Sumitomo Metal Mining Philippine Holdings

Corporation
Transfer Pricing Report
For the Financial Year Ended 31 December 2018
Table of Contents
LIST OF APPENDICES ........................................................................................................................ 3
LIST OF ABBREVIATIONS AND DEFINITIONS ..................................................................................... 4
1. EXECUTIVE SUMMARY .................................................................................................................. 6
2. BUSINESS DESCRIPTION ............................................................................................................. 7

2.1 SMMPH’S BUSINESS OVERVIEW ................................................................................................ 7

2.2 BUSINESS RESTRUCTURINGS OR INTANGIBLE TRANSFERS ......................................................... 12

3. COVERED TRANSACTIONS .......................................................................................................... 13

3.1 SUMMARY ........................................................................................................................... 13

3.2 RELATED ADVANCE PRICING AGREEMENTS AND TAX RULINGS .................................................... 13

4. FUNCTIONS, RISKS, AND ASSETS ............................................................................................... 14

4.1 FUNCTIONS ......................................................................................................................... 14

4.2 RISKS................................................................................................................................. 15

4.3 ASSETS .............................................................................................................................. 17

4.4 SUMMARY ........................................................................................................................... 17

5. ECONOMIC ANALYSIS ................................................................................................................ 18

5.1 DESCRIPTION OF THE COVERED TRANSACTIONS ....................................................................... 18

5.2 SELECTION OF THE MOST APPROPRIATE TRANSFER PRICING METHOD.......................................... 19

5.3 APPLICATION OF THE TNMM ................................................................................................... 20

5.4 RESULTS OF THE COMPARABLE SEARCH .................................................................................. 26

6. CONCLUSION ............................................................................................................................. 27
7. SCOPE ....................................................................................................................................... 28

Page 2
List of Appendices
Appendix A: Philippine and OECD Transfer Pricing Regulatory Overview

Appendix B: SMMPH’s Audited Financial Statements for FY2018

Appendix C: SMMPH’s Material Intercompany Agreements

Appendix D: Search Matrix for Comparable Companies

Appendix E: Relevant Financials of the Comparable Companies

Appendix F: Arm’s-Length Results of the Comparable Companies

Page 3
List of Abbreviations and Definitions
Abbreviation Definition
BIR Bureau of Internal Revenue
CBNC Coral Bay Nickel Corporation
ComRel Community and Public Relations department
Covered Transactions Provision of technical and back-office support services to related parties
CMD Corporate Management department
CPD Corporate Projects department
CPM Cost plus method
CUP Comparable uncontrolled price method
EMO Environmental Management office
FY2018 Financial year ended 31 December 2018
FY2017 Financial year ended 2017
FY2015 Financial year ended 2015
Group SMM and its affiliates
HR Human resources
IT Information technology
IQR Interquartile range
Management SMMPH’s President, Executive Vice President, and Chief Financial Officer
MRD Mineral Resources department
NAICS 2017 North American Industry Classification System 2017
NACE Rev. 2 European Classification of Economic Activities Revision 2
NCPM Net cost plus margin
NCR The Philippines’ National Capital Region
OECD Organisation for Economic Co-operation and Development
2017 Organisation for Economic Co-operation and Development Transfer
OECD Guidelines
Pricing Guidelines for Multinational Enterprises and Tax Administration
PHP Philippine peso
Plant Sites CBNC and THPAL
PLD Purchasing and Logistics department
PLI Profit level indicator
PSM Profit split method
RM Risk Management office
R&D Research and development
Report SMMPH’s transfer pricing report for the financial year ended 31 December 2018
RPM Resale price method
SMM Sumitomo Metal Mining Co., Ltd.

Page 4
 Abbreviation Definition
SMMPH or the Company Sumitomo Metal Mining Philippine Holdings Corporation
THPAL Taganito HPAL Nickel Corporation
TNMM Transactional net margin method
US SIC 1987 United States Standard Industrial Classification 1987
VP Vice President
We, our, or us Navarro Amper & Co./Deloitte Philippines

Page 5
1. Executive Summary
Navarro Amper & Co./Deloitte Philippines (“we”, “our”, or “us”) was engaged to prepare this transfer pricing
report (“Report”) to examine and document the arm’s length nature of the intercompany transactions between
Sumitomo Metal Mining Philippine Holdings Corporation (“SMMPH” or the “Company”), a company incorporated in
the Philippines, and its related parties, Coral Bay Nickel Corporation (“CBNC”) and Taganito HPAL Nickel
Corporation (“THPAL”), for the financial year ended 31 December 2018 (“FY2018”). This Report was prepared in
accordance with the Philippine transfer pricing regulations1 and as informed by the 2017 Organisation for
Economic Co-operation and Development (“OECD”) Transfer Pricing Guidelines for Multinational Enterprises and
Tax Administration (“OECD Guidelines”).

Sumitomo Metal Mining Co., Ltd. (“SMM”), the immediate and ultimate parent of SMMPH, is a Japan-based
company engaged in the exploration, smelting and refining, supply of non-ferrous metals, sales and
manufacturing of advanced materials. SMM and its affiliates (the “Group”) operates their business in the
Philippines, Japan, the United States, and Australia. In the Philippines, the Group operates their smelting and
refining through their subsidiaries and production companies CBNC and THPAL (the “plant sites”). SMMPH’s
primary business is to invest in capital stocks, bonds and other securities. Additionally, SMMPH provides technical
and back-office support services to the plant sites.

The intercompany transactions undertaken by SMMPH in FY2018 that is covered in this Report (the “Covered
Transactions”)2 are its provision of technical and back-office support services to CBNC and THPAL.

The Covered Transactions were analyzed on an aggregate basis for the purposes of this analysis, since the
functions performed, risks borne, and assets used by the Company for these transactions are similar and are
closely linked such that they cannot be adequately evaluated on a separate basis.

The Transactional Net Margin Method (“TNMM”) was selected as the most appropriate transfer pricing method,
and the Net Cost Plus Margin (“NCPM”) as the net profit indicator, to evaluate the arm’s length nature of the
Covered Transactions. In applying the TNMM, a benchmarking search utilizing Oriana company database was
undertaken to identify a set of technical and back-office support service providers that are comparable to SMMPH.

At the time of the occurrence of the Covered Transactions or at the time of the preparation of the tax returns for
FY2018, the financials from the financial year ended 2017 (“FY2017”) were the most recently available financial
data for the comparable companies. Therefore, financial data from the financial year ended 2015 (“FY2015”) to
FY2017 was used.

The three-year (FY2015 to FY2017) interquartile range (“IQR”) of the weighted average NCPM established by the
selected comparable companies is presented in Table 1.

Table 1: Results of the TNMM Analysis: Comparable Service Providers

SMMPH’s NCPM in FY2018 Lower Quartile Median Upper Quartile

7.98% 3.57% 4.18% 4.84%

Based on the analysis contained in this Report, it is noted that SMMPH’s NCPM result of 7.98 percent for FY2018
was above the IQR of the comparable companies’ weighted average NCPM. Therefore, it can be inferred that
SMMPH is being sufficiently remunerated for the Company’s provision of technical and back-office support services
to its related parties.

1
Philippine transfer pricing regulations set forth in Bureau of Internal Revenue (“BIR”) Revenue Regulation 2-2013
2
We understand that the Company has other intercompany transactions for FY2018 that were not charged with a mark-up (e.g.,
reimbursable expenses) and hence, are not analyzed in this Report.

Page 6
2. Business Description
2.1 SMMPH’s Business Overview

2.1.1 Description of Business and Strategies

SMM, the immediate and ultimate parent company of SMMPH, and its affiliates are engaged in the exploration,
smelting and refining, and sale of non-ferrous metals globally. In the Philippines, the Group operates their
smelting and refining business through CBNC and THPAL, which manufacture and export mixed sulfide from their
respective plant sites in the islands of Palawan and Surigao, respectively. Meanwhile, SMMPH’s primary business
is to invest and acquire shares and other securities, particularly those of the Nickel Asia Corporation. Additionally,
SMMPH also provides back-office support and technical services to the plant sites.

On 16 January 2011, SMMPH entered into a technical services and secondment agreement with CBNC and THPAL.
Based on the agreement, SMMPH would provide engineering support, technological guidance and training of
employees, and other forms of technical support for the CBNC and THPAL. SMMPH would additionally employ
managers and technical personnel to be seconded to the plant sites. On 1 January 2016, in addition to the
technical services, SMMPH also agreed to also provide back-office support services to CBNC and THPAL. Such
services included functions like accounting, purchasing and logistics, environmental management, administration
and human resources (“HR”), legal, information technology (“IT”), risk management, and community and public
relations.

Globally, the Group’s business strategy includes improving the production entities’ technical capabilities and
ensuring compliance, environmental protection, and operational safety in order to secure more resources and
provide high-quality materials such as non-ferrous metals and advanced materials via its global network. Locally,
SMMPH’s business strategy involves improving budget efficiency and cost effectiveness to help achieve targets
and deadlines set in coordination with the plant sites.

2.1.2 Shareholding Structure

Figure 1 presents SMM and its Philippine-based affiliates’ shareholding structure.

Figure 1. SMM and its Philippine-based Affiliates’ Shareholding Structure

SMM

54% 100% 75%

CBNC SMMPH THPAL

2.1.3 Services

SMMPH provides technical and back-office support services for CBNC and THPAL. These services are described in
Table 2.

