qualifications regardless of age, gender, race or social and economic background.

Possible risks of hiring diverse set of individuals are gaps in communication, acceptance of
differences in culture, values and religion, and discrimination.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risks

GSMI’s Human Resource (HR) Department recognizes the importance of hiring the most
suitable employees for specific positions. The recruitment process does not discriminate
based on any social, physical or cultural attributes of the candidate. Deliberation and
assessment of job fit is based solely on qualifications to perform the role.

Furthermore, employees are treated equally and provided the same opportunities to grow
and advance their careers. The Company and its Domestic Operating Subsidiaries do not
discriminate but recognize individuals on the basis of performance and results.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue to evaluate and improve
their hiring process and protocols to ensure engagement of a diverse set of competent
employees.

26
Employee Training and Development

Disclosure 2023 2022 Units

Total training hours provided to 80,713 61,548 Hours

employees*

a. Female employees 22,704 16,410 Hours

b. Male employees 58,009 45,138 Hours

Average training hours provided to 64.2 50.9 Hours/Employee

employees

a. Female employees 63.07 48.69 Hours/Employee

b. Male employees 64.60 51.70 Hours/Employee

*Total training hours include estimated training hours for employees under developmental assignment.

Impacts and Risks

Competent and highly skilled workers are essential for the continued growth and success of
the Company and its Domestic Operating Subsidiaries. Enhancing skill sets of employees
improves technical efficiency and increase overall productivity. On the contrary, inadequately
trained employees could result in poor customer service, lower organizational productivity,
and increased employee attrition. These individuals may also impact the Company’s brand
and reputation.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risks

It is GSMI’s policy to provide an environment conducive to the development of employees in

order for them to contribute effectively toward the attainment of business objectives as well
as their individual career goals. Training programs are classified into formal and informal
training.

Formal training includes corporate training programs, functional/technical school programs,

and e-learning. The Company has established an in-house technical school that covers topics
across multiple disciplines, one of which specifically develops alcohol sensory experts and
strengthens employee skills in liquor-making. Moreover, there are selected number of
employees enrolled in internationally recognized courses related to distillation, gin and
alcohol making, raw material and packaging to constantly expand the technical expertise of
its personnel.

On the other hand, informal training includes on-the-job training, developmental or special
assignments, that may involve job rotation or transfer under a coaching and mentoring set-
up.
27
To ensure purposive implementation of training programs, immediate superiors conduct a
Training Needs Assessment (TNA) to determine the training programs that are relevant to the
employee’s development. The results of the TNA are documented in the employee’s
individual development plan.

GSMI sustains the use of virtual learning to maximize employee engagement and
development. The Company utilizes various platforms to provide effective and purposive
training to enhance competencies of its employees. Among the programs conducted were
Liquor Technology, Shopper Marketing, Basic Selling Systems and Procedures, Liquor
Manufacturing Operations, SAP Plant Maintenance, Equipment Maintenance, Defensive
Driving and Motor Vehicle Accident Investigation.

Furthermore, GSMI continues to promote employees’ health, well-being, and personal

development. There are programs on Personal Effectiveness, Code of Champions, Work-Life
Harmony, and “Malasakit” Learning Sessions. Alternative topics include Financial Wellness,
Fostering Creativity at Work, and Effective Communication & Presentation Skills, among
others. In the end, GSMI invested an average of 64.2 training hours per employee for the full
year.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue to implement the TNA
for regular assessment of needed training relevant to employee development.

Labor-Management Relations

Disclosure 2023 2022 Units

% of employees covered with Collective 26 23 %

Bargaining Agreements*

Number of consultations conducted with 4 2 Count

employees concerning employee-related
policies**
*Based on regular employee count.
**This only considers the actual number of labor meetings or consultations for Collective Bargaining Agreements
held as a group.

Impacts and Risks

GSMI and its Domestic Operating Subsidiaries respect employee rights to freedom of
association and collective bargaining. Good labor-management relations are essential in
providing a safe and secure working environment for employees. However, risk related to
labor disputes cannot be avoided completely. In such a case, unresolved issues can affect
employee productivity, business performance and also reflect unfavorably on the Company’s
image and reputation.

