accompanies you - fabricato · • at delima marsh s. a.ceo and executive vice president at holasa...

A C C O M P A N I E S Y O U

T h e P r e s i d e n t ’ s R e p o r tP A G E 1 0

01

T h e F u t u r eP A G E 3 8

04T h e P a s t

P A G E 1 6

02

S u s t a i n a b i l i t yP A G E 4 2

05I n d i v i d u a l F i n a n c i a l

S t a t e m e n t sP A G E 5 4

06C o n s o l i d a t e d F i n a n c i a l

S t a t e m e n t sP A G E 1 0 6

07

T h e P r e s e n tP A G E 2 8

03

Writing, Journalistic and Graphic EditingTaller de Ediciónwww.tallerdeedicion.co

FABRICATO S.A.

Carrera 50 No. 38 – 320

Telephone: (+57 – 4) 448 – 3500

Email: [email protected]

Bello, Antioquia, COLOMBIA

www.fabricato.com

INDEX

FIGURESB I L L I O N S O F P E S O S ( C O P )

10.7%$35.386

SALES$366.231

$330.845

LEVEL OF FINANCIAL INDEBTEDNESS

FINANCIAL DEBTVS. EBITDA

OPERATING PROFIT$15.916-$8.808

$24.724

7,0%4,3%-2,7%

Margen Operacional

NET PROFIT$33.942-$32.760

9,3%-9,9%

Margen Neto

$66.702

19,2%

EBITDA$23.841

-$4.048

$27.889

6,5%-1,2%

Margen EBITDA

7,7%

OPERATING MARGIN

4.3%-2.7%

7%

NET MARGIN9.3%-9.9%

19.2%

EBITDA MARGIN6.5%-1.2%

7.7%

2014 2015

3.2%6.5

2.9%0.98

(Financial Liabilities vs. Total Assets)

(Times)

E X P O R T S *

DENIM KNIT TECHNICAL AND RECOVERED

TEXTILES

INSTITUTIONALTWILL AND POPLIN

19%Presence in 11 countries: Mexico, Peru, Ecuador, Bolivia, Venezuela, Costa Rica, the Dominican Republic, Guatemala, El Salvador, Honduras and Spain.

Clothing Institutional Technical and Recovered Textiles

81%

B Y B U S I N E S S U N I T

B Y B U S I N E S S L I N E *

VestuarioInstitucionalTextiles técnicos y recuperables67%

26%7%

27%

$97.538

26%

$90.792$105.119

29%

$43.547

11%

$29.235

7%

5 3 . 6 M I L L I O N M E T E R S O F F A B R I C

S O L D

2P L A N T A

2 . 6 5 4 E M P L O Y E E S

* Participation in Pesos (COP)

* Figures in Billions of Pesos (COP)

D O M E S T I C M A R K E T *

8 9

Juan Octavio Mejía Arias» Operations Director

Armando Castillo Builes» Marketing and Sales Director

Andrés Antonio Hincapié» Secretary General

Vacant» Administrative and Financial Director

Ernest & Young Audit S.A.S.

PrincipalJuan Carlos González Gómez

AlternateLuis Javier Yánez Cuadrado

S T E E R I N G C O M M I T T E E F I S C A L A U D I T O R

A l ternate Members

» Work Experience• Vice President of Planning at

Coltejer • CEO and Executive Vice

President at Holasa• CEO at Edospina• CEO at Cementos Andinos• Deputy Defense Minister• Advisor to the National Coffee

Growers Federation in New York• Founding partner of Banca de

Inversión Q&A• Founding partner of Fondo de

Inversión Colombo Suiza LQA• Negotiator representing

Colombian businessmen in the G3 (Mexico, Venezuela and Colombia) Business Group

» Academic Training• Administrative Engineer

from the National University; Medellín

• MBA from the University of Georgia

• Masters in Economics from the University of Oxford

• International Business Fellow, Harvard University

» Experiencia laboral• Secretary General and

Assistant to the President at Delima Marsh S. A.

• Executive President of the Cali Chamber of Commerce

• Executive President of the Unidad de Acción Vallecaucana

• Consul General at the Colombian Consulate in London

• Member of various Boards of Directors and councils

» Academic Training• High Government Program

at Universidad de los Andes

• Specialization in Labor Law at Universidad Nuestra Señora del Rosario

• Law and Political Science, Universidad La Gran Colombia in Bogotá

» Work Experience• President of Valorar Futuro

S. A.• Financial Vice President

of Colinversiones (Compañía Colombiana de Inversiones), today Celsia ESP S. A.

• General Manager of Colombiana Kimberly Colpapel S. A.

• Vice President of the Fundación para el Progreso de Antioquia

• Member of various Boards of Directors

» Academic Training• MBA from Louisiana State

University• Chemical Engineer from

Louisiana State University

» Work Experience• President of Peldar S. A.• President of Owens Illinois

Europe• Member of various Boards

of Directors

» Academic Training• BSc in Industrial

Engineering from the University of Michigan

• Advanced Marketing Program at Harvard University

• Senior Management from INCOLDA at Columbus University

• Company Presidents at Universidad de los Andes

• Negotiation Workshop. Conflict Management Group; Universidad de los Andes–Harvard

Ricardo Toro Ludeke* Roberto Arango Delgado*

» Work Experience• Latin American Director

of Marketing and Global Director of Supply Strategies at The Goodyear Tire & Rubber Company

• President of Goodyear de Colombia

• President of Kimberly–Clark Andean Region

• General Manager of Colpapel

• General Manager of Kimberly–Clark Chile

• General Manager of Colombiana Kimberly


» Academic Training• MSc in Krannert at Purdue

University• Senior Management

courses at Insead (France), The Leadership Institute, Thunderbird and Kellogg

• Chemical Engineer from Universidad Pontificia Bolivariana

Carlos Santiago Restrepo Posada

*Independent Member

Federico Molina Soto Gilberto Restrepo Vásquez*

Carlos Alberto de Jesus

» Work Experience• General Manager of Vicunha Ecuador• Member of various Boards of Directors in Ecuador• Associate Director at RPM443, Brazil• Commercial Director at Machasa, Chile• Commercial Director at Grafa, Argentina• Business Manager at Santista, Brazil » Academic Training• Bachelor’s Degree in Business Administration from UNICID; São Paulo• Postgraduate Degree in Marketing from ESPM; São Paulo

T H E B O A R D O F D I R E C T O R S

Principal Members

P R E S I D E N T

» Work Experience• Executive Director

of Konfigura Capital• Minister of the Treasury

and Public Credit (2003 – 2007)

• Dean of the Faculty of Economics at Universidad de los Andes

• Economic Advisor to the Office of the Comptroller General of the Republic

• Associate Researcher at Fedesarrollo

• Associate Professor at Universidad de los Andes

• Chief Research Economist at the Inter–American Development Bank (Washington)

• Technical Director of the Banco de la República


» Academic Training• Ph. D. and MSc. from

the University of Illinois Department of Economics

• Economist from the Universidad de los Andes

» Work Experience• President of Banco de

Occidente• President of Fundación

FES• Technical Vice President

of the Colombian Banking Association

• Permanent Member of the Rationalization of Expenditure and Public Finance Commission (1995 – 1997)

• Director General of Public Credit

• Director of the National Planning Department’s Global Programming Unit

• Economist; International Monetary Fund’s Department for the Western Hemisphere

• Director of Cabrera, Bedoya y Asociados S. A.


» Academic Training• Ph. D. from the London

School of Economics• Masters in Economics

from the Universidad de los Andes

• Bachelor’s Degree in Philosophy from the Pontificia Universidad Javeriana

» Work Experience• Legal and Administrative

Vice President of Coopcentral

• General Manager of Coopdesarrollo

• President of Banco del Estado

• Assistant Legal, Financial and Treasury Director of the Bogotá Secretary of the Treasury

• Inspector of Fondo Premium

• Professor at Universidad Externado de Colombia


» Academic Training• Attorney–at–Law;

Specialist in Commercial Law; Universidad Externado de Colombia

» Work Experience• Former Governor of the

Department of Caldas• Former President of Banco

Central Hipotecario (BCH)• Former President of the

Instituto de Fomento Industrial (IFI)

• Liquidator of Banco Cafetero

• Liquidating Agent of Interbolsa Holding

• Professional practice as an Attorney–at–Law


» Academic Training• Doctor in Legal Sciences;

Pontificia Universidad Javeriana.

» Work Experience• President of Smurfit

Kappa Latin America• President of Smurfit

Kappa Cartón de Colombia, Smurfit Kappa Cartón de Venezuela and Smurfit Kappa Cartón y Papel de México

• Member of various councils and committees


» Academic Training• Masters in Industrial

Administration; Purdue University

• Chemical Engineer; the University of Alabama

Alberto Carrasquilla Barrera* Pablo Muñoz Gómez Roberto Silva Salamanca* Alejandro Revollo Rueda Gabriel Mauricio Cabrera Galvis*

T H E P R E S I D E N T ’ S R E P O R T

A N N U A L R E P O R T 2 0 1 5

E F F I C I E N C Y A N D C O M P E T I T I V E N E S S

-- Annual Report 2015 --

12 13We present the Report of the Fabricato Board of Directors and the Presidency for the 2015 fiscal year for your consideration.

In 2015, the Colombian economy, as well as the majority of the economies in the coun-tries of the region, was strongly affected by the sharp decline in the price of commodities in-cluding oil and the appreciation of the dollar; the combination of these two factors generat-ed pressure on prices, interest rates and a lower level of economic activity.

Faced with an unfavorable macroeconom-ic scenario, in which the reduction of eco-nomic activity was imminent, an opportunity for strengthening the Colombian economy

Accumulated as of December

2015 (in billions of Pesos

– COP)

Accumulated as of December

2014 (in billions of Pesos

– COP)

Variation 2015 vs. 2014

(in billions of Pesos – COP)

Variation %

2015 vs. 2014

Sales 366.231 330.845 35.386 10.7

Operating Profit 15.916 - 8.808 24.724

Operating Margin 4.3% - 2.7% 7.0

Net Profit 33.942 - 32.760 66.702

Net Margin 9.3% - 9.9% 19.2

EBITDA 23.841 - 4.048 27.889

EBIDTA Margin 6.5% - 1.2% 7.7

emerged. First, and in the short term, by re-placing imported products. Second, and in the medium and long term, by the recovery of businesses abroad.

The favorable environment for businesses in the Colombian industrial sector, which be-gan in late 2014 and was maintained through-out 2015 coincided, in the case of Fabricato, with the conclusion of the restructuring and optimization process, planned at the end of 2013.

As a result of this combination of timeli-ness and efficiency, we obtained a significant improvement in the 2015 results, compared to the previous year:

Carlos Alberto de Jesus, President

D E A R S H A R E H O L D E R S :

-- The President’s Report --

It is important to note that net profit was pos-itively affected by the net result of the sale of 30% of the fiduciary rights of the Pantex lot; the operating profit for the textile business in the period was COP 15.916 billion.

Another important issue for the future of the Company was the definition of real–estate development, in the specific case of the Pantex lot. This is an area of 106,000 m2, located in the municipality of Bello, on which a real–es-tate complex – with apartments, a shopping center and service towers – will be built.

The model adopted by Fabricato for the project was a private tender, in which leading companies from the sector, both in Colombia and abroad, were invited to participate to make an offer for the development under the param-eters pre–established by Fabricato.

The main objective was to choose the companies with which we would associate. Therefore, it was decided to contribute the land as a 70% compensation in a real–estate trust and the consortium, which offered the greatest contribution of resources as a compensation for the remaining 30%, was chosen.

The companies Arquitectura y Concreto, Londoño Gómez, and Fondo de Inversión In-moval, managed by Credicorp Capital, formed the winning consortium; they are currently the holders of, respectively, 6%, 6% and 18% of the fiduciary rights of the Pantex lot.

By selling 30% of the fiduciary rights, Fab-ricato received COP 70 billion, used to pay suppliers, the substitution of costly financial liabilities, and working capital. The real–estate project should begin to generate revenue be-ginning 2017.

The combination of the positive profit re-sults and cash generation, together with the careful destination of the aforementioned resources from the Pantex project, helped to consolidate an important stage in this process

of Fabricato’s recovery. This achievement can be perceived through several management indicators, but it is specifically reflected in the EBITDA/Financial Indebtedness ratio: At the close of 2015, this indicator was 0.98.

Also noteworthy in 2015 was the renewal of our ISO 9001 Certification for three years and the renewal of the collective agreement until 2019, reflecting our commitment to the inte-grated quality system and with our employees, with whom we are especially grateful for all their effort and commitment.

Likewise, we thank our clients and suppli-ers, who have accompanied and supported us so closely this year.

Finally, we reaffirm that the binomial of effi-ciency and competitiveness remain our master line for growth, for which we will invest USD 8 million in 2016.

$70Billion Pesos

were received through the sale of 30% of the fiduciary rights, used in working capital and the substitution of financial liabilities.


14 15L E G A L A S P E C T SFabricato’s relationships with managers have been reduced to the performance of their du-ties and the payment of the respective remu-neration, that the Company has made subject to the law and the Bylaws. This means that there were no operations between sharehold-ers and managers.

In regard to shareholders, operations made by them have been approved as they were con-fined to provisions and permitted by law for Fa-bricato as an issuer.

In order to comply with Law 603 of 2000, the Company’s administration adopted the measures necessary to protect the industrial property and copyrights of the software insta-lled, through verification that permitted esta-blishing that the Company is the holder of the brands, names, emblems, slogans and distinc-tive signs that it uses in its products, services or computer programs. Through Resolution Number 83680, dated December 29, 2014, the Superintendency of Industry and Com-merce granted the registration of the Fabrimax mixed brand to Fabricato S. A. in Class 40 of the Nice Classification for ten years.

The Company complied with the provisions of the Colombian Financial Superintenden-

cy, in External Circular 062 of 2007 and the internal handbook related to the instructions to prevent and control money laundering and the financing of terrorism; no deficiencies were presented in the design and operation of the internal controls in this case.

In the work environment, control and mon-itoring of processes presented by retired per-sonnel were maintained. The final balance accrued as of December 31, 2015, was COP 2.339 billion.

The legal processes in favor of and against the Company were promptly responded to by the General Secretariat, supported, in some cases, by external professional specialists, whose processes are constantly reviewed and monitored.

During 2015, there were no significant events that could relevantly impact the performance of the Company in the immediate future.

As for the issues indicated in Article 446 of the Commerce Code, the following is stated:

• The value of the expenditures for salaries, fees, travel expenses, entertainment ex-penses, bonuses, allowances for transport and other expenses perceived by Company executives are included in Note 22 of the Financial Statements, as well as the outlays for the same concepts listed herein for ad-visors and managers, whose function was to transact business with public or private entities, or advise or prepare studies to con-duct such businesses, and the expenses for advertising and public relations.

• During 2015, the Company did not transfer money or other assets, free of charge or of any other type that could be likened to this, made in favor of natural or legal persons.

• Accounts Payable in foreign currency is in-cluded in Notes 13 and 16 of the Financial Statements.

• Company investments discriminated in other domestic or foreign companies are included in Note 10 of the Financial Statements.

This document is part of the information that was available to shareholders during the pe-riod provided by law to exercise the right of inspection.

C E R T I F I C A T E S A N D R E C O R D SIn accordance with the provisions of Article 46 of Law 964 of 2005, we state that the Financial Statements and other relevant annexes and reports that are presented do not contain any errors, inaccuracies or errors that could prevent the true financial situation or operations of Fabricato from being known.

As indicated in Article 47 of Law 964 of 2005, we certify that the Company has deve-loped policies and procedures, the operation of which is supervised by Internal Auditing and the Fiscal Auditor, with the assistance of the Audit Committee. This allows us to state that, under application, the financial information has adequate disclosure and control systems.

The 2015 Financial Statements were stu-died and approved by the Audit Committee, before being presented for consideration to the Board of Directors and the General Assembly of Shareholders.

To comply with the provisions in the para-graph of Article 87 of Law 1676 of 2013, we cer-tify that the administration of Fabricato has not hindered the free movement of invoices issued by sellers or suppliers of the Company.

C O D E O F C O N D U C T A N D E T H I C S H O T L I N EThe Code of Conduct is mandatory for all employees and di-rectors of the Company. This is how we ensure that all stake-holders are covered by these guidelines and policies, which must always be observed. Breaches of the Code of Conduct imply the application of the procedures established in the In-ternal Work Regulations regarding sanctions and may even involve the termination of the employment contract.

The Ethics Hotline is a reserved, anonymous communi-cation and reporting tool, where employees and stakeholders may report unethical actions or situations that may affect the interest of the Company.

T H A N K Y O U V E R Y M U C H

Carlos Alberto de JesusPresident

-- The President’s Report --

T H E P A S T

A N N U A L R E P O R T 2 0 1 5

A H I S T O R Y L I N K E D T O T H E G R O W T H O F I N D U S T R Y A N D T H E C O M P A N Y


18 19

T H E W A R POn Tuesday, December 19, 1922, at 1:00 P. M., four cars of the Antioquia Railroad stopped at the Bel-lo station. They were loaded with openers, warpers, cards and other machinery purchased by Don Jorge Echavarría so that, two years after founding the Fábri-ca de Hilados y Tejidos del Hato (Fabricato), finally, what was going to be one of the most important in-dustries in the country, began to operate. That same Tuesday, and in the year–end summer, the first group of workers began working. Their mission was to clean the machines with which the first fabric would be woven, the origin of the millions of meters that have been produced in 96 years of history.World War I had ended in 1918; imports of fabrics from Europe and other countries were held back, and other textile companies in Antioquia – such as Colte-jer and Compañía de Tejidos Resellón – became thriv-ing businesses.

By 1913, Bello had already acquired the status of municipality. It was a territory with about 5,000 in-habitants, almost all from the countryside, who had settled in its surrounding areas hoping to become workers in the textile industries that operated there. It was the perfect place for an industrial complex, due to the proximity of water sources and because there was enough manpower to operate the process.

On Wednesday, August 8, 1923, the Company was inaugurated; the machines – that months before had been unloaded from the trains – were started. That Tuesday, the history of Fabricato began to be wo-ven with each worker who passed through and helped build it, together with the development of the munic-ipality of Bello and the textile industry of the country.

1 9 1 9

1 9 2 0

In December, the land for the factory was purchased.

The Fabricato Articles of Incorporation

On February 26, the Fábrica de Hilados y Tejidos del Hato was established through a public deed as a corporation.

-- The Past --

1 9 2 2 1 9 2 3

1 9 3 2

On December 19, four cars arrived at the Antioquia Railroad station in Bello with the first boxes of machinery.

Jorge Echavarría, first administrator of

Fabricato

The Fabric of Perfect ThreadsOn August 8, Fabricato was inaugurated with the presence of General Pedro Nel Ospina Gómez, President of Colombia.

The production of plaids, towels and fancy fabrics began.


20 21

1 9 3 7

1 9 3 9 1 9 4 0

The thermal unit was installed.

Compañía de Tejidos de Bello was purchased by Fabricato, liquidating its corporate name in 1951 and thus becoming the Fabri-2 plant.

Studies began to build the hydroelectric plant in the waters of the La García stream.The private clinic was created for all free health services for workers. This year, the Patronato (a boarding house for female workers who lived in rural or remote areas of the Company) was also built.

Electric plant

Weft Winder

The Patronato installations

Wrapping Machine

1 9 4 1

1 9 4 5

1 9 4 7

The printing process began.

On July 4, the planning of the reservoir of the La García stream began.

The civil work for the construction of the reservoir began; it was inaugurated in 1948.

Production Room

-- The Past --


22 23

1 9 4 8

1 9 5 0

1 9 5 1

1 9 5 7

The worker housing program began, with the construction of the Barrio Obrero (with 320 modern architecture homes, a theatre, church, micro–soccer field and parks).

Inauguration of the Fabricato building.

On July 26, the La García hydroelectric plant began operation.

On March 18, the charter of the Fabricato Workers Cooperative (Cooperativa de Trabajadores de Fabricato, Cotrafa) was signed.

1 9 6 1

1 9 6 4

1 9 7 0

1 9 7 1

Fabric exports began.

On September 28, the Riotex Corporation was established.

Riotex began operations.

With Pantex, Fabricato participated in the founding of Enka de Colombia.

-- The Past --


24 25

1 9 7 3

1 9 7 6

1 9 8 5

Fabricato received the Order of Boyacá during the Presidency of Misael Pastrana Borrero.

Fabricato received the Quality Award, the first company to obtain this distinction.

The Concordato, composition with creditors, was signed for 12 years.

Misael Pastrana Borrero (left) in Fabricato’s 50th anniversary

1 9 8 6

1 9 8 7

The payment of the Concordato debt and the process of industrial reorganization began.

The Concordato ends early.Aerial view of Fabricato and Pantex

1 9 8 9Market launch of the bond issue for a total of COP 4 billion.

Visit by Ernesto Samper (third from the right),

Minister of Development in October 1990

2 0 0 0

2 0 0 5

Fabricato merged with Tejicóndor.

Fabricato purchased Fibratolima.

-- The Past --


26

2 0 0 8After an investment of USD 40 million, the most modern indigo plant in Latin America was inaugurated. This allowed expanding production by one million additional meters.

2 0 1 3The Board of Directors appointed Carlos Alberto de Jesus as President, responsible for leading the Company’s transformation strategy.

Fabricato selected the companies responsible for the real–estate development of the Pantex lot: Londoño Gómez S.A.S., Arquitectura y Con-creto S.A.S. and Fondo de Inversión Inmoval, administered by Credicorp Capital. There, a commercial and urban project will be built.2015

T H E P R E S E N T

S T A B I L I T Y A N D O P T I M I Z A T I O N

A N N U A L R E P O R T 2 0 1 5


30 31

-- The Present --

With the investments we have made, in 2016 this will be one of the most modern companies in the world.”

Carlos Alberto de Jesus, president


32 33

The year 2015 was a difficult one for the economies of the region. In Colombia, the macroeconomic environment was marked by the volatility of the Dollar; the uncertainty caused by falling oil prices; the beginning of El Niño, which lasted until 2016; and inflation of 6.77%, the highest since 2009.

In such a complex environment, Fabricato’s results were outstanding: 53.6 million meters of fabric sold; COP 366.231 billion in sales; EBITDA for COP 23.841 billion; operating profit of COP 15.916 billion and a consolidated net profit of COP 33.942 billion.

The figures are the result of a res-tructuring and optimization process that began in late 2013; it was executed in 2014 and began to show positive re-sults in 2015.

$53.6 million

meters of fabric sold in 2015.

This restructuring involved reviewing operating costs; renewing the portfolio; starting a technological restructuring plan; and setting goals for growth and expansion in the coming years.

The optimization required closing two of the four plants that were operat-ing in 2014 (Fibratolima in Ibagué and Notejidos in Bello, which joined the Rionegro plant). Similarly, the admin-istrative structure was simplified: four Vice Presidencies were eliminated and a structure – formed by the President,

BUSINESS UNITS

67%Clothing

Denim 27%

Twills and Poplins 29%

Knits 11%

26%Institutional

Military Line 16%

Work 10%

7%Technical and

Recovered Textiles

O R G A N I Z A T I O N A L C H A R T

PresidentCarlos Alberto de Jesus

Secretary GeneralAndrés Hincapié

Administrative and Financial DirectorVacant

OperationsDirector Juan Octavio Mejía

Marketing and SalesDirectorArmando Castillo

three directorates (Operations, Marketing and Sales, and Administra-tive and Financial) and a third level of managers that support it – was configured.

The renewal of the portfolio meant concentrating on five strategic lines: denim, twills, knitwear, nonwovens and institutional, and the elim-ination of three lines that did not fit the Company’s new focus: home, wools and pre–dyed plain fabric.

Additionally, the Company’s sales offices in Colombia, Peru, Ecua-dor, Mexico and Venezuela were closed, in order to increase the working capital efficiency.

-- The Present --


34

Our goal is to specialize in clothing and institutional lines, with products that are differentiated by their fibers, by the structure of their fabrics or by the finishings, as well as for our service and technical assistance, so that we can make a garment that differs from those in the market.”Armando Castillo, Marketing and Sales Director

M A R K E T P R E S E N C EWith two plants less and focused on five business lines, in 2015 the Compa-ny sold the same meters of fabric as in 2014, while sales grew 10.7% in Pesos.

Most of its production – 81% – was sold in the domestic market; the remaining 19%, internationally where South America and Central America are the main destinations.

The goal for 2016 is to continue growing in sales and increase the share of exports. To do this, the Company is already reaching new markets with sales representatives. There are contacts with brands in Spain and Italy to establish al-liances and sell the whole package.

It is projected that in the long term, exports will reach 35% of total sales, which will constitute a natural hedge to mitigate the impacts of the exchange rate. The alliances and the Central American market will be important in achieving that goal.

DOMESTIC AND INTERNATIONAL

MARKET

81%Domestic Market

19%Exports

C H A L L E N G E SAs a result of the volatility of the exchange rate, last year there was a decrease in the imports of fabrics of nearly 8%, representing an opportunity for local industries. However, that was a situation that reflected a variable market condi-tion and it is clear that to grow, not only a strategy – but also facing some challenges – is required.

The reduction of tariff quotas on products from China, economic opening and trade agreements make the scenario complex.

The entry of imported fabrics at prices below production costs, technical and open contraband, and informality in the garment sector are current challenges.

The strategic focus of competitiveness through effi-ciency is the only option to compete in an environment of economic liberalization and fair competition. Also, it is clear that, in an environment of unfair competition – in which bad practices abound – it is necessary that the Government in-tervene to combat them and favor the formal industry.


36 37

I N N O V A T I O NInnovation and the ability to differentiate are definite; for this reason, the Company has incorporated them into its strategy.

The research, development and inno-vation process in Fabricato is carried out in partnership with suppliers and clients. It be-gins with market knowledge, as well as the research of fashion trends, which has led us to introduce innovative processes and tech-nological developments that add value to the product and meet market needs.

The Company has experience in “func-tional finishes,” with which fabrics that re-pel liquids, grease, oils and mosquitos, as well as those that are wrinkle proof, those that are resistant to fire, ultra–violet rays and electric arcs, among others, are man-ufactured.

Innovation is a principle that – once it becomes transversal to all processes – contributes to competitiveness and the Company understands this. In fact, since 2010 it has been working on its incorpora-tion as a pillar of competitiveness; in 2012, it advanced a project with Colciencias to develop innovation capabilities.

Similarly, the Company implemented the Ideacción program, a tool for workers to participate in innovation, which permits taking advantage of and encouraging ideas and solutions aligned with the Company’s strategy and that contribute to technical or market processes.

In 2015, the ideas of workers from both the Fabricato and Riotex plants were re-warded. Similarly, workers who contribut-ed the most ideas in both plants and the leader who promoted the most ideas were recognized. Of the 373 initiatives present-ed – which generated savings in the Com-pany for more than COP 1.3 billion – 102 were rewarded with resources for COP 20,940,000.

FABRICATO

RIOTEX

114Ideas presented

30Ideas rewarded

259Ideas presented

72Ideas rewarded

102

373IDEAS REWARDED

IDEAS PRESENTED

I N V E S T I N G I N T E C H N O L O G YMuch of the Company’s restructuring strategy is supported by a process of technological transformation that has been underway since 2012; it will run through 2016 and the following years.

Altogether, over the past four years, investment has totaled nearly USD 34 million: USD 30 million in 2012 and USD 3.5 million in 2015, allocated to the textile business. These figures have contributed to mod-ernization and achieving the levels of efficiency and production that Fabricato has today.

For 2016, an investment of USD 8 million is planned, which will place Fabricato among the most modern in the world.

Good results are not just the product of investment and a restruc-turing plan; Fabricato’s human talent as well as its clients and suppliers have been definitive. In difficult times, providers have been close, sup-porting the Company. Similarly, clients, who recognize a seal of quality and compliance in the Fabricato products, have also supported us; this is evidenced in a survey conducted by Radder, which shows that the topics of quality, delivery times and client service are some of the most highly valued aspects.

2015 Achievements

1. Stabilize the business, meet the sales budget, and generate margin and profit.

2. Renew the portfolio of products and refocus the channel.

3. Finalize the commercial restructuring process in all the countries where we are present.

4. Recover client trust and credibility regarding quality, delivery times and type of products.

PRODUCT QUALITY

ATTENTION FROM STAFF

DELIVERY TIME

TECHNICAL ADVISE

DELIVERY LOGISTICS

PRICE

CLIENT PERCEPTION

72%

56%

28%

11%

6%

17%

Source: Raddar Client Satisfaction survey

USD

8 million

Is the investment allocated for 2016.

-- The Present --

T H E F U T U R E

G R O W T H I S T H E G O A L

A N N U A L R E P O R T 2 0 1 5


40 41

After the organizational restructuring and the changes that have been implemented in recent years, Fabricato is already working on the strat-egy for the future.

The Company began the investment plan for the coming years, including resources to continue technological innovation and main-tain efficiency and growth.

Partnerships with garment manufacturers will allow us to offer finished products, com-plete the link in the chain and become a pro-vider of markets that until now have been im-possible to penetrate.

I N V E S T M E N T I N T H E R E A L –E S T A T E S E C T O RWhile Fabricato’s core business continues to be in the textile sector, the Company is open to the possibilities that the market offers. There-fore, in 2014 Fabricato made the decision to enter the real–estate business, an alternative that will allow us to have an additional cash flow in the future and take advantage of an as-set that was not in use.

Thanks to the partnership with Arquitectura y Concreto, Londoño Gómez and the Fondo de Inversión Inmoval, administered by Cred-icorp Capital, the eleven hectares, where until four years ago Pantex operated, will become a real–estate development that not only contrib-utes to Fabricato and the project partners, but also to the municipality of Bello.

A shopping center, housing and a service center will operate on the old lot, which is considered one of the most valuable assets of the Company, not only for its size, but also be-cause it is situated in a strategic location north of the city.