Table 2: Services Offered by SMMPH

Services Description

Technical Services
This includes performance of inspection, testing, and maintenance checks on existing
equipment and provision of engineering support for existing and potential projects. This
Corporate projects
function is mainly advisory in nature. These services are delivered through SMMPH’s
Corporate Projects department (“CPD”).

Page 7
 Services Description
This includes provision of support and advice to THPAL and CBNC through the conduct of
geological field work, analysis, and research on existing and potential mineral resources.
Mineral resources
This function is mainly advisory in nature. These services are delivered through SMMPH’s
Mineral Resources department (“MRD”).
These include technical services provided through employees (i.e., engineers and
technical staff) seconded to CBNC and/or THPAL's local departments, specifically in the
Other technical Technical, Production, Maintenance, Power Station, Utilities, and Engineering
services departments. These seconded employees help manage, supervise, and oversee these
departments to achieve targets and activities in accordance to their respective plans and
schedules. The services provided here are mostly supervisory and managerial functions.
Back-office Support Services
These services include cash flow management, regulatory cash report, compliance,
bookkeeping, and organization of the payroll processing, including those of seconded
employees to the plant sites. These also include accounts payable, accounts monitoring,
Accounting bookkeeping, financial reporting, document control, expense control, as well as providing
tax advisory and other tax-related services to the plant sites. These services are
delivered through SMMPH’s Accounting department, through the Accounting and
Treasury sections, as well as seconded employees.
These services include providing documentation, travel arrangements, and
accommodation of expatriates and seconded employees to the plant sites for their trips
to and from Metro Manila or overseas, as well as arranged consultancy agreements for
Administration CBNC and THPAL. These also include recruiting, hiring, managing and training employees
responsible for service delivery, including those absorbed from and thereafter, seconded
to CBNC and THPAL. These services are delivered through SMMPH’s Administration
department, through the General Affairs and HR sections.
This involves preparation of advertising materials for the plant sites to be presented in
Community and special events and the monitoring of relevant news on its related parties’ industry. These
public relations services are delivered through SMMPH’s Community and Public Relations department
(“ComRel”).
This includes oversight and monitoring of the plant sites’ compliance with environmental
laws, and engaging with academic experts and external technical agencies on behalf of
Environmental
CBNC and THPAL to further assess and develop their environmental and rehabilitation
management
strategies. These services are delivered through SMMPH’s Environmental Management
office (“EMO”).
This involves providing IT-related support to the plant sites. These services are delivered
IT
through SMMPH’s IT department.
This includes providing legal support to the plant sites. These services are delivered
Legal
through SMMPH’s Legal department.
This includes purchasing equipment, spare parts, and raw materials on behalf of the
plant sites, which involves bidding and negotiating on behalf of the plant sites and
Purchasing and
facilitating the signing of their contracts with third-party forwarders. These services are
logistics
delivered through SMMPH’s Purchasing and Logistics department (“PLD”), through the
Equipment Purchase, Logistics, and Submaterial Purchase sections.
This includes providing countermeasures to potential security threats and risks faced by
the plant sites and their employees. This involves coordinating with Philippine Armed
Risk management
Forces and private security firms. These services are delivered through SMMPH’s Risk
Management office (“RM”).

Page 8
2.1.4 Key Customers

The sole customers of SMMPH for its provision of technical and back-office support services in FY2018 were its
affiliates, CBNC and THPAL.

2.1.5 Management and Organizational Structure

SMMPH’s President and Executive Vice President (“VP”) are responsible for overseeing, administering and directing
the Company’s day-to-day operations and business affairs. Meanwhile, the Corporate Management department
(“CMD”) is in charge of developing SMMPH’s business strategy and other company policies for the investments
business segment and services business segment.

Further, the Accounting, Administration, IT and Legal departments are also in charge of providing the Company’s
back-office needs, ensuring its smooth operations.

The Company’s organizational chart as of FY2018 is summarized in Figure 1, which also highlights the division of
SMMPH’s departments responsible for the provision of technical and back-office support services to CBNC and
THPAL.

Figure 1: Organizational Chart of SMMPH in FY2018

Legend
Management personnel President
Responsible for technical services
Responsible for investment business
Responsible for back-office support services
Executive
VP

VP for Chief VP for

Corporate Financial PLD
Management Officer

CPD MRD CMD Administration ComRel Legal Accounting IT PLD EMO RM

General Equipment
Affairs Accounting Purchase

HR Treasury Logistics

Submaterial
Purchase

Table 3 presents SMMPH’s headcount per department as well as the division of the seconded employees across
the plant sites. [SMMPH: Kindly confirm SMMPH’s number of employees in FY2018, since we have
identified some inconsistencies between the PowerPoint/Excel files provided. Further, please also
clarify if the RM department was in place in FY2018, as it had zero employees based on the files
provided to us - if yes, please indicate the number of employees in that department. Lastly, for
simplicity, please confirm if we can include the 5 seconded employees under General Affairs section in
the Administration department instead.]

Table 3: SMMPH’s Headcount of Employees in FY2018

Seconded to Seconded to
Department Manila Office Total
THPAL CBNC

Departments found in SMMPH’s Manila office and in the plant sites

President, Executive Vice President 2 - - 2

Page 9
 Seconded to Seconded to
Department Manila Office Total
THPAL CBNC
PLD 23 2 2 27
Accounting 22 - 1 23
Administration 14 - 3 17
General Affairs - 5 - 5
ComRel 3 - - 3
Legal 3 - - 3
CMD 2 - - 2
CPD 2 - - 2
EMO 2 - - 2
MRD 2 - - 2
IT 2 - - 2
RM - - - -

Departments only found in the plant sites

Production - 14 6 20
Maintenance - 9 2 11
Technical - 1 2 3
Engineering - - 2 2
Safety, Environmental &
- 2 - 2
Community Relations
Utilities - 2 - 2
Power Station & Utilities - - 1 1
Safety - - 1 1
Total 77 35 20 132

2.1.6 Financial Performance3

Table 4 presents a summary of the Company’s financial performance for its provision of technical and back-office
services to CBNC and THPAL in FY2018. [SMMPH: Please confirm that the difference between “Total
expenses” provided in the Excel file and the “Cost and Expenses” from the audited financial statement
are costs that are non-operating in nature. Further, please confirm if the total expenses provided for
the services business are really about 93 percent of SMMPH’s total expenses even though the service
business just comprises of 35 percent of SMMPH’s total revenue.]

Table 4: Summary of Financial Performance of SMMPH’s Provision of Technical and Back-office

Services in FY2018

Financial Performance Amount (PHP)

Service revenue 478,448,218
Total expenses 443,076,687
Operating profit 35,371,531

3
Refer to Appendix B for SMMPH’s audited financial statements for FY2018.

Page 10
 Financial Performance Amount (PHP)
NCPM 7.98%

2.1.7 Economic Circumstances of the Market

With globalization, more companies are now leaning towards executing strategies that are cost-efficient and would
enable them to focus on delivering quality services. Instrumental to these strategies is the shared service center
(“SSC”) industry, which is a dynamic industry involving the centralization of an organization’s administrative and
back-office functions (i.e., finance & accounting, HR, IT, procurement) and other technical support. While the
strategy of SSCs vary depending on business needs and overall service objectives, firms that engage within the
industry are primarily motivated by the reduction of cost and retention of focus on core competencies. 4 This model
is based on optimizing back-office work by professionalizing it where firms seek external support and expertise
primarily to assess and improve performance, rely less on human labor, and use the freed up time to provide more
valuable services. This is also true for outsourced technical support services.5

In FY2018, market demand and growth of the SSC industry is significant and accelerating. Globally, outlook on the
industry remains to be positive. Industry analysts forecast the industry to reach a value of US$240 billion in 2023,
representing a compound annual growth rate of 14.06 percent from 2018 to 2023. In 2018, worldwide spend on
shared services is estimated to have reached US$94.2 billion, posing an annual growth rate of 15.71 percent, higher
than the 15.30 percent growth rate in 2017. This growth was mainly driven by various technological advancements
that enabled firms to expand across more core business processes.6 In the Asia-Pacific region, the SSC industry is
well-established and remains to be popular with countries like the Philippines and Malaysia playing the leading role.
One of the strategies employed in the region is the establishment and expansion of SSCs in offshore locations with
an educated workforce. This is especially evident for the Philippines, given its low-cost resources, cheap labor, a
culturally-aligned work ethic, and a services delivery model in the region is global in scope.7

Meanwhile, for the engineering services outsourcing industry, where some of technical support services offered by
SMMPH can be classified, has largely been growing over the past years due to the rapid growth of developing
countries within the region and is expected to be worth roughly US$1.5 trillion by 2025. This industry also
exhibited high growth potential with a forecasted 27.1 percent CAGR from 2018 to 2022. 8 However, in the
Philippines, it is still considered to be in its early stages with regard to the technical services being offered as well
as its complexity, which presents an opportunity for expanded market reach and presence.9

Within the Philippines, the National Capital Region (“NCR”), where SMMPH is located, remained as the primary
provider of services-related activities accounting for more than half of the country’s total services sector output. 10
This could be mainly attributed to NCR being the country’s center of education11, allowing for a huge number of
professionals who could provide cheap back-office and technical services alike. By centralizing the plant sites’
technical and back-office support functions in SMMPH’s Manila office, the Group was able to take advantage of
market opportunities in NCR and increase the Group’s overall labor efficiency in the Philippines. For SMMPH, this
meant that aside from generating revenue with respect to its investments business, the Company also received
guaranteed revenue from the plant sites for providing technical and back-office support services.