28
Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risks

The Company and its Domestic Operating Subsidiaries maintain a peaceful and harmonious
labor-management relation with their employees by upholding their right to organize and
form labor unions freely.

Furthermore, platforms for grievances are well-established and all applicable labor laws are
complied with. The labor management council, composed of representatives from the labor
union, provides employees an avenue to express their respective concerns. Meetings are held
regularly to address these and to ensure that there is constant engagement. Other online
communication channels were also made available for employees to provide an alternative
venue to interact with management and raise their concerns.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries are continually looking for ways to
build better labor-management relations and enhance employees’ overall work experience.

Workplace Conditions, Labor Standards, and Human Rights

Occupational Health and Safety

Disclosure 2023 2022 Units

Safe Man-Hours* 8,241,675 7,898,788 Man-hours

No. of work-related injuries 17 30 Count

No. of work-related fatalities 0 0 Count

No. of work-related ill-health 69 16 Count

No. of safety drills 41 39 Count

*Note that in the 2022 Sustainability Report, the Safe Man-Hours was reported as accumulated hours.
Meanwhile, the same data in this year’s report are presented as full-year Safe Man-Hours only.

Impacts and Risks

Employees, especially those working in the manufacturing plants, are exposed to various
occupational hazards. These hazards, if not safeguarded and controlled, may cause injuries,
fatalities and ill-health that can affect operations. Furthermore, employees may also be
exposed to different psychological and emotional stresses in the workplace, which can affect
employee productivity and overall wellness.

29
Stakeholders: Employees, Suppliers, Business Partners, Regulators, Local Communities,
Customers

Management Approach for Impacts and Risks

Safety of employees is of utmost importance. Therefore, a comprehensive Occupational

Safety and Health (OSH) Management System, which adheres to all government regulations,
is implemented and strictly enforced in all facilities. This is evident in the training hours
dedicated for OSH, which ensured the safety of all employees.

The safety officer assigned in each of the facilities of the Company and its Domestic Operating
Subsidiaries monitor and ensure strict compliance of all OSH policies. They conduct regular
reviews and audits to identify potential hazards and proactively address all issues
immediately. Safety orientations, such as fire and earthquake drills, are held at least twice a
year in all facilities and offices. All employees are also required to undergo an 8-hour OSH
training, which is conducted by the Company’s Safety and Security Officers.

The Company and its Domestic Operating Subsidiaries are committed to improve health
services in compliance with Occupational Health mandates, such as adequacy in Occupational
Health (OH) personnel, number of treatment rooms, availability of medical supplies and
equipment. Medical personnel are assigned in the clinic of each facility, and every employee
is required to undergo Annual Physical Examination (APE). To further ensure the well-being
of employees, insurance and medical benefits are provided to, or can be availed by,
employees.

In addition, a variety of health and wellness programs are made accessible to employees to
allow relaxation and decompression. These are designed to ensure that the general well-
being of employees is maintained or improved through proper diet, exercise, and stress
management. HR also deploys various learning sessions and implements activities using
online platforms to foster camaraderie and develop stronger bonds among employees, which
are likewise considered essential in the workplace.

Ensuring the health and safety of employees inside and outside of the workplace remains the
primary objective of the Company and its Domestic Operating Subsidiaries. Necessary health
protocols are still implemented in all facilities to protect employees and prevent transmission
of the COVID-19 virus. This includes mandatory wearing of PPEs prior entry to any office or
facility, handwashing and disinfection.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue their efforts to improve
occupational health and safety measures, always aiming to prevent any form of incidents and
keep injuries to zero. As the government lifted the state of public health emergency due to
COVID-19 last July 2023, employees will still abide with the minimum health protocols to
continuously minimize COVID-19 cases and ensure that employees and workplaces are safe.

30
Labor Laws and Human Rights

Disclosure 2023 2022 Units

No. of legal actions or employee grievances 0 0 Count

involving forced or child labor

Do you have policies that explicitly disallow violations of labor laws and human rights (e.g.
harassment, bullying) in the workplace?

