Grace Corporation

Statement of Management's Responsibility for Financial Statements

The management for Grace Corporation is responsible for all information and representations contained
in the statements of financial position as at December 31, 2011 and 2010, and the statements of
comprehensive income, statements of changes in equity and statements of cash flows for each of the two
years in the period ended December 31, 2011, and the summary of significant accounting policies and other
explanatory notes. The consolidated financial statements have been prepared in accordance with Philippine
Financial Reporting Standards and reflect amounts that are based on the best estimates and informed
judgment of management with an appropriate consideration to materiality.

In this regard, management maintains a system of accounting and reporting which provides the necessary
internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded
against unauthorized use or disposition and liabilities are recognized. The management likewise discloses
to the Companys Audit Committee and to its external auditor:

(i) all significant deficiencies in the design or operation of internal controls that could adversely affect its
ability to record, process, and report financial data;

(ii) material weaknesses in the internal controls, and

(iii) any fraud that involves management or other employees who exercise significant roles in internal
controls.

It is assumed that the Board of Directors reviewed the financial statements before such statements are
approved and submitted to the stockholders of the Company.

The independent auditors appointed by the Board of Directors and stockholders, had audited the
financial statements of the Company in accordance with Philippine Standards on Auditing and has
expressed their opinion on the fairness of presentation upon completion of such audit, in their report to
the stockholders and Board of Directors dated October 4, 2014.






Alfredo Cacho
Chairman



Joselito T. Peron
Corporate Secretary
INDEPENDENT AUDITORS
REPORT The Stockholders and the
Board of Directors Grace Corporation
12 Ninoy Aquino Avenue
Paraaque City, Philippines

We have audited the accompanying financial statements of Grace Corporation which
comprise the statements of financial position as at December 31, 2011 and 2010, and the
statements of comprehensive income, statements of changes in equity and statements of cash
flows for each of the two years in the period ended December 31, 2011, and a summary of
significant accounting policies and other explanatory information.

Managements Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with Philippine Financial Reporting
Standards, and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based
on our audits. We conducted our audits in accordance with Philippine Standards on
Auditing. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors judgment, including the assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys preparation and
fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entitys internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated
financial statements.

We believe that the audit evidence we have obtained and the report of other auditors
are sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, based on our audits and the report of the other auditors, the financial
statements is present fairly, in all material respects, the financial position of Grace
Corporation as at December 31, 2011 and 2010. The financial statements for 2011 and 2010
in the period ended December 31, 2011 are in accordance with Philippine Financial Reporting
Standards.















Statement of Financial Position


ASSETS
Current Assets
2011

2010
Cash 14,232,159.00 1,100,000.00
Trade and Other Receivables - net 12,973,825.33 13,750,000.00
Marketable Securities 2,545,000.00 1,150,000.00
Short-term Investments 6,500,000.00 -
Merchandise Inventory 4,137,765.91 900,000.00
Prepaid Expenses 2,500,000.00 500,000.00
Total Current Assets 42,888,750.24 17,400,000.00
Noncurrent Assets
Property and Equipment - net 72,690,283.67 57,063,720.00
Total Noncurrent Assets 72,690,283.67 57,063,720.00
Total Assets 115,579,033.92 74,463,720.00


LIABILITIES AND EQUITY
Liabilities
Trade & Other Payables



21,192,999.09



22,450,500.00
Loans Payable 10,000,000.00 -
Income Tax Payable 2,783,873.65 1,053,816.00
Total Liabilities
33,976,872.74 23,504,316.00


Shareholders' Equity

Ordinary Share Capital 70,000,000.00 45,000,000.00
Subscribed Ordinary Share Capital 5,000,000.00 -
Subscription Receivable (2,125,000.00) -
Premium in excess of Par 5,250,000.00 3,500,000.00

Retained Earnings 3,477,161.18 2,459,404.00
Total Shareholders' Equity 81,602,161.18 50,959,404.00



































Statement of Comprehensive Income






2011 2010
Income
Net Sales 111,210,966.40 53,439,000.00
Other Income 1,951,430.33 110,000.00
113,162,396.74 53,549,000.00
Expenses
Costs of Sales
General and Admin
Expense
56,091,844.91