4
Monitor Deloitte (2019). Outsourcing and Shared Services 2019-2023: Global, Middle East and UAE industry outlook. Retrieved
from http://outsourcing-outlook.com/assets/pdf/Deloitte-DOC-Whitepaper_outsourcing-and-shared-services2019-2023.pdf
5
Shared Services and Outsourcing Network (2019). State of the Global Shared Services Market Report 2019. Retrieved from
https://www.ssonetwork.com/global-business-services/reports/state-of-the-global-shared-services-market-report-2019
6
“Monitor Deloitte (2019). Outsourcing and Shared Services 2019-2023: Global, Middle East and UAE industry outlook.”
Retrieved from http://outsourcing-outlook.com/assets/pdf/Deloitte-DOC-Whitepaper_outsourcing-and-shared-services2019-
2023.pdf
7
“Shared Services and Outsourcing Network (2019). State of the Global Shared Services Market Report 2019”. Retrieved from
https://www.ssonetwork.com/global-business-services/reports/state-of-the-global-shared-services-market-report-2019
8
“Global Engineering Services Outsourcing 2018-2022”, Research and Markets Website, July 2018,
https://www.researchandmarkets.com/reports/4603445/global-engineering-services-outsourcing-2018-2022#rela1-4603444.
9
“Engineering Services Outsourcing (ESO): Prospects and Potentials in the Philippines”, Gov.Ph Website, November 2018,
http://industry.gov.ph/wp-content/uploads/2018/11/Engineering-Services-Outsourcing-Prospects-and-Potentials-in-the-
Philippines.pdf.
10
“Report on Regional Economic Developments in the Philippines 2018,” Bangko Sentral ng Pilipinas. Retrieved from
http://www.bsp.gov.ph/downloads/Publications/2018/REDP_2018.pdf
11
“Higher Education Institutions Regional Distribution,” Commission on Higher Education. Retrieved from
https://ched.gov.ph/wp-content/uploads/2019-Higher-Education-Institutions-Regional-Distribution.pdf

Page 11
In FY2018, the Company obtained a revenue of PHP478 million from its services business, which is higher by 3.71
percent than in FY2017.

2.2 Business Restructurings or Intangible Transfers

SMMPH was not involved in or affected by any business restructurings or intangible transfers in FY2018.

Page 12
3. Covered Transactions
3.1 Summary

A summary of the Covered Transactions in FY2018 is presented in Table 5.

Table 5: Summary of the Covered Transactions of SMMPH in FY2018

Counterparty Volume Pricing

Transaction Type Counterparty Relationship
Tax Jurisdiction (PHP) Arrangement
Provision of CBNC 252,141,711
technical and
Philippines Affiliates Cost plus mark-up
back-office support
THPAL 226,306,507
services

Copies of the intercompany agreements between the Company and its related parties, which relate to the Covered
Transactions in FY2018, can be found in Appendix C.

The technical services provided by the Company to CBNC and THPAL include engineering support, technological
guidance and training of employees, and other forms of technical support, while its back-office support services
include accounting, administration and HR, community and public relations, corporate management,
environmental management, IT, legal, and risk management functions.12

In FY2018, CBNC and THPAL each paid a fixed monthly service fee of PHP13,180,000 to SMMPH. The fixed
monthly service fee was computed based on the budget prepared by SMMPH's Accounting department at the
beginning of the year. In addition, the labor costs of certain employees/departments of SMMPH were charged
separately and reimbursed to SMMPH by CBNC and THPAL with a six percent mark-up to cover handling costs and
other related expenses for departments and employees that delivered back-office support and a seven percent
mark-up for those that delivered technical services. The labor costs of the President and Executive Vice President
and some of the employees under the departments of Administration, IT, Legal, CMD, CPD, MRD, and ComRel
were not reimbursed by the plant sites and were charged as part of the fixed monthly service fees.

Moreover, SMMPH may perform year-end true-up adjustments to achieve an effective mark-up rate of six to
seven percent on total costs with respect to its services business segment. However, in cases where SMMPH
achieved an effective mark-up rate of six to seven percent or higher, no true-down adjustments would be
performed. In FY2018, SMMPH earned markup of 7.98 percent, therefore no true-up or true-down adjustments
were made.

In line with ensuring that the target effective mark-up rate was met, SMMPH’s Management and Accounting
department revisited annually and renegotiated the service agreement, if needed; particularly in (i) changes on
the existing fixed fee portion of the service fee, in case where there would be a significant increase or decrease in
associated costs for the year and (ii) expansion of services provided to CBNC and THPAL.

3.2 Related Advance Pricing Agreements and Tax Rulings

SMMPH did not have any effective unilateral or bilateral/multilateral advance pricing agreements or other tax
rulings in FY2018 related to the Covered Transactions.

12
Refer to Table 2 for a more detailed description of SMMPH’s technical and back-office services.

Page 13
4. Functions, Risks, and Assets
A functional analysis was conducted to determine how each associated entity added value to the Covered
Transactions. This analysis involved assessing the functions performed, risks assumed, and assets used (both
tangible and intangible) by each associated entity in connection with the Covered Transactions.

The major functions, risks, and assets relevant to the transfer pricing analysis of the Covered Transactions in
FY2018 were as follows:

4.1 Functions

4.1.1 Business Strategy

In FY2018, SMM was in charge of determining and developing the global business strategies of the Group, which
included improving technical capabilities and compliance, environmental protection, and operational safety to
secure more resources and provide high-quality materials such as non-ferrous metals and advance materials via
its global network. [SMMPH: We did not include the edit “and its group of companies” since this pertains
to the overall Group strategy.]

In addition, SMMPH, through its CMD, set its local business strategy, taking into account the business strategies
independently set by CBNC and THPAL. The local business strategy of SMMPH involved improving budget
efficiency, decreasing costs and working time, and enhancing operational efficiency in plant sites to meet the
deadlines they set in coordination with SMMPH’s President, Executive VP and Chief Financial Officer (collectively
known as the “Management”). All business strategies of SMMPH and the plant sites were subject to SMM’s
approval before implementation.

4.1.2 Sales and Pricing

The pricing of the services provided by SMMPH to the plant sites were set by its Management. The Company’s
Management also negotiated and concluded intercompany service contracts with CBNC and THPAL. Meanwhile,
SMMPH’s Accounting department was tasked to forecast the costs and corresponding budget plan with respect to
SMMPH’s provision of technical and back-office support services to the plant sites.

If the plant sites required additional services from SMMPH aside from the existing back-office and technical
services, they coursed such request through the respective department under SMMPH responsible for providing
the specific services.

4.1.3 Service Design and Methodology

With the approval of SMM, the Company decided to centralize back-office support of the plant sites in its Manila
office. SMMPH's Management, together with the Management of CBNC and/or THPAL, decided on the services that
SMMPH would provide to CBNC and THPAL based on the identified needs of the plant sites. Likewise, the decision
to centralize the technical services related to corporate projects and mineral resources, as well as those
performed by the seconded engineers and technical staff, in the Manila office was made by SMMPH with SMM’s
approval. This was done to increase overall labor efficiency and to make the handling of the engineers and
technical staffs’ licenses and documents more efficient. [SMMPH: Kindly confirm if the Company was also
responsible for the decision to centralize technical services as well.]

SMMPH developed the service design for back-office support services, as well as the methodology and
infrastructure used for the provision of these services. On the other hand, CBNC and THPAL primarily developed
the methodology and infrastructure for the provision of technical services.

The costs of developing the designs and methodologies for the provision of technical and back-office support
services were borne by their respective developers. However, since the costs for the provision of back-office
support services were charged back to the plant sites through the respective service agreement with SMMPH,
CBNC and THPAL essentially assumed the costs incurred in the development of the designs and methodologies for
both technical and back-office support services.

Page 14
4.1.4 Service Execution

For the back-office support services, the functions performed by SMMPH’s Accounting department, Administration
department, RM and PLD were performed on a regular basis for the plant sites. Additionally, SMMPH also
seconded some employees to the plant sites for such back-office support functions. Meanwhile, the functions
performed by ComRel, EMO, Legal and IT departments were performed on an as-needed basis or upon request
since these functions were mainly advisory and that the plant sites had their own in-house departments for such
functions. As such, CBNC and THPAL were free to avail of similar services from third-party agents and maintained
independence in decision making with respect to these functions parties.

For technical services, the functions related to corporate projects and mineral resources were performed by
SMMPH’s CPD and MRD, on an as-needed basis as well. The plant sites also had the choice to avail these services
from third-party agents. Meanwhile the other technical services were performed by the seconded engineers and
technical staff in the plant sites on a regular basis.

SMMPH’s corresponding department heads monitored the quality and delivery of technical and back-office support
services provided by its employees in the Manila office, with the exception of services provided by third party
agents availed on behalf of CBNC and THPAL (i.e., purchasing and logistics). However, services delivered by
SMMPH’s seconded employees were monitored by their corresponding department heads in the plant sites. As
such, SMMPH employed different measures for monitoring each service.

As SMMPH’s HR section was in charge of hiring the employees responsible for service delivery, it was also in
charge of termination. Likewise as some seconded employees of SMMPH were endorsed by CBNC or THPAL, they
may contact SMMPH’s HR section to recommend said employees for termination. SMMPH also handled the training
for the employees based in the Manila office while CBNC and THPAL generally handled the training for those
seconded to the plant sites.