With the sale of 30% of the lot, the Com-pany managed to implement the restructuring plan. With the remaining 70%, it will participate in a real–estate development that will allow it to receive income from the businesses that will operate there beginning in 2017.

Fabricato is very clear that its entry into the real–estate sector is an opportunity to generate income, which – although it will become a new business unit – does not mean a shift in its tex-tile industry

In addition to founding Pantex, Enka and Comercia (today, Factoring Bancolombia), Fabricato has participated in various business-es, such as Texmeralda, and cotton and agricul-tural companies, among others. So, more than a surprise, our entry into the real–estate busi-ness is an opportunity in the growth strategy.

The possibilities are in the market. There are as many as there are competitors. While continuing to grow and create value, Fabrica-to’s work is to explore the alternatives that most benefit it.

Fabricato is going to be a Company that aims for

excellence of what the textile business is and

be an investor, associated with large real–estate

companies, to leverage assets available for the

process to optimize production.”

Carlos Alberto de Jesus, President

For Fabricato comes smart – not unbridled – growth, with a very clear portfolio.

Challenges 2016

1. Growth and optimal use of technological reconversion.

2. Reach new key markets to the strategy, including Central America, Europe and the United States.

3. Maintain the proposal of differentiated collections and products.

4. Increase exports.

5. Take advantage of trade agreements.

-- The Future --

S U S TA I N A B I L I T Y

R E S P O N S I B L E G R O W T H

A N N U A L R E P O R T 2 0 1 5


44 45

Being sustainable means generating profits, guaranteeing the future of the or-ganization over time, being environmen-tally friendly, and, above all, generating value for the stakeholders. This means growing, avoiding environmental deteri-oration, seeking the welfare of employ-ees, but also of the community in which it is located; this is what Fabricato has been doing throughout its history.

Although a Department of Environ-mental Management did not exist, since the late 1960’s concern for the issue became a priority.

Anticipating legislation, in that de-cade Fabricato began a program to reduce levels of pollution from waste being discharged into the atmosphere and water.

Many years later, when Colombian law required companies to create areas that assumed these responsibilities, Fabricato had already created its Depart-ment of Environmental Management.

Today, the Company has an Environ-mental Committee, composed of plant managers; it meets monthly to analyze, map out, implement and monitor the Company’s environmental activities, es-tablish guidelines, and decide on com-mitments with clients and suppliers.

The Company has focused its envi-ronmental work in three fields of action: emissions, water consumption, and discharges. This work is carried out with responsibility and the commitment to return benefits to the environment from

which it draws resources for its operation.Precisely, in environmental issues,

Fabricato is a pioneer. It was one of the first companies in the industry in Antioquia to sign a Clean Production Agreement. It was signed in 1984 in the Rionegro (Riotex) plant, and it has been renewed three times. In 2000, in its plant in Bello, it signed voluntary agreements with the Ministry of the Environment and Sustainable Develop-ment and the regional environmental authorities: the Aburrá Valley Metropol-itan Area and the Regional Autonomous Corporation of Central Antioquia (Cor-poración Autónoma Regional del Cen-tro de Antioquia, Corantioquia). These commitments enable the achievement and evaluation of new targets, the im-plementation of clean production sys-tems, the measurement of impacts, the optimization of activities, and the recovery of water and steam.

These agreements are now called Sustainable Production and Consump-tion Conventions, as proposed in the Ministry’s Sustainable Consumption Policy. The last convention signed for the Bello plant was in 2011 and will be renewed in 2016; the convention for the Rionegro plant will be renewed in 2017.

Fabricato is aware that the textile sector requires water resources and knows the importance of good man-agement to avoid polluting processes. It knows that in today’s world, large re-ductions and savings are presented with the use of new technologies; thus, tech-nological renovation has been a priority. In 2016, construction will be completed on the Wastewater Treatment plant with Color Removal and Water Reuse.

These decisions seek care for the environment and generate benefits in every respect for the Company. Mod-ernization has implied an environmen-tal benefit because saving resources contributes to their moderated use. Precisely, the investment of USD 8 million planned for 2016 will improve efficiency while contributing to environ-mental care.

-- Sustainability --

E M I S S I O N SThere are several actions that Fabricato has taken since the 1940s to avoid contamination: It purchased measurement equipment, thought of the possibility to stop using coal as the main fuel and – because of the impossibility of doing so – opted to import purification equipment, which was inaugurated in 1979 and con-tributed to environmental decontamination.

At the end of that decade, with the implementa-tion of the process to purify dust emissions, gases and fumes expelled by the chimneys were reduced 95%; once sedimented, they were used to make cement.

With the purchase of this equipment, Fabricato properly managed the carbon soot and controlled the management of particulate material.

Another decision that contributed to controlling emissions was the use of natural gas – instead of diesel – in boilers, as it is a more environmental friendly fuel and has low emissions of carbon dioxide (CO

2). What

is remarkable is that in the moment when the Compa-ny made this decision, the topic of emissions was not part of the environmental discourse in the country.

This shows that this is not a recent concern, nor is it due solely to legal compliance; rather, it is part of the culture of the organization, an environmental con-sciousness that has been gestating since its birth.

Since 2008, the Company has a team to collect ash, an acquisition that contributes to the air quality of surrounding communities. Even today, the coal ash burned in the boilers is collected in its entirety and sold as raw material for the construction industry.

Additionally, to have efficient waste management, in the Bello plant there are two permanent operators of the companies in charge of separating all the materials, including the management line for hazardous waste.

Noteworthy is that, in 2015, Fabricato extended its commitment to suppliers. Through meetings and visits, jointly reviewed were their environmental man-agement plans and their strengths and opportunities for improvement with the goal that environmental re-sponsibility and sustainable consumption are carried out throughout the production chain.

The Company participates in a pilot project to continuously

monitor emissions.


46 47

Similarly, in 2015 the Company worked on im-plementing ISO 14000, an international envi-ronmental–management standard; it is a tool that helps companies improve their relation-ship with the environment by controlling and reducing the impacts of their operations.

The Energy Production Plant, which in a textile company requires special treatment to reduce its environmental impact, has sophis-ticated systems to collect all emissions to filter all hazardous elements, according to Colombi-an environmental regulations. At the present time, environmental authorities measure the emissions and recommend actions that must always be fulfilled.

Looking ahead, the Company already has a plan, participating in a pilot project for the con-tinuous monitoring of emissions, and togeth-er with the Aburrá Valley Metropolitan Area, it signed a memorandum of understanding with the Clinic Care Institute to install equipment that will measure emissions in the Bello plant in 2016.

W A T E R C O N S U M P T I O NWith regard to water consumption, Fabricato has implemented policies to use and reuse wa-ter resources for efficient consumption, avoid-ing its contact with contaminated material and assisting in its conservation, not only for its contribution to the productive process, but also because we consider it essential for humanity.

In the Bello plant, recovery of cooling wa-ter amounts to 70%. The heat sealers work with vapor that is then channeled and reused in the boilers in their production processes; it is a resource that – by arriving hot – re-quires less fuel to raise it to the required tem-peratures. The water used is provided by the

La García hydroelectric plant, which be-longs to Fabricato. The liquid is collected at the intake and reaches the water plant, where seven pools receive treatment, de-pending on their final use, including human consumption. Monthly, nearly 220,000 m3 of water are treated.

Additionally, the Company always aims to acquire low water–consumption technol-ogy, which allows a bath ratio (RB, the num-ber of liters of water required for a kilo of fab-ric to be dyed) of four (4), an optimum level in global measurements and far from a BR of 20, common in the industry decades ago.

A modern industry generates employment, economic growth, currency for the country and taxes for the municipality, many benefits… and minimizes its impact.”Carlos Alberto de Jesus, President

D I S C H A R G E SIn 2015, the Company strengthened its envi-ronmental and social commitment to the prop-er management of its discharges, so much of our waste is classified as reusable or recyclable.

Since 2007, Fabricato joined a collection plan produced by Empresas Públicas de Me-dellín (the Medellín Public Utilities Company) with agencies that regulate discharges. The de-cision was to take the discharges to a central-ized treatment plant and then process them in the wastewater treatment plant in Bello, located in the Navarra sector.

However, in 2015, the Company defined the construction of a Wastewater Treatment plant with Color Removal and Water Reuse, which will permit separating the liquid from the inks that fall in it and treat about 30% of the water consumptions of the textile plant.

E N E R G Y G E N E R A T I O NIn a visionary decision that meant a large in-vestment at the time, between 1947 and 1951 the Company built its own hydroelectric plant in the La García stream, located in the San Felix hamlet of the municipality of Bello.

It has two generators that produce 6,000 kWh; the energy is transported to the plant in Bello, and in 2015 – together with the ther-moelectric plant – it contributed to supply an average of 83% of the energy needs; in several months, self–generation reached 90%. This – our own supply – depends on the level of water in the reservoir; when it fails to self–generate, the company connects to the Empresas Públi-cas de Medellín electrical system.

The thermoelectric plant, located in the Bel-lo plant and which generates 8,000 kWh, was inaugurated on July 5, 1979. At that time, the investment amounted to COP 80 million and was presented as a contribution from the pri-vate sector and a share of social responsibility.

Self–generated energy represents a savings of approximately 45% for Fabricato, compared to the value that it would have to pay Empresas Públicas de Medellín in case its interconnec-tion were required.

CertificationsFabricato has ISO 9001 certification for its Quality Management System (QMS), standards accredited by IQNet, a global certification au-thority. In 2015, QMS was renewed until 2018 and covers the plants in Rionegro and Bello. This certification demonstrates the continuous improvement of the QMS; the efficient use of resources; objective, evidence–based decision making; client satisfaction; and the sustained success of the organization, among others.

Fabricato also has certification of products from the Colombian Institute of Technical Stan-dards and Certification (Instituto Colombiano de Normas Técnicas y Certificación, ICONTEC), for fabrics through the tender with the Armed Forces. These seals position the product brand and generate greater recognition and market opportunities. This certificate is validated by the National Accreditation Agency of Colom-bia (Organismo Nacional de Acreditación de Colombia, ONAC) and the American Nation-al Standards Institute (ANSI). Fabricato thus demonstrates that its products meet technical references through manufacturing systems and effective, reliable controls, which give backing and security to the end consumer. Current-ly, there are 11 products with seals, which were certified under the Colombian Ministry of De-fense Technical Standards (Normas Técnicas del Ministerio de Defensa, NTMD) 0328, 0053, 0067, 0075, 0146 and 0186.

The renewal of these seals was received by the Company in 2015 and extends to 2017.

Self–generated energy represents an approximate savings of 45% in the energy cost that the Company pays.



48 49

H U M A N R E S O U R C E SFabricato closed 2015 with 2,654 employees; six unions, each with 10 union representatives; and a collective agreement agreed upon until 2019, signed with the majority union.

The policy implemented by Human Re-sources is part of the Company’s overall strate-gy, which has included – as a fundamental pillar of its activity – concepts inherent to the sustain-ability of the Company and maintaining decent work to offer all its employees. These are also involved in interior pillars, supported by admin-istrative transparency, coherence, respect for human rights and environmental protection.

The aforementioned guidelines make the actions of Human Management on the welfare of employees and their families imperative; it also involves their training in activities associ-ated with the textile process and related to their daily life, attaining the professionalization of an important human nucleus.

To achieve this, Fabricato has implemented programs that include training, development plans and training in skills related to an activity. Likewise, it contributes to improving the quality of life of their family environment with academ-ic and recreational and leisure activities.

Work aimed at improving this welfare per-mits joint work with all the sectors that contrib-ute to the same intention. For example, with the Company unions, it seeks the continuous

strengthening of work conditions and condi-tions outside the workplace, and has signed agreements, such as the Wellness Program, which offers labor guarantees, even greater that those required by Colombian law.

H O U S I N GThe history of Fabricato and the municipality of Bello has been linked by both geographic loca-tion and by the Company’s contribution to the development and quality of life of the people of Bello (known as Bellanitas).

The Obrero (1941), San José (1963) and Santa Ana (1973) neighborhoods (barrios) were born through Fabricato and its housing policy for employees. Other barrios, such as El Carmelo, Salento and Manchester, benefitted from the business contribution of its employ-ees to purchase homes.

Even today, after decades of work, housing programs remain highly valued by employees. When five–year or seniority anniversaries are celebrated, employees state that among the greatest benefits they have received by being employed by Fabricato are the support to pur-chase a home or for their own education or that of their children.

E D U C A T I O N A N D T R A I N I N GTraining is a benefit enjoyed by employees since 1940, when the schol-arship program for children and siblings was instituted; this support con-tinues today.

By the end of 2015, Fabricato had a total of 2,654 employees; 2,240 in Fabricato and 414 in Riotex, of which more than 50% had completed their high school studies; some have technical and technological training and, to a lesser extent, others have higher education and post –graduate degrees.

FABRICATO RIOTEX

7%Primary 195

12%Unfinished

high school 359

51%High School 1.527

12%Technicians 348

11%Technologists 341

6%Professionals 173

1%Specialization 40

0%Masters 9

5%Primary 23

8%Unfinished

high school 37

64%High School 307

8%Technicians 38

13%Technologists 64

2%Professionals 10

0%Specialization 1



50

Incentives to access formal education also extend to the family group of each one of the employees, thanks to the economic contribution of the Scholarship Fund. In 2015, it amounted to COP 1.240 billion and benefitted 686 employees with the pay-ment of tuition in primary, secondary and higher education.

Employee children have access to the Scholarship Fund and, in many cases, it also benefits their spouses and siblings, who also participate in informal education, such as workshops in painting, sewing and crafts.

But besides contributing to technical, technological or professional training, em-ployees are trained in technical occupations related to the textile activity and other areas of personal growth.

In Fabricato’s history, the permanence of the Workers’ Training Center (Centro de En-trenamiento para Trabajadores) is recorded; it was founded in 1960 to offer courses that instructed them in activities related to the company, and, therefore, in the 1990s, Uni-versidad de la Tela was institutionalized. It is an internal entity in charge of programming

training sessions on topics that the Compa-ny requires and managing learning contracts with higher–education institutions. Its ob-jective is the certification of workers’ skills to perform their jobs through theoretical–prac-tical programs and validations. From 2008 to 2015, 8,935 employees have been certified.

In addition to Universidad de la Tela, Fab-ricato offers opportunities for training in tech-nical and technological programs that con-tribute to increasing the skills of its employees and accessing professional opportunities. As part of this program, in 2015, 14 employees graduated as technicians in logistics; 18 as technicians in electronic and industrial main-tenance, which is an academic program car-ried out in partnership with Coltejer and TCC, and which is expected to conclude in 2017.

On the other hand, each year the Compa-ny conducts induction and training programs. In 2015, the investment was COP 167 million, of which 10% was subsidized through an agreement with SENA (the Colombian Ap-prenticeship Service). Altogether 3,458 em-ployees participated and the total of training hours amounted to 89,605.

FABRICATO

RIOTEX

HOURS OF TRAINING BY PLANT

68.225TOTA

L

21.380TOTA

L

54.415During work hours

13.810During

worker’s time

20.660During work hours

720During

worker’s time


52 53

A Diploma program in Integrated Management was established with the Metropolitan Technological In-stitute (Instituto Tecnológico Metropolitano, ITM) for production managers; it was attended by 22 supervi-sors. A Diploma program in Cost Management was es-tablished with the School of Engineering of Antioquia (Escuela de Ingeniería de Antioquia, EIA), in which 14 people from the Areas of Costs, Accounting and Engi-neering participated, as well as production heads and managers, in order to acquire tools to adjust the cost structure to be more profitable and more competitive.

Also, the relationship of Fabricato with other edu-cational institutions is given through:

• Scholarships for employees, both administrative and those covered by the collective agreement, who are able to carry out undergraduate and gra-duate programs in different universities in the city.

• The professionalization of employees with techni-cal and technological programs developed on site.

• Participation in summons that allow employees to obtain Government subsidies for up to 50% of the value of specialized continuous –training programs.

• Agreements to conduct specialized programs with universities such as EAFIT, the School of En-gineering of Antioquia (EIA), the Metropolitan Te-chnological Institute (ITM) and the University of Antioquia, among others.

• Internship students from various institutions to contribute to specific projects in the Company.

• Participation in the University, Company and Sta-te Committee, a strategic alliance that brings to-gether institutions from different sectors for joint ventures.

• The SENA –Fabricato agreement allows refresher courses, development and certification of labor skills through programs tailored to the needs of the Company. During 2015, 460 operational sta-ff members participated. In addition, 26 people took part in the Focused Improvement training program, which seeks to incorporate knowledge for analysis and troubleshooting.

In SENA, a course was also taught to qualify forklift operators and thus avoid accidents. It had 78 partici-pants during 4,620 hours.

As additional programs, it is worth noting that some were conducted to protect health, decrease and prevent accidents, as well as offering training courses for working at heights. In these courses there were a total of 219 employees: 45 certified in heights, 166 re-certified and eight certified as coordinators of working at heights.

In the health risk program I Value Myself, I Take Care of Myself (Me valoro, Yo me cuido), which seeks to raise awareness about self –care and the care of the health and physical integrity of workers, 115 people participated.

COP 1.24 Billion were invested in the Scholarship Fund for formal education in 2015, which benefitted 686 employees.

FOOD AND TRANSPORT SERVICEFabricato offers food and transport service to all employees, with an in-vestment that – in 2015 – amounted to COP 4.102 billion.

Food service consists of offering a daily meal at a very low economic cost. The rate is low compared to average market prices and corresponds to the type of contract and salary, with values ranging from COP 50 to COP 3,500 per day. It provides breakfast for the 6:00 AM to 2:00 PM shift; lunch for the 7:00 AM to 5:00 PM shift; supper for the 2:00 to 10:00 PM shift; and dinner for those who work from 10:00 PM to 6:00 AM.

Similarly, all operational staff ben-efit from the transport service, which connects the plants, through existing agreements with transportation com-panies. The routes reach several desti-nations in the Aburrá Valley.

Fabricato has been involved in

the development of the municipality

of Bello.

CORPORATE SOCIAL RESPONSIBILITYThe contribution to the welfare of the Company’s stakeholders is a job that is constantly carried out; it also forms part of Fab-ricato’s history. Its presence in the municipality of Bello led to the commitment to develop that community. The construction of the hospital that is today managed by Nueva EPS, to the hut where Marco Fidel Suárez – 33rd Colombian President from 1918 to 1921 – lived, as well as the creation of entire barrios endowed with water and sewage, and the campus of Colegio La Salle, are evidence of Fabricato’s commitment to the environment, a com-mitment that continues today and leads the Company to plan activities to benefit its inhabitants.

In 2015, under the strategic line “Community Involvement and Social Fabric,” the training program in knowledge of the tex-tile sector stands out. The summons was made in the barrios in the municipality of Bello with the lowest index of social devel-opment; 60 young people answered the summons, of which 11 were hired by Fabricato.

The commitment also extends to having the pensioner pay-roll up to date; in 2015, it amounted to COP 14 billion for 2,200 people (800 directly with Fabricato and 1,400 shared), an eco-nomic resource that is provided even in the difficult financial sit-uations of the Company.


S E P A R A T E F I N A N C I A L

S T A T E M E N T S

A N N U A L R E P O R T 2 0 1 5

56 57

— Separate financial statements —-- Annual Report 2015 --

STATUTORY AUDITORS´ REPORT

ON THE SEPARATED FINANCIAL STATEMENTS

To the Shareholders of Fabricato S.A.

I have audited the accompanying separated financial statements of Fabricato S.A., which comprise the separated statement of financial position as at December 31, 2015 and the separated income statement, statement of comprehensive income, separated statement of chang-es in equity and separated statement of cash flows for the year then ended, and the summary of significant accounting policies and other explanatory notes.

Management is responsible for the preparation and fair presentation of the separated financial statements, in accordance with Accounting and financial information standards accepted in Colombia; of designing, im-plementing, and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements whether due to fraud or error; and selecting and ap-plying appropriate accounting policies and making estimates that are reasonable in the circumstances.

My responsibility is to express an opinion on these separated financial statements based on my audits. I obtained the necessary information to comply with my functions and performed my examinations in accor-dance with auditing standards generally accepted in Colombia. Those standards require me to comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the separated financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the separated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risk of material misstatements in the separated fi-nancial statements. In making those risk assessments, the auditor con-siders the internal controls relevant to the entity’s preparation and fair presentation of the separated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant estimates made by man-agement, as well as evaluating the overall presentation of the financial statements. I believe that my audits provide a reasonable basis for my audit opinion.

In my opinion, the accompanying separated financial statements, taken from the accounting books, present fairly, in all material respects, the financial position of Fabricato S.A., as of December 31, 2015, the results of its operations and the cash flows for the year then ended, in accor-

dance with Accounting and financial information standards accepted in Colombia.

As described in Note 1 of the Separated Financial Statements, on No-vember 7th, 2000, the Company formalized a restructuring agreement with its internal and external creditors, under the guidelines stablished in the Law 550. To the date, we have no evidence that the Company has breached the commitments made in the economic restructuring agreement mentioned above.

Further, based on the scope of my audits, I am not aware of situations indicating that the Company has not: 1) kept minute books, the share-holders’ register and the accounting records in accordance with legal re-quirements and the accounting technique; 2) carried out its operations in accordance with the by-laws and the decisions of the Shareholders’ and of the Board of Directors, and of the rules related with the integral social security; 3) retained correspondence and the accounting vouchers; and, 4) adopted internal control measures for the maintenance and custody of the Company’s assets and those of third parties held by it. Addi-tionally, there is agreement between the accompanying financial state-ments and the accounting information included in the management report prepared by the management, which includes the representation by management on the free circulation of invoices with endorsement issued by vendors or suppliers

Medellín, Colombia February 29, 2016

JUAN CARLOS GONZÁLEZ GÓMEZ

Statutory Auditor Professional Card 54009-T Designated by Ernst & Young Audit S.A.S. TR-530

The undersigned Legal Representative and Certified Public Accountant under whose responsibility the financial statements were prepared, we hereby certify:

As for issuing the statement of financial position at 31 December 2015, and the state of profit or loss and other comprehensive income, statement of changes in equity and cash flow statement for the year ended on that date, which according to the regulations are made available to sharehold-ers and third parties, the statements contained therein and figures taken faithfully from the books have been previously verified.

Such statements, explicit and implicit, are as follows:

Existence: The consolidated assets and liabilities of Fabricato S.A. there on the closing date and recorded transactions have been made during the year.

Integrity: All economic events have been recognized.

Rights and Obligations: The consolidated assets represent probable future economic benefits and liabilities represent probable future economic sacrifices, obtained by Fabricato S.A. on the cutoff date.

Valuation: All items have been recognized by appropriate amounts.

Presentation and disclosure: The economic facts have been properly classified, described and disclosed.

The opening financial statements at January 1, 2014 and transition at December 31, 2014, detail the off-balance figures obtained following the guidelines described in Note 2.6 first-time adoption of Accounting Standards and Financial Reporting accepted Colombia.

CERTIFICATION OF THE SEPARATED

FINANCIAL STATEMENTS

CARLOS ALBERTO DE JESUS

Legal representative LUZ BIBIANA HINCAPIÉ RÍOS

AccountantProfessional Card No. 73063-T

59

— Separate financial statements —


Legal Representative(See attached certification)

LUZ BIBIANA HINCAPIÉ RÍOS

General AccountantProfessional Card # 73063-T(See attached certification)


Fiscal AuditorProfessional Card # 54009-T Designated by Ernst & Young Audit S.A.S TR-530(See my inform of February 29 2016)

58


CERTIFICATION OF FINANCIAL STATEMENTS

LAW 964 OF 2005


Legal representative

General Shareholders’ Meeting of Fabricato S. A.

Medellín

THE UNDERSIGNED LEGAL REPRESENTATIVE OF FABRICATO S. A.

CERTIFIES:

The financial statements and management report corresponding to year 2015 and 2014 do not contain any errors, inaccuracies or flaws that pre-vent knowing the true financial condition or operations of the Company..

The company also certifies that the financial statements were reviewed and approved by the Audit Committee before being submitted for consid-eration by the Board and the General Assembly of Shareholders.

For the record, this certification is signed on February 19th 2016.

Assets Notes 2015 2014 01/01/2014

Current assets

Cash and cash equivalents 5 24.504 9.028 6.661

Trade receivables and other receivables, net 6 93.170 57.337 62.187

Accounts receivable related parties and associated 18 2.324 10.055 39.274

Inventories, net 7 92.917 84.221 83.412

Tax assets 8 7.749 4.950 3.888

Other financial assets 12 670 9 45

Other non-financial assets 1.006 902 1.677

Assets classified as held for sale 9 23 638 5.308

Total current assets 222.363 167.140 202.452

Non-current assets

Property, plant and equipment 9 424.448 422.476 584.826

Investment Property 9 21.528 146.987 5.091

Intangible assets 129 39 -

Investments in subsidiaries, joint ventures and associates 10 115.323 26.815 29.542

Trade receivables and other receivables 6 2.436 4.183 5.438

Accounts receivable related parties and associated 18 5.716 8.084 7.358

Deferred tax assets 11 54.430 57.412 60.247

Other financial assets 12 3.421 3.421 3.421

Total non-current assets 627.431 669.417 695.923

Total assets 849.794 836.557 898.375

SEPARATE STATEMENTS OF FINANCIAL SITUATIONTo 31 December 2015, 2014 and 01 January 2014 / In million of Colombian pesos

See attached notes.

60 61















Equity and Liabilities Notes 2015 2014 01/01/2014

Liabilities

Current liabilities

Financial liabilities 13 23.842 23.758 33.440

Employee Benefits 14 24.923 21.613 23.173

Other provisions 15 1.606 369 898

Trade payables and other payables 16 42.447 52.215 56.271

Accounts payable related parties and associated 18 3.764 3.832 508

Tax liabilities 17 6.397 5.161 7.116

Total current liabilities 102.979 106.948 121.406

Non-current liabilities

Financial liabilities 13 442 2.874 6.183

Employee benefits 14 103.969 113.935 118.150

Other provisions 15 6.077 5.396 7.350


Deferred tax liabilities 11 70.000 74.669 76.039

Total non-current liabilities 189.988 205.730 220.578

Total liabilities 292.967 312.678 341.984

Equity

Issued capital 19 36.807 36.807 36.807

Issue premium 19 207.194 207.194 207.194

Exercise outcome 33.942 (32.760) -

Accumulated earnings 19 181.734 214.494 214.494

Other comprehensive income (746) 248 -

Reservations 19 97.896 97.896 97.896

Total equity 556.827 523.879 556.391

Total equity and liabilities 849.794 836.557 898.375

SEPARATE STATEMENTS OF FINANCIAL SITUATIONTo 31 December 2015, 2014 and 01 January 2014 / In million of Colombian pesos

See attached notes.

Continuing operations Notes 2015 2014

Ordinary activities income 20 366.231 330.845

Sales cost (318.914) (306.646)

Gross profit 47.317 24.199

Other income 24 17.349 16.495

Distribution costs 21 (2.286) (3.476)

Selling and administrative expenses 21 (15.614) (13.454)

Expenses for employee benefits 22 (16.327) (15.280)

Impairment losses 23 (2.308) (6.028)

Other expenses 24 (12.215) (11.264)

Gain (loss) from operating activities 15.916 (8.808)

Profit from the net monetary position 26 261 43

Financial income 25 1.179 1.436

Financial costs 25 (15.476) (18.411)

Profits (losses) - equity method 27 1.223 (2.725)

Other income from subsidiaries 27 32.593 -

Gain (loss) before taxes 35.696 (28.465)

Tax expense 11 (1.754) (4.295)

Gain (loss) from continuing operations 33.942 (32.760)

Net profit (loss) for the year 33.942 (32.760)

Other comprehensive income

(Losses) profit on defined benefit plans (1.565) 437

Deferred tax components of other comprehensive income 11 571 (189)

Components of other comprehensive income, net of tax (994) 248

Net income (loss) Total comprehensive income for the year 32.948 (32.512)

Basic and diluted Earnings (losses) per share * 3,69 (3,56)

SEPARATE STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME To 31 December 2015, 2014 / In million of Colombian pesos

See attached notes.

* Calculated on the result of the period

62 63















Equity

Equity attributable to controller owners

TOTAL

Reservations

Issued

capital

Issue

premium

Legal

reserve

Occasional

reserve

Other

reserves

Other

comprehensive

income

Profit for

the year

Collected

earnings

Equity at the beginning of the period - January 2014

36.807 207.194 17.724 41.596 38.576 - - 214.494 556.391

Profit for the year - - - - - - (32.760) - (32.760)

Other comprehensive income - - - - - 248 - - 248

Equity at end of period - December 2014

36.807 207.194 17.724 41.596 38.576 248 (32.760) 214.494 523.879

Profit for the year - - - - - - 33.942 - 33.942

Appropriations results - - - - - - 32.760 (32.760) -

Other comprehensive income - - - - - (994) - - (994)


36.807 207.194 17.724 41.596 38.576 (746) 33.942 181.734 556.827

SEPARATE STATEMENTS OF CHANGES IN EQUITYTo 31 December 2015, 2014 and 01 January 2014 / In million of Colombian pesos

See attached notes.