37,884,905.00
34,785,500.00

11,779,500.00
Distribution Expense
Interest
Expense
2,783,520.00

114,830.00
1,150,000.00

445,500.00
Other

Expenses 1,891,438.00 70,000.00
98,766,537.91 48,230,500.00
Income Before Tax 14,395,858.83 5,318,500.00
Income Tax Expense 4,318,757.65 1,595,400.00
Net Income 10,077,101.18 3,723,100.00
Other Comprehensive Income -
Total Comprehensive Income 10,077,101.18 3,723,100.00
EPS 13.44 8.27




Statement of Changes in Equity

















Ordinary Share
Capital
Subscribed
Ordinary Share
Capital


Subscription
Receivable

Share Premium

Retained Earnings

Total

January 01, 2011

45,000,000.00

-

-

3,500,000.00

2,459,404.00

50,959,404.00
Net Income - - - - 10,086,216.55 10,086,216.55
OCI - - - - - -
Issuance of Shares 25,000,000.00 5,000,000.00 (2,125,000.00) 1,750,000.00 - 29,625,000.00
Cash Dividends - - - - (7,500,000.00) (7,500,000.00)
December 31, 2011 70,000,000.00 5,000,000.00 (2,125,000.00) 5,250,000.00 3,486,276.55 81,611,276.55
Statement of Cash Flows



CASH FLOWS FROM
OPERATING ACTIVITIES

Income Before Tax
Adjustments
Depreciation
14,408,880.79


4,373,436.33
Interest Expense 114,830.00
Gain on Sale of Securities (1,026,000.00)
Interest Income (894,873.33)
Dividend Income (40,000.00)
Accrued Expenses 665,500.00
Operating income before working
capital changes

Changes in operating assets and
17,601,773.79
liabilities
Decrease/(Increase) in:

Receivables 765,027.67
Inventories (3,237,765.91)
Prepaid Assets (1,990,000.00)
Increase/(Decrease) in:

Trade and Other Payables (1,259,375.88)
Cash generated from operations 11,879,659.67
Income Tax Paid (1,053,816.00)

Cash provided by operating activate 10,825,843.67

CASH FLOWS FROM
INVESTING ACTIVITIES

Additions to
Property and Equipment (20,000,000.00)
Short-term Investments (12,080,000.00)
Proceeds for the sale of securities 1,976,000.00
Cash used by investing activities (30,104,000.00)

CASH FLOWS FROM

FINANCING ACTIVITIES
Proceeds from borrowings 7,900,000.00
Issuance of Shares 29,625,000.00
Cash provided by financing
activities 37,525,000.00
Net Increase in Cash 18,246,843.67
Adjustments (5,114,684.67)
Cash, January 1, 2011 1,100,000.00
Cash, December 31, 2011 14,232,159.00







Grace Corporation
Notes to Financial Statements




Note 1 Corporate Information

Grace Corporation was incorporated in the Philippines and registered with the Securities and Exchange
Commission
(SEC) on May 10, 2009 under Registration No.
1007000.

Its primary purpose is to engage in, operate, conduct, carry on and maintain the business of importing,
exporting, buying, selling, handling and otherwise dealing in, all kinds of office, school and printing supplies
and all kinds of office machinery and equipment as well as general commission business on the said products.

The companys principal place of business is located at 12 Ninoy Aquino Avenue., Paraaque City,
Philippines.


Note 2 Summary of Significant Accounting Policies

Basis of Preparation
The accompanying consolidated financial statements of the Group have been prepared on a historical cost
basis, except for financial assets at fair value through profit or loss (FVPL). The financial statements are
presented in Philippine Peso (P=).

Statement of Compliance
The consolidated financial statements of the Grace Corporation have been prepared in compliance with
Philippine
Financial Reporting Standards (PFRS).

Future Changes in Accounting Policies
The company will adopt the following new and amended Standards and Philippine Interpretations enumerated
below when these become effective. Except as otherwise indicated, the company does not expect the adoption of
these new and amended PFRS and Philippine Interpretations to have significant impact on the financial
statements.