4.1.5 Infrastructure Setup

The IT department of SMMPH set up, monitored, and maintained the network and server of the Company, which it
used in providing back-office support services. Likewise, CBNC and THPAL employed their own IT departments in
their respective plant sites that performed similar functions. SMMPH’s IT department only provided support and
advice to the IT departments of both CBNC and THPAL, if needed. For example, more complex IT-related
problems of the plant sites were escalated to SMMPH’s IT department in the Manila office. The IT department of
SMMPH was additionally tasked to coordinate with the IT department in the plant sites to align the IT strategies of
the three departments. However, CBNC and THPAL still maintained independence on implementation of these
strategies.

4.1.6 Administration

SMMPH’s Administration department, through the HR section, performed the HR functions of the Company, while
its Accounting department performed the accounting and finance functions of the Company, including invoicing to
the related parties. SMMPH also had its own Legal and IT departments to perform these respective functions.
SMMPH’s HR section was responsible for hiring and training its employees who handled such administrative
functions.

4.2 Risks

4.2.1 Market Risk

Market risk is the risk that the value of future income streams is subject to market uncertainty. Market risk can
incorporate several types of business risks (both operating and non-operating), such as volume and price risk.

CBNC and THPAL independently decided how to manage market fluctuations for their respective production
businesses, and primarily assumed market risk. Since SMMPH received service revenue from the plant sites, it
was indirectly exposed to market risk related to market fluctuations. However, since the services performed by
SMMPH were required to support the plant sites, CBNC and THPAL sourced such services solely from the
Company. Hence, the Company was a captive service provider and received service revenues regardless of
market demand for CBNC and THPAL's products. As such, SMMPH’s exposure to market risk related to market
fluctuations was negligible.

Page 15
4.2.2 Service Liability Risk

Service liability risk arises when a company fails to perform the agreed service at accepted or advertised
standards. As a result, the company may face the risk of the customers claiming for service related damages.

As a service provider, SMMPH mainly assumed service liability risk. In case of service delivery failure, these
problems were settled by CBNC and THPAL with SMMPH's HR section if such cases were related to the delivery of
service by SMMPH's seconded employees. Any other cases were settled by SMMPH’s Management or Accounting
department with each plant site's Management or Accounting department. [SMMPH: Please confirm.] By
maintaining close communication with CBNC and THPAL's Management and respective departments, SMMPH
minimized its service liability risk exposure.

4.2.3 Foreign Exchange Risk

Foreign exchange risk refers to the change in the value of investment or income due to the fluctuation of the
currency used in a transaction.

Although the transactions between SMMPH and its affiliates were all in denominated in Philippine peso, the
salaries of some of its Japanese officers were paid in either US dollar or Japanese yen. With this, SMMPH assumed
some foreign exchange risks. However, these risks were minimal, so the Company did not perform hedging
activities related to these transactions in FY2018. In these situations, SMMPH assumed any losses or gains arising
from the fluctuations in the value of a currency.

4.2.4 Credit Risk

Credit risk relates to the potential loss, which may be associated with the uncollectible receivables.

In its provision of services, SMMPH gave a 30-day credit limit term to its affiliates and recorded losses in case of
uncollectible receivables. With this, SMMPH assumed minimum credit risk since it was unlikely that its affiliates
would default on payment. In FY2018, SMMPH's affiliates always paid ahead of time; thus, no provisions for bad
debts was accounted for.

4.2.5 Manpower Attrition Risk

Risk of attrition of manpower arises when trained staff leaves the organization and risk arising from other factors
affecting productivity and efficiency.

Ultimately, since the Company assumed the responsibility to provide services to its related parties, the risk of
attrition of these employees was borne by SMMPH. These risks were mitigated through different incentives the
Company provided for its employees in the form of differential pay, hometown leaves, educational allowance,
medical allowances, and other benefits.

4.2.6 Manpower Utilization Risk

Manpower utilization risk pertains to the potential loss, which may be associated with underutilized employees.

CBNC and THPAL informed SMMPH of their resource requirements (i.e., technical and back-office support
services), while SMMPH was responsible for fulfilling these requirements and hiring employees responsible for
service delivery. SMMPH was then compensated by CBNC and THPAL, regardless of the employee utilization.
Hence, CBNC and THPAL bore any losses arising from the underutilization of SMMPH's resources and mainly
capacity utilization risk.

4.2.7 Security Risk

As the plant sites operated in remote areas of the country and handled rare and valuable commodities, which that
have attracted the attention from rebels and terrorists in these areas in previous years, leaving the plant sites and
its employees, including those seconded by SMMPH, to face security risks. To mitigate this risk, SMMPH and the
plant sites had placed security measures by working with private security consultants and agencies, and the
Philippine Army. Since any costs borne by SMMPH in doing such were paid for by the service fees received from
the plant sites, the security risk was effectively borne by CBNC and THPAL.

Page 16
4.3 Assets

4.3.1 Tangible Assets

SMMPH’s key tangible assets included their office equipment, furniture and fixtures, and leasehold improvements
used in the business operations.

4.3.2 Intangible Assets

In its provision of services to CBNC and THPAL, the Company did not own nor use any valuable intangible assets.
SMMPH was also not involved in the development, enhancement, maintenance, and protection of any significant
intangible assets. The Company only used third-party software for its provision of back-office support services.

4.4 Summary

SMMPH was a provider of technical and back-office support services to CBNC and THPAL. The Company provided
most of its services to the plant sites on a regular basis in order to support their respective production and sale
activities. Meanwhile, some were provided upon request since the plant sites had their own in-house teams and
the function were mainly advisory in nature. As such, SMMPH’s key function was only to support the plant sites’
businesses. Hence, the main risk faced by SMMPH was service liability risk. All other risks faced by the Company
were considered negligible.

Based on its functions performed, risks assumed, and assets owned in relation to the Covered Transactions,
SMMPH was characterized as a limited risk service provider.

Page 17
5. Economic Analysis
The economic analysis provides the arm’s length pricing implications with reference to comparable independent
companies, to illustrate the arm’s length nature of the results derived from transfer pricing methods applied by
SMMPH and its counterparties with respect to the Covered Transactions.

5.1 Description of the Covered Transactions

5.1.1 Description of the Services Provided

The services provided by the Company to CBNC and THPAL, as outlined in Table 2, included technical and back-
office support services. The technical services include engineering support, technological guidance and training of
employees, and other forms of technical support (e.g., mineral resources, corporate projects) while its back-office
support services include accounting, administration and HR, community and public relations, corporate
management, environmental management, IT, legal, and risk management functions.

5.1.2 Description of Cost Base

The cost base used by SMMPH in its provision of technical and back-office support services covered total costs
with respect to its services business segment (i.e., both direct and indirect costs.) This is equivalent to labor
costs, handling costs, administrative costs, and overhead costs. As the nature of the cost base relates to the
receipt of technical and back-office support services, they may reasonably be charged to CBNC and THPAL, as it
derived benefits from such services. [SMMPH: Please confirm if irregular one-off costs or extraordinary
costs were excluded in the fees charged to your related parties.]

5.1.3 Cost Allocation Process

The method used to allocate the cost base should reasonably reflect those costs that would have been borne by
comparable independent enterprises. Therefore, to satisfy the arm’s length principle, an appropriate allocation
method would consider the nature and usage of the service being provided.

The cost allocation process of SMMPH is summarized in Figure 2.

Figure 2: Cost Allocation Process for Services Rendered by SMMPH in FY2018

Step 2:
Step 3:
Step 1: Charge directly
Allocate indirect Step 4:
Calculate the arritributable
costs based on Apply a mark-
costs incurred costs to the
derived up.
by SMMPH. CBNC and
benefits.
THPAL.

The Company’s cost allocation process begins with charging direct costs (i.e., labor costs) to CBNC and THPAL
based on the work done for the plant sites. Some of these labor costs were reimbursed back to SMMPH under the
service agreement with a mark-up of either six percent for labor cost of employees that delivered back-office
support services, or seven percent for labor cost of employees that delivered technical services while some labor
costs were charged based on the fixed monthly service fees without a mark-up. Indirect costs, comprising of
management overhead, office rental and utilities, depreciation and amortization, and other operating expenses,
were then allocated to CBNC or THPAL based on their derived benefits.

5.1.4 Description of Allocation Key

Based on the OECD Guidelines, appropriate allocation keys for the Covered Transactions should be based on
metrics that accurately represent the proportion of total costs to be borne by the related parties, relative to the
benefit they would receive from the services.

Page 18
SMMPH used the estimated hours of work done for each plant site, as well as the number of seconded employees
to each plant site, as the primary allocation keys for the costs it incurred in undertaking technical and back-office
support services. These were considered as appropriate allocation keys, as the estimated work hours and the
number of seconded employees are directly proportional to the derived benefits received by CBNC and THPAL.

5.2 Selection of the Most Appropriate Transfer Pricing Method

The OECD Guidelines outlines five transfer pricing methods that can be applied to establish whether the conditions
of controlled transactions are consistent with the arm’s length principle. Three out of the five methods are
traditional transaction methods, and the other two are transactional profit methods. The selection of the most
appropriate transfer pricing methodology is crucial in evaluating the arm’s length nature of the Covered
Transactions.