SEPARATE STATEMENTS OF CASH FLOWTo 31 December 2015, 2014 / In million of Colombian pesos

2015 2014

Operating activities

Types of cash receipts from operating activities

Proceeds from sales of goods and services 348.909 365.689

Proceeds from royalties, fees, commissions and other revenue 20.799 58.269

Proceeds from premiums and claims, annuities and other policy benefits 1.218 67

Types of cash payment from operating activities

Payments to suppliers for goods and services (297.983) (284.981)

Payments to and on behalf of employees (82.972) (92.553)

Payments for premiums and claims, annuities and other policy benefits (1.384) (1.729)

Payments for value added tax (IVA) (11.458) (6.024)

Net cash flow (used in) from operations (22.871) 38.738

Interest paid (374) (779)

Income taxes paid - (13)Taxes, fees and charges (11.447) (13.261)

Net cash flow (used in) from operating activities (34.692) 24.685

Investing activities

Resources for changes in subsidiary ownership interests 68.250 -

Purchases of property, plant and equipment (10.054) (5.739)

Payments arising from future contracts, forwards, options and swap (392) -

Dividends received 375 270

Other cash inflows 66 251

Net cash flow from (used in) investing activities 58.245 (5.218)

Financing activities

Proceeds from loans 8.411 26.335

Loan refunds (16.757) (43.468)

Other cash outflows (12) (97)

Net cash flow used in financing activities (8.358) (17.230)

Net increase in cash and cash equivalents before the effect of changes in the exchange rate 15.195 2.237

Effects of variations in the exchange rate on cash and cash equivalents

Effects of variations in the exchange rate on cash and cash equivalents 281 130

Net increase in cash and cash equivalents 15.476 2.367

Cash and cash equivalents at beginning of year 9.028 6.661

Cash and cash equivalents at end of year 24.504 9.028

See attached notes.

64 65


nancial statements based on the Accounting Standards and Financial Reporting accepted in Colombia requires the use of management judg-ment for the application of accounting policies, which are described in Section 2.28.

2.2. CONVERSION OF TRANSACTIONS AND BALANCES IN FOREIGN CURRENCY(a) Functional currency and presentation currency Items included in the financial statements are expressed in the

currency of the primary economic environment in which the entity operates (Colombian pesos). The financial statements are present-ed in “Colombian Pesos”, which is the functional currency of the Company and the presentation currency.

(b) Transactions and balances in foreign currency Transactions in foreign currency are initially recorded at the

exchange rates prevailing at the dates of the transactions. 1. Monetary assets and liabilities denominated in foreign cur-rencies are translated to the functional currency at the end of each period with the exchange rate as market certified by the Superintendencia Financiera de Colombia. Gains and losses differences are recognized in the income statement. 2. Non-monetary items that are measured at historical cost in for-eign currency are translated using the rates prevailing at the date of the transaction. Non-monetary items that are measured at their reasonable value are translated at the exchange rate of the date when the reasonable value is determined.

2.3. CLASSIFICATION OF ASSETS AND LIABILITIESAssets and liabilities are classified according to the intended use or according to their degree of realization, availability, enforceability or liq-uidation, in terms of time and values.

For this purpose, it is understood as current assets those things that will be achievable or available within a period not exceeding one year and as current liabilities, those amounts shall be due or payable also within a period not exceeding one year.

2.4. CASH AND CASH EQUIVALENTSFor purposes of preparing the cash flow statement, the cash and banks and highly liquid investments with maturity less than three months, are considered cash and cash equivalents.

The accompanying cash flow statement was prepared using the di-rect method, which is to redo the income statement using the cash system, primarily to determine the cash flow from operating activities.

2.5. FINANCIAL ASSETS2.5.1. CLASSIFICATIONThe Company classifies its financial assets in the following categories:

Financial assets at fair value through results, loans and receivables, investments and other corresponding to cash equivalents with no ex-piration date.

The classification depends on the purpose for which the financial as-sets were acquired and is performed since initial recognition, all finan-cial assets establish rights and obligations between the parties, rights

correspond to revenue and obligations to the expenditure that can be generated, each financial asset contains an agreement, which deter-mines the way in which each of the parties will develop activities jointly.(a) Financial assets at fair value through results: These are as-

sets held for trading. A financial asset is classified in this category if acquired mainly for the purpose of selling in the short term.

(b) Loans and receivables: Commercial accounts receivable and other receivables are financial assets with fixed or determinable payments, which are recognized at fair value. At the end of each month a general deterioration analysis is performed and is com-plemented by the individual analysis, the value is estimated on bal-ances that have indications of future losses, the amount of certain expense is recognized in the result for the period.

(c) Investment: Correspond to investments in companies with less than a 20% participation, which are recognized at fair value minus the recognition of identified value impairment in each investment at the end of each accounting period.

2.5.2. RECOGNITION AND MEASUREMENTPurchases and sales of financial assets are recognized on the set-tlement date, the date on which the purchase or sale of the asset is made. Investments are initially recognized at fair value plus transaction costs in the case of financial assets that are not registered at fair value through results.

Financial assets recognized at fair value through results are initially recognized at fair value and transaction costs are recognized as expen-diture in the period income statement.

Investments are derecognized when the right to receive cash flows ceases or when investments expire or are transferred and substantially lose all risks and rewards of ownership.

Loans and receivables are initially registered at fair value, they are later evaluated applying the method of effective interest rate and are subject to impairment analysis. The method of effective interest rate is a mechanism for calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts future cash flows (includ-ing all fees and paid points or received that form an integral part of the rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or where appropriate, a shorter period to the net book value at initial recognition.

Gains and losses arising from changes in fair value of “financial as-sets at fair value through results” are included in the period income statement. The fair values of quoted investments are based on its cur-rent trading price. If the market for a financial instrument is not active (or the instrument is unlisted) its fair value is established using valua-tion techniques.

At the end of each period we assess whether there is objective evi-dence of impairment or the impairment in the value of a financial asset or group of financial assets.

2.5.3. IMPAIRMENT OF FINANCIAL ASSETSThe Company constantly evaluates loans, receivables and other finan-cial assets, in order to identify whether there is objective evidence for impairment losses.

GENERAL NOTES

NOTE 1 GENERAL INFORMATION

Fabricato S.A. was established according to Colombian legislation on February 26, 1920. The corporate purpose includes, among others, manufacturing and marketing of textile, clothing and non-woven fabric; production, sale and manufacture of machinery, spare parts, compo-nents and accessories for the textile and clothing industry; investment fund shares, quotas or social interest; the contribution in companies, entities or corporations of commercial nature.

The construction and execution of construction projects for housing, commerce, industry, offices and services was included in the corporate purpose in the shareholders meeting in March 2013.

Its main facility is located in the municipality of Bello in Carrera 50 # 38 – 320. The lasting term of the company expires on 26 February 2049.

By decision of the Shareholders, the Company changed its name from Textiles Fabricato Tejicóndor S.A., to Fabricato S.A., by writing No 2979 granted before Notary 15 of Medellin on April 8, 2011. The Compa-ny is currently developing its corporate purpose under the new name.

Fabricato S.A., is registered in Registro Nacional de Valores y Emisores (RNVE) and its shares which are traded on the Colombia Stock Exchange (BVC).

The Company is registered as an economic group in the Chamber of Commerce of Medellin, being the Industrial Diversification matrix of San Pedro S.A.S., Fabrisedas S.A. on settlement, Comercializadora los Colores S.A.S. on settlement, Textiles del Rio S.A., Fabricato del Ecuador S.A. on settlement and Fabritexca C.V. on settlement.

Economic intervention lawBefore the merger between Fabricato S.A., & Tejicóndor S.A., which was held on August 8, 2002, the Companies were under Law 550 of 1999. Both companies signed similar agreements with their creditors on No-vember 7, 2000.

On 21 July 2008 the creditors of the Companies signed an amend-ment to the restructuring agreement in order to unify the initial agree-ments and reschedule debts payments. The debts are to be canceled as provided in each of them.

The Company has designed plans and strategies to ensure continuity in the cash flow generation and does not foresee violations or situa-tions that affect the ability of the entity to continue as a going concern.

The balance of liabilities that are included in the agreement as of December 31, 2015 amounts to $ 1,276 million pesos (2014 - $ 1,285).

Monitoring committeeWith representation from each group of creditors a Supervisory Commit-tee was formed, it never acquires the character of manager or co-man-

ager, as its functions are derived exclusively as representative of creditors. To date, the Company has complied with all terms of the agreement.

NOTE 2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

Accounting standards appliedThe Company prepares its financial statements in accordance with accounting standards and financial reporting accepted in Colombia (NCIF), established by Law 1314 of 2009, regulated only by the 2420 regulatory Decree of 2015 as amended by Decree 2496 of 2015. These accounting standards and financial reporting, correspond to Interna-tional Financial Reporting Standards (IFRS) translated officially autho-rized by the International Accounting Standards Board (IASB) as of December 31, 2012.

In addition, the Company applies the following guidelines in accor-dance with laws and other regulations in Colombia, and which are ex-ceptions to the International Financial Reporting Standards as issued by the IASB:

• Part 2 of Book 2 of Decree 2420 of 2015 added by Decree 2496 of 2015 provides that for the determination of post-employment ben-efits in respect of future pensions or disability, is used as the best approximation of market parameters set in Decree 2783 of 2001, rather than the requirements determined in accordance with IAS 19.

• Article 2.1.2. Part 1 of Book 2 of Decree 2420 of 2015 added by De-cree 2496 of 2015 provides for the application of Article 35 of Law 222, which indicates that participations in subsidiaries to be rec-ognized in the separate financial statements by the equity method instead of recognition in accordance with the provisions of IAS 27, ie at cost or fair value.

The main policies and practices that the Company has adopted in the preparation of these separate financial statements are described below:

2.1. PRESENTATION PRINCIPLESUntil the activities ended on December 31, 2014, the Company prepared its financial statements in accordance with previous Colombian ac-counting laws. The information corresponding to prior periods, includ-ed in the current financial statements with comparative purposes, has been modified and is presented in accordance with the rules described above. The effects of changes between previous Colombian accounting laws applied until the end of activities on 31 December 2013 and NCIF are explained in note 3 letter b. of first-time adoption of Accounting Standards and Financial Reporting accepted in Colombia (NCIF).

Responsibility StatementThe Management of the Company is responsible for the information contained in these financial statements. The preparation of these fi-

SEPARATED FINANCIAL STATEMENTS TO THE NOTESAt 31 December 2015, 2014 (in million of Colombian Pesos)

66 67


of the Company is reduced to zero, a provision is recognized only to the extent that the Company has incurred legal or constructive obligations.

Gains or losses on transactions between the Company and the sub-sidiaries, associates or joint ventures are eliminated to the extent of participation of the Company in these entities in applying the equity method.

Once applied the equity method, the Company determines whether it is necessary to recognize impairment losses in respect of the invest-ment held in the investee.

2.9. NET PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are those held by the Company to use in goods production or supply and services or for administrative pur-poses; they are expected to be used during more than one period, they are measured at cost minus accumulated depreciation and impairment losses that are identified.The cost of items of property, plant and equipment includes:(a) Purchase price: Includes import duties, sales tax or other taxes

nondeductible minus discounts and rebates.(b) Costs required for commissioning: these Include all costs di-

rectly attributable to the asset location and manufacturing in place and the necessary conditions for it to operate in the manner in-tended by management costs.

Only those costs that meet the following requirements can be capital-ized later:(a) Increase asset productivity (units produced or deficiencies that

would lower production costs).(b) Increase the useful life of the asset.

When parts of an operation of property, plant and equipment have different useful lives, and their value is representative, they are recorded as separate items (major components) of property, plant and equipment.

The depreciation of property, plant and equipment begins when the asset is available for use, i.e. when it is in the location and the condi-tions needed to operate in the manner intended by management con-ditions, the depreciation of an asset ceases when the asset is classified as held for sale and on the date on which it does not account for the company anymore.

The depreciation method defined by the Company is the straight-line method for all asset classes.

The depreciation charge for each period is recognized in the result for the period.

The Company assesses at the end of each reporting period whether there is any indication that the value of an asset may be impaired, con-sidering information from internal sources and determines the end of each accounting period the recoverable amount for fixed assets from estimates the value in use of the following cash generating units:

FABRICATO S.A. CASH GENERATING UNITS

1/F1-WATER PLANT

2/RIOTEX-NOTEJIDOS-RECUPERABLES

3/HYDROELECTRIC POWER PLANT

4/ THERMOELECTRIC PLANT

If when performing analysis to determine the impairment of fixed assets of the cash generating units, the Company identifies an impairment, it proceeds with the accounting records thereof.

When the Company identifies a reversal of impairment losses, the carrying amount of the asset is increased to its recoverable amount, and is accounted for the recovery of impairment.

The useful lives to depreciate property, plant and equipment of the Company are as follows:

Asset Useful Life

Machinery and laboratory equipment

It is defined by the technicians of the Company taking into account the maintenance manuals of each machine.

Computer equipment

Laptops 3 years, desktops 5 years

Furniture 10 years

Buildings It is defined by the appraiser

Vehicles 10 years and 5 years for motorcycles

The Company reviews the useful lives for each asset at the end of the accounting period.

The Company assesses if there is any indication of impairment of any asset at the end of each period. If any indication exists, the entity estimates the recoverable amount of the asset.

An item of property, plant and equipment is derecognized upon sale or when there is no expected future economic benefits from its use or disposition.

The gain or loss incurred from the derecognition of an asset is cal-culated as the difference between net sales revenue, if any, and the carrying amount of the asset. This effect is recognized in income for the period.

2.10. INVESTMENT PROPERTIESThey are investment properties (land or buildings), those which the Company has to lease, earn rentals or for capital appreciation rather than for use in goods production or supply or services or for adminis-trative purposes or sale in the ordinary course operations (inventories).

The cost of investment properties includes:(a) Acquisition costs and any directly attributable expenditure such as

professional fees for legal services and property transfer taxes.(b) Costs incurred to construct an item of property investment.

The Company uses the cost method for subsequent measurement of investment property and the depreciation method defined is the straight-line method.

The Company reviews the useful lives for each asset at the end of the accounting period, for investment properties, an 81-years period

If there is any evidence, the Company measures the value of deteri-oration with the following considerations:

• Age at maturity of invoices.• Significant financial difficulties of the debtor.

• It is probable that the debtor will enter bankruptcy or other finan-cial reorganization.

For trade receivables, impairment is estimated based on the antiquity days of the expiration of invoices as follows:

Determining antiquity days for calculating the deterioration

Type of Customer Tolerance

Days116 and 150 151 and 180 181 and 250 251 and 360 More than 361

National 115 10% - 25% 50% 100%

Abroad and others 150 - 10% 25% 50% 100%

To make individual analysis, we also calculate the customer payments rotation as qualitative variable to monitor in the analysis of impairment at the end of each accounting period.

For other accounts receivable if there is any evidence of impairment, the value of the individual analysis as each account should be determined.

If during the same accounting period the value of the impairment loss decreases, the deterioration recorded in the previous period is re-duced (decrease in expenditure). If this decrease corresponds to an impairment recognized in a previous accounting term, it is recognized as a recovery of provisions with decreased spending.

For each accounting period an adjustment is determined to be made for impairment on general commercial portfolio, which is used for pe-riods where deterioration generated in the individual analysis is greater than defined for the overall portfolio deterioration.

Long term accounts receivable are measured at the amortized cost. For other financial instruments, impairment testing is performed

based on the carrying amount of the asset and the present value of future cash flows, if the carrying amount of the asset is greater, it is reduced up to the present value of future cash flows and the value of the loss is recognized in the income statement.

2.6. CURRENT TAX ASSETSBalances include mainly the advances of income tax and complemen-tary tax withheld, industry and commerce and private liquidation surplus which are registered and adjusted in accordance with the expectation of recoverability or compensation thereof.

2.7. INVENTORIESInventories are recorded at cost and at period end are reduced to net achievable value if lower. The cost is determined based on the weight-ed average method and the standard cost, depending on the type of inventory.

The Company assesses at the end of each month, the net achiev-able value of inventories of finished products with normal rotation, ob-solete inventories and inventories with low turnover.

When sales are presented to achieve a feasible net value, the Compa-ny recognizes the loss as an expense of the period. If increments occur in the net achievable value in the following periods that mean a reversal of the reduction in value, it is recognized as a lower value in the period cost in which it occurs and if they occur in later periods, as a recovery of net achievable value.

The Company conducts analysis on irrecoverable obsolescence in-

ventories according to the type of inventory (inventory of raw materials, materials, chemicals, supplies and spare parts, inventory in process and finished product inventory).

To determine the impairment of inventories, the Company analyzes the references that are dated for more than a year, for the references where there is obsolescence, 100% impairment is applied on its cost taking into account the criteria and guidelines for obsolete inventory management. When such references are found in less than a year and above the normal rotation period (four months) without orders or sales projection, it is categorized as useless inventory and it is subject to de-terioration or possible use.

2.8. INVESTMENTSThe investments that the Company holds in subsidiaries are carried at cost in separate balance sheets, the value of the investment is updated by the equity method and they are consolidated in the financial state-ments of the controller, as if it were a single entity.

The controller recognized in the separate financial statements, the dividend as a lower value of the investment from the subsidiary when the right to receive is established.

Investments in associates that the Company owns are recorded at cost in separate balance sheets and the controller must make the ad-justment of the equity method, recognizing subsequent changes in the financial statements of the associate, recording the results for the peri-od and equity variations in the proportion to investment. The controller recognizes in the separate financial statements the dividend as a lower value of the investment from the partner when the right to receive is established.

Investments in joint ventures held by the Company are recorded at cost in the separate balances, and the controller must make the ad-justment of the equity method, recognizing subsequent changes in the financial statements of business altogether, recording the results for the period and equity changes in proportion to the investment. The controller recognizes the dividend as a lower value of the investment from the joint venture in the separate financial statements when the right to receive is established.

Investments in joint ventures are accounted according to the par-ticipation that is held in the assets, liabilities, revenue and expenses in the joint operation.

If the participation of the Company in the losses of a subsidiary, as-sociate or joint venture is equal or exceeds its interest, the Company ceases to recognize its share of further losses. Once the participation

68 69


2.17. DEFERRED TAXESThe deferred income tax is recognized for temporary differences be-tween the tax bases of assets and liabilities and their book value for financial reporting purposes.

Deferred tax assets are recognized to the extent that it is probable that the temporary differences, the book value of unused tax credits and unused tax losses can be used, except:

• If the deferred tax liability arises from the initial recognition of Goodwill or of an asset or liability from a transaction that is not a business combination and at the time of the transaction did not affect the accounting nor taxable profit (tax loss) gain.

• In respect of taxable temporary differences associated with in-vestments in subsidiaries, if the reversal timing of temporary dif-ferences can be controlled and if it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred taxes are measured at the tax rates expected to apply to tem-porary differences when they are reversed, based on the laws that have been approved or are about to be approved at the report date.

The carrying amount of deferred tax assets is reviewed at each re-porting date and reduced to the extent that it is no longer probable that there is sufficient taxable income to use in all or part of the deferred tax asset. Unrecognized deferred tax assets are reviewed at each reporting date and are recognized to the extent that it is probable that there are future tax profits that allow the recovery of the deferred tax asset.

The deferred tax related to items recognized outside results are rec-ognized in correlation to the underlying transaction either in ORI or directly in equity.

Deferred assets and tax liabilities are offset if there is an enforceable right to offset the assets and liabilities through current tax, and when deferred assets and tax liabilities arising from income taxes correspond to the same taxation authority and fall on the same entity or taxpayer, or different entities or taxpayers, but the Company intends to settle current assets and tax liabilities on a net basis, or realize its assets and tax liabil-ities simultaneously.

2.18. EMPLOYMENT BENEFITSIt includes both labor obligations as the estimates to cover all employ-ee benefits held by the Company, employee benefits are all forms of consideration given by the Company in exchange for services provided by employees or compensation for the cessation of work activities of employees, which are classified as short-term benefits, long-term and post-employment.

The short-term benefits correspond to different compensation ben-efits that are expected to be completely settled before the end of the annual period of twelve months, we have, among others: salaries, wag-es, social security contributions, paid leave and absences for disability, premium services, vacation bonus and profit-sharing and incentives such as performance bonuses. All short-term benefits are recognized and measured by the payable amount.

The long-term benefits and post-employment benefits correspond to benefits for employees which are different to short-term, including se-niority premiums, pensions, severance retroactivity, and life insurance. All

long-term benefits are valued by applying the projected credit unit meth-od calculated by an actuary at the end of each accounting period. The Company accounts for costs of services as a higher value of the benefits and the interest cost of each benefit as financial expenses.

2.19. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

2.19.1. PROVISIONSA provision is recognized if there is a legal or constructive obligation arising from a fact or past event that can be estimated reliably and it is probably necessary to an outflow of economic benefits to settle the obligation in the future.

2.19.2. CONTINGENT LIABILITIESA contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence, or possibly non-occurrence of one or more uncertain future events not wholly within the control of the Company; or a present obligation that arises from past events but is not recognized for accounting because: (a) It is not likely that to satisfy it, a resources outflow with embodying economic benefits will be required; or (b) The amount of the obligation cannot be measured with sufficient reliability.

A contingent liability is not recognized in the financial statements, but is reported in notes, except in the case where the possibility of any outflow of resources in settlement is remote.

2.19.3. CONTINGENT ASSETSA contingent asset is a possible asset that arises from past events and whose existence must be confirmed only by occurrence, or possibly by non-occurrence of one or more uncertain future events which are not entirely under the control of the Company.

A contingent asset is not recognized in the financial statements, but is reported in notes, but only if the entry of economic benefits is probable.

2.20. REVENUE RECOGNITIONRevenues from ordinary activities are recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably, regardless of when the payment is made by the client. Revenue is measured at the fair value of the con-sideration received or receivable, taking into account the conditions of payment defined contractually with the customer and excluding taxes and tariffs.

Revenues from the sale of goods in the course of ordinary activities is recognized when all the following conditions are met:

• The Company has transferred the significant risks and benefits of property ownership to the buyer.

• The Company does not retain any involvement in the current man-agement of the sold goods, in the degree associated with own-ership and does not withhold effective control over them either.

• The amount of revenue can be measured reliably.

was defined for buildings and construction, and an indefinite useful life was defined for land.

At the end of each accounting period, the Company reviews the use-ful lives for each asset, to check whether they remain appropriate.

The company assesses if there is any indication of impairment of any asset at the end of each period. If it exists, the entity estimates the recoverable amount of the asset.

Any gain or loss on the sale of an investment property (calculated as the difference between the value of the sale and the carrying amount of the item) is recognized in the result for the period.

At the end of each period the fair value of investment property is eval-uated by technical appraisals performed by an advisor, with the aim of revealing changes in the fair value of assets classified in this category.

Investment properties are derecognized when sold or when there are no expected future economic benefits from its use or disposition.

2.11. NET INTANGIBLE ASSETSIntangible assets included in the financial statements comply with the definition of identifiability, control and future economic benefits to be recognized.

The cost of intangible assets, corresponds to the price an entity pays to acquire separately an intangible asset minus accumulated amortiza-tion and accumulated impairment losses.

The useful life of an intangible asset is defined taking into account the period of expected future economic benefits. The depreciation method used by the Company is the straight-line method, both the period and the amortization method used for intangible assets are re-viewed at least at the end of each year.

Intangible assets have a finite useful life and are amortized over a range of 1 to 5 years and according to the contractual terms of pur-chase.

Internally generated brands are not recognized in the statement of financial position. Intangible assets are subsequently measured under the cost model, which are deducted from the amount of initial recogni-tion, depreciation based on the estimated useful lives and impairment losses that occur or accumulate. The effect of amortization and po-tential impairment is recorded in income for the period, unless in the case of the first, that are recorded as an increase in construction or manufacture of a new asset.

An intangible asset is derecognized at the time of sale or when there are no future economic benefits from its use or disposal.

The gain or loss incurred from the derecognition of the asset is calcu-lated as the difference between net sales revenue, if any, and the carrying amount of the asset. This effect is recognized in income for the period.

2.12. OTHER NON-FINANCIAL ASSETSThe other non-financial assets mainly include costs and expenses covering several accounting validities such as interest, insurance and maintenance. These items are amortized over the period in which the future benefit is considered to be received.

At the end of each period the Company guarantees that the balanc-es in the accounts prepaid expenses relate to payments for goods or services that have not yet been received and are presented as an item of other non-financial assets.

2.13. ASSETS HELD AS AVAILABLE FOR SALENon-current assets and groups of assets for disposition that are clas-sified as held for sale are measured at the lower of carrying amount or fair value minus selling costs. Non-current assets and groups of assets for disposal are classified as held for sale if its carrying amount will be recovered mainly through a sale transaction rather than through continuing use. This condition is met only when the sale is highly probable and the asset or group of assets for disposition are available in their current conditions, for immediate sale. Management must be committed to the sale, and it should be expected to meet the requirements for recognition as such, within the following year to the date of the qualification.

Property, plant and equipment and intangible assets once classified as held for sale, are not subject to depreciation or amortization.

2.14. FINANCIAL LIABILITIESFinancial liabilities are initially recognized at fair value, net of transac-tion costs incurred and subsequently measured at amortized cost.

Financial liabilities of the Company include trade payables and other payables, bank overdrafts on current accounts, debts and interest-bear-ing loans, the financial guarantee contracts and financial liabilities with and without effective coverage.

The effective interest method is a mechanism for calculating the amortized cost of a financial liability and of allocating interest expense over the period. The effective interest rate is the rate that exactly dis-counts future cash flows to pay through the full term financial obliga-tion.

Financial liabilities are classified as current or non-current liabilities, depending on the defined term for each obligation, each one is gov-erned by an agreement containing specific conditions for each dis-bursement period.

The Company derecognizes financial liabilities when the obligations are settled, canceled or have expired.

Other short term accounts payable are measured at nominal value, they do not differ with the amount billed because the transaction does not have significant costs associated.

2.15. ACCOUNTS AND NOTES PAYABLEThey represent Company obligations arising from goods or services received, they are recorded separately in order of importance and ma-teriality.

2.16. TAXESThey represent the value of the general and compulsory duties for the State and in charge of the Company, they are determined based on pri-vate sales on the respective tax bases generated in the corresponding fiscal period.

The balance includes withholding tax, retention of industry and com-merce, tax income and complementary income tax for equity CREE, sales tax, tax on industry and trade, which are recorded under current tax regulations.

The payable balance for income tax and income tax for equity CREE, is determined based on estimates and its value is taken to the results of the period, it is presented net of advances and withholdings at the end of the accounting period.

70 71


2.25. DETERMINATION OF FAIR VALUESAt each reporting period closing date the fair value of financial instru-ments traded in active markets is determined by reference to quoted prices on the market, or prices quoted by market participants (pur-chase price for long positions and sale price for short positions), with-out deducting transaction costs.

For financial instruments that are not traded in active markets, fair value is determined using valuation techniques appropriate to the circumstances. Such techniques may include using recent market transactions between interested and well informed parties acting in conditions of mutual independence, the reference to the fair value of other financial instruments that are essentially similar, the analysis of discounted cash flow values and other appropriate valuation models.

To estimate the fair values, we have used the following methods and assumptions:

• The fair cash values and short-term investments, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short maturities of these instruments.

• The Company evaluates receivable accounts and long-term loans at fixed and variable rates, based on parameters such as interest rates, the risk factors of each particular country, customer cred-itworthiness and the risk characteristics of the funded project. Based on this assessment, accounting provisions are registered to count expected losses on these accounts receivable. As of 31 De-cember 2015, the carrying amounts of these receivables, net pro-visions, are not materially different from the fair values calculated.

• The fair value of debt degrees and quoted shares is based on quot-ed prices at the closure date of the reporting period. The fair value of unlisted shares, bank loans, finance lease obligations and other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt conditions, credit risk and similar maturities.

2.26. IMPAIRMENT OF ASSETS WITH DEFINITE USEFUL LIVESAt each closing date of the reporting period, the Company assesses whether there is any indication that an individual component or group of properties, plant and equipment and/or intangible asset with definite useful lives could be impaired in value. If such trace exists, and the an-nual impairment testing for an asset is then required, the Company es-timates the recoverable amount of that asset. The recoverable amount of an asset is the higher of fair value minus sell costs of that asset and its value in use. The recoverable amount is determined for an individual asset, unless the individual asset does not generate cash flows that are substantially independent of other assets or groups of assets, in which case the cash flows of the group of assets that make up the cash-gen-erating unit to which they belong.

When the carrying amount of an individual asset or a cash-gener-ating unit exceeds its recoverable amount, the individual asset, or, the cash-generating unit, is considered impaired and its value is reduced to its recoverable amount.

When assessing value in use of an individual asset or a cash-gener-ating unit, the estimated future cash flow is discounted to its present value using a discount rate before tax that reflects current market as-sessments over the temporary value of money and the specific risks to that individual asset, or, where applicable, the cash-generating unit.

To determine the fair value minus sell costs, recent market transac-tions are taken into account, if any. If these type of transactions cannot be identified, an appropriate valuation model is used. These calculations are verified against multiple valuations, quoted prices for similar assets in active markets and other available indicators of fair value.

The Company bases its impairment calculation on detailed budgets and projection calculations that are made separately for each of the cash generating units of the Company which are assigned to individual assets. Usually, budgets and projection calculations cover a period of five years. For longer periods, a growth rate in the long term is calculated and applied to the future cash flow projections from the fifth year.

The impairment losses related to continuing operations, are recog-nized in the income statement in the expense categories of the income statement that correspond to the function of the impaired asset (usu-ally in the sales cost and other operating expenses), except for prop-erty previously revalued where the revaluation was recorded in other comprehensive income. In this case, the impairment is also recognized in other comprehensive income up to the amount of any previous re-valuation recognized.

Also, for this kind of asset at each closing date of the reporting pe-riod, we perform an assessment of whether there is any indication that the impairment losses previously recognized no longer exist or have decreased. If such indication exists, the Company makes an estimate of the recoverable amount of the individual asset or cash-generating unit as appropriate.

An impairment loss in value previously recognized is reversed only if there was a change in the assumptions used to determine the re-coverable amount of the individual asset or cash-generating unit since the last time when a loss impairment was recognized in that asset or cash-generating unit. The reversal is limited so that the carrying amount of the asset or cash-generating unit does not exceed its recoverable amount, nor exceed the carrying amount that would have been deter-mined, net of depreciation or related amortization, if an impairment loss for that asset or cash-generating unit had not been recognized in prior periods. Such reversal is recognized in the income statement in the same line in which the respective charge for impairment was previous-ly recognized (usually in the sales cost or other operating expenses), unless the asset is carried at a revalued amount, in which case the reversal is similar to a revaluation increase.