Yes, as cited in the Company Code of Conduct and Ethics and the Policy on Child and Forced
Labor. Kindly check the links below:

https://www.ginebrasanmiguel.com/wp-content/uploads/2023/09/Code-of-Conduct-and-
Ethical-Business-Policy.pdf

https://www.ginebrasanmiguel.com/wp-content/uploads/2023/09/Policy-on-Child-and-
Forced-Labor.pdf

Topic Y/N If Yes, cite reference in the company policy

Forced labor Y “Each employee shall comply with, and respect all
applicable laws, rules and regulations governing the
Child labor Y Company’s business, in all jurisdictions where such is
concluded.”
Human Rights Y

Impacts and Risks

Disregard for forced and child labor, and human rights could undermine the reputation of the
Company. Any violation of these laws and regulations could lead to sanctions, penalties and
legal liabilities. It can also affect employee productivity and disrupt overall operations.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risks

GSMI and its Domestic Operating Subsidiaries strictly adhere to the Code of Conduct and
Ethics, which states that the Company is firmly committed to the promotion of a culture that
fosters and maintains the core values of fairness, transparency, accountability and integrity
in the conduct of its business. All directors, officers and employees are expected to observe
with zeal these core values in the performance of their duties.

Therefore, all applicable laws, rules and regulations on forced labor, child labor and anything
that violates human rights, including, but not limited to, sexual harassment, verbal or physical
abuse, and discrimination, are strictly implemented. Filed complaints or reported incidents

31
undergo due process to determine validity. Thereafter, appropriate sanctions and corrective
actions are applied and administered accordingly.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue to comply with all
applicable labor laws and be vigilant against any violations of labor and human rights within
the organization including their business partners.

Supply Chain Management

Do you have a supplier accreditation policy? If yes, please attach the policy or link to the policy.

While the SMC group has its group-wide supplier accreditation policy, it will not be disclosed
as it is deemed confidential. The supplier accreditation policy demands that an accredited
supplier abide by statutory requirements as well as standards set by the Company and its
Domestic Operating Subsidiaries. Each supplier contract includes a clause that ensures
adherence to laws that tackle topics such as, but not limited to, to environmental
performance, forced labor, child labor, human rights, bribery, and corruption.

GSMI and its Domestic Operating Subsidiaries have a Code of Conduct and Ethics that extends
to their suppliers. Kindly check the links below for reference:

https://www.ginebrasanmiguel.com/wp-content/uploads/2023/09/Code-of-Conduct-and-
Ethical-Business-Policy.pdf

In addition, suppliers are also mandated to comply with the SMC group Supplier Code of
Conduct. The relevant provisions of which are cited in the table below.

https://www.sanmiguel.com.ph/storage/files/reports/SMG_Supplier_Code_of_Conduct_for
_Corporate_Website.pdf

Do you consider the following sustainability topics when accrediting suppliers?

Topic Y/N If Yes, cite reference in the supplier policy

Environmental performance Y “San Miguel Group (“SMG”) Suppliers shall

comply with environmental laws and
regulations applicable to their operations
worldwide.”

Forced labor Y “SMG Suppliers must not utilize or benefit any

way from forced or compulsory labor.”

Child labor Y “SMG Suppliers shall comply with local

32
 minimum working age laws and requirements
and not employ child labor.”

Human rights Y “SMG Suppliers shall treat each employee with

dignity and respect.”

Bribery and corruption Y “SMG Suppliers shall conduct their business in

accordance with the highest standards of
ethical behavior.”
“SMG Suppliers shall not offer, make, or
receive any form of bribe in order to win or
retain business, or seek to influence a business
or regulatory decision inappropriately.”

Impacts and Risks

The supply chain covers various aspects of the Company’s business operations from raw
material sourcing, production, warehousing until product delivery. As these processes and
activities are handled by both direct employees and legitimate third-party suppliers and
contractors, the Company effectively contributes to economic value generation through
employment, purchase of input materials, and from availing ancillary services that support
operations of the Company and its Domestic Operating Subsidiaries.