The Philippine transfer pricing regulations generally follow the OECD Guidelines with respect to the selection and
application of the most appropriate transfer pricing methodology. A detailed explanation on the transfer pricing
methods is provided in the Philippine and OECD transfer pricing regulatory overview in Appendix A.

5.2.1 Applicability of the Comparable Uncontrolled Price Method

The comparable uncontrolled price method (“CUP”) compares the prices charged in controlled and uncontrolled
transactions. As the use of the CUP entails a direct comparison of prices, it requires strict product comparability.
However, it is difficult to identify perfectly comparable contracts or arrangements of SMMPH’s counterparties with
third-party service providers due to differences in the types of services and scope. It is also difficult to identify
comparable transactions between third parties, which meet the high degree of comparability requirement.
Further, as SMMPH transacted exclusively with related parties, no internal comparables exist. As such, the CUP
method was rejected.

5.2.2 Applicability of the Resale Price Method

The resale price method (“RPM”) evaluates whether the amount charged in a controlled transaction is at arm’s
length based on the gross margin realized in comparable uncontrolled transactions. This method is generally used
for distributors that resell products without physically altering them or adding substantial value to them.

This method is not appropriate for SMMPH, since it was engaged in the provision of services and not in the resale
of products as a distributor. As such, the RPM was rejected.

5.2.3 Applicability of the Cost Plus Method

The cost plus method (“CPM”) determines an arm’s length range of prices by identifying an arm’s length mark-up
to the direct cost base (i.e., cost of services) used by a third party for pricing its products under comparable
circumstances.

As information with regard to differences in cost of services and other cost accounting practices among
comparable companies that would materially affect the gross profit mark-up is not readily available, the CPM was
rejected.

5.2.4 Applicability of the Profit Split Method

The profit split method (“PSM”) determines arm’s length profit based on combined profits derived by the
counterparties to the transaction. PSM is mostly used in cases where the parties to a transaction make highly
integrated or complex contributions to the transaction, often involving the creation of an intangible asset.

The PSM is not applicable to the Covered Transactions, since SMMPH, as a service provider, did not perform
complex functions in undertaking the Covered Transactions. As such, the PSM was rejected.

5.2.5 Applicability of the Transactional Net Margin Method

The transactional net margin method (“TNMM”) examines the net profit that a company collects from a controlled
transaction relative to an appropriate base (e.g., costs, sales, or assets). TNMM is typically used, as financial data
on comparable independent companies is commonly publicly available. Further, TNMM is also more tolerant of
accounting inconsistencies as its use of net operating profit analysis, which naturally captures both cost of goods
sold and operating expenses, allows for a more consistent comparison of financial results albeit differing
accounting treatments as to cost classification.

Page 19
Since the financial information of independent comparable companies were easily accessible through the use of
public databases, TNMM was selected as the most appropriate method to test the arm’s length nature of the
Covered Transactions.

5.3 Application of the TNMM

In order to analyze the Covered Transactions, a search was conducted in order to identify companies that
performed similar functions, bore similar risks, and owned similar assets as the Company. A reliable application of
the TNMM requires the following:

 Selection of the tested party;

 Determination of the appropriate level of aggregation of financial results;

 Selection of years for comparison;

 Selection of comparable companies;

 Selection of profit level indicator;

 Adjustment for accounting and other factors; and

 Determination of an appropriate range of results.

5.3.1 Selection of the Tested Party

As indicated in paragraph 3.18 of the OECD Guidelines,

When applying a cost plus, resale price or transactional net margin method … it is necessary to choose
the party to the transaction for which a financial indicator (mark-up on costs, gross margin, or net profit
indicator) is tested. The choice of the tested party should be consistent with the functional analysis of the
transaction. As a general rule, the tested party is the one to which a transfer pricing method can be
applied in the most reliable manner and for which the most reliable comparables can be found, i.e., it will
most often be the one that has the less complex functional analysis.

The tested party is the entity whose operating profit attributable to the transaction can be verified using the most
reliable data and who has the most reliable and fewest adjustments. It is typically the party with less complex
functions and who does not own valuable intangible property or unique assets.

The delineation of SMMPH’s key functions, risks, and assets indicates that it is a service provider engaged in
routine functions and limited risks. The Company also does not own any unique or hard-to-value intangibles. This
is in contrast with CBNC and THPAL which assume entrepreneurial risks as the mining companies for which it is
more difficult to find comparable companies. Because comparable companies with a profile similar to SMMPH can
be identified, SMMPH was selected as the tested party.

5.3.2 Selection of Years of Comparison

The OECD Guidelines suggests that the use of multiple year data is appropriate in order to reduce the potential
distortion caused by business and product life cycles. It does not specify the number of years to use. Rather, the
number of years of data to use should reliably capture the effects of any business, economic, and cyclical forces
on the financial profitability of both the tested party and the comparable companies. An analysis and comparison
based on the financial year under review plus the two previous years’ financial results is considered sufficient to
reliably capture the effects of business, economic, and cyclical factors.

It is also important to note that the tested party's year-end is not always the same as the comparable companies’
year-ends. Therefore, the year-ends of the comparable companies may be adjusted accordingly to allow for a
more accurate comparison of the tested party, taking into account the availability of data.

At the time of the occurrence of the Covered Transactions or at the time of the preparation of the tax returns for
FY2018, the financials from FY2017 were the most recently available financial data for the comparable companies.
Therefore, financial data from FY2015 to FY2017 was used. Further, in order to account for companies that do not
follow the Company’s 31 December year-end, a 12-months-before approach was applied in determining the
comparable companies’ year-end period. The comparable year-end periods are outlined in Table 6.

Page 20
 Table 6: Financial Year-End Mapping

Financial Year-End Comparable Year-End Period

31 December 2018 1 January 2017 – 31 December 2017
31 December 2017 1 January 2016 – 31 December 2016
31 December 2016 1 January 2015 – 31 December 2015

5.3.3 Selection of Comparable Companies13

5.3.3.1 Database Selection

The objective of the search was to identify independent companies (i.e., companies operating at arm’s length)
performing similar functions and assuming similar risks as SMMPH with respect to the Covered Transactions. The
primary resource used to identify a set of companies which can be considered comparable to SMMPH within the
Southeast Asian region was Oriana company database.

The source of data for the Oriana search was the 8 November 2019 release of the Oriana company database. The
process of selecting independent companies comparable to SMMPH is documented below.

5.3.3.2 Search Criteria

The search criteria for the preliminary

 Status of activity: In the first step of our search process, we limited our search to active companies in
order to filter out those companies that did not undertake any economic activity.

 Geographical market: Our next step involved searching for companies that were domiciled in the
Southeast Asian region.

 Legal form: Only companies with legal forms of a corporation, public limited, or a private limited
company (i.e. Type 1 and Type 2 in company Oriana database) were accepted in order to screen out those
that were not operating as corporations.

 Independence: We then included companies with BvD independence indicators “A+”, “A”, “A-“, “B+”,
“B”, and “B-“ in the Oriana company database. Companies without these indicators own more than 50
percent of the companies’ shares of stocks, either indirectly- or directly-majority owned and thus, were
not included in the search. This criterion was applied in order to eliminate companies with significant
controlled transactions, as they may engage in transactions at conditions that are specific to their
relationship with their related parties and hence, would not be an objective starting point in determining
the appropriate return for the Covered Transactions.

 Industry code: In this step, we identified relevant industry classification codes the North American
Industry Classification System 2017 (“NAICS 2017”), European Classification of Economic Activities
Revision 2 (“NACE Rev.2”), and United States Standard Industrial Classification 1987 (“US SIC 1987”) in
which potentially comparable companies are classified. These codes were considered to most closely
represent the functional profile of SMMPH. The selected codes used to identify potential comparable
companies are listed in Table 7.

Table 7: Industry Codes of Potential Comparable Companies

Industry Code Industry Description

NAICS 2017
2131 Support activities for mining
4885 Freight transportation arrangement
541199 All other legal services
5412 Accounting, tax preparation, bookkeeping, and payroll services

13
Refer to Appendix D for the search matrix, which details the general review and financial review process and results.

Page 21
 Industry Code Industry Description
54133 Engineering services
54162 Environmental consulting services
54169 Other scientific and technical consulting services
Research and development in the physical, engineering, and life sciences (except
541715
nanotechnology and biotechnology)
54189 Other services related to advertising
5611 Office administrative services
5612 Facilities support services
56149 Other business support services
NACE Rev. 2
990 Support activities for other mining and quarrying
6209 Other information technology and computer service activities
6910 Legal activities
6920 Accounting, bookkeeping and auditing activities; tax consultancy
712 Technical testing and analysis
721 Research and experimental development on natural sciences and engineering
821 Office administrative and support activities
US SIC 1987
4731 Arrangement of transportation of freight and cargo
7379 Computer related services, not elsewhere classified
8711 Engineering services
8721 Accounting, auditing, and bookkeeping services
8741 Management services
8744 Facilities support management services
9441 Administration of social, human resource and income maintenance programs

 Year of incorporation: Companies whose year of incorporation was after 2010 were also excluded from
the search. This was done to ensure that potential comparable companies already had stable operations
prior to the tested period FY2015 to FY2017.

 Financial data: Companies with insufficient financial data (e.g., operating revenue) at least two years
during the period FY2015 to 2017 were rejected.

 Consistent losses: We then excluded companies which have loss-making for two consecutive years
during the period FY2015 to FY2017 due to the volatility of their profitability as evidenced by consecutive
years of losses incurred, which may erroneously affect the analysis.