2.27. RELATIVE IMPORTANCEThe recognition and presentation of economic events is done accord-ing to their relative importance.

Information is material or has relative importance if its omission or inappropriate expression can influence decisions carried out by users on the basis of the financial information of a reporting entity.

2.21. RECOGNITION OF EXPENSESExpenses are recognized in the results when there is a decrease in future economic benefits related to a reduction of an asset, or an in-crease in a liability, which can be measured reliably.

2.22. NET PROFIT OR LOSS PER BASIC AND DILUTED SHARE Net profit or loss per share is calculated taking into account the weight-ed average number of shares in circulation during each year, which was 9,201,848,397 for 2015 and 2014.

2.23. OPERATING SEGMENTSThe Company’s operating segments are: Textile Business and Real es-tate business.

• The Company defines as main factors: The income that can be obtained from each business segment and the way the results are analyzed by management and the Board.

• The types of products and services from which its income from ordinary activities derives are the textile business and future devel-opment of the real estate business.

• The results of each segment are differentiated by the division which corresponds and their respective cost centers.

• Management monitors the operating results of business units separately for the purpose of making decisions about allocating resources and assessing financial performance. The financial per-formance of the segments is evaluated on the basis of profit or operating loss and is measured consistently with operating profit or loss disclosed in the financial statements.

2.24. FINANCIAL RISK MANAGEMENTThe main financial liabilities of the Company include debt and interest bearing loans, trade accounts payable and other payables, and financial guaranteed contracts. The main purpose of these financial liabilities is to finance the Company’s operations and provide guarantees in support of its operations. The Company has loans, trade and other receivables, and cash and short-term loans that come directly from its operations.

The Company is exposed to market risk, credit and liquidity, which are permanently evaluated by the presidential committee and the financial management.

The policies defined by the Company for managing each of these risks are summarized below:

2.24.1. MARKET RISK Market risk is the probability that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market pric-es. Market prices involve four types of risk: interest rate risk, exchange rates risk, commodity price risk and other price risks such as the risk of prices of equity securities. Financial instruments affected by market risk include debt and interest bearing loans, cash deposits, financial invest-ments available for sale and derivative financial instruments.

The Company controls and monitors financial risks to which it is exposed, trying to obtain natural coverage for cash flow and financial

assets and liabilities in dollars, hiring credits to ensure favorable interest rates, and by permanently reviewing and controlling the total cash flows of the company by the company’s financial team, searching together to minimize the impact on operating results for market risk, credit and liquidity.

2.24.2. INTEREST RATE RISKThe interest rate risk is the probability that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Company exposure to interest rate risk is mainly related to long-term debt obligations with variable interest rates.

As for interest rates, it is emphasized that to 31 December 2015, finan-cial obligations do not exceed 3% of the total assets of the Company, the short-term renewals of these financial liabilities lead to permanent revision of interest rates however we expect to change this situation, the start of new trade relations with financial institutions with long-term ap-proval quotas to finance the investment plan approved for 2016.

For 2015, although the impact could be measured by fluctuations in interest rates, this is lower than other market variables may have due to the low level of financial indebtedness.

2.24.3. EXCHANGE RATE RISKThe exchange rate risk is the probability that the fair value or future cash flows of a financial instrument will fluctuate due to changes in exchange rates. The exposure of the Company to the risk of exchange rate relates, first, with operating activities the Company (when revenues and expenses are denominated in a currency other than the functional currency of the Company) which is the Colombian peso and, second, with the operational activities of foreign subsidiaries (when revenues and expenses are denominated in a currency other than the functional currency of that subsidiary that is different from the Colombian peso).

In addition, the Company is exposed to fluctuations in exchange rates related to the conversion into Colombian pesos of foreign sub-sidiaries whose functional currency is different to the Colombian peso.

At the end of 2015, the Company does not have financial derivative contracts for exchange rates or interest rates, for exchange rates, it seeks to manage a natural coverage, which involves having some flex-ibility (change of origin, national or foreign) on purchases and foreign currency obligations to achieve proper relation to the volume of sales made abroad. It is important to note that because of production cycles (including time inventory) and sales, is relatively easy to move the price effects on costs presented by exchange rates, this depends on the time in which the market is located and is the Company Management who periodically evaluates operating results integrating these variables, in this manner, there is no significant impact on net income of the Com-pany for exchange rate fluctuations.

Thus, taking into account the definitions from the management of the Company regarding the non-use of financial derivatives and to review the effect of these risks on the results, it is found that the monitoring carried out at the market variables and timely measure-ment within the operating cycle has achieved that the result from being distorted by market variables have a financial impact.

72 73


laws. Real property (land and buildings) and machinery and equipment that had disinvestment expectation, were measured at cost.

Additionally, for other classes of fixed assets (furniture, office equip-ment, computer equipment and transport equipment), the measure-ment in the opening balance sheet was at restated cost, which was es-tablished as the book value under previous Colombian accounting laws.

The Company has chosen to take these values as attributed cost of these assets on the dates of the respective revaluations, because it was considered that these values were substantially comparable with the fair value of those assets on the dates of these revaluations, or with their own cost or depreciated cost according to NCIF, in this case adjusted to reflect changes in the general price index, also on the same dates. After the dates of the respective assessments (technical and financial), measurements of property, plant and equipment were performed in ac-cordance with IAS 16 (Property, plant and equipment). With this purpose, the Company has chosen the provided cost model in this standard.

3.2.2. INTANGIBLE ASSETSRestatement of cost of intangible assets to eliminate non-capitalizable expenditures in accordance with IFRS.Improvements in other people’s property, recognized under previous Colombian accounting laws, were reclassified to the account of proper-ty, plant and equipment.

3.2.3. COST ATTRIBUTED TO INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATED The Company adopted the cost method for measuring its investments in subsidiaries, jointly controlled entities and associates, except for the investment in Riotex, which means deregister amounts recorded so far by concepts such as: equity method, inflation adjustments and valori-zation on these investments. For the Riotex investment measurement, attributed cost was used (balance under previous Colombian account-

ing laws). Investments in associated companies are adjusted to market value corresponding to stock market value.

3.2.4. DESIGNATION OF PREVIOUSLY RECOGNIZED FI-NANCIAL INSTRUMENTS The classification of financial instruments previously recognized under generally accepted accounting principles in Colombia, shall be on the date of transition to IFRS.

3.2.5. LEASES The Company has chosen to apply the transitional provisions in CINIIF 4 (Determining whether an arrangement contains a lease) and has evaluated all lease agreements based on the conditions existing up to 1 January 2014 (date of transition to NCIF).

3.2.6. EMPLOYMENT BENEFITS - ACTUARIAL GAINS AND LOSSESThe Company has chosen to adjust liabilities for pension plans as of 1 January 2014 (date of transition to NCIF), recording the entire ac-tuarial gains and losses accumulated to that date (and not previously recognized by the previous Colombian accounting laws), charged to retained earnings.

From 1 January 2014 (date of transition to NCIF), the Company has chosen to recognize actuarial gains and losses in the period in which they are earned, with fee (credit) to other comprehensive income.

3.3. CONCILIATION BETWEEN COLOMBIAN ACCOUNTING PRINCIPLES AND NCIF (OPENING BALANCE)The following conciliation provides a quantification of the economic effects of the transition to NCIF on January 1, 2014 (opening balance).

2.28. JUDGMENTS, ESTIMATES AND SIGNIFICANT ACCOUNTING ASSUMPTIONS The preparation of financial statements in accordance with NCIF re-quires the management development and consideration of judgments, estimates and significant accounting assumptions that affect the re-ported amounts of assets and liabilities, income and expenses, as well as the report of measurement and disclosure of contingent assets and liabilities at the closing date of the reporting period. In this sense, the uncertainties associated with the estimates and assumptions used could lead in the future to final results which could differ from those estimates and require significant changes to the reported amounts of affected assets and liabilities.

2.28.1. JUDGMENTSIn applying the accounting policies of the Company, the management has made the following judgments that have significant effect on the amounts recognized in the financial statements.

2.28.2. ESTIMATES AND SIGNIFICANT ACCOUNTING ASSUMPTIONSThe key assumptions concerning the future and other sources of un-certainty estimates up to the closing date of the reporting period, which have a risk of causing significant adjustments to the carrying amounts of assets and liabilities during the next financial year, are described below:

• The Company has based its estimates and significant accounting assumptions considering the parameters available at the time of preparation of the financial statements. However, current circum-stances and assumptions about future events may vary due to market changes or circumstances arising beyond the control of the Company. These changes are reflected in the assumptions when they occur.

• The main estimates made by the Company, correspond to the recognition of inventory impairment, portfolio, liabilities for legal proceedings and deferred taxes.

• The inventory impairment is recognized when the net achievable value is less than the cost of inventory or when inventory referenc-es show obsolescence conditions.

• Deteriorating portfolio in accordance with the rotation of the bal-ances for customers and in accordance with the impairment policy described in 2.5.3.

• The estimated obligations for legal proceedings is made based on the assessment of probability of occurrence by the Legal Depart-ment of the Company and External Advisors.

NOTE 3 FIRST-TIME ADOPTION OF ACCOUNTING STANDARDS AND FINANCIAL INFORMATION ACCEPTED IN COLOMBIA (NCIF)

These financial statements corresponding to the period that ended on December 31, 2015 are the first financial statements the Company has prepared in accordance with the NCIF. For prior periods and up to the end of activities on December 31, 2014, the Company prepared its fi-nancial statements in accordance with generally accepted accounting principles in Colombia (previous Colombian accounting laws).

Therefore, the Company prepares financial statements that comply with current NCIF for the periods that ended on December 31, 2015 and thereafter, together with comparative information as of December 31, 2014 and for the end of activities on that date, as it is described in the section of applicable accounting standards. As part of the preparation of these financial statements, the statement of opening financial situa-tion was prepared to January 1, 2014.

This note explains the main adjustments made by the Company to restate the statement of financial situation as to January 1, 2014 and financial statements previously published to December 31, 2014 and for the end of activities, all of them prepared according with previous Colombian accounting laws.

3.1. INFORMATION REQUIRED FOR THE ENDED ACTIVITIES ON DECEMBER 31, 2015According to the requirements, the main adjustments of the transition to NCIF are explained below, and the following conciliation related to this transition are presented:(i) Between equity determined in accordance with previous Colom-

bian accounting laws and equity determined in accordance with NCIF to 1 January 2014 (date of transition to NCIF), and December 31, 2014;

(ii) Between the net result determined in accordance with previous Colombian accounting laws for the end of activities on December 31, 2014, and the total comprehensive income determined in ac-cordance with NCIF on the same date.

In preparing these conciliations, the Administration has considered the NCIF currently approved and applied in the preparation of these financial statements, these are the first annual financial statements presented in accordance with NCIF, but giving effect to the excep-tions and exemptions under the version of IFRS 1 regulated in Decree 2420 of 2015 and partially amended by Decree 2496 of 2015 as de-scribed below:

• In accordance with IFRS 1, the opening balance to begin the pre-sentation and preparation corresponded to January 1, 2014.

• The first-time adoption of IFRS requires the Company to apply ex-isting standards and interpretations retrospectively. This implies re-turning to the initial recognition of an asset item, liability and equity and adjust it to the requirements of IFRS from that moment until the date of the opening financial situation statement.

3.2. EXEMPTIONS AND EXCEPTIONSIFRS 1 provides exemptions and exceptions to the retroactive appli-cation of the International Financial Reporting Standards. The first are optional while the second are mandatory (retrospective application is prohibited). According with this, the Company applied the following ex-emptions and exceptions.

3.2.1. USE OF ATTRIBUTED COST ON PROPERTY, PLANT AND EQUIPMENTReal property (land and buildings) and machinery and equipment were measured in the statement of financial position opening on 1 January 2014 (date of transition to NCIF) at attributed cost on the basis of technical appraisals conducted in the previous Colombian accounting

74 75


3.4. CONCILIATION BETWEEN COLOMBIAN ACCOUNTING PRINCIPLES AND NCIF (TRANSITION BALANCE)The following conciliation provides a quantification of the economic effects of the transition to NCIF on 31 December 2014 (transition balance).

STATEMENT OF FINANCIAL SITUATION COLGAAPTransition settings

NCIF

AssetsCurrent assetsAvailable 9.037 - 9.037 Trade receivables and other receivables (11) 72.419 (77) 72.342 Inventories, net (8) 85.217 (996) 84.221 Intangibles (5) 4.406 (4.406) - Deferred assets (5) 4.808 (3.906) 902 Assets classified as held for sale (3 and 4) - 638 638 Total current assets 175.887 (8.747) 167.140 Non-current assetsProperty, plant and equipment (3, 4 and 9) 71.435 351.041 422.476 Investment Property (1, 3 and 4) - 146.987 146.987 Intangible assets (5) - 39 39 Investments in subsidiaries, joint ventures and associates (2 and 4) 41.395 (14.580) 26.815 Trade receivables and other receivables (11) 9.231 3.036 12.267 Deferred tax assets (6) 4.876 52.536 57.412 Other financial assets (2) 17.442 (14.021) 3.421 Deferred assets and other assets (5) 12.392 (12.392) - Valuations (3) 560.963 (560.963) - Total non-current assets 717.734 (48.317) 669.417 Total assets 893.621 (57.064) 836.557 Equity and LiabilitiesLiabilitiesCurrent liabilitiesFinancial liabilities (9) 23.626 132 23.758 Employee benefits (7) 18.975 2.638 21.613 Other provisions (10) 4.606 (4.237) 369 Trade payables, associates and other payables 56.355 (308) 56.047 Tax liabilities 4.725 436 5.161 Total current liabilities 108.287 (1.339) 106.948 Non-current liabilitiesFinancial liabilities (9) 2.874 - 2.874 Employee benefits (7) 94.800 19.135 113.935 Other provisions (10) 6.488 (1.092) 5.396 Trade payables and other payables 8.856 - 8.856 Deferred tax liabilities (6) 4.669 70.000 74.669 Total non-current liabilities 117.687 88.043 205.730 Total liabilities 225.974 86.704 312.678 Equity Issued capital 36.807 - 36.807 Premium 213.783 (6.589) 207.194 Activity result (28.908) (3.852) (32.760)Accumulated earnings (320.144) 534.638 214.494 Other comprehensive income - 248 248 Equity revaluation (4) 107.250 (107.250) - Reappraisal surplus 560.963 (560.963) - Reservations 97.896 - 97.896 Total equity 667.647 (143.768) 523.879 Total equity and liabilities 893.621 (57.064) 836.557

ASSET CONCILIATION

Previous PCGA patrimony balance 722.219

Change in assets (71.299)

Change in liabilities (94.529)

Total modification for convergence (165.828)

Balance of equity NCIF 556.391

Absolute change ($) 165.828

Relative change (%) 22,96%

CHANGES IN ASSETS

Inventories to net achievable value (impairment) (107)

Fair value adjustment of investment properties (1 and 3) 126.654

Fair value adjustment of investment 13.649

Elimination valuations in investments (2) 21.146

Adjustment for changes in application or disposal of equity method in investments (2) 16.704

Measurement adjustment to property, plant and equipment attributed cost (3) 379.398

Elimination valuations in property, plant and equipment (3) (604.527)

Adjustments for depreciation of property, plant and equipment (3) 2.746

Property, plant and equipment deterioration (3) (503)

Reclassification adjustment for assets under operating leases 147

Inflation adjustments (4) (35.422)

Elimination of deferred (5) (18.574)

Impairment of intangibles 1

Assets deferred tax adjustments (6) 55.560

Adjust in other investments (51)

Investment impairment (2) (8.408)

Money market investment impairment (2) (20.342)

Effect of liquidation of subsidiaries 742

Removing difference in change in inventories (112)

Total assets decrease (71.299)

Changes in liabilities

Provisions recognition or adjustment (1.000)

Pension liability adjustment - non-current portion (7) (13.146)

Passive adjustment for other employeelong term benefits - non-current portion (7) (9.598)

Liability deferred tax registration (6) (69.924)

Recognition of leased assets (149)

Effect of liquidation of subsidiaries (712)

Total liabilities decrease (94.529)

76 77


During the transition period, lower amortization expense is presented under NCIF on the results of the period, as the Company discharged balances for these items that did not meet the requirements to be rec-ognized as assets. During the transition period, these deferred charges continued

amortizing under previous Colombian accounting laws and not under NCIF given that they were recognized in retained earnings in the opening balance sheet previously.

(6) The balance of accounted deferred tax was reversed according to local standard for $4.687 worth in assets and $6.115 in liabilities. For the opening balance deferred tax debit and credit generated by the temporary differences between the tax bases and accounting bases under IFRS was calculated and recorded, using the methodology of liability based on accounts balance. Deferred taxes are recorded in assets or non-current liabilities (Note 11).

The greatest effect of these differences between the previ-ous Colombian accounting laws and NCIF were recognized in re-tained earnings in the opening balance sheet profits and during the transition period in the income statement and other compre-hensive income, consistent with the nature of the originating item.

(7) The Company engaged the estimated labor liabilities under NCIF on 31 December 2013 (calculations under the methodology of the projected credit unit), generating a total adjustment of $22.744 for pensions, retroactive severance payment, seniority premium and life insurance, whose detail is explained in note 13. According to IAS 19, actuarial gains and losses are recognized directly in other comprehensive income. Liabilities are recognized for certain employee benefit plans than under the previous accounting principles were carried to expense as they were paid.

During the transition period, measurements of pension liabil-ities and other long-term benefits under NCIF generated a higher value of expenditure, the effect of which was: • The corresponding current service cost and past service cost in the

period results as an operating expense value.• The effect of the value of money over time is recognized in

income for the period as a financial component.• The corresponding values for gains (losses) on pension liabil-

ities were recognized in other comprehensive income and the other result from long-term benefits in the period results.

(8) Other adjustments in current assets: The cost of inventories includes all costs of acquisition and processing, as well as other incurred costs to give them their current location and condition, net from trade discounts, rebates and other similar items. Under previous Colombian accounting laws, financial discounts and other related discounts related to inventories purchase are recognized as income on the results of the Company. During the transition period, the Company recognized a lower reimbursement of inventories impairment under NCIF derived from the implementation of policies of deterioration. this value was recognized in the cost of sales in the results of the period.

(9) Leases: Under previous Colombian accounting laws, certain leases where the Company is lessee were classified as operating leases. Under NCIF, the Company analyzed the transfer of the risks and benefits of these contracts on the starting date of the obligation considering that IFRS 1 does not provide a voluntary exemption on

the classification and measurement of IAS 17 – Leases. Product of it, some leases are classified as financial in the opening balance sheet, recognizing the corresponding assets and liabilities in the statement of opening financial situation.

During the transition period, the effect of the amortized cost valuation of these financial liabilities was recognized in income for the period as a financial component. In the same way, a lower lease expense value for the payment for the use of the asset is presented under NCIF which under previous Colombian account-ing laws was recognized in the results and under NCIF as a lower value of the liability recognized.

(10) Provisions: The Company recognized existing obligations on the date of the opening balance in which it is probable that a resources outflow is made for its cancellation. The registered value is the best estimate of the expenditure required for settlement. In addition, derecognition was demanded on provisions that did not meet the recognition criteria of IAS 37 - Provisions, contingent assets and liabilities. During the transition period, the provisions related effects were due to: • The effects of money value over time recognized under NCIF in

the period results as a financial component.• The effect of changes in estimates and new provisions are rec-

ognized in income for the period.(11) During the transition period, the Company recognized a further

deterioration of accounts receivable under NCIF derived from the implementation of policies of deterioration. The effect on the results of the period was recognized as a lower value of operational expenditure.

NOTE 4 ACCOUNTING AND FINANCIAL INFORMATION STANDARDS ACCEPTED IN COLOMBIA. ISSUED, NOT APPLICABLE YET

Article 2.1.2 of Book 2, Part 1 of Decree 2420 of 2015 as amended by Decree 2496 of 2015 includes the rules that have been issued by the IASB and adopted in Colombia whose validity will be effective in later years to 2015.

New Accounting and Financial Reporting Standards (NCIF) accepted in Colombia, effective from January 1, 2016.Disclosure of the recoverable value of nonfinancial assets amending IAS 36 Impairment of Assets (May 2013)This amendment reduces cases where disclosures about the recover-able value of assets or cash generating units are required, it clarifies such disclosures and introduces an explicit requirement to disclose the discount rate used in determining impairment (or reversals) in which the recoverable amount is determined using the present value.

CINIIF 21 Levies - new interpretation (May 2013)The interpretation aims to give guidance on the circumstances in which a liability for taxes must be recognized, in accordance with IAS 37. In this regard, the CINIIF can be applied to any situation that creates a present obligation to pay taxes or levies to the State.

INCOME STATEMENT COLGAAPTransition settings

NCIF

Ordinary activities income 330.845 - 330.845 Sales cost (303.986) (2.660) (306.646)Gross profit 26.859 (2.660) 24.199 Other income 24.783 (8.288) 16.495 Distribution costs - - - Selling and administrative expenses (53.941) 15.703 (38.238)Other expenses (18.622) 7.358 (11.264)Gains from the net monetary position 377 (334) 43 Financial income 1.552 (116) 1.436 Financial costs (8.532) (9.879) (18.411)Gains (losses) - equity method - (2.725) (2.725)Loss before tax (27.524) (941) (28.465)Tax expense (1.384) (2.911) (4.295)Net loss for the year (28.908) (3.852) (32.760)Actuarial losses on defined benefit plans - 437 437 Deferred tax components of other comprehensive income - (189) (189) Comprehensive income Total Loss for the year (28.908) (3.604) (32.512)

The following briefly explains the main adjustments of the transition to NCIF that affect equity up to 1 January 2014 (date of transition to NCIF) and December 31, 2014, arising from comparing the ac-counting policies adopted by the Company in preparing the financial statements until the end of activities on December 31, 2014 (previous Colombian accounting laws) and the accounting policies applied by the Company in the preparation of financial statements from the be-ginning of activities on January 1 2015 (NCIF).

(1) Corresponds to the separately recognition of the value of an area of 106.000 square meters located in the municipality of Bello, destined for a real estate project, which under local standards was recorded as property, plant and equipment and the difference between the carrying value amount and the appraised value in valuation accounts.

(2) Corresponds to the adoption of the cost method for measuring its investments in subsidiaries, entities jointly controlled and associated companies, which implies deregister carrying amounts recorded so far by concepts such as equity method, inflation adjustments and valuations on such investments. It also includes the adjustment to market value, which in this case corresponds to stock market price, of investments in associated companies.

(3) The Company, being in an opening financial situation chose to measure property, plant and equipment items and investment properties, as follows:• Real property (land and buildings) and machinery and equip-

ment were measured at attributed cost (appraised value) in the opening balance sheet. Appraisals were in charge of the firm Valorar S.A. and they were made in December 2013, in accor-dance with the requirements of IAS 16.

• Real property (land and buildings) and machinery and equipment that had disinvestment expectation, were measured at cost.

• For other types of fixed assets (furniture, office equipment, computer equipment and transport equipment), the measure-ment in the opening balance sheet was at depreciated cost according to the local standard.

Under previous Colombian accounting laws, maximum every

3 years, property, plant and equipment of the Company were re-appraised by technical studies conducted by specialized evalua-tors, recording the highest value of the assets in the accounts of assets and equity. Under accounting standards and financial reporting accepted in Colombia, these assets are recognized at historical cost minus depreciation and impairment losses, with which the local record is entirety annulled.

The adjustments in the opening financial position have a net effect on equity for $96,232, including the reclassification of land located in the municipality of Bello to investment property.

During the transition period, higher spending was presented for depreciation under NCIF in income for the period, mainly due to the divestment plans established by the Company, effects were also presented in depreciation since the useful lives determined by the Company under NCIF were higher than those determined under previous Colombian accounting laws.

(4) Under previous Colombian accounting laws, inflation adjustments were adjusted until 2006 but they are reversed because the criteria of IAS 29 is not met to recognize these adjustments. because of the measurement of the assets of the Company, inflation adjustments recorded up to December 2013 were eliminated.

Additionally, under previous Colombian accounting laws, the Company recognized inflation adjustments in account balances in equity originated until December 31, 2006, excluding the re-appraisal surplus. According to legal norms, this balance may be distributed as profits when the Company is settled or capitalized. Whereas under NCIF, inflation adjustments are not applicable, these balances were transferred to retained earnings.

(5) Under previous Colombian accounting laws, deferred charges are recognized as goods or services received, which is expected to monetize in other future periods and amortized over the time that is considered will be used or receive the benefit. In keeping with the recognition criteria of IAS 38 for intangible assets, the Company derecognized deferred disbursements that did not meet the recognition criteria of assets. The Company adjusted the balances of prepaid expenses and deferred charges corresponding to goods or services that had already been received.

78 79


IFRS 9: Financial Instruments, Accounting coverage and changes to IFRS 9, IFRS 7 and IAS 39 (November 2013).This amendment modifies mainly the following aspects:

• Adds a new chapter on accounting coverage in which a new model is introduced, where accounting and risk management are aligned and introduces improvements in relation to the disclosure of these issues.

• Introduces improvements in reporting changes in fair value of an entity’s own debt contained in IFRS 9 with easier access.

• Removes the effective date of mandatory application of IFRS 9.New Standards of Accounting and Financial Reporting (NCIF) ac-cepted in Colombia, applicable from 1 January 2017, with the excep-tion of IFRS 15 applicable from January 1, 2018

IFRS 9 Financial Instruments: Classification and Valuation In July 2014, the IASB published the final version of IFRS 9 Financial Instruments that collects all project phases of financial instruments and replaces IAS 39 Financial Instruments: valuation and classification and all previous versions of IFRS 9. The standard introduces new requirements for classification, valuation, impairment and coverage accounting. IFRS 9 is effective for fiscal years beginning on January 1, 2018 although Decree 2420 has set it for January 1, 2017 and earlier application is permitted. retrospective application is required, but it is not required to modify comparative information. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is allowed if the initial implementation date is prior to February 1, 2015.IFRS 14 Regulated Activities DeferralsIFRS 14 is an optional rule allowing an entity, when it adopts IFRS for the first time and whose activities are subject to rate regulation, to continue applying most of its existing accounting policy for deferred regulated accounts. Entities adopting IFRS 14 must present deferred regulated accounts as separate accounts in the statement of finan-cial situation and present movements such as separate accounts in the income statement and the global result statement. The standard requires disclosures regarding the nature and risks associated with the entity regulated tariffs as well as the impacts of regulated rates in the financial statements. IFRS 14 is applicable for annual periods beginning on January 1, 2016.

Annual Improvements of IFRS, cycle 2010 – 2012These improvements are effective from 1 July 2014. Improvements in-clude the following changes:

IFRS 15 Ordinary income activities Proceeding from Customer ContractsIFRS 15 was published in May 2014 and establishes a new five-step model applied to revenue from customer contracts. According to IFRS 15 revenue is recognized for an amount that reflects the consideration that an entity expects to be entitled to receive in exchange for transfer-ring goods or services to a customer. The principles of IFRS 15 represent a more structured approach to value and register income.

This new standard is applicable to all entities and abrogates all previ-ous revenue recognition standards. Full retroactive or partial retroactive

application is required for periods beginning on January 1, 2018, allowing earlier application.

Amendments to IFRS 11: Accounting for acquisitions of interests in joint venturesAmendments to IFRS 11 require an operator to count the acquisition of participation in a joint operation, which is a business, applying the relevant principles of IFRS 3 for accounting the business combinations. The amendments also clarify that the shares previously held in the joint venture are not revalued on the acquisition of additional shares while joint control is maintained. Additionally, an exception to the range of these changes has been added to not apply when the parties sharing joint control are under the common control of an ultimate dominant society.

The changes apply to the initial acquisition of holdings in a joint op-eration and the acquisition of any additional interest in the same joint operation. They will apply prospectively for periods beginning on Janu-ary 1, 2016, although early application is permitted.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of DepreciationThese amendments clarify that revenues reflect an obtaining pattern arising from the operation of a business profit (which is part of the asset); more than the economic benefits that are consumed by the use of the asset. Therefore, it is not possible to amortize plant and equip-ment using an amortization method based on income and can only be used in very limited circumstances to amortize intangible assets. These amendments apply prospectively for fiscal years beginning on January 1, 2016, but can be applied in advance.

Amendments to IAS 16 and IAS 41: Biological assets that produce fruitThese modifications change the way of recording biological assets that produce fruit. According to these changes, biological assets that are used to produce fruit for several years are no longer in the range of IAS 41 and must be registered in accordance with IAS 16. After initial recognition, these biological assets are valued at amortized cost until maturity and using the cost model or revaluation after maturity. IAS 41 continues being applied on the fruit which will be valued at fair value minus sales costs. On the other hand, IAS 20 will be applied when relat-ed to plants that produce fruit. These modifications have to be applied retroactively for fiscal years beginning on January 1, 2016, although early adoption is permitted.

Amendments to IAS 27: Equity Method in Separate Financial StatementsThe amendments allow entities to use the equity method for account-ing subsidiaries, joint ventures and associates in its separate financial statements. Entities that have already implemented IFRS and choose the change to the equity method, will have to apply this change retro-actively. Entities applying IFRS for the first time and choose to use the equity method in its separate financial statements will have to apply the method from the date of transition to IFRS. These amendments

Novation of Derivatives and Continuation of Accounting Coverage amending IAS 39 Financial Instruments: Recognition and Measurement (June 2013)Under this rule, it would not be needed to stop applying accounting coverage to novated derivatives that meet the criteria detailed by it.Annual Improvements to IFRS: 2010-2012 Cycle (December 2013): IFRS 2 Share-based payments; IFRS 3 Business Combinations; IFRS 8 Operating Segments; IAS 16 Property, Plant and Equipment; IAS 24 Related Party Disclosures; IAS 38 Intangible Assets.