Effective 2012

PAS 12 (Amendment), Income Taxes - Deferred Tax: Recovery of Underlying Assets
The Amendment to PAS 12 is effective for annual periods beginning on or after January 1, 2012. It provides a
practical solution to the problem of assessing whether recovery of an asset will be through use or sale. It
introduces a presumption that recovery of the carrying amount of an asset will normally be through sale.


PFRS 7 (Amendments), Financial Instruments: Disclosures - Disclosures - Transfers of Financial Assets
The Amendments to PFRS 7 are effective for annual periods beginning on or after July 1, 2011. The amendments
will allow users of financial statements to improve their understanding of transfer transactions of financial assets
(for example, securitizations), including understanding the possible effects of any risks that may remain with
the entity that transferred the assets. The amendments also require additional disclosures if a
disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

Effective 2015
PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, as issued in 2010, reflects the first phase of the work on the replacement of PAS 39 and applies
to classification and measurement of financial assets and financial liabilities as defined in PAS 39. The
Standard is effective for annual periods beginning on or after January 1, 2013. In subsequent phases, hedge
accounting and derecognition will be addressed. The completion of this project is expected in 2011. The adoption
of the first phase
of PFRS 9 will have an effect on the classification and measurement of the Groups financial assets. The Group will
quantify the effect in conjunction with the other phases, when issued, to present a more comprehensive picture.

Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash with original maturities of three months or less from dates of
acquisition and which are subject to an insignificant risk of change in value.

Short-term Investments
Short-term investments are short-term placements with maturities of more than three months but less than one
year from the date of acquisition. These earn interest at the respective short-term investment rates.

Financial Instruments
Date of recognition
The Group recognizes a financial asset or a financial liability in the consolidated statement of financial position
when it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that
require delivery of assets within the time frame established by regulation or convention in the marketplace are
recognized on the settlement date.

Initial recognition of financial instruments
All financial assets and financial liabilities are recognized initially at fair value. Except for securities at FVPL,
the initial measurement of financial assets includes transaction costs. The Group classifies its financial assets
in the following categories: financial assets at FVPL, loans and receivables, held-to-maturity (HTM)
investments, and AFS financial assets. The Group also classifies its financial liabilities into financial liabilities at
FVPL and other financial liabilities. The classification depends on the purpose for which the investments were
acquired and whether they are quoted in an active market.

The Group determines the classification of its financial instruments at initial recognition and, where allowed and
appropriate, re-evaluates such designation at every reporting date. Financial instruments are classified as
liability or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and
losses relating to a financial instrument or a component that is a financial liability, are reported as expense or
income. Distributions to holders of financial instruments classified as equity are charged directly to equity, net
of any related income tax benefits.

Determination of fair value
The fair value for financial instruments traded in active markets at the reporting date is based on their quoted
market price or dealer price quotations (bid price for long positions and ask price for short positions), without any
deduction for transaction costs. When current bid and ask prices are not available, the price of the most
recent transaction provides evidence of the current fair value as long as there has not been a
significant change in economic circumstances since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using
appropriate valuation methodologies. Valuation methodologies include net present value techniques,
comparison to similar instruments for which market observable prices exist, option pricing models, and other
relevant valuation models.

Inventories
Inventories are carried at the lower of cost and net realizable value (NRV).

Prepaid Expenses
Prepaid expenses are carried at cost less the amortized portion. These typically comprise prepayments
for commissions, marketing fees, advertising and promotions, taxes and licenses, rentals and insurance.
Property and Equipment
Property and equipment, except for land, are carried at cost less accumulated depreciation and amortization and any
impairment in value. Land is carried at cost less any impairment in value. The initial cost of property and equipment
consists of its construction cost or purchase price and any directly attributable costs of bringing the property
and equipment to its working condition and location for its intended use.

Equity
When the shares are sold at premium, the difference between the proceeds at the par value is credited to Additional
paid-in capital account. Direct costs incurred related to equity issuance are chargeable to Additional paid-in
capital account. If additional paid-in capital is not sufficient, the excess is charged against retained earnings. When
the
Group issues more than one class of stock, a separate account is maintained for each class of stock and the number
of shares issued.