 Service and business activity: Finally, we rejected companies that were not functionally comparable to
the Company were rejected. For this analysis, companies with the following words stated on their trade
descriptions, national activity labels, or company overview were rejected: "manuf*", "assembl*", "distr*",
"construc*", "engineer*", "retail*", “food*”, and “marketing”.

The results of the preliminary search process using the Oriana company database following the criteria above is
summarized in Table 8.

Page 22
 Table 8: Summary of the Preliminary Search on Oriana

No. of Companies No. of Companies

Rejection Criteria
Rejected Remaining

Status of activity 51,332,732

Geographic market 48,508,407 2,824,325

Legal form 702,679 2,121,646

Independence 1,617,929 503,717

Industry code 482,289 21,428

Year of incorporation 13,851 7,577

Financial data 2,533 5,044

Consistent losses 1,319 3,725

Service and business activity 1,469 2,256

As a result of the preliminary search conducted from the Oriana company database, 2,256 potential comparable
companies were identified

5.3.3.3 Reviewing Potential Comparables

From the preliminary search, 2256 companies were further analyzed and underwent quantitative and qualitative
screening based on the following criteria:

Quantitative Screening

 Non-comparable operating revenue: Companies with an average three-year operating revenue 10

times greater than or 10 times less than SMMPH’s operating revenue for its services business in FY2018
were rejected;

 Significant intangible assets: Companies with an average three-year intangible assets/average three-
year total assets greater than three percent were removed. This involves ownership of significant tangible
or intangible assets such as brands and trademarks, indicating a different level of investment into
intellectual property;

 Significant research and development (“R&D”) activities: Companies with an average three-year
R&D expense/average three-year operating revenue greater than three percent were rejected;

Qualitative Screening

 Insufficient qualitative information: Companies found to have no corroborating information to clarify

suspicious or unclear points about its business operations were also removed;

 Non-comparable function: Companies that perform functions that are not comparable to the
distribution function activity of SMMPH were rejected;

 Other reasons: Finally, companies were also rejected for other reasons not mentioned above. Companies
that possess qualities that affect their comparability with the tested party’s functional and risk profile (e.g.
non-comparable service delivery method, includes performance of other significantly different services,
etc.) were rejected.

The results of the quantitative and qualitative screening criteria is summarized in Table 9.

Page 23
 Table 9: Summary of the Quantitative and Qualitative Screening

No. of No. of
Rejection Criteria Companies Companies
Rejected Remaining

Number of companies in the preliminary search 2,256

Quantitative screening

Non-comparable operating revenue 1,868 388

Significant intangible assets 0 388

Significant R&D activities 12 376

Qualitative screening

Insufficient qualitative information 51 325

Non-comparable function 276 49

Others 43 6

After the quantitative and qualitative review, six companies remained sufficiently comparable and constitute the
final set of comparable companies. The preliminary search and screening process described above identified these
six companies that are most comparable to SMMPH from a functional and risk perspective. The legal entity names
and business descriptions of these companies and their relevant financial data are provided in Table 10 and
Appendix D, respectively.

Table 10: Final set of Comparable Companies

Company name Country Principal activities

This company is primarily engaged in providing

engineering services which include various testing and
AWORLDTEC ENGINEERING
1 Malaysia inspection services for equipment, buildings and plant
SDN BHD
sites. The company also offers IT consultancy and
manpower supply services.
This company provides equipment testing services, civil
GEO-TECHNOLOGY engineering services like project management and
2 Thailand
CONSULTANT CO., LTD. geological services like environmental site assessment
and surveying.
This company is primarily engaged in personnel search,
JM CHING MANAGEMENT selection referral and placement in connection with
3 Malaysia
SDN BHD employment supplied to the potential employer or to the
prospective employee.
This company offers payroll administration services, and
staff placement and employment solutions. The staff
placement services covers human resources,
4 PETRONNIC SDN BHD Malaysia
administration, IT, legal and engineering. Under
engineering, staff provide inspection services to this
company's clients.
SHELL GLOBAL SOLUTIONS
The Company's principal activity involves engineering and
5 (THAILAND) COMPANY Thailand
technical testing.
LIMITED

Page 24
 Company name Country Principal activities

This company provides a range of resourcing solutions like

6 TECHSAP ASP SDN BHD Malaysia managed IT services, shared services, talent acquisition,
and full payroll outsourcing services.

5.3.4 Selection of the Most Reliable Profit Level Indicator

A reliable application of the TNMM requires the selection of a profit level indicator (“PLI”) which produces the most
reliable measure of income the tested party would have earned had it dealt with related parties at arm’s length,
taking into account all facts and circumstances. A PLI measures a company’s return for its investment of
resources and its assumption of risk. The reliability of PLIs might be enhanced through a number of adjustments
for differences in capital employed and functions performed.

As indicated in the OECD Guidelines, PLIs can be grouped into financial ratios, which are computed based on
information from the income statement only, and return on capital employed, which is computed using both
income statement and balance sheet data. For a TNMM analysis, Philippine transfer pricing regulations specify
three PLIs, (i) return on costs (i.e., cost plus margin and net cost plus margin), (ii) return on sales (i.e., gross
margin and operating margin), and (iii) return on capital employed (i.e., return on operating assets).

For the analysis of the Covered Transactions, NCPM was selected as the most reliable PLI, as it is appropriate to
evaluate SMMPH’ profitability in terms of total operating costs, as this captures the value of SMMPH’s key
functions as a service provider. Therefore, the NCPM was determined as the selected PLI. The NCPM is computed
as follows:

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡
𝑁𝑒𝑡 𝑐𝑜𝑠𝑡 𝑝𝑙𝑢𝑠 𝑚𝑎𝑟𝑔𝑖𝑛 =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑠𝑒𝑟𝑣𝑖𝑐𝑒𝑠 + 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠

5.3.5 Accounting Adjustments

A reliable TNMM analysis requires that only those profits arising from ordinary and comparable business
operations of the comparable companies and the tested party be compared. Furthermore, a reliable analysis is
based on the most accurate data available and is not affected by differences in accounting practices that have no
relationship to the actual business operations. Accordingly, no accounting adjustments were made, as they were
not necessary.

5.3.6 Capital Adjustments

Adjustments are often made to PLIs to reflect differences between the tested party and the comparable
companies with respect to elements of working capital. Companies with higher working capital requirements,
other things being equal, are expected to earn higher levels of profit to compensate for the greater use of capital.
Accordingly, no capital adjustments were made, as they were not necessary.

5.3.7 Use of IQR

According to paragraph 3.57 of the OECD Guidelines,

… while every effort has been made to exclude points that have a lesser degree of comparability, what is
arrived at is a range of figures for which it is considered, given the process used for selecting
comparables and limitations in information available on comparables, that some comparability defects
remain that cannot be identified and/or quantified, and are therefore not adjusted. In such cases, if the
range includes a sizeable number of observations, statistical tools that take account of central tendency
to narrow the range (e.g. the interquartile range or other percentiles) might help to enhance the
reliability of the analysis.

The use of the IQR generally increases the reliability of the comparison unless there are sufficient data to identify,
and to make adjustments to eliminate the effects of all material differences between the tested party and the
comparable companies. The IQR represents the middle 50 percent of returns observed among the comparable
companies. Because all material differences could not be adjusted, the results of the comparable search were
based on the IQR.

Page 25
5.4 Results of the Comparable Search

The selected comparable companies were used to determine an arm’s length range of results. The NCPM earned
by the selected comparable companies were considered over the three-year period (FY2015 to FY2017) and are
presented in Table 11.14

Table 11: Results of the TNMM Analysis: Comparable Service Providers

Lower Quartile Median Upper Quartile

3.57% 4.18% 4.84%

14
The calculation of the interquartile range is provided in Appendix F.

Page 26
6. Conclusion
Based on the information, data and analysis contained in this Report, it has reasonably concluded that this Report
contains the information and analysis in accordance with the transfer pricing documentation requirements set
forth in the OECD Guidelines and the Philippine transfer pricing regulations.

Since the financial information of independent comparable companies were easily accessible through the use of
public databases, TNMM was selected as the most appropriate transfer pricing method, and the NCPM as the net
profit indicator, to evaluate the arm’s length nature of the Covered Transactions. In applying the TNMM, a
benchmarking search utilizing the Oriana company database was undertaken to identify a set of service providers
that are comparable to the Company’s provision of technical and back-office support services to its related
parties, namely CBNC and THPAL. The search yielded six comparable service providers engaged in the provision of
either back-office support or technical services or both.

An analysis of NCPM results achieved by service providers from FY2015 to FY2017 that are functionally
comparable to SMMPH indicates that the three-year weighted average NCPM earned ranges from 3.57 percent to
4.84 percent, with a median of 4.18 percent.

SMMPH’s NCPM result of 7.98 percent for FY2018 was above the interquartile range of the comparable companies.
Therefore, it can be inferred that SMMPH was sufficiently remunerated for its provision of technical and back-office
support services to CBNC and THPAL.