An employee's inconsistency, or a supplier’s inability, to deliver contractual obligations can

result in operational disruptions. Moreover, the Company being associated with suppliers and
contractors that do not comply with environmental, labor, and other applicable government
regulations could potentially compromise the reputation of brands and the Company.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Investors, Customers

Management Approach for Impacts and Risks

Proper screening and accreditation of suppliers and contractors are performed to guarantee
quality and compliance with applicable government laws and regulations. A multi-level
evaluation process filters the most appropriate applicants based on internal guidelines. This
ensures that the Company and its Domestic Operating Subsidiaries only engage with parties
that source their products responsibly to secure the sustainability of the supply chain. The
Company also conducts supplier performance evaluation to monitor services and quality of
materials are all within the Company’s requirements.

Similarly, direct employees are monitored, mentored and provided with various training to
ensure consistent performance of their roles. They are also guided by GSMI’s core values to
deliver results and do their best. A detailed discussion on this topic may be found in the
training and development section.

33
It is also noteworthy to mention that some of the Company’s suppliers have implemented
various programs to lessen their own carbon footprint, and to contribute to the achievement
of the 2030 UNSDG. For raw materials suppliers, initiatives include sustainable sourcing,
water conservation, land management and transition towards renewable energy while
packaging suppliers are focused on further optimizing input materials and shifting towards
the use of recyclable or renewable alternatives.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue enhancing supplier
assessment practices and further integrate other sustainability topics in its accreditation and
monitoring process.

Relationship with Community

Significant Impacts on Local Communities

Operations with
Collective or
significant Does the
individual
(positive or particular
rights that
negative) impacts Vulnerable operation
have been Enhancement
on local groups have
Location identified a measures
communities (if impacts on
particular
(exclude CSR applicable)* indigenous
concern for
projects; this has people
the
to be business (Y/N)?
community
operations)

Sta.
Barbara,
Pangasinan,
Health,
Cabuyao,
Education, and
Laguna,
Livelihood
Cauayan, Local hiring
Projects
GSMI, EPSBPI Isabela, Not for
No
& DBI Ligao City, applicable applicable
Constant
Albay, jobs
engagement
Mandaue
with
City, Cebu,
communities
Bago City,
Negros
Occidental

Sales offices Several Not No Local hiring Health,

34
 locations applicable for Education, and
across the applicable Livelihood
Philippines jobs Projects
*Vulnerable sector includes children and youth, elderly, persons with disabilities, vulnerable women, refugees,
migrants, internally displaced persons, people living with HIV and other diseases, solo parents, and the poor or
the base of the pyramid (BOP; Class D and E)

For operations that are affecting Indigenous Peoples (IPs), indicate the total number of Free
and Prior Informed Consent (FPIC) undergoing consultations and Certification Preconditions
(CPs) secured and still operational and provide a copy or link to the certificates if available:
NOT APPLICABLE

Certificates 2023 2022 Units

FPIC process which is still undergoing Not Applicable Not Applicable Count
consultations

CP secured Not Applicable Not Applicable Count

Impacts and Risks

Although the Company and its Domestic Operating Subsidiaries do not have operations
affecting ancestral domains of indigenous people or other vulnerable groups, they recognize
the potential direct and indirect impacts on nearby communities. Thus, any untoward
incident could disrupt the peaceful co-existence of both parties and possibly compromise the
Company’s reputation.

Stakeholders: Local Communities, Regulators, Employees

Management Approach for Impacts and Risks

The presence of the Company and its Domestic Operating Subsidiaries is not limited to where
their six production facilities are located, it also extends to all communities covered by their
distribution network. Thus, having a harmonious and collaborative relationship with the local
government and communities where the facilities are situated and the products distributed,
are essential to sustaining the business. As such, any potential socio-economic and
environmental impacts on, and risks in, areas of operation are monitored and appropriately
managed.

Furthermore, this expanded coverage of business operations translates to value creation

through direct and indirect creation of jobs, increase in economic activity, and contributions
to local business tax, among others, thereby promoting inclusive growth in areas where GSMI
products are available.

35
 Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries will continue to explore other areas
where they can assist communities to promote inclusive growth.

Customer Management

Customer Satisfaction
This section is a material topic to the Company and its Domestic Operating Subsidiaries. They
deploy various strategies such as Focus Group Discussions (FGDs), market studies to stay
updated with customer preferences and keep abreast with the latest trends. However, due
to the proprietary nature of this information, the results will not be disclosed, instead the
relevant management approaches will be discussed in this section.