Subscriptions receivable pertains to the uncollected portion of the subscribed shares.
Retained earnings represent accumulated earnings of the Group less dividends
declared.
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity.
No gain or loss is recognized in the consolidated statement of income on the purchase, sale, issue or cancellation
of the Groups own equity instruments. Any difference between the carrying amount and the consideration, if
reissued, is recognized in additional paid-in capital. Voting rights related to treasury shares are nullified for the
Group and no dividends are allocated to them respectively. 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.

Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and
the revenue can be reliably measured.

Gain/loss on sale of investments
Prior to January 1, 2010, gain or loss is recognized in the consolidated statement of income if the Group disposes
some of its investment in a subsidiary or associate. Gain or loss is computed as the difference between the
proceeds of the disposal and its carrying amount, including the carrying amount of goodwill, if any.

Expenses
Direct operating expenses and general and administrative expenses, except for lease agreements, are recognized
as they are incurred.

Earnings Per Share
Basic earnings per share (EPS) is computed by dividing net income attributable to common equity holders by the
weighted average number of common shares issued and outstanding during the year and adjusted to give
retroactive effect to any stock dividends declared during the period. Diluted EPS is computed by dividing net
income attributable to common equity holders by the weighted average number of common shares issued and
outstanding during the
year plus the weighted average number of common shares that would be issued on conversion of all the dilutive
potential common shares. The calculation of diluted EPS does not assume conversion, exercise or other issue
of potential common shares that would have an antidilutive effect on earnings per share.

Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. These are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not
recognized in the consolidated financial statements but disclosed when an inflow of economic benefits is
probable.

Events after the Reporting Period
Post year-end events that provide additional information about the Groups position at the reporting date (adjusting
events) are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are
disclosed in the consolidated financial statements when material.





Note 3 Significant Accounting Judgments and Estimates

The preparation of the accompanying consolidated financial statements in conformity with PFRS requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. The estimates and assumptions used in the accompanying consolidated
financial statements are based upon managements evaluation of relevant facts and circumstances as of the date
of the consolidated financial statements. Actual results could differ from such estimates.

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

Classification of financial assets
The company had classified its equity investments in different companies as Fair Value Through Profit or Loss
in accordance with the classification criteria that was set by the PFRS 9.

Depreciation of Property and Equipment
The method that was used by the company in depreciating its property and equipment is straightline method which
is one of the allowed depreciation methods under PAS16.

Estimation of allowance for bad debts
In estimating the amount of irrecoverable receivables the company find it prudent to make use of the estimation
of bad debts based on the 5% of the total outstanding receivables of the company.



Note 4 Cash


Cash in Bank 14,230,755.00 1,090,000.00
Petty Cash 1,404.00 10,000.00

Cash 14,232,159.00 1,100,000.00



Note 5 Trade and Other Receivables



2011 2010
Accounts Receivable 10,302,420.00 5,850,000.00
Accounts Receivable -
Others
2,800.00 6,400,000.00
Allowance for Bad
debts
(515,121.00)
Dividend Receivable 40,000.00
Notes Receivable 2,470,000.00 1,500,000.00
Accrued Interest Receivable 684,873.33 ____________
Trade & Other Receivable 12,984,972.33 13,750,000.00



Note 6 Marketable Securities

Name of Company
PLDT
No. of Shares
2,400.00
Closing Price
340.00
Market Value
816,000.00
San Miguel 4,000.00 200.00 800,000.00
Philex Mining 500,000.00 1.82 910,000.00
Omico 10,000,000.00 0.0019 19,000.00
Total 2,545,000.00










Note 7 Prepaid Expenses



Prepaid Expenses 2011 2010
Advertising 50,000.00 120,000.00
Insurance 50,000.00 80,000.00
Prepaid Interest Expense 2,100,000.00
Unused Supplies 300,000.00 300,000.00
Total 2,500,000.00 500,000.00




Note 8 Property and Equipment





Land


Building
Furniture
and
Fixtures

Transportation
Equipment

Office
Equipment


Total
Cost
01 January,

2011 16,500,000.00 33,000,000.00 3,550,000.00 6,000,000.00 2,130,000.00 61,180,000.00
Additions - 20,000,000.00 - - - 20,000,000.00
Disposals - - - - - -
31 December,
2011