Page 27
7. Scope
The conclusion of this Report is based on:

a. Information and data provided by SMMPH to us, the completeness and accuracy of which we did not
independently verify.

b. The assumption that SMMPH has made a reasonably thorough search for the information we requested
and that SMMPH is not aware of any other information that would have a material impact on our analysis.

c. The Philippine transfer pricing regulations, contained in Revenue Regulations No.2-2013, and the OECD
Guidelines in effect as of the date of the Covered Transactions in this Report. If there are any significant
changes to the foregoing guidance (for which we shall have no responsibility to advise the Company),
such changes may result in our conclusion being rendered invalid or necessitate (upon the Company’s
request) a reconsideration of the conclusion.

d. SMMPH’s understanding that our Report is only intended to meet the requirements of the Philippine
transfer pricing regulations and OECD Guidelines and that additional information may be required upon
audit to clarify or enhance the information contained in our Report or to provide additional information
that may be required under local country law.

e. SMMPH’s understanding that our analysis of third party transactions was limited to the information that
the Company had provided to us.

f. SMMPH’s understanding that our conclusion is applicable only to the taxable year(s) and the transactions
specifically covered by our Report.

g. SMMPH’s understanding that a misstatement, omission, or change in any of the information upon which
we have relied may render our conclusion invalid or necessitate (upon the Company’s request) a
reconsideration of our Report.

h. SMMPH’s understanding that this Report is solely for the benefit of the Company and may not be relied
upon by any other person or entity other than the tax administration in the country in which it operates.

i. SMMPH’s understanding that this Report is only intended to meet the requirements of the Philippine
transfer pricing regulations, OECD Guidelines, and no other national, foreign, or local taxes or duties of
any kind are covered by our Report.

j. SMMPH’s understanding that the Report is limited to the specific tax purpose identified in the Report and
may not be used for any other purpose, including use as the primary source for SMMPH’s accounting
records.

k. SMMPH’s understanding that our conclusion is not binding on the tax administrations in countries in
which SMMPH and its affiliates operate, appeals organizations, or judicial bodies and should not be
considered a representation, warranty, or guarantee that such tax administrations, appeals organizations,
or judicial bodies will concur with our conclusion.

l. SMMPH’s understanding that the review of documents does not constitute an engagement to provide
audit, compilation, review, or attest services as described in the pronouncements on professional
standards issued by the Philippine accounting regulators.

Page 28
Appendix A: Philippine and OECD
Transfer Pricing Regulatory
Overview
Overview of the OECD Guidelines

Generally, many countries have their own transfer pricing rules, but most of them are based on the OECD
Guidelines for the introduction and establishment of their transfer pricing rules. The principles set forth in the
OECD Guidelines state that transactions between related parties should be consistent with the arm’s length
standard.

Application of the arm’s length principle is generally based on a comparison of the conditions in the controlled
transaction with conditions in transactions between independent enterprises. In assessing comparability, the
factors that may be important include:

 Characteristics of the property or services;

 Functions performed;

 Assets employed;

 Risks assumed;

 Contractual terms;

 Economic conditions; and

 Business strategies.

The arm’s-length amount charged in a controlled transfer of tangible property may be tested under one of the
traditional transaction methods, which include comparable uncontrolled price method, resale price method, and
cost plus method. A controlled transaction may also be tested under one of the transactional profit methods,
which include profit split method and transactional net margin method. A method not described in the OECD
Guidelines may also be applied, provided it satisfies the arm’s length principle. Traditional transaction methods
are preferable to other methods because they are the most direct means of determining whether controlled
transactions are arm’s length.

Transfer Pricing Regulation in the Philippines

The Philippine Bureau of Internal Revenue (“BIR”) has recently introduced the Transfer Pricing (“TP”) Regulation
that provides directions to taxpayers and the BIR on the implementation of Section 50 of the National Internal
Revenue Code of 1997 on the allocation of income and deductions. Section 50 of the Tax Code provides that:

In the case of two or more organizations, trades or businesses (whether incorporated and whether
or not organized in the Philippines) owned or controlled directly or indirectly by the same interests,
the Commissioner is authorized to distribute, apportion or allocate gross income or deductions
between or among such organization, trade or business, if he determines that such distribution,
apportionment or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the
income of any such organization, trade or business.

The purpose of Section 50 is to ensure that taxpayers clearly reflect income attributable to controlled transactions
and to prevent the avoidance of taxes with respect to such transactions.

With the issuance of the TP regulation, guidelines are laid down in applying the arm’s length principle for cross-
border and domestic transactions between associated enterprises. These guidelines are largely based on the arm’s
length methodologies as set out under the OECD Guidelines.

Page 29
Arm’s Length Principle

The principles set forth by the TP regulation state that transactions between related parties should be consistent
with the arm’s length standard. The arm’s length principle is the international transfer pricing standard that OECD
Member countries have agreed to be used for tax purposes by multinational enterprises and tax administrations.
The authoritative statement of the arm’s length principle is set forth in Article 9, Paragraph 1 of the OECD Model
Tax Convention, which forms the basis of bilateral tax treaties involving OECD Member countries and an
increasing number of non-Member countries. Article 9 provides:

[When] conditions are made or imposed between... two [related] enterprises in their commercial
or financial relations which differ from those which would be made between independent
enterprises, then any profits which would, but for those conditions, have accrued to one of the
enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits
of that enterprise and taxed accordingly.

OECD Member countries and other countries have adopted the arm’s length principle for the evaluation of transfer
prices for goods, services, technical assistance, trademarks, or other assets transferred or licensed between
related or controlled enterprises as a means of achieving the objectives of securing the appropriate tax base in
each jurisdiction and avoiding double taxation.

The arm’s length principle is sound in theory since it provides the closest approximation of the workings of
the open market in case where property (such as goods, other types of tangible assets, or intangible
assets) is transferred or services are rendered between associated enterprises. While it may not always be
straightforward to apply in practice, it does generally produce appropriate levels of income between
members of MNE groups, acceptable to tax administrations. This reflects the economic realities of the
controlled taxpayer’s particular facts and circumstances and adopts as a benchmark the normal operation
of the market.15

Application of the arm’s length principle is generally based on a comparison of the conditions in a controlled
transaction with the conditions in an uncontrolled transaction between independent enterprises. For such
comparisons to be useful, the economically relevant characteristics of the situations being compared must be
sufficiently.

Traditional Transaction Method

In order to reliably apply a transactional method, transactions between unrelated parties under the same, or
similar, circumstances as the related party transactions of the tested party must be identified. In order to apply a
transactional based method to the related party transactions under analysis, it would be necessary to identify a
transaction involving the sale of similar products as those in the transaction under review. However, the mere
identification of transactions between unrelated parties is not sufficient to establish the comparability of
transactions. Detailed comparisons between the related party and third party transactions must be made so that
comparability adjustments, if required, can be made in order to increase the reliability of the analysis.

If transactions between unrelated parties cannot be identified or do not exist, or if material differences between
the controlled and uncontrolled transactions exist for which no reliable adjustments can be made, then the
reliability of traditional transactional methods is reduced relative to profit based methods.

Comparable Uncontrolled Price

General Description

According to Section 10.a of RR No. 02-13 TP Guidelines, “the CUP method compares amounts charged in
controlled transactions with amounts charged in comparable third party transactions. Comparable sales may be
between two third parties or between one of the related parties and a third party.”

The CUP method is generally the most reliable measure of arm’s length results if transactions are identical or if
only minor, readily quantifiable differences exist between the tested transaction and available benchmarks.

15
OECD Guidelines paragraph 1.14

Page 30
The CUP method requires a high degree of comparability of products and functions. Comparability can be achieved
by a reasonable number of adjustments, which do not materially affect the comparable price. Adjustments likely
to be required include those for differences in:

 Product quality;

 Contractual terms;

 Geographic markets;

 Embedded intangibles; and

 Foreign currency risks.

Resale Price Method

General Description

The RPM begins with the price at which a product that has been purchased from an associated enterprise
is resold to an independent enterprise. This price (the resale price) is then reduced by an appropriate
gross margin on this price (the ‘resale price margin’) representing the amount out of which the reseller
would seek to cover its selling and other operating expenses and, in the light of the functions performed
(taking into account assets used and risks assumed), make an appropriate profit. What is left after
subtracting the gross margin can be regarded, after adjustment for other costs associated with the
purchase of the product (e.g. customs duties), as an arm's- length price for the original transfer of
property between the associated enterprises.

The RPM is generally appropriate where the final transaction is made with a third party. Moreover, it is most often
used for distributors that resell products without physically altering them or adding substantial value to them. The
starting point of the analysis is the price at which a product purchased from a related party, is resold to an
unrelated third party. The appropriate gross margin is subtracted from the price and, after adjusting for other
transaction costs, the result can be regarded as an arm’s-length price for the original product.

This method requires detailed comparisons of functions performed, risks borne, and contractual terms of
controlled and uncontrolled transactions. As a result, a higher degree of comparability is more likely to exist
between controlled and uncontrolled re-sales of property by the same reseller (i.e. internal RPM). In the absence
of comparable uncontrolled transactions involving the same reseller, an appropriate comparison may be derived
from comparable uncontrolled transactions of other resellers (i.e., external RPM).

The RPM is unlikely to lead to accurate results if there are differences in:

 Level of market;

 Functions performed; or

 Products.

A reasonable number of adjustments may be made to compensate for the lack of comparability between
controlled and uncontrolled transactions in:

 Inventory turnover;

 Contractual terms;

 Transport costs; and

 Other measurable differences.