These amendments include:IFRS 2 Share-based PaymentThe improvement is applied prospectively and clarifies various issues related to the definitions of performance and service as part of the award conditions, which include:

• A performance condition must contain a service condition.• A performance target must be met while the counterparty is pro-

viding the service.• A performance target may be related to the operations or activities

of an entity or for another entity in the same group.• A performance condition may or may not be a market condition.• If the counterparty, regardless of the reason, fails to provide service

during the concession period, the service condition is not satisfied.

IFRS 3 Business Combinations The amendment is applied prospectively and clarifies that all agree-ments of contingent consideration classified as liabilities (or assets) arising from a business combination must be subsequently measured at fair value through profit or loss, whether or not within the range of the IAS 39.

IFRS 8 Operating SegmentsThe changes apply retroactively, and clarify that:• If the counterparty, regardless of the reason, fails to provide service

during the concession period, the service condition is not satisfied.• An entity must disclose the judgments made by management in

applying the aggregation criteria of paragraph 12 of IFRS 8; This includes a brief description of the operating segments that have been aggregated and economic indicators (eg, sales and gross margins) that have been evaluated to determine that the aggre-gate operating segments share similar economic characteristics.

• A conciliation between segment assets and total assets should be disclosed only if the conciliation is reported to the highest author-ity in decision-making operation of the entity, in accordance with the disclosure required for segment liabilities.

IAS 16 Property, plant and equipment and IAS 38 Intangible AssetsThe amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that an asset may be revalued in reference to observable data, either by adjusting the gross carrying amount of the asset at market value or adjusting the gross amount and the accumulated depreciation or amor-tization proportionally so that the resulting carrying value is equal to the

market value. Additionally, accumulated depreciation and amortization is the difference between the gross amount and the carrying amount of the assets.

IAS 24 Disclosing information about related partiesThe amendment applies retroactively and clarifies that a management entity (an entity that provides services to key management personnel) is a related party subject to disclosure of related parties. In addition, a company that uses a management entity is required to disclose ex-penses incurred for management services. This amendment is not rele-vant to the company because it does not receive management services from other entities.Annual improvements to IFRS: 2011-2013 Cycle (December 2013): IFRS 1 First-time Adoption of International Financial Reporting Standards; IFRS 3 Business Combinations; IFRS 13 Fair Value Measurement; IAS 40 Investment Property

These amendments include:IFRS 3 Business CombinationsThe amendment applies prospectively and clarifies the range exception in IFRS 3:

• Joint Arrangements, and no joint ventures are outside the range of IFRS 3

• This exception applies only to the extent accounting in the finan-cial statements of the same whole agreement.

IFRS 13 Fair value measurementThe amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and fi-nancial liabilities, but also for other contracts within the range of IAS 39.

IAS 40 Investment PropertyThe description of the auxiliary services of IAS 40 distinguishes be-tween investment properties and owner-occupied property (eg, proper-ty and equipment). The amendment applies prospectively and clarifies that IFRS 3, and not the description of auxiliary services of IAS 40, is used to determine whether the transaction is the acquisition of an as-set or a business combination.

The company is in the analysis and assessment process of impacts of rules that will take effect and are applicable. The Company has not adopted any standard, interpretation or amendment, that has been is-sued but not yet come into force.

Defined benefit plans: Contributions to employees, amending IAS 19 Employee Benefits (November 2013)IAS 19 requires that an entity considers the remuneration to employees or third parties in accounting for defined benefit plans. When salaries are linked to the service, they should be attributed to periods of service as a negative benefit. These amendments clarify that if the amount of compensation is independent to years of service, an entity may rec-ognize such remuneration as a reduction in service cost in the period in which the service is provided, instead of assigning remuneration to periods of service.

80 81


NOTES OF SPECIFIC CHARACTER

NOTE 5 CASH AND CASH EQUIVALENTS

Cash is represented by immediate liquidity resources like cash itself, bank deposits and other highly liquid investments.

The following is the comprising available detail:

2015 2014 01/01/2014

Banks (1) 19.077 4.281 6.421Funds (2) 5.031 3.628 19Cash equivalents (3) 366 1.004 13Cash 21 95 143

Saving accounts 9 20 65

Total 24.504 9.028 6.661

(1) The increase in banks balances to 31 December 2015 is due in part to payments in advance from clothing manufacturing customers, because their business cycles generate liquidity excess in the last month of the year. Additionally, the balance is impacted by the process of normalization of the cash flow of the Company and reflected good performance in operating results. This balance will be used to finance working capital for the first half of 2016.

Restricted balances relate to pension trusts for $66 (2014 - $131 and 01/01/2014 - $1,387) and bank accounts for $279 (2014 - $222 and 01/01/2014 - $ -).

(2) In 2015 and 2014 it includes deposits as a reserve for payroll and social security in January 2016.

(3) To December 31, cash equivalents are accounts corresponding to an autonomous equity of collective portfolio investment of $366 (2014 - $1.004 and 01/01/2014 - $13).

must be applied to periods beginning on January 1, 2016, although early adoption is permitted.

Amendments to IFRS 10 and IAS 28: Asset Sale or Contribution between the Investor and its Associates or Joint VenturesThe amendments address the conflict between IFRS 10 and IAS 28 in the treatment of loss of control of a subsidiary that is sold or contrib-uted to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets consti-tuting a business, as defined in IFRS 3, between the investor and the associate or joint venture and is entirely recognized. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to the interests of unrelated investors in the associate or joint venture. These amendments must be applied prospectively and are effective for periods beginning on January 1, 2016, with early adoption permitted.

Annual Improvements 2012-2014 CycleThese improvements are effective for annual periods beginning on 1 January 2016, with early adoption permitted. These include:

IFRS 5 Non-current Assets Held for Sale and Discontinued OperationsAssets (or disposal groups) are generally arranged either through sale or distribution to its owners. The amendment clarifies that the change of one of the other available methods would not be considered a new layout plan, but is a continuation of the original plan. Therefore, there is no interruption in the application of the requirements of IFRS 5. This amendment should be applied prospectively.

IFRS 7 Financial Instruments: Disclosures(i) Contracts for Provision of Services

The amendment clarifies that a Provision of service contract which includes a fee can constitute continuing involvement in a financial as-set. An entity must assess the nature of the rate and according to the guide continued involvement in IFRS 7 in order to assess whether the disclosures are required. Evaluation of provision of service contracts constitute a continuing involvement that must be done retrospectively. However, the disclosure requirement would not have to be provided for a period beginning before the annual period in which the entity first applies the amendments.

(ii) Applicability of the Amendments to IFRS 7 to the Interim Condensed Financial Statements The amendment clarifies that compensation disclosure requirements do not apply to interim condensed financial statements, unless such disclosures provide a significant update of the information reported in the most recent annual report. This amendment should be applied ret-rospectively.

IAS 19 Employee BenefitsThe amendment clarifies that the depth of the high quality corporate bond market is evaluated based on the currency in which the obligation

is denominated, instead of the country where the obligation is. When there is not a deep high quality corporate bond market in that currency, government bonds rates should be used. This amendment should be applied prospectively.

IAS 34 Interim Financial ReportingThe amendments clarify that required interim disclosures must be ei-ther in the interim financial statements or incorporated by cross-refer-encing between the interim financial statements and wherever interim financial information is included (eg in management commentary or risk reports). Other information in the interim financial information should be available to users on the same conditions as interim financial statements and at the same time. This amendment should be applied retrospectively.

Amendments to IAS 1 Disclosure InitiativeAmendments to IAS 1 Presentation of Financial Statements clarify, rather than changing significantly, the existing requirements in IAS 1. The amendments clarify:

• Materiality requirements in IAS 1.• What specific lines in the income statement and ORI and state-

ment of financial situation can be unbundled.• Entities have flexibility in the order in which the notes to the finan-

cial statements are presented.• That the participation in the ORI of accounted associates and joint

ventures for using the equity method should be presented together in a single line, and classified between those items that will or will not subsequently reclassified to the income statement.

In addition, the amendments clarify the requirements that apply when additional subtotals are presented in the financial situation statement and income statements and ORI. These amendments are effective for annual periods beginning on January 1, 2017, with early adoption permitted.

Amendments to IFRS 10, 12 and IAS 28 Investment Entities: Application of Consolidation ExceptionThe amendments address issues that have arisen in the application of the consolidation exception in investment entities under IFRS 10.

Amendments to IFRS 10 clarify that the exception to present the consolidated financial statements applies to the matrix entity that is a subsidiary of an investment entity when the investment entity mea-sures all its subsidiaries at fair value.

Moreover, amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and pro-vides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. Amendments to IAS 28 allow the investor in applying the equity meth-od, leaving the fair value measurement applied by the investment entity associate or joint venture to its participation in the subsidiaries.

These amendments should be applied retrospectively and are effec-tive for annual periods beginning on January 1, 2017, with early adoption permitted.

82 83

-- Annual Report 2015 -- — Separate financial statements —

(3) The balance of this account consists of the following:

Accounts receivable from employees 2015 2014 01/01/2014

Domestic calamity 46 549 73Housing 248 417 772Education 85 90 176Total 379 1.056 1.021

Rates and maturities of accounts receivable from employees are as follows:

Modality Employee Type Term in years Rate a.e.

Housing fundConventional 10 12,68%

Administrative 8 15,39%

Solidarity FundConventional 1

Administrative 1 12,68%Education Administrative minimum 2 DTF + 5 points

(4) The balance of this account consists of the following

Income receivable 2015 2014 01/01/2014

Interests* 7.995 7.995 7.013Others 299 412 597Subtotal 8.294 8.407 7.610Impairment income receivable (8) (8.052) (7.638) (7.065)Total 242 769 545

* It corresponds to the different interests of portfolio loan to Textiles Konkord for $7.995 (2014 - $7.995 and 01/01/2014 - $7.013)


Others 2015 2014 01/01/2014

Temporary unions 683 367 1.205For suppliers * 301 316 126Total 984 683 1.331

* It corresponds to advances made to suppliers of assemblies, transfers and adjustments at fairs or remodeling projects and facilities of the company.


Loans to individuals 2015 2014 01/01/2014

Personal guarantee * 206 5.760 5.719Subtotal 206 5.760 5.719Impaired loans to individuals (8) (181) (5.688) (5.714)Total 25 72 5

* $5.582 (01/01/2014 - $5.557) this is included from the Industrial Coal Company liquidated in 2015

NOTE 6 TRADE ACCOUNTS RECEIVABLE AND OTHER ACCOUNTS RECEIVABLE

The following is the detail comprising trade accounts receivable and other receivables

2015 2014 01/01/2014

CostDeterioration

(8)Total Cost

Deterioration (8)

Total CostDeterioration

(8)Total

Customers (1) 94.687 (3.061) 91.626 59.076 (3.049) 56.027 70.212 (10.366) 59.846

Several debtors (2) 15.999 (13.659) 2.340 17.345 (14.432) 2.913 18.195 (13.318) 4.877 Accounts receivable from employees (3)

379 - 379 1.056 - 1.056 1.021 - 1.021

Income receivable (4) 8.294 (8.052) 242 8.407 (7.638) 769 7.610 (7.065) 545 Others (5) 984 - 984 683 - 683 1.331 - 1.331 Loans to individuals (6) 206 (181) 25 5.760 (5.688) 72 5.719 (5.714) 5 Claims (7) 55 (45) 10 45 (45) - 45 (45) -

Total 120.604 (24.998) 95.606 92.372 (30.852) 61.520 104.133 (36.508) 67.625

Current portion 93.170 57.337 62.187

Non-current portion 2.436 4.183 5.438

(1). The balance of this account consists of the following:

Customers 2015 2014 01/01/2014

National * 71.506 42.286 53.802Abroad 23.181 16.790 16.410Subtotal 94.687 59.076 70.212Deterioration clients (8) (3.061) (3.049) (10.366)Total 91.626 56.027 59.846

* The increase in the balance of accounts receivable in 2015 relates mainly to the process of normalization of the cash flow that involved sus-pending the portfolio discount, alternative used in previous periods.


Several debtors 2015 2014 01/01/2014

Notes receivable from non-customers * 15.119 16.558 17.219Accounts receivable from former shareholders 724 724 724Others 156 63 252Subtotal 15.999 17.345 18.195Several debtors impairment (8) (13.659) (14.432) (13.318)Total 2.340 2.913 4.877

* It includes the balance of notes receivable for $12.870 to Konkord Textiles (2014 - $12.870 and 01/01/2014 - $12.870), former employees waiting for resolution $2.181 (2014 - $2.236 and 01/01/2014 - $1.710), DIAN balances for liquidation of subsidiaries $ - (2014 - $1.270 and 01/01/2014 - $2.213) and others for $68 (2014 - $ 182 and 01/01/2014 - $426)

84 85


December 31, 2014

Type of debtor unexpiredOverdue 1 to

180 daysOverdue 181 to

360 daysOverdue more than 360 days

Deterioration Total

Customers 41.127 8.731 2.392 6.826 (3.049) 56.027

Several debtors 4.451 24 - 12.870 (14.432) 2.913

Accounts receivable from employees

1.056 - - - - 1.056

Income receivable 153 687 493 7.074 (7.638) 769

Others 683 - - - - 683

Loans to individuals 5.591 69 3 97 (5.688) 72

Claims - - - 45 (45) -

Total 53.061 9.511 2.888 26.912 (30.852) 61.520

January 1, 2014




Deterioration Total

Customers 57.445 6.494 894 5.379 (10.366) 59.846

Several debtors 18.195 - - - (13.318) 4.877


1.021 - - - - 1.021


Others 1.331 - - - - 1.331


Claims - - - 45 (45) -

Total 83.816 7.165 1.362 11.790 (36.508) 67.625

The guarantee portfolio balance is $2.420 (2014 - $4.406 and 01/01/2014 - $14.847). The conditions for this portfolio to be under warranty are given by a trust management.

NOTE 7 INVENTORIES

The following is a breakdown which includes inventories:

2015 2014 01/01/2014

Products in process 33.484 26.843 29.936Finished products 28.680 33.243 31.981Raw Materials 16.613 15.445 8.338Materials, parts and accessories 5.732 5.203 5.080Inventories in transit 5.938 1.863 6.023Advance payments 2.371 1.454 1.951Others 99 170 103Total 92.917 84.221 83.412


claims 2015 2014 01/01/2014

For transporters 54 44 44Others 1 1 1Subtotal 55 45 45Deterioration claims (8) (45) (45) (45)Total 10 - -

(8) The total balance of impairment for different accounts receivable and other receivables, includes:

Opening balance January 1, 2014 (36.508)Provision (Note 23) (6.355)Portfolio punishments 8.323 Recovery (Note 23) 3.688 Closing balance December 31, 2014 (30.852)Provision (Note 23) (2.880)Portfolio punishments 8.162 Recovery (Note 23) 572 Closing balance December 31, 2015 (24.998)

The age composition of the trade accounts receivable and other receivables balance to December is as follows:

December 31, 2015




Deterioration Total

Customers 73.590 8.687 830 11.580 (3.061) 91.626

Several debtors 3.129 - - 12.870 (13.659) 2.340


379 - - - - 379


Others 984 - - - - 984

Loans to individuals 3 16 8 179 (181) 25

Claims - 10 - 45 (45) 10

Total 78.250 8.767 854 32.733 (24.998) 95.606

86 87


Property, plant and equipmentThe following is the detail which includes property, plant and equipment:

Net cost LandsBuildings and constructions

Machinery and

equipment

Office equipment

Computer equipment

transport equipment

TOTAL

Opening balance /January 1, 2014

374.445 68.743 140.363 374 615 286 584.826

Additions and transfers (128.333) (14.720) 776 - 43 97 (142.137)Sales - - (296) - - (13) (309)Casualties - (3.361) (593) - (4) - (3.958)Depreciation for the period - (1.837) (13.551) (104) (348) (106) (15.946)

Balance at the end of December 2014

246.112 48.825 126.699 270 306 264 422.476

Additions and transfers 9 606 16.324 - 49 - 16.988 Advance payments - - 2.063 - - - 2.063 Sales (1.026) (1.050) (309) - - - (2.385)Casualties - - (801) (5) - - (806)Depreciation for the period - (1.530) (11.982) (66) (193) (117) (13.888)

Balance at the end of December 2015

245.095 46.851 131.994 199 162 147 424.448

To December 31 there was property, plant and equipment with restrictions or burdens guaranteeing financial obligations as follows:

Type of Obligation

2015 2014 01/01/2014

Constructions, lands and buildings financial 279.802 280.988 220.001Machinery and equipment financial 1.079 1.079 3.815Total 280.881 282.067 223.816

The conditions for these assets to be guaranteed are given by mortgages and a guarantee contract (see Note 13).

Investment PropertiesThe following is the detail which includes investment properties:


TOTAL

Opening balance January 1, 2014 427 4.664 5.091

Additions and transfers 128.331 14.720 143.051

Sales (374) (713) (1.087)Depreciation - (68) (68)Balance at the end of December 2014 128.384 18.603 146.987 Additions and transfers (110.040) (14.652) (124.692)Sales (9) (636) (645)Depreciation - (122) (122)Balance at the end of December 2015 18.335 3.193 21.528

As of December 31, 2015 the balance of investment properties mainly cor-responds to an urban lot of approximately 55,116 m2 located at km 2 via the airport Perales in Ibague Tolima, which is intended to develop a real estate project with applications for housing, trade, services and other minor secu-rities whose fair values correspond to their own carrying amount. In 2014, this balance includes the aforementioned lot and lot Pantex located in the municipality of Bello for $124.692, which was taken as investment property in 2015, with the aim of participating in a real estate project that includes the construction of housing, services and trade.

At the end of activities, the Company estimated, by the method of dis-counted cash flow, the present value of cash flows for each of the Cash Generating Units, concluding that none of them requires impairment ad-justment at December 31, 2015.

The charge to income for the year depreciation of property, plant and equipment and investment property amounted to $14.010 (2014 - $16.014).

The effect of the gain or loss on sale or retirement of assets classified as held for sale, property, plant and equipment and investment property in the income statement is as follows:

Other information: 2015 2014

Reduction of inventory value 9.297 17,600 Reversal of the reduction of inventory (1) (9.705) (20.172)

(1) The sale of impaired inventory generates reversal in net achievable value.

Inventories pledged as liabilities guarantee are $9.844 (2014 - $9.844 and 01/01/2014 - $5.780). The conditions for these inventories to be guaranteed are given by Merchandise Certificates of Deposit or pledge bonds.

NOTE 8 TAX ASSETS

The following is the detail that includes tax assets:

2015 2014 01/01/2014

Private tax settlement remains 7.283 4.893 3.885Tax Advance on industry and Commerce 460 56 -Industry and Commerce 3 - 3Sales tax withheld 2 1 -Others 1 - -Total 7.749 4.950 3.888

NOTE 9 ASSETS CLASSIFIED AS HELD FOR SALE, PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES

Assets classified as held for saleThe following is the detail that includes the assets available for sale:

Machinery and equipment

Buildings and constructions

TOTAL

Opening balance January 1, 2014 4.258 1.050 5.308sales (3.620) (1.050) (4.670)Balance at the end of December 2014 638 - 638Additions and transfers (193) - (193)sales (422) - (422)Balance at the end of December 2015 23 - 23

88 89


of interest in subsidiaries for $32.593 (Note 27).Product from the sale, the Company’s participation in the trust de-

creased to 70% ($87.284).The effect on results of the application of the equity method and reg-

ulatory change of December 2015 with the regulatory Decrees 2420 and 2496 issued by the Ministry of Commerce, Industry and Tourism, which es-tablish the obligation to apply Article 35 of Law 222 for updating the value of investments in subsidiaries as follows:

Fabrisedas 2015 2014

Initial investment value 3.415 5.386

Income (expense) equity method 449 (1.971)New investment balance 3.864 3.415

Riotex 2015 2014

Initial investment value 23.400 24.156

Income (expense) equity method 775 (756)New investment balance 24.175 23.400

During 2015 and 2014 no equity effect is presented on equity method.

The date of incorporation and official address of the subsidiary companies is as follows:

Construction date

Location

Fabrisedas 11/04/88 CaliComercializadora los colores S.A.S.in liquidation (before Textiles Prisma) 19/12/64 Medellín

Diversificación Industrial de San Pedro 3/09/79 San Pedro, Antioquia

Fabricato del Perú S.A.C. "Fabriperú in liquidation" 31/05/10 Lima, Perú

Fabricato del Ecuador S.A. "Fabridor" in liquidation 29/01/93 Quito, Ecuador

Fabricato Textiles C.A. "Fabritexca" in liquidation 23/03/92 Caracas, Venezuela

Textiles del Rio S.A. 28/09/70 Rionegro, Antioquia

The figures presented below were taken from the financial statements of the subordinate companies up to December 31, certificates and audited subject as what is prescribed by the applicable legal rules to each of the companies:

2015

Assets Liabilities Equity Net result

Fabrisedas 3.930 65 3.865 450

Comercializadora los colores S.A.S. in liquidation (before Textiles Prisma) 1.517 18.295 (16.778) 218 Diversificación Industrial de San Pedro 17 451 (434) - Fabricato del Perú S.A.C. "Fabriperú in liquidation" 714 10.687 (9.973) (55)Fabricato del Ecuador S.A. "Fabridor" in liquidation 1.564 8.010 (6.446) (473)Fabricato Textiles C.A. "Fabritexca" in liquidation 2.391 25.500 (23.109) (158)Alianza Fiduciaria Patrimonio Autónomo 124.691 - 124.691 - Textiles del Rio S.A. 38.871 14.697 24.174 774 Total 173.695 77.705 95.990 756

Effect on income2015 2014

Utility Loss Net Utility Loss Net

Assets classified as held for sale 173 (20) 153 59 (29) 30

Investment Properties 31 (67) (36) - (302) (302)Property, plant and equipment 3.581 (1.317) 2.264 5.512 (593) 4.919 Total 3.785 (1.404) 2.381 5.571 (924) 4.647

The Company has insurance policies for real estate and machinery.

NOTE 10 INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES

The following is the detail that includes investments:

2015 2014 01/01/2014

Investments in subordinated entities 115.323 26.815 29.542

To December 31, investments in subsidiaries included the following:

Number of shares

%2015 2014 01/01/2014

Cost Impairment Total Cost Impairment Total Cost Impairment Total

Fabrisedas 10.044.294 96,00 9.601 (5.737) 3.864 9.152 (5.737) 3.415 11.123 (5.737) 5.386

Comercializadora los colores S.A.S. in liquidation (before Textiles Prisma)*

231.887.397 94,20 5.271 (5.271) - 5.271 (5.271) - 5.271 (5.271) -

Diversificación Industrial de San Pedro*

498.462 52,50 50 (50) - 50 (50) - 50 (50) -

Fabricato del Perú S.A.C. "Fabriperú in liquidation"*

15.489 90,00 1.040 (1.040) - 1.040 (1.040) - 1.040 (1.040) -

Fabricato del Ecuador S.A. "Fabridor" in liquidation*

2.432.286 99,97 6.613 (6.613) - 6.613 (6.613) - 6.613 (6.613) -

Fabricato Textiles C.A. "Fabritexca" in liquidation*

643.009 100,00 7.322 (7.322) - 7.322 (7.322) - 7.322 (7.322) -

Textiles del Rio S.A. 11.772.262 94,80 24.175 - 24.175 23.400 - 23.400 24.156 - 24.156

Fabricato de México S.A. de C.V. liquidated in 2014

24.831 97.64 - - - - - - 4.070 (4.070) -

Fabritelar S.A. de C.V. liquidated in 2014

25.000 50.00 - - - - - - 4 (4) -

Alianza Fiduciaria S.A. Fideicomisos

- 70.00 87.284 87.284 - - - -

Total 141.356 (26.033) 115.323 52.848 (26.033) 26.815 59.649 (30.107) 29.542

* During 2015, 2014 and 01/01/2014 equity method was not carried out with these subsidiaries because the Company has them one hundred percent (100%) deteriorated.

As of 31 December 2015, the balance of investment corresponds to commercial trust administration contract, among Fabricato S.A. (Set-tlor and beneficiary) and Alianza Fiduciaria SA (Trustee), established on June 19, 2015, by public deed No. 3070, where the Settlor provides the asset “354170 - Lot Pantex” for $124.691, the Trust by way of com-

mercial trust for the construction and implementation of projects in buildings for housing, services and trade.

During July 2015, the Company ceded by way of selling 30% of fidu-ciary trust rights to the Group Manager responsible for developing the project. The sales value amounted to $70.000, generating a sale utility

90 91


(2). The following is the detail that corresponds to the balance of deferred tax liabilities:

2015 2014 01/01/2014

Fixed assets 63.746 73.530 75.369Other assets and liabilities 6.065 950 670Actuarial calculations ORI 189 189 -Total 70.000 74.669 76.039

Deferred tax effects recognized in the income statement for the period are as follows:

Financial situation statement Profit and loss statementOther comprehensive

income

2015 2014 01/01/2014 2015 2014 2015 2014

Fixed assets (63.447) (72.856) (74.722) (9.409) (1.866) - -

Other assets and liabilities 5.017 14.838 21.891 9.821 7.053 - -

Tax credits 42.478 40.950 37.039 (1.528) (3.911) - -

Actuarial calculations ORI 382 (189) - - - 571 (189)

Total deferred tax (15.570) (17.257) (15.792) (1.116) 1.276 571 (189)

The Company does not recognize deferred tax assets on temporary differences arising on investments in subsidiaries since there are no future sales expectations, so it is likely that the difference will not be reversed in the foreseeable future.

Temporary differences that do not generate tax are:

2015 2014 01/01/2014

Temporary differences for Investments in subsidiaries * 28.586 29.810 27.08328.586 29.810 27.083

* This difference creates a deferred tax liability because the tax value exceeds the book value for these investments.

The conciliation for equity CREE, property and net income is as follows:

Equity cree income reconciliation 2015 2014

Taxable Base COLGAAP 7.037 8.440Tax rate 9% 9%Subtotal 633 760Surtax 312 -Subtotal 945 760Prior year tax adjustment 18 -

Equity CREE Income tax 963 760

2014

Assets Liabilities EquityNet

result

Fabrisedas 3.991 577 3.414 (1.972)

Comercializadora los colores S.A.S. in liquidation (before Textiles Prisma) 2.230 18.676 (16.446) (2.965)Diversificación Industrial de San Pedro 17 451 (434) - Fabricato del Perú S.A.C. "Fabriperú in liquidation" 598 8.123 (7.525) (1.946)Fabricato del Ecuador S.A. "Fabridor" in liquidation 1.870 6.320 (4.450) (3.429)Fabricato Textiles C.A. "Fabritexca" in liquidation 1.658 19.266 (17.608) (1.343)Textiles del Rio S.A. 48.961 25.560 23.401 (755)Total 59.325 78.973 (19.648) (12.410)

01/01/2014

Assets Liabilities EquityNet

result

Fabrisedas 12.921 7.535 5.386 - Comercializadora los colores S.A.S. in liquidation (before Textiles Prisma) 22.212 39.548 (17.336) - Diversificación Industrial de San Pedro 199 449 (250) -

Fabritelar S.A. de C.V. liquidated in 2014 2.161 340 1.821 -

Fabricato de México S.A. de C.V.liquidated in 2014 682 175 507 -

Fabricato del Perú S.A.C. "Fabriperú in liquidation" 3.995 9.869 (5.874) -

Fabricato del Ecuador S.A. "Fabridor" in liquidation 10.420 13.850 (3.430) - Fabricato Textiles C.A. "Fabritexca" in liquidation 896 14.979 (14.083) - Textiles del Río S.A. 42.870 18.714 24.156 - Total 96.356 105.459 (9.103) -

NOTE 11 DEFERRED TAX

The breakdown of deferred income tax is as follows:

2015 2014 01/01/2014

Deferred tax assets (1) 54.430 57.412 60.247Deferred tax liabilities (2) (70.000) (74.669) (76.039)Deferred tax liabilities, net (15.570) (17.257) (15.792)

(1). The following is the detail that corresponds to the balance of deferred tax assets:

2015 2014 01/01/2014

Tax credits 42.478 40.950 37.039Other assets and liabilities 11.082 15.788 22.561Actuarial calculations ORI 571 - -Fixed assets 299 674 647Total 54.430 57.412 60.247

92 93


Liquid income conciliation 2015 2014

Accounting income (loss) NCIF before tax 35.696 (28.465)

Difference in COLGAAP profit before tax because of the change in accounting policy 21.657 941

COLGAAP Accounting profit before tax 57.353 (27.524)

More additional tax revenue:

Presumptive interest income 280 322

Income deductions recovery - portfolio provision 53 1.319

Income for productive assets 40% deduction refund 73 320

Income for deductions recovery - tax actuarial calculation 3.972 541

4.378 2.502

More nondeductible expenses:

Provisions 8.410 727

Taxes 537 727

Asset retirement 741 667

Tax on financial movements 712 760

Amortization retirement pension, actuarial calculation R.R.I.I 707 459

Others 9.288 13.053

20.395 16.393

Minus untaxed income (loss):

Untaxed dividends 375 271

Utility on assets sale 712 (126)

Amortization retirement pension, actuarial calculation 12.161 872

13.248 1.017

Minus compensation with tax credits 61.841 -

Total income (loss) liquid 7.036 (9.646)

presumptive income 6.837 8.293

Total net taxable income 7.036 8.293

Tax rate 25% 25%

Current income tax 1.759 2.074

Occasional earnings 1.396 1.853

10% 10%

Tax on occasional earnings 140 185

Prior year tax adjustmen 8 -

Income tax 1.907 2.259

The detail of income tax expense is as follows:

Tax expenses 2015 2014

Rental tax 1.907 2.259CREE tax 963 760Deferred tax (1.116) 1.276Total 1.754 4.295

Liquid assets conciliation 2015 2014

Accounting equity NCIF 556.827 523.879Difference in COLGAAP profit after tax because of the change in Accounting policy 19.852 3.604Reclassifications equity accounts 232.308 305.992Modification of assets and liabilities (165.828) (165.828)Accounting equity COLGAAP 643.159 667.647Plus:

Difference accounting and tax cost for investments 24.746 35.915 Difference in portfolio provision 80.944 76.530 Higher tax value on fiduciary rights 24.773 30.583 Assets tax adjustment 10.138 10.766 Higher deferred tax value 7.038 8.692 Actuarial calculation 514 (3.212)Asset provisions 34.977 34.888 Liabilities provisions 10.464 9.217 Others - 1.413 Subtotal 193.594 204.792Minus:

Deferred tax depreciation 10.379 7.669Deferred taxes (1.475) 208Valuations 483.673 560.963Subtotal 492.577 568.840 Liquid equity 344,176 303,599

94 95


Effective tax rate and nominal rate conciliation 2015

Accounting profit NCIF before income tax from continuing operations 35.696Difference in COLGAAP profit before tax because of the change in accounting policy 21.657Income before income tax 57.353The statutory tax rate of 39% 22.328Adjustment related to current income tax of last year 26Additional tax revenue 1.707Untaxed income (5.167)Use of tax losses not previously recognized (24.118)Not tax deductible expenses 7.954Occasional earnings tax 140The effective tax rate of 8.04% 2.870

For 2014, the tax base is a special income (presumptive), thus accounting clearance is not generated.