16,500,000.00

53,000,000.00

3,550,000.00

6,000,000.00

2,130,000.00

81,180,000.00
Accumulated Depreciation
01 January,
2011 - 1,914,000.00 1,004,460.00 600,000.00 597,820.00 4,116,280.00
Depreciation - 2,712,436.33 640,000.00 600,000.00 421,000.00 4,373,436.33
Disposals - - - - - -
31 December,

2011 - 4,626,436.33 1,644,460.00 1,200,000.00 1,018,820.00 8,489,716.33
Net Book
Value 16,500,000.00 48,373,563.67 1,905,540.00 4,800,000.00 1,111,180.007 2,690,283.67___





























Note 9 Trade and Other Payables

Trade and Other Payables 2011 2010
Dividends Payable 7,000,000.00
Accounts Payable 4,350,170.00 906,500.00
Advances from Customers 50,000.00
Professional Fee Payable 350,000.00
Notes Payable 3,506,500.00
Note Payable - Non Trade - 21,000,000.00
Notes Payable - Officer 1,700,000.00
Bonus Payable 2,542,743.67
SSS Medicare Premium Payable 144,720.00 62,000.00
Withholding Tax Payable 129,600.00 52,500.00
Light, Water, Telephone Payable 148,500.00 29,500.00
Representation Expense Payable 97,000.00
Taxes and Licenses Payable 70,000.00
HDMF Premiums Payable 63,200.00
Accrued Interest Payable 69,330.00
Vat Payable 969,360.45 400,000.00
Total Liabilities 21,191,124.12 22,450,500.00


Note 10 Shareholders Equity

2010 2011

Authorized 1,000,000.00 1,000,000.00
Issued 450,000.00 700,000.00
Subscribed 50,000.00
Treasury - -

Outstanding 450,000.00 750,000.00




2010 2011
Ordinary Share Capital 45,000,000.00 70,000,000.00
Subscribed Ordinary Share Capital 5,000,000.00 -
Share Premium 3,500,000.00 5,250,000.00
Total Shareholders'
Contribution 48,500,000.00 82,375,000.00













Note 11 Retained Earnings

Retained Earnings, Dec. 31, 2010 - restated 2,459,404.00
Net Income for the year 2011 10,077,101.18
Dividends Paid for 2011 (7,500,000.00)
Adjustments (1,559,344.00)
Retained Earnings, Dec. 31, 2011 3,477,161.18



Note 12 Net Sales


2011 2010
Gross

Sales 113,123,050.00 54,539,000.00
Sales Discount (870,607.14) (300,000.00)
Sales Returns & Allowances (1,041,475.00) (800,000.00)

Net Sales 111,210,967.86 53,439,000.00



Note 13 - Other Income




2011 2010
Gain on Sale of Securities 1,026,000.00
Interest Income 894,873.33 110,000.00
Dividend Income 40,000.00
Miscellaneous Income 1,704.00
1,962,577.33 110,000.00





Note 14 General and Administrative Expense


2011 2010
Salaries Expense 24,022,840.00 7,000,000.00
Bonus Expense 2,542,117.73
Supplies Expense 1,411,862.00 108,000.00
Taxes and Licenses 980,000.00 900,000.00
SSS Premium Expense 1,270,500.00 270,500.00
HDMF Premiums Expense 1,100,000.00 100,000.00
Light, Water, Telephone 1,370,700.00 210,000.00
Professional Fee 350,000.00 -
Depreciation Expense - Bldg 2,712,436.33 1,650,000.00
Depreciation Expense - F&F 640,000.00 640,000.00
Depreciation Expense - OE 421,000.00 421,000.00
Insurance Expense 550,000.00 200,000.00
Bad Debts Expense 515,121.00 280,000.00
37,886,577.05 11,779,500.00









Note 15 Distribution Expense


2011 2010
Gasoline Expense 1,146,000.00 100,000.00
Advertising Expense 820,520.00 318,000.00
Representation Expense 217,000.00 132,000.00
Depreciation Expense - TE 600,000.00 600,000.00
2,783,520.00 1,150,000.00




Note 16 Other Expenses


2011 2010
Miscellaneous Expense 410,438.00 70,000.00
Unrealized Loss on Securities 1,481,000.00
1,891,438.00 70,000.00