Page 31
Cost Plus Method

General Description

The CPM compares gross margins of controlled and uncontrolled transactions. The starting point of CPM is the
costs incurred by the supplier of property (or services) in a controlled transaction for property transferred or
services provided to an associated purchaser. An appropriate mark-up is then added to this cost, to make an
appropriate profit in light of the functions performed and the market conditions. What is arrived at after adding
the cost plus mark-up to the above costs may be regarded as an arm's-length price of the original controlled
transaction.

The CPM is most often used to assess the mark-up earned by manufacturers, assemblers or other producer of
goods selling to related parties. It can also apply to provision of intra-group services.

This method requires detailed comparisons of products produced, functions performed, risks borne, manufacturing
complexity, cost structures and intangibles between controlled and uncontrolled transactions. Comparability is
most likely found between controlled and uncontrolled provision of services by the same seller (i.e., internal CPM).
In the absence of such sales, an appropriate comparison may be derived from comparable uncontrolled sales of
other producers (i.e., external CPM).

The CPM is less likely to be reliable if material differences exist between the controlled and uncontrolled
transactions with respect to:

 Intangibles;

 Cost structure;

 Business experience;

 Management efficiency;

 Functions performed; and

 Products.

A reasonable number of adjustments may be made to compensate for the lack of comparability between
controlled and uncontrolled transactions in:

 Inventory turnover;

 Contractual terms;

 Transport costs; and

 Other measurable differences.

The degree of consistency in accounting practices between the controlled transaction and the uncontrolled
comparables that materially affect the gross profit mark-up affects the reliability of the result. Thus, for example,
if differences in inventory and other cost accounting practices would materially affect the gross profit mark-up,
the ability to make reliable adjustments for such differences would materially affect the reliability of the result.
Further, the reliable application of the CPM requires a high degree of comparability of functions performed and
accounting classification of cost of goods sold and operating expenses in the controlled and uncontrolled
transactions. A small difference in either of these factors can significantly affect the cost plus margin.

Transactional Profit Method

The traditional transaction methods discussed above are the most direct means of establishing whether conditions
in the commercial and financial relations between associated enterprises are at arm’s-length basis. As a result,
traditional transaction methods are preferable to other methods. However, there are some practical difficulties in
the application of the traditional transaction methods. When any of the three traditional transaction methods
cannot be reliably applied alone or exceptionally cannot be applied at all, other approaches might be used to
approximate arm’s-length conditions. TP regulations refer to two transactional profit methods that examine the
profits that arise from particular transactions among related enterprises. These two methods, the PSM and the

Page 32
TNMM, are the only profit methods that satisfy the arm’s length principle. Unlike transactional methods that focus
on the results of specific transactions, profit based methods compare the tested party’s overall profitability to the
overall profitability of third party comparable companies. Whereas highly detailed information is required in order
to reliably apply transactional methods, the profit-based methods generally require less specific information and
are therefore easier to apply. The focus of profit-based methods, then, is to establish the existence of sufficiently
comparable uncontrolled entities that are performing similar functions and incur similar business risks as the
tested taxpayer.

Profit Split Method

General Description

According to Section 10.d of RR No. 02-13, “PSM seeks to eliminate the effect on profit of special conditions made
or imposed in a controlled transaction (or in controlled transactions that are appropriate to aggregate) by
determining the division of profits (or losses) that independent enterprises would have expected to realize from
engaging in the transaction/s.”

Moreover, Paragraph 2.114 of OECD Guidelines provides that:

The transactional profit split method first identifies the profits to be split for the associated enterprises
from the controlled transactions in which the associated enterprises are engaged (“the combined profits”).
References to “profits” should be taken as applying equally to losses. It then splits those combined profits
between the associated enterprises on an economically valid basis that approximates the division of
profits that would have been anticipated and reflected in an agreement made at arm's length.

The OECD Guidelines identifies two approaches for splitting profits between the controlled parties: a contribution
profit split approach and a residual profit split approach.

Under a contribution analysis, combined profit is divided between the associated enterprises based on the relative
value of the functions performed by each, supplemented if possible by external market data that indicate how
independent enterprises would have divided profit in similar circumstances. It may not be necessary to estimate
the market value of each controlled party’s contributions if the relative value of contributions can be measured
directly.

Under a residual analysis, combined profit is divided in two stages. First, each controlled party is allocated
sufficient profit to provide it with a basic return appropriate for the type of transactions in which it is engages.
Second, any residual profit would be allocated among the parties based on an analysis of the facts and
circumstances that might indicate how this residual would have been divided between independent enterprises,
considering relative bargaining positions and other factors.

The reliability of this method is particularly sensitive to the quality of the data and assumptions used.

Transactional Net Margin Method

General Description

According Section 10.e of RR No. 02-13,

The TNMM examines the net profit relative to an appropriate base (e.g. costs, sales, assets) that a
taxpayer realizes from a controlled transaction (or transactions that are appropriate to aggregate
under the principles of paragraphs 3.9-3.12 of the OECD Guidelines). Thus, a Transactional Net
Margin Method operates in a manner similar to the CPM and RPM. This similarity means that in
order to be applied reliably, the TNMM must be applied consistent with the manner in which the
resale price or Cost Plus Method is applied. This means in particular that the net profit indicator of
the taxpayer from the controlled transaction (or transactions that are appropriate to aggregate
under the principles of paragraphs 3.9-3.12 of the OECD Guidelines) should ideally be established
by reference to the net profit indicator that the same taxpayer earns in comparable uncontrolled
transactions, i.e. by reference to (“internal comparables”).16 Where this is not possible, the net
margin that would have been earned in comparable transactions by an independent enterprise
(“external comparables”) may serve as a guide.17 A functional analysis of the controlled and

16
Paragraphs 3.27-3.28 of the OECD Guidelines
17
Paragraphs 3.29-3.35 of the OECD Guidelines

Page 33
 uncontrolled transactions is required to determine whether the transactions are comparable and
what adjustments may be necessary to obtain reliable results.

The associated enterprise to which the TNMM is applied (the tested party) should be the enterprise for which
reliable data on the most closely comparable transactions can be identified, which will often entail selecting the
least complex of the enterprises that does not own valuable intangible property or unique assets.

Differences in products or services are less likely to affect comparability under this method than under the
traditional transaction methods. Functional similarity, however, as well as various other factors that affect
net margins should be taken into account in assessing comparability under this method. These factors
include competitive position, management efficiency, individual strategies, and varying cost structures.

Page 34
Appendix B: SMMPH’s Audited
Financial Statements for FY2018
Please see SMMPH’s audited financial statements for FY2018 attached in a separate file.
Appendix C: SMMPH’s Material
Intercompany Agreements
Please see SMMPH’s material intercompany agreements attached in a separate file.
Appendix D: Search Matrix for
Comparable Companies
Please search matrix attached in a separate file.
Appendix E: Relevant Financials of the
Comparable Companies

SHELL GLOBAL
GEO-
Income Statement AWORLDTEC JM CHING SOLUTIONS
TECHNOLOGY PETRONNIC TECHSAP ASP
ENGINEERING MANAGEMENT (THAILAND)
(USD) CONSULTANT SDN BHD SDN BHD
SDN BHD SDN BHD COMPANY
CO., LTD.
LIMITED

Fiscal years 2015 to 2017 2015 to 2017 2015 to 2017 2015 to 2017 2015 to 2017 2015 to 2017

Operating revenue 9,694,941 1,716,835 9,348,039 47,298,248 9,265,899 5,236,530

Cost of services - 1,008,800 - - 8,503,765 -

Gross profit 9,694,941 708,036 9,348,039 47,298,248 762,134 5,236,530

Other Operating Expense 9,640,528 650,579 8,905,275 45,519,017 367,495 4,928,289

Operating profit 54,412 57,457 442,764 1,779,231 394,640

308,241

NCPM 0.56% 3.46% 4.97% 3.91% 4.45% 6.25%

Appendix F: Arm’s Length Results of
the Comparable Companies
Net Cost Plus Margin
Company Name
Weighted
2015 2016 2017
Average

AWORLDTEC ENGINEERING SDN BHD 0.69% 0.22% 0.72% 0.56%

GEO-TECHNOLOGY CONSULTANT CO., LTD. 3.12% 5.81% 1.75% 3.46%

JM CHING MANAGEMENT SDN BHD 4.49% 5.31% 5.18% 4.97%

PETRONNIC SDN BHD 2.15% 9.68% 3.02% 3.91%

SHELL GLOBAL SOLUTIONS (THAILAND)

4.78% 5.87% 1.73% 4.45%
COMPANY LIMITED

TECHSAP ASP SDN BHD 7.50% 5.61% 5.29% 6.25%

Weighted
2015 2016 2017
Average

Minimum 0.69% 0.22% 0.72% 0.56%

Lower Quartile 2.39% 5.38% 1.73% 3.57%

Median 3.80% 5.71% 2.38% 4.18%

Upper Quartile 4.70% 5.85% 4.64% 4.84%

Maximum 7.50% 9.68% 5.29% 6.25%

Number of observations 6 6 6 6
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities
(collectively, the “Deloitte organisation”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are
legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm
and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see
www.deloitte.com/about to learn more.

Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax & legal and related services. Our
global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organisation”) serves
four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000 people make an impact that matters at
www.deloitte.com.

Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and their
related entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region,
including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Shanghai,
Singapore, Sydney, Taipei, Tokyo and Yangon.

About Deloitte Philippines

In the Philippines, services are exclusively and independently provided by Navarro Amper & Co., a duly registered professional partnership in the
Philippines.

© 2020 Navarro Amper & Co