Impacts and Risks

The Company places a premium on delivering the best product value to keep a high level of
customer satisfaction. The key attributes that affect customer satisfaction are quality,
affordability, product safety and availability. Low customer satisfaction may result in a decline
in sales and brand preference, negatively affecting business performance and financial
position.

Stakeholders: Customers, Employees, Suppliers, Business Partners, Regulators

Management Approach for Impacts and Risks

All products of GSMI undergo stringent quality assurance protocols to consistently produce
high quality products. Through continuous process and product innovation, the existing
formulation is improved and the product portfolio is updated based on evolving consumer
preference. Because of this, GSMI brands have remained relevant, earning continued
patronage.

The Company performs various market researches and surveys to ensure that customer
satisfaction is kept high and marketing campaigns effective. The insights from these
researches and surveys serve as inputs to improving existing products and in addressing
prevailing customer concerns. Similarly, the findings from these researches are used to
develop new products based on emerging trends. GSMI Customer Care contact number and
email address are available for any inquiries, feedback or suggestion on products and
services.

36
 Opportunities and Management Approach

GSMI will continuously pursue product innovation, process improvements and expand
availability to further enhance overall customer satisfaction. Moreover, the Company will
continue to develop and create products that meet the constantly changing preferences of
the consumer.

Health and Safety

Disclosure 2023 2022 Units

No. of substantiated complaints on product 5 4 Count

or service health and safety*

No. of complaints addressed 5 4 Count

*Substantiated complaints include complaints from customers that went through the organization’s formal
communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon
by government agencies.

Impacts and Risks

The Company is committed in assuring the safe consumption of all its products. However, it
recognizes that perception on product quality may be affected even by unverified
information pertaining to contamination, human error and improper handling among others.
This may result in product complaints, reputational damage to brands and reduction in sales.
On the other hand, zero or minimal complaints will result in continued customer trust and
patronage.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Local Communities,

Customers

Management Approach for Impacts and Risks

GSMI has established its reputation as a company that manufactures high-quality liquor
products. It adheres to all applicable statutes and government regulations and possesses all
required permits and licenses to operate its facilities. All raw materials and packaging
materials conform to quality standards and specifications prescribed by the Company and
regulators. Moreover, a standardized production process and multi-point quality assurance
checks ensure product quality that is consistent and always safe for human consumption.

The Company and its Domestic Operating Subsidiaries have achieved numerous certifications
that validate the quality of the processes and products such as:

● International Organization for Standardization (ISO),

● Good Manufacturing Practices (GMP)
● Hazard Analysis and Critical Control Points (HACCP) Accreditation
37
 ● Halal
● Food Safety Systems Certification (FSSC)

In addition, two out six facilities are currently working on their ISO 14001:2015 certification
or the “Environmental Management System” to further improve implementation of
environmental practices. Correspondingly, this will contribute to the preservation and
protection of the environment even beyond corporate boundaries.

The Company and its Domestic Operating Subsidiaries are working towards obtaining other
certifications to fully implement an Integrated Management System (IMS) that guarantee
product and service quality, productivity, profitability and sustainability. Details of the IMS
Policy is published in GSMI’s official website via this link:

https://www.ginebrasanmiguel.com/integrated-management-system-policy/

As for, handling reported product defects, a formal investigation is immediately launched and
representatives from the Company quickly reach out to the complainant. The submitted or
collected samples are subjected to various physico-chemical and sensory analysis.
Furthermore, comprehensive product traceability, root-cause analysis and simulations are
likewise carried out to definitively determine the validity of the claimed defect. Trade checks
and product recalls are done as necessary based on the results of evaluation.

Opportunities and Management Approach

The Company and its Domestic Operating Subsidiaries consistently seek to improve by
upgrading qualifications and adopting world-class standards of operations and business
processes. Management continues to support initiatives to acquire certifications with respect
to the quality and safety of the products.

Marketing and Labelling

Disclosure 2023 2022 Units

No. of substantiated complaints on marketing 0 0 Count

and labelling*

No. of complaints addressed 0 0 Count

*Substantiated complaints include complaints from customers that went through the organization’s formal
communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon
by government agencies.