NOTE 12 OTHER FINANCIAL ASSETS

The following is the detail that corresponds to the balance of other financial assets:

2015 2014 01/01/2014

Fiduciary in management - Autonomous Equity (1) 1.299 1.299 1.299Other investments (2) 2.122 2.122 2.122Other financial assets (3) 670 9 45Total 4.091 3.430 3.466current portion 670 9 45Non-current portion 3.421 3.421 3.421

(1) Investments in fiduciary administration as Autonomous Equity correspond to the following:

Number of shares

2015 2014 01/01/2014


Enka de Colombia

154.059.736 13.184 (11.885) 1.299 13.184 (11.885) 1.299 13.184 (11.885) 1.299

(2) Other investments correspond to the following:

Number of shares

%2015 2014 01/01/2014


Enka de Colombia 109.240.812 1,84 9.349 (8.428) 921 9.349 (8.428) 921 9.349 (8.428) 921

Promotora Nacional de Zonas Francas S.A.

63.826.441 16,77 1.125 - 1.125 1.125 - 1.125 1.125 - 1.125

Textiles Espinal S.A.* 20.366.920 24,52 - - - 3.916 (3.916) - 3.916 (3.916) -

Centro de Exposiciones y Convenciones de Medellín

250.000 0,34 82 (82) - 82 (82) - 82 (82) -

Industrial Hullera S.A.* 14.568.100 22,50 - - - 68 (68) - 68 (68) -

Setas Colombianas S.A. 191.151 0,02 75 - 75 75 - 75 75 - 75

Confecciones Toval S.A. 16.333.560 3,08 16 (16) - 16 (16) - 16 (16) -

Coltejer S.A. 30 (29) 1 30 (29) 1 30 (29) 1

Total 10.677 (8.555) 2.122 14.661 (12.539) 2.122 14.661 (12.539) 2.122

* These companies were liquidated in 2015.

(3) Corresponds to Tax Refund Titles and Tax Refund Certificates that have no expiration date.

NOTE 13 FINANCIAL LIABILITIES

The following is the detail of financial obligations:

2015 2014 01/01/2014

National banks 14.621 18.445 15.718Foreign banks 8.259 6.927 21.467Law 550 466 508 574Other obligations 938 752 1.864Total 24.284 26.632 39.623Current portion 23.842 23.758 33.440Non-current portion 442 2.874 6.183

96 97


Rates and maturities of financial obligations are as follows:

Provider Obligation code Date from Date until balance 2015Effective

annual ratenominal rate Warranty

Banco Colpatria Red Multibanca

E021105000 3/12/15 3/03/16 2.353 11.83% 5,75% Mortgage F1

E051200023 20/11/15 18/02/16 5.906 11.83% 5,75%Representative

signatureN021400001 23/11/15 19/02/16 3.617 13,54% 12,90% Mortgage F1N021400002 23/11/15 19/02/16 5.262 13,54% 12,90% Mortgage F1N031400636 29/10/15 27/01/16 4.127 13,54% 12,90% Mortgage F1

Intereses 3/12/15 3/03/16 44 - - Mortgage F121.309

Patrimonio autónomo Fiduciaria Colpatria

PM01126780 5/01/12 5/01/17 225 10,09% 9,65% PortfolioPM01126781 13/01/12 13/01/17 375 10,09% 9,65% PortfolioPM05126790 4/05/12 4/01/17 306 10,07% 9,63% PortfolioPM09121023 21/08/12 21/08/17 710 9,56% 9,17% Portfolio

1.616Fiduciaria Bancolombia

L5501N0010 7/11/00 7/11/20 211 50%DTF T.V. 0,00%

211Banco de La República

L5502N6022 7/11/00 7/11/20 254 0,00% 0,00%

254Inversiones S&F S.A.

L5501NI005 7/05/13 7/11/20 1 0,00% 0,00%

1Servicios Generales Suramericana

N061500002 10/06/15 10/04/16 862 17,32% 0,00%

862Renting Tecnológico 29Bancolombia 2

31Total 24.284

NOTE 14 EMPLOYEE BENEFITS

The following is the detail of labor obligations and provisions for employee benefits:

2015 2014 01/01/2014

Retirement pensions (1) 109.665 113.813 118.854Severance payable retroactively 3.805 7.377 9.758Severance payable without retroactivity 2.611 2.844 3.061Work processes (2) 2.339 4.451 2.238Seniority bonus 2.256 1.792 1.634Deferred bonus 3.193 1.705 1.941Performance bonus 1.443 - -Payable wages 1.179 1.280 1.387Vacation 1.240 907 968Vacation bonus 465 796 -Interest on severance pay 506 494 597Employee death insurance 190 89 136Extralegal benefits - - 749Total 128.892 135.548 141.323Current portion 24.923 21.613 23.173Non-current portion 103.969 113.935 118.150

(1) Corresponds to the benefit employees have with retirement and survival income under Colombian law, which are not covered by the pension system of the Colombian state or had at least 10 years of service before 1 January 1967, which were valued in accordance with Article 7 “Ex-planatory Notes” Decree 2420, issued by the Ministry of Commerce, Industry and Tourism, which provides that for the calculation of post-em-ployment liabilities addressed by IAS 19, the parameters established in Decree 2783 of 2001 should be used as best market approach, instead of the requirements established by IAS 19.

(2) Corresponds to work processes of the Company that are in the labor jurisdiction currently enrolled in judicial offices and mostly obey to Decree 2025 of 2011 and the jurisprudential change on operation and its ability to contract with third parties.

The following is the detail of the obligations of short and long term valued using actuarial techniques:

2015Initial

balanceFinancial cost Service cost

Payments throughout

the year

(Gains) Losses

Final balance

Retirement pensions 113.813 7.382 - (13.095) 1.565 109.665

Retroactive Severance 7.377 472 216 (652) (3.608) 3.805

Seniority bonus 1.792 84 629 (249) - 2.256

Deferred bonus 1.705 - 3.102 (1.614) - 3.193

Life insurance 89 5 96 - - 190

Total 124.776 7.943 4.043 (15.610) (2.043) 119.109

98 99


2014Initial


Payments throughout

the year

(Gains) Losses

Final balance

Retirement pensions 118.854 8.394 - (12.998) (437) 113.813

Retroactive Severance 9.758 1.365 - (1.051) (2.695) 7.377

Seniority bonus 1.634 107 384 (333) - 1.792

Deferred bonus 1.941 - 739 (975) - 1.705

Life insurance 136 9 144 (19) (181) 89

Total 132.323 9.875 1.267 (15.376) (3.313) 124.776

Estimates for retirement pensions are as follows:

2015 2014 01/01/2014

Cost method: Article 2 of Decree 2984 of August 2009 Sí Sí SíTechnical interest rate 4,80% 4,80% 4,80%Pension adjustment rate 2,88% 2,88% 2,88%

Estimates for the severance payment retroactivity, seniority premiums and deferred bonus are as follows:

2015 2014 01/01/2014

Cost method: Project Credit Unit Sí Sí SíDiscount rate (nominal) between 6,50%-7,66% 7,00% 7,00%Salary increase (nominal) 7,27% 3,00% 3,00%Inflation cost of living 6,77% 3,00% 3,00%

NOTE 15 OTHER PROVISIONS

The Company records some provisions arising from past events that can be estimated reliably every month. Such is the case of legal proce-

edings, tender sales commissions, taxes on real estate, tax on Commer-ce and industry and deferred income tax.

The following is the breakdown of other provisions:

2015 2014 01/01/2014

Other provisions* 6.718 4.784 7.283

Civil processes 965 965 965Labor Contingencies - 16 -Total 7.683 5.765 8.248Current portion 1.606 369 898Non-current portion 6.077 5.396 7.350

* The balance relates to: provision obligations for subsidiaries liquidation for $2.257 (2014 - $2.257 and 01/01 / 2014- $2.257); provision for penalty on program balances demonstration in Plan Vallejo $1.554 (2014 - $- and 01/01/2014 - $- ); legal process Empresas Publicas de Medellin for $1.122 (2014 - $642 and 01/01/2014 - $642); legal process restoring property with the third Textiles Konkord $910 (2014 - $910 and 01/01/2014 - $910); provision tender fees $ - (2014 - $ - and 01/01/2014 - $1.453); other provisions $875 (2014 - $ 975 and 01/01/2014 - $2.021).

NOTE 16 TRADE ACCOUNTS PAYABLE AND OTHER ACCOUNTS PAYABLE

The following is the detail of trade and other payables

2015 2014 01/01/2014

National providers 15.300 26.096 28.931Foreign providers 21.670 15.432 23.771Advance payments received 8.809 11.101 5.891Costs and expenses to pay 3.546 5.950 6.836Payroll withholdings and contributions 1.067 1.029 1.344Provision for public services 551 173 632Accounts payable law 550 547 563 581Various creditors 138 324 907Law 550 providers 263 214 186Revenues received for third parties 44 189 48Contractors 12 - -Total 51.947 61.071 69.127Current portion 42.447 52.215 56.271Non-current portion 9.500 8.856 12.856

NOTE 17 TAX LIABILITIES

The following is the detail of tax liabilities:

2015 2014 01/01/2014

Sales tax to be paid 6.003 4.691 6.633Income and complementary - - 83Withholding tax 370 340 340

Sales tax withheld 116 96 37

Real estate tax 6 34 22Industry and Commerce (98) - 1Total 6.397 5.161 7.116

NOTE 18 ACCOUNTS RECEIVABLE AND PAYABLE TO RELATED PARTIES

The following is the detail of accounts receivable from related parties:

2015 2014 01/01/2014

Textiles del Rio S.A.being restructured 5.518 15.317 7.310Fabricato del Ecuador Fabridor S.A. in liquidation 1.152 1.717 13.042Fabricato del Perú S.A.C. in liquidation 1.301 847 3.397Comercializadora los Colores S.A.S. in liquidation 69 257 18.833Fabrisedas S.A. in liquidation - 1 4.041Diversificación Industrial de San Pedro S.A. - - 9Total 8.040 18.139 46.632Current portion 2.324 10.055 39.274Non-current portion 5.716 8.084 7.358

100 101


The Company grants loans to its subsidiaries in order that they address various labor and tax commitments; depending on this, disbursement conditions are defined.

These loans were granted in terms between 1 and 36 months and inte-rest rates ranging from 9% to 12%, in some cases interest is not settled, considering that they are minor and have short deadlines.

The following is the detail of accounts payable to related parties:

2015 2014 01/01/2014

Fabrisedas S.A. in liquidation 3.764 3.832 -Comercializadora los Colores S.A.S. in liquidation - - 508Total 3.764 3.832 508

NOTE 19 EQUITY

The authorized capital of the Company is represented by 13.500.000.000 shares with a nominal value of $4 Colombian pesos each, from which, 9.201.848.397 shares are subscribed and paid for 2015, 2014 and 01/01/2014.The capital surplus balance in 2015, 2014 and 01/01/2014 is $207.194.

ReservesAppropriations approved by the General Assembly of Shareholders are recorded as reserve, charged to the results of the year for regulatory compliance or to meet expansion plans or financing needs.The total balance of reserves in 2015, 2014 and 01/01/2014 is $97.896.

The legal dispositions that provide for the constitution of applicable reserves to the Company are as follows:

Legal reserveThe Company is required to appropriate, as a legal reserve, 10% of its

annual net profits until the balance of the reserve is equal to 50% of the subscribed capital, as long as the Company does not present ac-cumulated losses to be amortized. The legal reserve is not distributable before the liquidation of the Company and should be used to absorb or reduce losses. Appropriations in excess of 50% mentioned above are unrestricted by the Shareholders.

Reserve for tax dispositionsThis reserve is to obtain tax deductions for depreciation in excess of accounted depreciation, according to legal provisions (Article 130 of the Tax Code); as far as tax depreciation exceeds accounted tax deprecia-tion, a reserve of 70% of such excess should be constituted.

Accumulated earningsThe balance from accumulated earnings is as follows:

2015 2014 01/01/2014

Loss of previous years (352.904) (320.144) (320.144)Change in accounting policy NCIF

Equity accounts reclassifications 700.466 700.466 700.466 Assets and liabilities Modification (165.828) (165.828) (165.828)Subtotal * 534.638 534.638 534.638Accumulated earnings 181.734 214.494 214.494

* According to paragraph 1.2 of the External Circular 036 of December 12, 2014, the net differences generated in the first application of the NCIF will not be distributed to absorb losses, perform capitalization process-

es, share profits and/or dividends, or be recognized as reserves, they will only be available when they have been performed effectively.

NOTE 20 ORDINARY ACTIVITIES INCOME

The balance of revenue includes:

2015 2014

National sales (1) 296.667 265.861Sales abroad (2) 69.564 64.984Total 366.231 330.845

(1) Domestic sales correspond to the following:

2015 2014

Sales 304.245 273.519Discounts (99) (157)Quality rebate (788) (1.158)Return on sales (6.691) (6.343)Total 296.667 265.861

(2) Sales abroad correspond to the following:

2015 2014

Sales 73.881 69.467Quality rebate (1.164) (785)Return on sales (3.153) (3.698)Total 69.564 64.984

NOTE 21 DISTRIBUTION, ADMINISTRATION AND SALES EXPENSES

The detail of distribution, administration and sales expenses is as follows:

2015 2014

Diverse (1) 4.828 3.924Services (2) 3.521 3.547Taxes 2.229 2.026Fees 1.224 1.299Insurance 759 769Legal expenses 717 81Contributions and affiliations 635 473Leases 570 174Travel expenses 549 393Depreciation 323 445Maintenance and repairs 249 207Amortization 6 116Adaptation and installation 4 -Subtotal 15.614 13.454Distribution costs (3) 2.286 3.476Total 17.900 16.930

102 103


(1) Diverse expenses relate to fees for $3.238 (2014 - $2.309), freight export expenses $652 (2014 - $889) software and hardware costs $323 (2014 - $253), samples and own products $202 (2014 - $231) and $413 (2014 - $242).

(2) The service charges consist of fixed production services $729 (2014 - $731), publicity, advertising and promotion $902 (2014 - $866), toilet and surveillance $651 (2014 - $823), transport, freight and hauling $905 (2014 - $ 566), others $334 (2014 - $ 561).

(3) Distribution costs correspond to the expenses incurred in the Distribution Center (CEDI), which is responsible for final delivery of the products of the Company to customers.

NOTE 22 COSTS PER EMPLOYEE BENEFITS

The detail of costs for employee benefits is as follows:

2015 2014

Wages 8.899 8.818

Bonuses 1.993 672

Contributions Pension funds and / or severance pay 1.128 1.147

Aid 838 922

Extralegal bonuses 682 745

Premium bonus 571 623

Severance 533 579

Vacation 493 489

Contributions to compensation funds 338 343

Contributions EPS 255 239

Contributions ARP 157 137

Workers' compensation 115 291

Interest on Severance 89 89

Contributions ICBF 80 68SENA 54 45Endowments and supplies for employees 49 56Staff training 26 7Insurance 16 -Cultural and sporting activities 11 10

Total 16.327 15.280

NOTE 23 IMPAIRMENT LOSSES

The detail of the reversion of impairment losses is as follows:

2015 2014

Debtors Recovery (Note 6) 572 3.688 Property, plant and equipment Impairment - (3.361)Debtors Impairment (Note 6) (2.880) (6.355)Total (2.308) (6.028)

NOTE 24 OTHER INCOME AND OTHER EXPENSES

The detail of other income is as follows:

2015 2014

Drawback other costs and expenses (1) 5.236 4.907 Utility on sale of property, plant and equipment (Note 9) 3.785 5.571 Other sales (3) 3.720 1.825 Leasing (2) 2.301 2.205 Indemnifications 1.223 766 Diverse 709 951 Dividends and / or participations 375 270 Total 17.349 16.495

The detail of other expenses is as follows:

2015 2014

Various expenses (4) 8.500 7.934 Extraordinary expenses (5) 2.311 2.406 Loss on sale of property, plant and equipment (Note 9) 1.404 924 Total 12.215 11.264

(1) Includes reimbursement of actuarial calculation (Severance) $3.608 (2014 - $2.695) and other costs and expenses $1.628 (2014 - $2.212).(2) Includes leases to Lindalana S.A. $1.383 (2014 - $1.357) and $918 (2014 - $848).(3) Relates to sale of surplus and other products.(4) Various expenses correspond to labor demands by $ - (2014 - $2.720) Charge for subsidiary services $869 (2014 - $1.116), early retirees’

payment $3.102 (2014 - $1.023), related activities costs $2.017 (2014 - $1.946), surplus and other byproducts cost $1.228 (2014 - $637), fines, penalties and litigation $786 (2014 - $ -) and other expenses $498 (2014 - $492).

(5) Includes the tax on financial transactions $1.423 (2014 - $1.648), taxes paid for $521 (2014 - $546) and costs and expenses from previous years $367 (2014 - $212).

NOTE 25 FINANCIAL INCOME AND COSTS

The detail of finance income is as follows:

2015 2014

Interests 589 1.342 Conditioned trade discounts 586 94 Others 4 - Total 1.179 1.436

104 105


The detail of finance costs is as follows:

2015 2014

Interests 13.268 15.695 Conditioned trade discounts 1.640 2.275 Commissions 464 287 Banking expenses 104 154 Total 15.476 18.411

NOTE 26 EARNING DERIVED FROM NET MONETARY POSITION

The detail of gains or monetary losses is as follows:

2015 2014

Exchange difference income 47.803 34.987 Exchange difference (expense) (47.542) (34.944)Total 261 43

NOTE 27 OTHER INCOME AND LOSSES OF SUBSIDIARIES

The detail of income and expenses from subsidiaries is as follows:

2015 2014

Income or (loss) from equity method 1.223 (2.725)Other revenue from susbsidiarias * 32.593 - Total 33.816 (2.725)

* In 2015, it corresponds to the sale of 30% of fiduciary trust rights “354170 - Lot Pantex”, to the Management group responsible for the develop-ment of the real estate project in former Pantex Lot. The sales value amounted to $70.000, generating an utility on sale of interest in subsidia-ries for $32.593 (Note 10).

NOTE 28 TRANSACTIONS IN RESULTS WITH RELATED PARTIES

The main transactions with related companies to December 31 were:

2015 2014

Sales of goods 3.026 8.671 Purchase of goods and services (20.589) (17.264)Total (17.563) (8.593)

The Company made until 2013 sales transactions with affiliates (Co-mercializadora los colores, Fabricato del Ecuador, Fabricato del Perú, Diversificación Industrial de San Pedro, Fabrisedas) and is currently per-forming the same operations with Textiles del Rio S.A.There were no transactions with shareholders whose share exceeds 10% of the subscribed capital of the Company or other transactions except inherent payments for the entailment to members of the Board of Directors or managers. Operations with subordinate companies, shareholders, directors and managers of the characteristics listed below were not carried out during 2015 and 2014:(1) free or compensated Services.(2) Loans involving an obligation to the borrower that does not corres-

pond to the essence or nature of the contract.(3) Loans with different interest rates to those normally paid or charged

to third parties under similar conditions of risk, term, etc.

All operations were carried out under market conditions.The Company also considers as related parties the Board and the Presidential Committee, which has the authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly.

The charge to results for fees of the Board was for $242 (2014 - $167) and the charge to results for benefits to key management employees (Directors and Presidency) was for $2.267 (2014 - $1.719).

NOTE 29 EVENTS AFTER THE PERIOD IN WHICH REPORTED

No significant events occurred after the closing of the financial state-ments that may significantly affect the financial situation of the com-pany reflected in the financial statements up to December 31, 2015.

NOTE 30 APPROVAL OF FINANCIAL STATEMENTS

The issuance of the financial statements of Fabricato S.A., for the year that ended on 31 December 2015 was authorized by the Management Board, as stated in Act No. 3094 of the Board of Directors February 9, 2016, to be presented to the General meeting of Shareholders in accor-dance with the requirements of the Commercial Code.

C O N S O L I D A T E D F I N A N C I A L

S T A T E M E N T S

A N N U A L R E P O R T 2 0 1 5

108 109

-- Consolidated financial statements ---- Annual Report 2015 --

To the Shareholders of Fabricato S.A., and Subsidiaries

I have audited the accompanying consolidated financial statements of Fabricato S.A., and its Subsidiaries (The Group) which comprise the consolidated statement of financial position as at December 31, 2015 and the consolidated income statement, statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and the summary of significant accounting policies and other explanatory notes.

Management is responsible for the preparation and fair presentation of the consolidated financial statements, in accordance with Account-ing and financial information standards accepted in Colombia; of de-signing, implementing, and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements whether due to fraud or error; and select-ing and applying appropriate accounting policies and making estimates that are reasonable in the circumstances.

My responsibility is to express an opinion on these consolidated finan-cial statements based on my audits. I obtained the necessary infor-mation to comply with my functions and performed my examinations in accordance with auditing standards generally accepted in Colom-bia. Those standards require me to comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risk of material misstatements in the consolidat-ed financial statements. In making those risk assessments, the audi-tor considers the internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that my audits provide a reasonable basis for my audit opinion.

In my opinion, the accompanying consolidated financial statements, taken from the accounting books, present fairly, in all material respects, the financial position of Fabricato S.A.,and its Subsidiaries as of De-cember 31, 2015, the results of its operations and the cash flows for the year then ended, in accordance with Accounting and financial informa-tion standards accepted in Colombia.

As described in Note 1 of the Consolidated Financial Statements, on November 7th, 2000, the Company formalized a restructuring agree-ment with its internal and external creditors, under the guidelines stablished in the Law 550. To the date, we have no evidence that the Company has breached the commitments made in the economic re-structuring agreement mentioned above.

Medellín, Colombia February 29, 2016

STATUTORY AUDITORS´ REPORT

ON THE CONSOLIDATED FINANCIAL STATEMENTS



The undersigned Legal Representative and Certified Public Accountant under whose responsibility the financial statements were prepared, we hereby certify:

As for issuing the statement of financial position at 31 December 2015, and the state of profit or loss and other comprehensive income, statement of changes in equity and cash flow statement for the year ended on that date, which according to the regulations are made available to sharehold-ers and third parties, the statements contained therein and figures taken faithfully from the books have been previously verified.

Such statements, explicit and implicit, are as follows:

Existence: The consolidated assets and liabilities of Fabricato S.A. there on the closing date and recorded transactions have been made during the year.

Integrity: All economic events have been recognized.

Rights and Obligations: The consolidated assets represent probable future economic benefits and liabilities represent probable future economic sacrifices, obtained by Fabricato S.A. on the cutoff date.

Valuation: All items have been recognized by appropriate amounts.

Presentation and disclosure: The economic facts have been properly classified, described and disclosed.

The opening financial statements at January 1, 2014 and transition at December 31, 2014, detail the off-balance figures obtained following the guidelines described in Note 2.6 first-time adoption of Accounting Standards and Financial Reporting accepted Colombia.

CERTIFICATION OF THE CONSOLIDATED

FINANCIAL STATEMENTS


Legal RepresentativeLUZ BIBIANA HINCAPIÉ RÍOS

AccountantProfessional Card # 73063-T

111







-- Consolidated financial statements --

110


CERTIFICATION OF FINANCIAL STATEMENTS

LAW 964 OF 2005


Legal Representative

General Shareholders’ Meeting of Fabricato S. A.

Medellin

THE UNDERSIGNED LEGAL REPRESENTATIVE OF FABRICATO S. A.

CERTIFIES:

The financial statements and management report corresponding to year 2015 and 2014 do not contain any errors, inaccuracies or flaws that pre-vent knowing the true financial condition or operations of the Company.

The company also certifies that the financial statements were reviewed and approved by the Audit Committee before being submitted for consid-eration by the Board and the General Assembly of Shareholders.

For the record, this certification is signed on February 19th 2016.

Assets Notes 2015 2014 01/01/2014

Current assets

Cash and cash equivalents 5 25.382 9.577 12.138

Trade receivables and other receivables, net 6 94.692 66.368 86.080

Inventories, net 7 92.928 84.221 87.442

Tax assets 8 10.265 7.248 7.828

Other financial assets 11 670 9 45

Other non-financial assets 1.046 1.187 2.186

Assets classified as held for sale 9 23 638 17.617

Total current assets 225.006 169.248 213.336

Non-current assets

Property, plant and equipment, net 9 461.791 461.615 625.986

Investment Property 9 146.219 146.987 5.091

Intangible assets, net 165 65 60

Trade receivables and other receivables 6 2.627 4.411 5.784

Deferred tax assets 10 55.203 58.472 62.370

Other financial assets 11 3.460 3.460 3.460

Total non-current assets 669.465 675.010 702.751

Total assets 894.471 844.258 916.087

See attached notes

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt December 31, 2015, 2014 and 01 January 2014 (In million of Colombian pesos)

112 113














Equity and Liabilities Notes 2015 2014 01/01/2014

Liabilities

Current liabilities

Financial liabilities 12 23.844 23.840 33.465


Other provisions 14 1.682 595 2.138


Tax liabilities 16 7.050 6.239 8.572

Total current liabilities 103.146 107.971 127.718


Financial liabilities 12 442 3.009 6.318


Other provisions 14 6.077 5.397 7.350

trade payables and other payables 15 9.734 8.930 13.265

Deferred tax liabilities 10 76.329 81.510 86.481

Total non-current liabilities 197.127 213.422 233.969


Equity

Issued capital 17 36.807 36.807 36.807

Issue premium 17 207.194 207.194 207.194

Exercise outcome 33.474 (41.374) -

accumulated earnings 17 183.584 223.410 212.503

Other comprehensive income (2.164) (1.068) -

reservations 17 97.896 97.896 97.896

Non-controlling interests 37.407 - -

Total equity 594.198 522.865 554.400

Total equity and liabilities 894.471 844.258 916.087

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt December 31, 2015, 2014 and 01 January 2014 (In million of Colombian pesos)

See attached notes.

CONTINUING OPERATIONS Notes 2015 2014

Ordinary activities income 18 366.263 337.039

Sales cost (318.947) (316.665)

Gross profit 47.316 20.374

Other income 22 18.682 17.634

Distribution costs 19 (2.286) (3.476)

Selling and administrative expenses 19 (15.817) (15.944)

Expenses for employee benefits 20 (17.002) (19.716)

Impairment losses 21 (1.673) (5.376)

Other expenses 22 (12.274) (14.042)

Gain (loss) from operating activities 16.946 (20.546)

Profit from the net monetary position 24 244 (160)

Financial income 23 1.205 1.537

Financial costs 23 (15.561) (18.550)

Other income from subsidiaries 25 32.593 -

Gain (loss) before taxes 35.427 (37.719)

Tax expense 10 (1.953) (3.655)

Gain (loss) from continuing operations 33.474 (41.374)

Net profit (loss) for the year 33.474 (41.374)


(Losses) profit on defined benefit plans (1.565) 437

Deferred tax components of other comprehensive income 10 571 (189)

Losses from conversion rate (102) (1.316)

Components of other comprehensive income (1.096) (1.068)

Income (loss) Total comprehensive income for the year 32.378 (42.442)

CONSOLIDATED INCOME STATEMENT AND OTHER COMPREHENSIVE INCOME At December 31, 2015, 2014 (In million of Colombian pesos)

See attached notes

114 115














Equity

Equity attributable to controller owners

TOTAL

reservations

Issued

capital

Issue

premium

Legal

reserve

Occasional

reserve

other

reserves

Other comprehensive

income

Profit for

the year

Non-Controlling

Interests

Collected

earnings

Equity at the beginning of the period - January 2014

36.807 207.194 17.724 41.596 38.576 - - - 212.503 554.400

Profit for the year - - - - - - (41.374) - - (41.374)


- - - - - (1.068) - - - (1.068)

Other increases / decreases in subsidiaries

- - - - - - - - 10.907 10.907


36.807 207.194 17.724 41.596 38.576 (1.068) (41.374) - 223.410 522.865

Profit for the year - - - - - - 33.474 - - 33.474

Appropriations results - - - - - - 41.374 - (41.374) -


- - - - - (1.096) - - - (1.096)

Other increases / decreases in subsidiaries

- - - - - - - - 1.548 1.548

Minority interest - - - - - - - 37.407 - 37.407


36.807 207.194 17.724 41.596 38.576 (2.164) 33.474 37.407 183.584 594.198

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYAt December 31, 2015, 2014 and 01 January 2014 (In million of Colombian pesos)

See attached notes

CONSOLIDATED STATEMENT OF CASH FLOWSAt December 31, 2015, 2014 (In million of Colombian pesos)

2015 2014

Operating activities

Types of cash receipts from operating activities

Proceeds from sales of goods and services 349.554 384.636Proceeds from royalties, fees, commissions and other revenue 20.799 58.269Proceeds from premiums and claims, annuities and other policy benefits 1.218 67Proceeds from subsequent sales of securities held for rental to others and subsequently assets held for sale 11 155Other proceeds from operating activities 659 413Types of cash payment from operating activities

Payments to suppliers for goods and services (298.091) (305.834)Payments to and on behalf of employees (83.150) (92.721)Payments for premiums and claims, annuities and other policy benefits (1.384) (1.729)Payments for value added tax (IVA) (12.158) (9.377)Net cash flow (used in) from operations (22.542) 33.879

Interest paid (374) (779)Income taxes paid - (13)Taxes, fees and charges (11.447) (13.259)Net cash flow (used in) from operating activities (34.363) 19.828

Investing activities

Resources for changes in subsidiary ownership interests 68.250 - Purchases of property, plant and equipment (10.054) (5.739)Payments arising from futures contracts, forwards, options and swap (392) - Dividends received 375 270Other cash inflows 66 180 Net cash flow from (used in) investing activities 58.245 (5.289)

Financing activities

Proceeds from loans 8.411 26.335 Loan refunds (16.757) (43.468)Other cash outflows (12) (97)Net cash flow used in financing activities (8.358) (17.230)

Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate

15.524 (2.691)

Effects of variations in the exchange rate on cash and cash equivalents

Effects of variations in the exchange rate on cash and cash equivalents 281 130Net increase (decrease) in cash and cash equivalents 15.805 (2.561)

Cash and cash equivalents at beginning of period 9.577 12.138

Cash and cash equivalents at end of period 25.382 9.577

See attached notes.