Impacts and Risks

GSMI takes particular care to not misrepresent itself or its products to its customers and other
stakeholders. Therefore, the Company complies with the standards set by regulating bodies

38
in all its marketing and advertising campaigns. As with similar products, any form of substance
abuse or over-consumption of such product by an irresponsible individual can lead to
temporary loss of sobriety and may cause possible health issues in the future.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Local Communities,

Customers

Management Approach for Impacts and Risks

GSMI seeks to protect consumers from these risks so steps are taken to ensure that products
are consumed in a responsible manner. The Company adheres to the regulations set by the
Ad Standards Council (ASC), ensuring that all relevant advertising and promotional materials
are endorsed and approved prior to release. The prescribed “Drink Responsibly” statement
appears in all TV, radio, digital commercials and other applicable advertising and promotional
materials.

In addition, product labels abide to all regulations issued by government agencies, such as
the Philippine Food and Drug Administration (FDA) and the Department of Trade and Industry
(DTI).

Opportunities and Management Approach

GSMI is constantly exploring ways to further promote responsible drinking, especially in the
marketing of its product.

Customer privacy

Disclosure 2023 2022 Units

No. of substantiated complaints on customer 0 0 Count

privacy

No. of complaints addressed 0 0 Count

No. of customers, users and account holders 0 0 Count

whose information is used for secondary
purposes

Impacts and Risks

GSMI respects and upholds data privacy rights and ensures that all personal data collected,
including those from or about the customers, are processed pursuant to provisions of the
Data Privacy Act of 2012, its Implementing Rules and Regulations and issuances of the

39
National Privacy Commission (NPC) [collectively, the “Privacy Laws”]. The Company ensures
that the Privacy Laws are complied with.

A breach of customer privacy could compromise personal security and safety. Furthermore,
violation of the Data Privacy Act may result in sanctions, penalties, and could undermine the
Company’s reputation, and even disrupt certain aspects of business operations.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Local Communities,

Customers.

Management Approach for Impacts and Risks

To ensure strict implementation of the Privacy Laws, the Company has adopted a Personal
Data Privacy Policy (“Privacy Policy”), which was approved by its Board of Directors on May
25, 2017. Pursuant thereto, the Company also appointed a Data Protection Officer (DPO) who
is responsible for ensuring the Company’s compliance with applicable laws and regulations
for the protection of data privacy and security. The Company has implemented programs to
ensure compliance with the Privacy Laws and Privacy Policy, including, but not limited to, the
following:

● Privacy impact assessments for the data processing systems/data processes of the
Company and its Domestic Operating Subsidiaries;
● Implementation of organizational, physical and technical security measures to
safeguard personal information;
● Data privacy awareness activities through the holding of data privacy trainings and
orientation for employees, and the celebration of the Privacy Awareness Week;
● Revision of Company identification cards and other forms to contain only relevant
personal information;
● Inclusion of privacy statements and notices in the Company’s official website, brand
websites, relevant corporate documents (employment application forms, visitor
registration, CCTV placements in plants, dealership application and related
documents, etc.) and promo or advertising materials/activities (Ngiting Instanalo,
Ngiting Suki Raffle Promo, Ginumanfest, World Gin Day, and Vino Kulafu Lakas Panalo
Promo); and
● Inclusion of data privacy provision in contracts, as may be applicable;

Opportunities and Management Approach

GSMI constantly evaluates its policies to ensure that they continue to secure customer
information and that the policies are updated and compliant with current laws and
regulations.

40
Data Security

Disclosure 2023 2022 Units

No. of data breaches, including leaks, thefts 0 0 Count

and losses of data

Impacts and Risks

GSMI recognizes the importance of strict data security policies, which, if neglected or not
strictly implemented, may lead to data breaches such as data leaks, thefts, and losses.
Possible consequences of data breaches may include, but are not limited to, loss of
intellectual property, reputational damage to the Company, and disruption in business
operations.

Stakeholders: Employees, Suppliers, Business Partners, Regulators, Local Communities,

Customers

Management Approach for Impacts and Risks

The Company and its Domestic Operating Subsidiaries are guided by SMC’s corporate policies
on information security, which state that they should protect the confidentiality, integrity,
availability, and legality of SMC’s electronic data and their information technology and
communications assets. This includes equipment and network systems that stores and/or
transports data.

The policy focuses on the protection of information from unauthorized access to or

modification of data, whether in storage, during processing, or while in transit. There are also
protective measures implemented to detect and counter threats. All employees, consultants,
and contractors are expected to abide by the information security policies and the acceptable
use guidelines for all equipment and other related data that have been entrusted to them in
their respective line of work.

In addition, the Company has a Personal Data Privacy Policy in place. In the event of discovery
of possible signs of data breaches, the employees and agents of the Company involved in the
processing of personal data shall immediately report the facts and circumstances to the DPO
for verification and investigation. All security incidents and personal data breaches shall be
documented through written reports. In the case of personal data breaches, a report shall
include the facts surrounding an incident, the effects of such incident, and the remedial
actions taken by the Company.

More details about personal data security can be found in the Personal Data Privacy Policy of
GSMI, which may be accessed through the link below:

https://www.ginebrasanmiguel.com/wp-content/uploads/2019/02/Personal-Data-Privacy-
Policy.pdf

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 Opportunities and Management Approach

There is always an opportunity to improve the strength and security of Company databases
and security systems through adaptation of new software and encryption of computers and
servers. These are constantly being pursued by the Information Technology (IT) department,
guided by SMC’s Corporate IT group.

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 UN SUSTAINABLE DEVELOPMENT GOALS
Product or Service Contribution to UN SDGs
Key products and services and its contribution to sustainable development.

Key Products and Societal Value / Potential Negative Management

Services Contribution to UN Impact of Approach
SDGs Contribution to Negative Impact

Alcoholic N/A Alcohol abuse GSMI puts

beverages considerable efforts
on responsible
drinking through its
advertising materials.
The Company also
abides by all
applicable laws and
regulations on
alcohol drinking.

Disinfectant 3.3/3.9 – To provide a N/A N/A

Alcohol reliable supply of
quality and affordable
rubbing alcohol used
for personal care as
well as cleansing and
disinfecting.

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Secondary Contributions

Key Products and Societal Value / Potential Negative Management

Services Contribution to UN Impact of Approach
SDGs Contribution to Negative Impact

12.2/12.5 - Products The practice of

use glass bottles as recycling and use of
packaging and also glass cullets in the
collect these to be manufacture of new
re-used in packaging materials
production. keep the negative
impacts of
repeatedly sourcing
raw materials to a
Use of recyclable minimum.
packaging
12.2/12.5 – Recycling of
aluminum cans and
Use of 100% ROPP caps still
recyclable material requires use of fuel See Impacts and
(aluminum) as thus the emission of Risks and
packaging materials GHG. Management
(cans and roll-on Approach on
pilfer-proof (ROPP) Materials for details.
caps) for some
products.

12.5 - Reduction of N/A

ROPP size of G.S.M.
Blue Flavors 1 Liter
SKU.
Reduction of solid 12.5 - Elimination of N/A
waste non-environment
friendly plastic
pourer in GSM Blue
700ml and 1 Liter
SKU.

Employment 8.3, 8.5 - GSMI While the labor The Company has
provides equal management policies and
opportunity as an relationship is safeguards in place to
employer, and collaborative and ensure decent work is
continues to provide harmonious, there is provided, as discussed
decent jobs to its still a risk of attrition, in the Employee
value chain such as though minimal, due Management, Labor-
suppliers, Management
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 contractors, dealers, to personal Relations, and
and wholesalers. preferences. Workplace Conditions
section of this report.

Education 4.4 - GSMI, in Alcohol Abuse Responsible drinking

partnership with is integrated in the
Technical Education syllabus of GSMI
and Skills scholars’ TESDA
Development training.
Authority (TESDA),
provides training on
bartending and basic
business skills. The
program, Ginebra
San Miguel
Technopreneur
Program, renewed
its partnership with
TESDA and created
Ginebra San Miguel
Bar Academy which
aims to expand the
number of scholars.
In 2023, there were
64 graduates of the
said program.

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