116 117


NCIF are explained in note 3 letter b. of first-time adoption of Account-ing Standards and Financial Reporting accepted in Colombia (NCIF).

Responsibility StatementThe Management of the Company is responsible for the information contained in these financial statements. The preparation of these fi-nancial statements based on the Accounting Standards and Financial Reporting accepted in Colombia requires the use of management judg-ment for the application of accounting policies, which are described in Section 2.29.

2.2. CONSOLIDATION BASISThe consolidated financial statements include the accounts of Fabri-cato S.A. (Parent Company) and its subsidiary companies (hereinafter referred to as the Group), in which the parent directly or indirectly has 50% or more of its assets, or without possessing it, has its administra-tive control.

Companies with which Fabricato S.A. practiced the consolidation process were as follows:

Subsidiary Country of constitution

Number of shares

31/12/2015 31/12/2014 01/01/2014

Fabrisedas Colombia 10.044.294 96,00% 96,00% 96,00%Comercializadora los colores S.A.S. in liquidation (before Textiles Prisma)

Colombia 231.887.397 94,20% 94,20% 94,20%

Diversificación Industrial de San Pedro Colombia 498.462 52,50% 52,50% 52,50%Fabricato del Perú S.A.C. "Fabriperú in liquidation"

Peru 15.489 90,00% 90,00% 90,00%

Fabricato del Ecuador S.A. "Fabridor" in liquidation

Ecuador 2.432.286 99,97% 99,97% 99,97%

Fabricato Textiles C.A. "Fabritexca" in liquidation

Venezuela 643.009 100,00% 100,00% 100,00%

Textiles del Rio S.A. Colombia 11.772.262 94,80% 94,80% 94,80%Alianza Fiduciaria S.A. Patrimonio Autónomo Pantex

Colombia - 70,00% - -

Fabricato de México S.A. de C.V. liquidated in 2014 (1)

Mexico 24.831 - - 97,64%

Fabritelar S.A. de C.V. liquidated in 2014 (1) Mexico 25.000 - - 50,00%

(1). Companies liquidated in 2014.

Subsidiaries are fully consolidated from the date of acquisition, which is the date on which the parent obtains control, and continue to be consol-idated until the date that such control ceases. The financial statements of subsidiaries are prepared for the same reporting period as that of the Controlling Company, using consistent accounting policies. All investment balances, accounts receivable and payable, capital, reserves and other transactions, gains and losses arising from conducted transactions be-tween Group entities and dividends, are totally eliminated.

A change in interest in a subsidiary, without loss of control, is ac-counted as an equity transaction. When the Parent Company loses control of a subsidiary:

• Derecognizes assets (including Goodwill) and liabilities of the subsidiary;

• Derecognizes the carrying amount of any non-controlling interest;• Derecognized accumulated conversion differences, recorded in

equity;• Recognizes the fair value of the compensation that has been

received;• Recognizes the fair value of any retained residual investment;• Recognizes any positive or negative balance as a result; and• Reclassifies earnings or retained results, as appropriate, the partic-

ipation of the Company in the previously recognized components in other comprehensive income.

2.3. CONVERSION OF TRANSACTIONS AND BALANCES IN FOREIGN CURRENCY(a) Functional currency and presentation currency Items included in the financial statements are expressed in the

currency of the primary economic environment in which the Par-ent Company operates (Colombian pesos). The financial state-ments are presented in “Colombian Pesos”, which is the functional currency of the Parent Company and the presentation currency.

In the process of consolidation with foreign subsidiaries, financial statements were made in US dollars and converted to the func-tional currency, based on the average exchange rate of the last year, income statements and the official exchange rate certified by Superintendencia Financiera de Colombia at the end of the report-ing period for balance sheet accounts, the resulting differences in the conversion process of the financial statements are recorded in other comprehensive income.

(b) Transactions and balances in foreign currency Transactions in foreign currency are initially recorded at the ex-

change rates prevailing at the dates of the transactions.1. Monetary assets and liabilities denominated in foreign cur-

rencies are translated to the functional currency at the end of each period with the exchange rate as market certified by the Superintendencia Financiera de Colombia. Gains and losses differences are recognized in the income statement.

GENERAL NOTES

NOTE 1 GENERAL INFORMATION

Fabricato S.A., (Parent) was established according to Colombian leg-islation on February 26, 1920. The corporate purpose includes, among others, manufacturing and marketing of textile, clothing and non-wo-ven fabric; production, sale and manufacture of machinery, spare parts, components and accessories for the textile and clothing industry; investment fund shares, quotas or social interest; the contribution in companies, entities or corporations of commercial nature.

The construction and execution of construction projects for housing, commerce, industry, offices and services was included in the corporate purpose in the shareholders meeting in March 2013.

Its main facility is located in the municipality of Bello in Carrera 50 # 38 – 320. The lasting term of the company expires on 26 February 2049.

By decision of the Shareholders, the Parent Company changed its name from Textiles Fabricato Tejicóndor S.A., to Fabricato S.A., by writ-ing No 2979 granted before Notary 15 of Medellin on April 8, 2011. The Company is currently developing its corporate purpose under the new name.

The Parent is registered in Registro Nacional de Valores y Emisores (RNVE) and its shares which are traded on the Colombia Stock Ex-change (BVC).

Fabricato S.A is registered as an economic group in the Chamber of Commerce of Medellin, being the Industrial Diversification matrix of San Pedro S.A.S., Fabrisedas S.A. on settlement, Comercializadora los Colores S.A.S. on settlement, Textiles del Rio S.A., Fabricato del Ecuador S.A. on settlement and Fabritexca C.V. on settlement.

Economic intervention lawBefore the merger between Fabricato S.A., & Tejicóndor S.A., which was held on August 8, 2002, the Companies were under Law 550 of 1999. Both companies signed similar agreements with their creditors on No-vember 7, 2000.

On 21 July 2008 the creditors of the Companies signed an amend-ment to the restructuring agreement in order to unify the initial agree-ments and reschedule debts payments. The debts are to be canceled as provided in each of them.

The Controlling Company has designed plans and strategies to en-sure continuity in the cash flow generation and does not foresee vio-lations or situations that affect the ability of the entity to continue as a going concern.

The balance of liabilities that are included in the agreement as of December 31, 2014 amounts to $ 1,276 million pesos (2014 - $ 1,285).

.

Monitoring committeeWith representation from each group of creditors a Supervisory Com-mittee was formed, it never acquires the character of manager or co-manager, as its functions are derived exclusively as representative of creditors. To date, the Parent Company has complied with all terms of the agreement.

NOTE 2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

Accounting standards appliedThe Group prepares its financial statements in accordance with ac-counting standards and financial reporting accepted in Colombia (NCIF), established by Law 1314 of 2009, regulated only by the 2420 regulatory Decree of 2015 as amended by Decree 2496 of 2015. These accounting standards and financial reporting, correspond to Interna-tional Financial Reporting Standards (IFRS) translated officially autho-rized by the International Accounting Standards Board (IASB) as of December 31, 2012.

In addition, the Group applies the following guidelines in accordance with laws and other regulations in Colombia, and which are exceptions to the International Financial Reporting Standards as issued by the IASB:

• Part 2 of Book 2 of Decree 2420 of 2015 added by Decree 2496 of 2015 provides that for the determination of post-employment ben-efits in respect of future pensions or disability, is used as the best approximation of market parameters set in Decree 2783 of 2001, rather than the requirements determined in accordance with IAS 19.

• Article 2.1.2. Part 1 of Book 2 of Decree 2420 of 2015 added by De-cree 2496 of 2015 provides for the application of Article 35 of Law 222, which indicates that participations in subsidiaries to be recog-nized in the separate financial statements by the equity method in-stead of recognition in accordance with the provisions of IAS 27, ie at cost or fair value.

The main policies and practices that the Group has adopted in the preparation of these consolidated financial statements are described below:

2.1. PRESENTATION PRINCIPLESUntil the activities ended on December 31, 2014, the Group prepared its financial statements in accordance with Previous Colombian Ac-counting Laws. The information corresponding to prior periods, includ-ed in the current financial statements with comparative purposes, has been modified and is presented in accordance with the rules described above. The effects of changes between Previous Colombian Account-ing Laws applied until the end of activities on 31 December 2013 and

CONSOLIDATED FINANCIAL STATEMENTS NOTESAt December31 2015, 2014 (in million of Colombian Pesos)

118 119


Determining antiquity days for calculating the deterioration

Type of Customer Tolerance

Days116 and 150 151 and 180 181 and 250 251 and 360

More than 361

National 115 10% - 25% 50% 100%

abroad and others 150 - 10% 25% 50% 100%

To make individual analysis, we also calculate the customer payments rotation as qualitative variable to monitor in the analysis of impairment at the end of each accounting period.

For other accounts receivable if there is any evidence of impair-ment, the value of the individual analysis as each account should be determined.

If during the same accounting period the value of the impairment loss decreases, the deterioration recorded in the previous period is re-duced (decrease in expenditure). If this decrease corresponds to an impairment recognized in a previous accounting term, it is recognized as a recovery of provisions with decreased spending.

For each accounting period an adjustment is determined to be made for impairment on general commercial portfolio, which is used for pe-riods where deterioration generated in the individual analysis is greater than defined for the overall portfolio deterioration.

Long term accounts receivable are measured at the amortized cost. For other financial instruments, impairment testing is performed

based on the carrying amount of the asset and the present value of future cash flows, if the carrying amount of the asset is greater, it is reduced up to the present value of future cash flows and the value of the loss is recognized in the income statement.

2.7. CURRENT TAX ASSETSBalances include mainly the advances of income tax and complemen-tary tax withheld, industry and commerce and private liquidation surplus which are registered and adjusted in accordance with the expectation of recoverability or compensation thereof.

2.8. INVENTORIESInventories are recorded at cost and at period end are reduced to net achievable value if lower. The cost is determined based on the weight-ed average method and the standard cost, depending on the type of inventory.

The Parent Company assesses at the end of each month, the net achievable value of inventories of finished products with normal rota-tion, obsolete inventories and inventories with low turnover.

When sales are presented to achieve a feasible net value, the Group recognizes the loss as an expense of the period. If increments occur in the net achievable value in the following periods that mean a reversal of the reduction in value, it is recognized as a lower value in the period cost in which it occurs and if they occur in later periods, as a recovery of net achievable value.

The Group conducts analysis on irrecoverable obsolescence inven-tories according to the type of inventory (inventory of raw materials, materials, chemicals, supplies and spare parts, inventory in process and finished product inventory).

To determine the impairment of inventories, the Group analyzes

the references that are dated for more than a year, for the references where there is obsolescence, 100% impairment is applied on its cost taking into account the criteria and guidelines for obsolete inventory management. When such references are found in less than a year and above the normal rotation period (four months) without orders or sales projection, it is categorized as useless inventory and it is subject to de-terioration or possible use.

2.9. INVESTMENTSThe investments that the Parent Company holds in subsidiaries are car-ried at cost in separate balance sheets, the value of the investment is updated by the equity method and they are consolidated in the finan-cial statements of the controller, as if it were a single entity.

The controller recognized in the separate financial statements, the dividend as a lower value of the investment from the subsidiary when the right to receive is established.Investments in associates that the Parent Company owns are recorded at cost in separate balance sheets and the controller must make the adjustment of the equity method, recognizing subsequent changes in the financial statements of the associate, recording the results for the period and equity variations in the proportion to investment.

The controller recognizes in the separate financial statements the dividend as a lower value of the investment from the partner when the right to receive is established.

Investments in joint ventures held by the Parent Company are re-corded at cost in the separate balances, and the controller must make the adjustment of the equity method, recognizing subsequent changes in the financial statements of business altogether, recording the results for the period and equity changes in proportion to the investment.

The controller recognizes the dividend as a lower value of the in-vestment from the joint venture in the separate financial statements when the right to receive is established.Investments in joint ventures are accounted according to the participation that is held in the assets, liabilities, revenue and expenses in the joint operation.

If the participation of the Parent Company in the losses of a sub-sidiary, associate or joint venture is equal or exceeds its interest, the Parent Company ceases to recognize its share of further losses. Once the participation of the Company is reduced to zero, a provision is rec-ognized only to the extent that the Parent Company has incurred legal or constructive obligations.

Gains or losses on transactions between the Parent Company and the subsidiaries, associates or joint ventures are eliminated to the ex-tent of participation of the Parent Company in these entities in applying the equity method.

Once applied the equity method, the Parent Company determines whether it is necessary to recognize impairment losses in respect of the investment held in the investee.

2. Non-monetary items that are measured at historical cost in foreign currency are translated using the rates prevailing at the date of the transaction. Non-monetary items that are measured at their reasonable value are translated at the exchange rate of the date when the reasonable value is determined.

2.4. CLASSIFICATION OF ASSETS AND LIABILITIESAssets and liabilities are classified according to the intended use or according to their degree of realization, availability, enforceability or liq-uidation, in terms of time and values.

For this purpose, it is understood as current assets those things that will be achievable or available within a period not exceeding one year and as current liabilities, those amounts shall be due or payable also within a period not exceeding one year.

2.5. CASH AND CASH EQUIVALENTSFor purposes of preparing the consolidated cash flow statement, the cash and banks and highly liquid investments with maturity less than three months, are considered cash and cash equivalents.

The accompanying consolidated cash flow statement was prepared using the direct method, which is to redo the income statement using the cash system, primarily to determine the cash flow from operating activities.

2.6. FINANCIAL ASSETS

2.6.1. CLASSIFICATIONThe Group classifies its financial assets in the following categories:

Financial assets at fair value through results, loans and receivables, investments and other corresponding to cash equivalents with no ex-piration date.

The classification depends on the purpose for which the financial as-sets were acquired and is performed since initial recognition, all finan-cial assets establish rights and obligations between the parties, rights correspond to revenue and obligations to the expenditure that can be generated, each financial asset contains an agreement, which deter-mines the way in which each of the parties will develop activities jointly.(a) Financial assets at fair value through results: These are as-

sets held for trading. A financial asset is classified in this category if acquired mainly for the purpose of selling in the short term.

(b) Loans and receivables: Commercial accounts receivable and other receivables are financial assets with fixed or determinable payments, which are recognized at fair value. At the end of each month a general deterioration analysis is performed and is com-plemented by the individual analysis, the value is estimated on bal-ances that have indications of future losses, the amount of certain expense is recognized in the result for the period.

(c) Investment: Correspond to investments in companies with less than a 20% participation, which are recognized at fair value minus

the recognition of identified value impairment in each investment at the end of each accounting period.

2.6.2. RECOGNITION AND MEASUREMENTPurchases and sales of financial assets are recognized on the set-tlement date, the date on which the purchase or sale of the asset is made. Investments are initially recognized at fair value plus transaction costs in the case of financial assets that are not registered at fair value through results.

Financial assets recognized at fair value through results are initially recognized at fair value and transaction costs are recognized as expen-diture in the period income statement.

Investments are derecognized when the right to receive cash flows ceases or when investments expire or are transferred and substantially lose all risks and rewards of ownership. .

Loans and receivables are initially registered at fair value, they are later evaluated applying the method of effective interest rate and are subject to impairment analysis. The method of effective interest rate is a mechanism for calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts future cash flows (includ-ing all fees and paid points or received that form an integral part of the rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period to the net book value at initial recognition.

Gains and losses arising from changes in fair value of “financial as-sets at fair value through results” are included in the period income statement. The fair values of quoted investments are based on its cur-rent trading price. If the market for a financial instrument is not active (or the instrument is unlisted) its fair value is established using valua-tion techniques.

At the end of each period we assess whether there is objective evi-dence of impairment or the impairment in the value of a financial asset or group of financial assets.

2.6.3. IMPAIRMENT OF FINANCIAL ASSETSThe Group constantly evaluates loans, receivables and other financial assets, in order to identify whether there is objective evidence for im-pairment losses.If there is any evidence, the Group measures the value of deterioration with the following considerations:

• Age at maturity of invoices.• Significant financial difficulties of the debtor.• It is probable that the debtor will enter bankruptcy or other

financial reorganization.

For trade receivables, impairment is estimated based on the antiquity days of the expiration of invoices as follows:

120 121


2.12. NET INTANGIBLE ASSETSIntangible assets included in the financial statements comply with the definition of identifiability, control and future economic benefits to be recognized.

The cost of intangible assets, corresponds to the price an entity pays to acquire separately an intangible asset minus accumulated amortiza-tion and accumulated impairment losses.

The useful life of an intangible asset is defined taking into account the period of expected future economic benefits. The depreciation method used by the Group is the straight-line method, both the period and the amortization method used for intangible assets are reviewed at least at the end of each year.

Intangible assets have a finite useful life and are amortized over a range of 1 to 5 years and according to the contractual terms of pur-chase.

Internally generated brands are not recognized in the statement of financial position. Intangible assets are subsequently measured under the cost model, which are deducted from the amount of initial recogni-tion, depreciation based on the estimated useful lives and impairment losses that occur or accumulate. The effect of amortization and po-tential impairment is recorded in income for the period, unless in the case of the first, that are recorded as an increase in construction or manufacture of a new asset.

An intangible asset is derecognized at the time of sale or when there are no future economic benefits from its use or disposal.

The gain or loss incurred from the derecognition of the asset is cal-culated as the difference between net sales revenue, if any, and the carrying amount of the asset. This effect is recognized in income for the period.

2.13. OTHER NON-FINANCIAL ASSETSThe other non-financial assets mainly include costs and expenses covering several accounting validities such as interest, insurance and maintenance. These items are amortized over the period in which the future benefit is considered to be received.

At the end of each period the Group guarantees that the balances in the accounts prepaid expenses relate to payments for goods or ser-vices that have not yet been received and are presented as an item of other non-financial assets.

2.14. ASSETS HELD AS AVAILABLE FOR SALENon-current assets and groups of assets for disposition that are classi-fied as held for sale are measured at the lower of carrying amount or fair value minus selling costs. Non-current assets and groups of assets for disposal are classified as held for sale if its carrying amount will be re-covered mainly through a sale transaction rather than through continu-ing use. This condition is met only when the sale is highly probable and the asset or group of assets for disposition are available in their current conditions, for immediate sale. Management must be committed to the sale, and it should be expected to meet the requirements for recogni-tion as such, within the following year to the date of the qualification.

Property, plant and equipment and intangible assets once classified as held for sale, are not subject to depreciation or amortization.

2.15. FINANCIAL LIABILITIESFinancial liabilities are initially recognized at fair value, net of transac-tion costs incurred and subsequently measured at amortized cost.

Financial liabilities of the Group include trade payables and other payables, bank overdrafts on current accounts, debts and interest-bear-ing loans, the financial guarantee contracts and financial liabilities with and without effective coverage.

The effective interest method is a mechanism for calculating the amortized cost of a financial liability and of allocating interest expense over the period. The effective interest rate is the rate that exactly dis-counts future cash flows to pay through the full term financial obligation.

Financial liabilities are classified as current or non-current liabilities, depending on the defined term for each obligation, each one is gov-erned by an agreement containing specific conditions for each dis-bursement period.

The Group derecognizes financial liabilities when the obligations are settled, canceled or have expired.

Other short term accounts payable are measured at nominal value, they do not differ with the amount billed because the transaction does not have significant costs associated.

2.16. ACCOUNTS AND NOTES PAYABLEThey represent Group obligations arising from goods or services received, they are recorded separately in order of importance and materiality.

2.17. TAXESThey represent the value of the general and compulsory duties for the State and in charge of the Company, they are determined based on pri-vate sales on the respective tax bases generated in the corresponding fiscal period.

The balance includes withholding tax, retention of industry and com-merce, tax income and complementary income tax for equity CREE, sales tax, tax on industry and trade, which are recorded under current tax regulations.

The payable balance for income tax and income tax for equity CREE, is determined based on estimates and its value is taken to the results of the period, it is presented net of advances and withholdings at the end of the accounting period.

2.18. DEFERRED TAX ASSETS The deferred income tax is recognized for temporary differences be-tween the tax bases of assets and liabilities and their book value for financial reporting purposes.

Deferred tax assets are recognized to the extent that it is probable that the temporary differences, the book value of unused tax credits and unused tax losses can be used, except:

• If the deferred tax liability arises from the initial recognition of Goodwill or of an asset or liability from a transaction that is not a business combination and at the time of the transaction did not affect the accounting nor taxable profit (tax loss) gain.

• In respect of taxable temporary differences associated with in-vestments in subsidiaries, if the reversal timing of temporary dif-ferences can be controlled and if it is probable that the temporary differences will not reverse in the foreseeable future.

2.10. NET PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are those held by the Group to use in goods production or supply and services or for administrative purpos-es; they are expected to be used during more than one period, they are measured at cost minus accumulated depreciation and impairment losses that are identified.

The cost of items of property, plant and equipment includes:a) Purchase price: Includes import duties, sales tax or other taxes

nondeductible minus discounts and rebates.b) Costs required for commissioning: these Include all costs directly

attributable to the asset location and manufacturing in place and the necessary conditions for it to operate in the manner intended by management costs.

Only those costs that meet the following requirements can be capital-ized later:a) Increase asset productivity (units produced or deficiencies that

would lower production costs).b) Increase the useful life of the asset.

When parts of an operation of property, plant and equipment have dif-ferent useful lives, and their value is representative, they are recorded as separate items (major components) of property, plant and equipment.

The depreciation of property, plant and equipment begins when the asset is available for use, i.e. when it is in the location and the condi-tions needed to operate in the manner intended by management con-ditions, the depreciation of an asset ceases when the asset is classified as held for sale and on the date on which it does not account for the company anymore.

The depreciation method defined by the Group is the straight-line method for all asset classes.

The depreciation charge for each period is recognized in the result for the period.

The Group assesses at the end of each reporting period whether there is any indication that the value of an asset may be impaired, con-sidering information from internal sources and determines the end of each accounting period the recoverable amount for fixed assets from estimates the value in use of the following cash generating units.

FABRICATO S.A. CASH GENERATING UNITS

1/F1-WATER PLANT

2/RIOTEX-NOTEJIDOS-RECUPERABLES

3/HYDROELECTRIC POWER PLANT

4/ THERMOELECTRIC PLANT

If when performing analysis to determine the impairment of fixed assets of the cash generating units, the Company identifies an impairment, it proceeds with the accounting records thereof.

When the Group identifies a reversal of impairment losses, the carry-ing amount of the asset is increased to its recoverable amount, and is accounted for the recovery of impairment.

The useful lives to depreciate property, plant and equipment of the Company are as follows:

Asset Useful Life

Machinery and laboratory equipment

It is defined by the technicians of the Company taking into account the maintenance manuals of each machine.

Computer equipment

Laptops 3 years, desktops 5 years

Furniture 10 years

Buildings It is defined by the appraiser

vehicles 10 years and 5 years for motorcycles

The Group reviews the useful lives for each asset at the end of the accounting period.

The Group assesses if there is any indication of impairment of any asset at the end of each period. If any indication exists, the entity esti-mates the recoverable amount of the asset.

An item of property, plant and equipment is derecognized upon sale or when there is no expected future economic benefits from its use or disposition.

The gain or loss incurred from the derecognition of an asset is cal-culated as the difference between net sales revenue, if any, and the carrying amount of the asset. This effect is recognized in income for the period.

2.11. INVESTMENT PROPERTIESThey are investment properties (land or buildings), those which the Group has to lease, earn rentals or for capital appreciation rather than for use in goods production or supply or services or for administrative purposes or sale in the ordinary course operations (inventories).

The cost of investment properties includes:a) Acquisition costs and any directly attributable expenditure such as

professional fees for legal services and property transfer taxes.b) Costs incurred to construct an item of property investment.

The Group uses the cost method for subsequent measurement of in-vestment property and the depreciation method defined is the straight-line method.

The Group reviews the useful lives for each asset at the end of the accounting period, for investment properties, an 81-years period was defined for buildings and construction, and an indefinite useful life was defined for land.

At the end of each accounting period, the Group reviews the useful lives for each asset, to check whether they remain appropriate.

The Group assesses if there is any indication of impairment of any asset at the end of each period. If it exists, the entity estimates the recoverable amount of the asset.

Any gain or loss on the sale of an investment property (calculated as the difference between the value of the sale and the carrying amount of the item) is recognized in the result for the period.

At the end of each period the fair value of investment property is evaluated by technical appraisals performed by an advisor, with the aim of revealing changes in the fair value of assets classified in this category.

Investment properties are derecognized when sold or when there are no expected future economic benefits from its use or disposition.

122 123


2.24. OPERATING SEGMENTSThe Group’s operating segments are: Textile Business and Real estate business.

• The Group defines as main factors: The income that can be ob-tained from each business segment and the way the results are analyzed by management and the Board of the Parent Company.

• The types of products and services from which its income from ordinary activities derives are the textile business and future devel-opment of the real estate business.

• The results of each segment are differentiated by the division which corresponds and their respective cost centers.

• Management monitors the operating results of business units separately for the purpose of making decisions about allocating resources and assessing financial performance. The financial per-formance of the segments is evaluated on the basis of profit or operating loss and is measured consistently with operating profit or loss disclosed in the financial statements.

2.25. FINANCIAL RISK MANAGEMENTThe main financial liabilities of the Group include debt and interest bearing loans, trade accounts payable and other payables, and financial guaranteed contracts. The main purpose of these financial liabilities is to finance the Group’s operations and provide guarantees in support of its operations.

The Group has loans, trade and other receivables, and cash and short-term loans that come directly from its operations.

The Group is exposed to market risk, credit and liquidity, which are permanently evaluated by the presidential committee and the financial management.

The policies defined by the Parent Company for managing each of these risks are summarized below:

2.25.1. MARKET RISKMarket risk is the probability that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market pric-es. Market prices involve four types of risk: interest rate risk, exchange rates risk, commodity price risk and other price risks such as the risk of prices of equity securities. Financial instruments affected by market risk include debt and interest bearing loans, cash deposits, financial invest-ments available for sale and derivative financial instruments.

The Group controls and monitors financial risks to which it is ex-posed, trying to obtain natural coverage for cash flow and financial assets and liabilities in dollars, hiring credits to ensure favorable inter-est rates, and by permanently reviewing and controlling the total cash flows of the Group by the Parent Company’s financial team, searching together to minimize the impact on operating results for market risk, credit and liquidity.

2.25.2. INTEREST RATE RISKThe interest rate risk is the probability that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Group exposure to interest rate risk is mainly related to long-term debt obligations with variable interest rates.

As for interest rates, it is emphasized that to 31 December 2015, fi-

nancial obligations do not exceed 3% of the total assets of the Group, the short-term renewals of these financial liabilities lead to permanent revision of interest rates however we expect to change this situation, the start of new trade relations with financial institutions with long-term approval quotas to finance the investment plan approved for 2016.

For 2015, although the impact could be measured by fluctuations in interest rates, this is lower than other market variables may have due to the low level of financial indebtedness.

2.25.3. EXCHANGE RATE RISKThe exchange rate risk is the probability that the fair value or future cash flows of a financial instrument will fluctuate due to changes in exchange rates. The exposure of the Group to the risk of exchange rate relates, first, with operating activities the Group (when revenues and expenses are denominated in a currency other than the functional currency of the Company) which is the Colombian peso and, second, with the operational activities of foreign subsidiaries (when revenues and expenses are denominated in a currency other than the functional currency of that subsidiary that is different from the Colombian peso).

In addition, the Group is exposed to fluctuations in exchange rates related to the conversion into Colombian pesos of foreign subsidiaries whose functional currency is different to the Colombian peso. .

At the end of 2015, the Group does not have financial derivative contracts for exchange rates or interest rates, for exchange rates, it seeks to manage a natural coverage, which involves having some flex-ibility (change of origin, national or foreign) on purchases and foreign currency obligations to achieve proper relation to the volume of sales made abroad. It is important to note that because of production cycles (including time inventory) and sales, is relatively easy to move the price effects on costs presented by exchange rates, this depends on the time in which the market is located and is the Parent Company Management who periodically evaluates operating results integrating these variables, in this manner, there is no significant impact on net income of the Company for exchange rate fluctuations.

Thus, taking into account the definitions from the management of the Parent Company regarding the non-use of financial derivatives and to review the effect of these risks on the results, it is found that the monitoring carried out at the market variables and timely measurement within the operating cycle has achieved that the result from being dis-torted by market variables have a financial impact.

2.26. DETERMINATION OF FAIR VALUESAt each reporting period closing date the fair value of financial instru-ments traded in active markets is determined by reference to quoted prices on the market, or prices quoted by market participants (pur-chase price for long positions and sale price for short positions), with-out deducting transaction costs.

For financial instruments that are not traded in active markets, fair value is determined using valuation techniques appropriate to the circumstances. Such techniques may include using recent market transactions between interested and well informed parties acting in conditions of mutual independence, the reference to the fair value of other financial instruments that are essentially similar, the analysis of discounted cash flow values and other appropriate valuation models.

Deferred taxes are measured at the tax rates expected to apply to tem-porary differences when they are reversed, based on the laws that have been approved or are about to be approved at the report date.

The carrying amount of deferred tax assets is reviewed at each re-porting date and reduced to the extent that it is no longer probable that there is sufficient taxable income to use in all or part of the deferred tax asset. Unrecognized deferred tax assets are reviewed at each reporting date and are recognized to the extent that it is probable that there are future tax profits that allow the recovery of the deferred tax asset.

The deferred tax related to items recognized outside results are rec-ognized in correlation to the underlying transaction either in ORI or directly in equity.

Deferred assets and tax liabilities are offset if there is an enforceable right to offset the assets and liabilities through current tax, and when deferred assets and tax liabilities arising from income taxes correspond to the same taxation authority and fall on the same entity or taxpayer, or different entities or taxpayers, but the Company intends to settle current assets and tax liabilities on a net basis, or realize its assets and tax liabilities simultaneously

2.19. EMPLOYMENT BENEFITSIt includes both labor obligations as the estimates to cover all em-ployee benefits held by the Group, employee benefits are all forms of consideration given by the Company in exchange for services provided by employees or compensation for the cessation of work activities of employees, which are classified as short-term benefits, long-term and post-employment.

The short-term benefits correspond to different compensation ben-efits that are expected to be completely settled before the end of the annual period of twelve months, we have, among others: salaries, wag-es, social security contributions, paid leave and absences for disability, premium services, vacation bonus and profit-sharing and incentives such as performance bonuses. All short-term benefits are recognized and measured by the payable amount.

The long-term benefits and post-employment benefits correspond to benefits for employees which are different to short-term, including seniority premiums, pensions, severance retroactivity, and life insur-ance. All long-term benefits are valued by applying the projected credit unit method calculated by an actuary at the end of each accounting period. The Group accounts for costs of services as a higher value of the benefits and the interest cost of each benefit as financial expenses.

2.20. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

2.20.1. PROVISIONSA provision is recognized if there is a legal or constructive obligation arising from a fact or past event that can be estimated reliably and it is probably necessary to an outflow of economic benefits to settle the obligation in the future.

2.20.2. CONTINGENT LIABILITIESA contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence, or possi-bly non-occurrence of one or more uncertain future events not wholly within the control of the Group; or a present obligation that arises from past events but is not recognized for accounting because: (a) It is not likely that to satisfy it, a resources outflow with embodying economic benefits will be required; or (b) The amount of the obligation cannot be measured with sufficient reliability.

A contingent liability is not recognized in the financial statements, but is reported in notes, except in the case where the possibility of any outflow of resources in settlement is remote.

2.20.3. CONTINGENT ASSETSA contingent asset is a possible asset that arises from past events and whose existence must be confirmed only by occurrence, or possibly by non-occurrence of one or more uncertain future events which are not entirely under the control of the Group.

A contingent asset is not recognized in the financial statements, but is reported in notes, but only if the entry of economic benefits is probable.

2.21. REVENUE RECOGNITIONRevenues from ordinary activities are recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured reliably, regardless of when the payment is made by the client. Revenue is measured at the fair value of the con-sideration received or receivable, taking into account the conditions of payment defined contractually with the customer and excluding taxes and tariffs.

Revenues from the sale of goods in the course of ordinary activities is recognized when all the following conditions are met:

• The Group has transferred the significant risks and benefits of property ownership to the buyer.

• The Group does not retain any involvement in the current manage-ment of the sold goods, in the degree associated with ownership and does not withhold effective control over them either.

• The amount of revenue can be measured reliably.

2.22. RECOGNITION OF EXPENSESExpenses are recognized in the results when there is a decrease in future economic benefits related to a reduction of an asset, or an in-crease in a liability, which can be measured reliably.

2.23. NET PROFIT OR LOSS PER SHARENet profit or loss per share is calculated taking into account the weight-ed average number of shares in circulation of the Parent Company, which was 9,201,848,397 for 2015 and 2014.

124 125


2.29.2. ESTIMATES AND SIGNIFICANT ACCOUNTING ASSUMPTIONSThe key assumptions concerning the future and other sources of un-certainty estimates up to the closing date of the reporting period, which have a risk of causing significant adjustments to the carrying amounts of assets and liabilities during the next financial year, are described below:

• The Group has based its estimates and significant accounting assumptions considering the parameters available at the time of preparation of the financial statements. However, current cir-cumstances and assumptions about future events may vary due to market changes or circumstances arising beyond the control of the Company. These changes are reflected in the assumptions when they occur.

• The main estimates made by the Group, correspond to the rec-ognition of inventory impairment, portfolio, liabilities for legal pro-ceedings and deferred taxes.

• The inventory impairment is recognized when the net achievable value is less than the cost of inventory or when inventory referenc-es show obsolescence conditions.

• Deteriorating portfolio in accordance with the rotation of the bal-ances for customers and in accordance with the impairment policy described in 2.6.3.

• The estimated obligations for legal proceedings is made based on the assessment of probability of occurrence by the Legal Depart-ment of the Parent Company and External Advisors.

NOTE 3 FIRST-TIME ADOPTION OF ACCOUNTING STANDARDS AND FINANCIAL INFORMATION ACCEPTED IN COLOMBIA (NCIF)

These financial statements corresponding to the period that ended on December 31, 2015 are the first financial statements the Group has pre-pared in accordance with the NCIF. For prior periods and up to the end of activities on December 31, 2014, the Company prepared its financial statements in accordance with generally accepted accounting princi-ples in Colombia (previous Colombian accounting laws).

Therefore, the Group prepares financial statements that comply with current NCIF for the periods that ended on December 31, 2015 and thereafter, together with comparative information as of December 31, 2014 and for the end of activities on that date, as it is described in the section of applicable accounting standards. As part of the preparation of these financial statements, the statement of opening financial situa-tion was prepared to January 1, 2014.

This note explains the main adjustments made by the Group to restate the statement of financial situation as to January 1, 2014 and financial statements previously published to December 31, 2014 and for the end of activities, all of them prepared according with previous Co-lombian accounting laws.

3.1. INFORMATION REQUIRED FOR THE ENDED ACTIVITIES ON DECEMBER 31, 2015According to the requirements, the main adjustments of the transition

to NCIF are explained below, and the following conciliation related to this transition are presented:(i) Between equity determined in accordance with previous Colom-

bian accounting laws and equity determined in accordance with NCIF to 1 January 2014 (date of transition to NCIF), and December 31, 2014;

(ii) Between the net result determined in accordance with previous Colombian accounting laws for the end of activities on December 31, 2014, and the total comprehensive income determined in ac-cordance with NCIF on the same date.

In preparing these conciliations, the Administration has considered the NCIF currently approved and applied in the preparation of these finan-cial statements, these are the first annual financial statements present-ed in accordance with NCIF, but giving effect to the exceptions and ex-emptions under the version of IFRS 1 regulated in Decree 2420 of 2015 and partially amended by Decree 2496 of 2015 as described below:

• In accordance with IFRS 1, the opening balance to begin the pre-sentation and preparation corresponded to January 1, 2014.

• The first-time adoption of IFRS requires the Group to apply existing standards and interpretations retrospectively. This implies return-ing to the initial recognition of an asset item, liability and equity and adjust it to the requirements of IFRS from that moment until the date of the opening financial situation statement.

3.2. EXEMPTIONS AND EXCEPTIONSIFRS 1 provides exemptions and exceptions to the retroactive appli-cation of the International Financial Reporting Standards. The first are optional while the second are mandatory (retrospective application is prohibited). According with this, the Company applied the following ex-emptions and exceptions.

3.2.1. USE OF ATTRIBUTED COST ON PROPERTY, PLANT AND EQUIPMENTReal property (land and buildings) and machinery and equipment were measured in the statement of financial position opening on 1 January 2014 (date of transition to NCIF) at attributed cost on the basis of technical appraisals conducted in the previous Colombian accounting laws. Real property (land and buildings) and machinery and equipment that had disinvestment expectation, were measured at cost.

Additionally, for other classes of fixed assets (furniture, office equip-ment, computer equipment and transport equipment), the measure-ment in the opening balance sheet was at restated cost, which was es-tablished as the book value under previous Colombian accounting laws.

The Group has chosen to take these values as attributed cost of these assets on the dates of the respective revaluations, because it was considered that these values were substantially comparable with the fair value of those assets on the dates of these revaluations, or with their own cost or depreciated cost according to NCIF, in this case adjusted to reflect changes in the general price index, also on the same dates. After the dates of the respective assessments (technical and financial), measurements of property, plant and equipment were per-formed in accordance with IAS 16 (Property, plant and equipment).

To estimate the fair values, we have used the following methods and assumptions:

• The fair cash values and short-term investments, trade receivables, trade payables and other current liabilities approximate their car-rying amounts largely due to the short maturities of these instru-ments.

• The Group evaluates receivable accounts and long-term loans at fixed and variable rates, based on parameters such as interest rates, the risk factors of each particular country, customer cred-itworthiness and the risk characteristics of the funded project. Based on this assessment, accounting provisions are registered to count expected losses on these accounts receivable. As of 31 De-cember 2015, the carrying amounts of these receivables, net pro-visions, are not materially different from the fair values calculated.

• The fair value of debt degrees and quoted shares is based on quot-ed prices at the closure date of the reporting period. The fair value of unlisted shares, bank loans, finance lease obligations and other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt conditions, credit risk and similar maturities.

2.27. IMPAIRMENT OF ASSETS WITH DEFINITE USEFUL LIVESAt each closing date of the reporting period, the Group assesses whether there is any indication that an individual component or group of properties, plant and equipment and/or intangible asset with defi-nite useful lives could be impaired in value. If such trace exists, and the annual impairment testing for an asset is then required, the Group es-timates the recoverable amount of that asset. The recoverable amount of an asset is the higher of fair value minus sell costs of that asset and its value in use. The recoverable amount is determined for an individual asset, unless the individual asset does not generate cash flows that are substantially independent of other assets or groups of assets, in which case the cash flows of the group of assets that make up the cash-gen-erating unit to which they belong.

When the carrying amount of an individual asset or a cash-gener-ating unit exceeds its recoverable amount, the individual asset, or, the cash-generating unit, is considered impaired and its value is reduced to its recoverable amount.

When assessing value in use of an individual asset or a cash-gener-ating unit, the estimated future cash flow is discounted to its present value using a discount rate before tax that reflects current market as-sessments over the temporary value of money and the specific risks to that individual asset, or, where applicable, the cash-generating unit.

To determine the fair value minus sell costs, recent market transac-tions are taken into account, if any. If these type of transactions cannot be identified, an appropriate valuation model is used. These calculations are verified against multiple valuations, quoted prices for similar assets in active markets and other available indicators of fair value.

The Group bases its impairment calculation on detailed budgets and projection calculations that are made separately for each of the cash generating units of the Group which are assigned to individual assets. Usually, budgets and projection calculations cover a period of five years. For longer periods, a growth rate in the long term is calculated

and applied to the future cash flow projections from the fifth year.The impairment losses related to continuing operations, are recog-

nized in the income statement in the expense categories of the income statement that correspond to the function of the impaired asset (usu-ally in the sales cost and other operating expenses), except for prop-erty previously revalued where the revaluation was recorded in other comprehensive income. In this case, the impairment is also recognized in other comprehensive income up to the amount of any previous re-valuation recognized.

Also, for this kind of asset at each closing date of the reporting pe-riod, we perform an assessment of whether there is any indication that the impairment losses previously recognized no longer exist or have decreased. If such indication exists, the Group makes an estimate of the recoverable amount of the individual asset or cash-generating unit as appropriate.

An impairment loss in value previously recognized is reversed only if there was a change in the assumptions used to determine the re-coverable amount of the individual asset or cash-generating unit since the last time when a loss impairment was recognized in that asset or cash-generating unit. The reversal is limited so that the carrying amount of the asset or cash-generating unit does not exceed its recoverable amount, nor exceed the carrying amount that would have been deter-mined, net of depreciation or related amortization, if an impairment loss for that asset or cash-generating unit had not been recognized in prior periods. Such reversal is recognized in the income statement in the same line in which the respective charge for impairment was previous-ly recognized (usually in the sales cost or other operating expenses), unless the asset is carried at a revalued amount, in which case the reversal is similar to a revaluation increase.

2.28. RELATIVE IMPORTANCEThe recognition and presentation of economic events is done accord-ing to their relative importance.

Information is material or has relative importance if its omission or inappropriate expression can influence decisions carried out by users on the basis of the financial information of a reporting entity.

2.29. JUDGMENTS, ESTIMATES AND SIGNIFICANT ACCOUNTING ASSUMPTIONS The preparation of financial statements in accordance with NCIF re-quires the management development and consideration of judgments, estimates and significant accounting assumptions that affect the re-ported amounts of assets and liabilities, income and expenses, as well as the report of measurement and disclosure of contingent assets and liabilities at the closing date of the reporting period. In this sense, the uncertainties associated with the estimates and assumptions used could lead in the future to final results which could differ from those estimates and require significant changes to the reported amounts of affected assets and liabilities.

2.29.1. JUDGMENTSIn applying the accounting policies of the Group, the management has made the following judgments that have significant effect on the amounts recognized in the financial statements.

126 127


ASSET CONCILIATION

PREVIOUS PCGA PATRIMONY BALANCE 739.440

Change in assets (88.818)

Change in liabilities (100.317)

TOTAL MODIFICATION FOR CONVERGENCE (189.135)

BALANCE OF EQUITY NCIF 550.305

Absolute change ($) 189.135

Relative change (%) 25,58%

CHANGES IN ASSETS

Inventories to net achievable value (impairment) (1.488)Fair value adjustment of investment properties (1 and 3) 126.654 Fair value adjustment of investment 13.163 Elimination valuations in investments (2) 21.146 Adjustment for changes in application or disposal of equity method in investments (2) 16.704 Measurement adjustment to property, plant and equipment attributed cost (3) 380.639 Elimination valuations in property, plant and equipment (3) (606.042)Adjustments for depreciation of property, plant and equipment (3) (4.928)Property, plant and equipment deterioration (3) (503)Reclassification adjustment for assets under operating leases 147 Inflation adjustments (4) (35.239)Elimination of deferred (5) (17.786)Impairment of intangibles (1.703)Assets deferred tax adjustments (6) 53.462 Adjust in other investments (51)Investment impairment (2) (10.229)Money market investment impairment (2) (20.342)Effect of liquidation of subsidiaries 742 Removing difference in change in inventories (941)Adjustment of other financial instruments at fair value 346 Deterioration of debtors (5.587)Other increases (decreases) in current assets 3.018 TOTAL ASSETS DECREASE (88.818)

CHANGES IN LIABILITIES

Provisions recognition or adjustment (837)

Pension liability adjustment - non-current portion (7) (13.463)

Passive adjustment for other employee long term benefits - non-current portion (7) (9.598)

Liability deferred tax registration (6) (75.993)

Recognition of leased assets (149)

Effect of liquidation of subsidiaries (712)

Other liabilities 435

TOTAL LIABILITIES DECREASE (100.317)

With this purpose, the Company has chosen the provided cost model in this standard.

3.2.2. INTANGIBLE ASSETSRestatement of cost of intangible assets to eliminate non-capitalizable expenditures in accordance with IFRS.

Improvements in other people’s property, recognized under previous Colombian accounting laws, were reclassified to the account of proper-ty, plant and equipment.

3.2.3. DESIGNATION OF PREVIOUSLY RECOGNIZED FINANCIAL INSTRUMENTSThe classification of financial instruments previously recognized under generally accepted accounting principles in Colombia, shall be on the date of transition to IFRS.

3.2.4. LEASESThe Company has chosen to apply the transitional provisions in CINIIF 4 (Determining whether an arrangement contains a lease) and has

evaluated all lease agreements based on the conditions existing up to 1 January 2014 (date of transition to NCIF).

3.2.5. EMPLOYEE BENEFITS - ACTUARIAL GAINS AND LOSSESThe Company has chosen to adjust liabilities for pension plans as of 1 January 2014 (date of transition to NCIF), recording the entire actuarial gains and losses accumulated to that date (and not previously recog-nized by the previous Colombian accounting laws), charged to retained earnings.

From 1 January 2014 (date of transition to NCIF), the Company has chosen to recognize actuarial gains and losses in the period in which they are earned, with fee (credit) to other comprehensive income.

3.3. CONCILIATION BETWEEN COLOMBIAN ACCOUNTING PRINCIPLES AND NCIF (OPENING BALANCE)The following conciliation provides a quantification of the economic effects of the transition to NCIF on January 1, 2014 (opening balance).

128 129


INCOME STATEMENT COLGAAPTransition settings

NCIF

Ordinary activities income 330.845 6.194 337.039 Sales cost (303.986) (12.679) (316.665)

Gross profit 26.859 (6.485) 20.374 Other income 24.783 (7.149) 17.634 Distribution costs - (3.476) (3.476)Selling and administrative expenses (53.934) 12.898 (41.036)Other expenses (18.621) 4.579 (14.042)Gains from the net monetary position 377 (537) (160)Financial income 1.552 (15) 1.537

Financial costs (8.532) (10.018) (18.550)

Loss before tax (27.516) (10.203) (37.719)Tax expense (1.384) (2.271) (3.655)

Net loss for the year (28.900) (12.474) (41.374)Actuarial losses on defined benefit plans - 437 437Deferred tax components of other comprehensive income - (189) (189)Losses from conversion rate - (1.316) (1.316)

Comprehensive income Total Loss for the year (28.900) (13.542) (42.442)

The following briefly explains the main adjustments of the transition to NCIF that affect equity up to 1 January 2014 (date of transition to NCIF) and December 31, 2014, arising from comparing the accounting policies adopted by the Group in preparing the financial statements until the end of activities on December 31, 2014 (previous Colombian accounting laws) and the accounting policies applied by the Group in the preparation of financial statements from the beginning of activities on January 1 2015 (NCIF). (1) Corresponds to the separately recognition of the value of an area

of 106,000 square meters located in the municipality of Bello, des-tined for a real estate project, which under local standards was recorded as property, plant and equipment and the difference be-tween the carrying value amount and the appraised value in valua-tion accounts.

(2) The Group, being in an opening financial situation chose to mea-sure property, plant and equipment items and investment proper-ties, as follows:

• Real property (land and buildings) and machinery and equipment were measured at attributed cost (appraised value) in the opening balance sheet. Appraisals were in charge of the firm Valorar S.A. and they were made in December 2013, in accordance with the requirements of IAS 16.

• Real property (land and buildings) and machinery and equipment that had disinvestment expectation, were measured at cost.

• For other types of fixed assets (furniture, office equipment, com-puter equipment and transport equipment), the measurement in the opening balance sheet was at depreciated cost according to the local standard.

Under previous Colombian accounting laws, maximum every 3 years, property, plant and equipment of the Group were reap-praised by technical studies conducted by specialized evaluators,

recording the highest value of the assets in the accounts of assets and equity. Under accounting standards and financial reporting ac-cepted in Colombia, these assets are recognized at historical cost minus depreciation and impairment losses, with which the local record is entirety annulled.

The adjustments in the opening financial position have a net effect on equity for $96.232, including the reclassification of land located in the municipality of Bello to investment property.

During the transition period, higher spending was presented for depreciation under NCIF in income for the period, mainly due to the divestment plans established by the Group, effects were also presented in depreciation since the useful lives determined by the Group under NCIF were higher than those determined under previ-ous Colombian accounting laws.

(3) Under previous Colombian accounting laws, inflation adjustments were adjusted until 2006 but they are reversed because the criteria of IAS 29 is not met to recognize these adjustments. because of the measurement of the assets of the Company, inflation adjust-ments recorded up to December 2013 were eliminated.

Additionally, under previous Colombian accounting laws, the Group recognized inflation adjustments in account balances in eq-uity originated until December 31, 2006, excluding the reappraisal surplus. According to legal norms, this balance may be distributed as profits when the Company is settled or capitalized. Whereas un-der NCIF, inflation adjustments are not applicable, these balances were transferred to retained earnings.

(4) Under previous Colombian accounting laws, deferred charges were recognized as goods or services received, which is expected to monetize in other future periods and amortized over the time that is considered will be used or receive the benefit. In keeping with the recognition criteria of IAS 38 for intangible assets, the

3.4. CONCILIATION BETWEEN COLOMBIAN ACCOUNTING PRINCIPLES AND NCIF (TRANSITION BALANCE)The following conciliation provides a quantification of the economic effects of the transition to NCIF on 31 December 2014 (transition balance).

STATEMENT OF FINANCIAL SITUATION COLGAAPTransition settings

NCIF

Assets

Current assets

Available 9.052 534 9.586

Trade receivables and other receivables (11) 72.421 1.195 73.616 Inventories, net (8) 85.217 (996) 84.221 Intangibles (5) 4.406 (4.406) - Deferred assets (5) 4.808 (3.621) 1.187 Assets classified as held for sale (3 and 4) - 638 638

Total current assets 175.904 (6.656) 169.248

Non-current assets

Property, plant and equipment (3, 4 and 9) 71.435 390.180 461.615 Investment Property (1, 3 and 4) - 146.987 146.987 Intangible assets (5) - 65 65 Investments in subsidiaries, joint ventures and associates (2 and 4) 41.395 (41.395) - Trade receivables and other receivables (11) 9.231 (4.820) 4.411 Deferred tax assets (6) 4.876 53.596 58.472 Other financial assets (2) 17.442 (13.982) 3.460 Deferred assets and other assets (5) 12.392 (12.392) - Valuations (3) 560.963 (560.963) - Total non-current assets 717.734 (42.724) 675.010

Total assets 893.638 (49.380) 844.258

Equity and Liabilities

Liabilities

Current liabilities

Financial liabilities (9) 23.626 214 23.840 Employee benefits (7) 18.984 4.717 23.701 Other provisions (10) 4.606 (4.011) 595 Trade payables, associates and other payables 56.355 (2.759) 53.596 Tax liabilities 4.725 1.514 6.239 Total current liabilities 108.296 (325) 107.971


Financial liabilities (9) 2.874 135 3.009 Employee benefits (7) 94.895 19.681 114.576 Other provisions (10) 6.488 (1.091) 5.397 Trade payables and other payables 8.856 74 8.930 Deferred tax liabilities (6) 4.669 76.841 81.510 Total non-current liabilities 117.782 95.640 213.422


Equity

Issued capital 36.807 - 36.807 Premium 213.783 (6.589) 207.194 Activity result (28.900) (12.474) (41.374)Accumulated earnings (320.144) 543.554 223.410 Other comprehensive income - (1.068) (1.068)Equity revaluation (4) 107.250 (107.250) - Reappraisal surplus 560.963 (560.963) - Reservations 97.896 - 97.896 Non-controlling interests (95) 95 - Total equity 667.560 (144.695) 522.865

Total equity and liabilities 893.638 (49.380) 844.258

130 131


Under this rule, it would not be needed to stop applying accounting coverage to novated derivatives that meet the criteria detailed by it.Annual Improvements to IFRS: 2010-2012 Cycle (December 2013): IFRS 2 Share-based payments; IFRS 3 Business Combinations; IFRS 8 Operating Segments; IAS 16 Property, Plant and Equipment; IAS 24 Related Party Disclosures; IAS 38 Intangible Assets

These amendments include:IFRS 2 Share-based PaymentThe improvement is applied prospectively and clarifies various issues related to the definitions of performance and service as part of the award conditions, which include:

• A performance condition must contain a service condition.• A performance target must be met while the counterparty is pro-

viding the service.• A performance target may be related to the operations or activities

of an entity or for another entity in the same group.• A performance condition may or may not be a market condition.• If the counterparty, regardless of the reason, fails to provide service

during the concession period, the service condition is not satisfied.

IFRS 3 Business Combinations The amendment is applied prospectively and clarifies that all agree-ments of contingent consideration classified as liabilities (or assets) arising from a business combination must be subsequently measured at fair value through profit or loss, whether or not within the range of the IAS 39.

IFRS 8 Operating Segments The changes apply retroactively, and clarify that:

• If the counterparty, regardless of the reason, fails to provide service during the concession period, the service condition is not satisfied.

• An entity must disclose the judgments made by management in applying the aggregation criteria of paragraph 12 of IFRS 8; This includes a brief description of the operating segments that have been aggregated and economic indicators (eg, sales and gross margins) that have been evaluated to determine that the aggre-gate operating segments share similar economic characteristics.

• A conciliation between segment assets and total assets should be disclosed only if the conciliation is reported to the highest author-ity in decision-making operation of the entity, in accordance with the disclosure required for segment liabilities.

IAS 16 Property, plant and equipment and IAS 38 Intangible AssetsThe amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that an asset may be revalued in reference to observable data, either by adjusting the gross carrying amount of the asset at market value or adjusting the gross amount and the accumulated depreciation or amor-tization proportionally so that the resulting carrying value is equal to the market value. Additionally, accumulated depreciation and amortization is the difference between the gross amount and the carrying amount of the assets.

IAS 24 Disclosing information about related partiesThe amendment applies retroactively and clarifies that a management entity (an entity that provides services to key management personnel) is a related party subject to disclosure of related parties. In addition, a company that uses a management entity is required to disclose ex-penses incurred for management services. This amendment is not rele-vant to the company because it does not receive management services from other entities.

Annual improvements to IFRS: 2011-2013 Cycle (December 2013): IFRS 1 First-time Adoption of International Financial Reporting Standards; IFRS 3 Business Combinations; IFRS 13 Fair Value Measurement; IAS 40 Investment Property

These amendments include:IFRS 3 Business Combinations

The amendment applies prospectively and clarifies the range excep-tion in IFRS 3:

• Joint Arrangements, and no joint ventures are outside the range of IFRS 3

• This exception applies only to the extent accounting in the finan-cial statements of the same whole agreement.

IFRS 13 Fair value measurementThe amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and fi-nancial liabilities, but also for other contracts within the range of IAS 39.

IAS 40 Investment PropertyThe description of the auxiliary services of IAS 40 distinguishes be-tween investment properties and owner-occupied property (eg, proper-ty and equipment). The amendment applies prospectively and clarifies that IFRS 3, and not the description of auxiliary services of IAS 40, is used to determine whether the transaction is the acquisition of an as-set or a business combination.

The company is in the analysis and assessment process of impacts of rules that will take effect and are applicable. The Company has not adopted any standard, interpretation or amendment, that has been is-sued but not yet come into force.

Defined benefit plans: Contributions to employees, amending IAS 19 Employee Benefits (November 2013)IAS 19 requires that an entity considers the remuneration to employees or third parties in accounting for defined benefit plans. When salaries are linked to the service, they should be attributed to periods of service as a negative benefit. These amendments clarify that if the amount of compensation is independent to years of service, an entity may rec-ognize such remuneration as a reduction in service cost in the period in which the service is provided, instead of assigning remuneration to periods of service.

IFRS 9: Financial Instruments, Accounting coverage and changes to IFRS 9, IFRS 7 and IAS 39 (November 2013).This amendment modifies mainly the following aspects:

Group derecognized deferred disbursements that did not meet the recognition criteria of assets. The Group adjusted the balances of prepaid expenses and deferred charges corresponding to goods or services that had already been received.

During the transition period, lower amortization expense is presented under NCIF on the results of the period, as the Group discharged balances for these items that did not meet the require-ments to be recognized as assets. During the transition period, these deferred charges continued amortizing under previous Colombian accounting laws and not un-der NCIF given that they were recognized in retained earnings in the opening balance sheet previously.

(5) The balance of accounted deferred tax was reversed according to local standard for $4,687 worth in assets and $6,115 in liabilities. For the opening balance deferred tax debit and credit generated by the temporary differences between the tax bases and accounting bases under IFRS was calculated and recorded, using the meth-odology of liability based on accounts balance. Deferred taxes are recorded in assets or non-current liabilities.

The greatest effect of these differences between the previous Colombian accounting laws and NCIF were recognized in retained earnings in the opening balance sheet profits and during the tran-sition period in the income statement and other comprehensive income, consistent with the nature of the originating item.

(6) The Parent Company engaged the estimated labor liabilities under NCIF on 31 December 2013 (calculations under the methodolo-gy of the projected credit unit), generating a total adjustment of $22.744 for pensions, retroactive severance payment, seniority premium and life insurance, whose detail is explained in note 13. According to IAS 19, actuarial gains and losses are recognized di-rectly in other comprehensive income. liabilities are recognized for certain employee benefit plans than under the previous account-ing principles were carried to expense as they were paid.

(7) Other adjustments in current assets: The cost of inventories in-cludes all costs of acquisition and processing, as well as other incurred costs to give them their current location and condition, net from trade discounts, rebates and other similar items. Under previous Colombian accounting laws, financial discounts and oth-er related discounts related to inventories purchase are recognized as income on the results of the Group. As a result of applying the criteria in NCIF in opening balance sheet and in the transition peri-od, discounts granted by suppliers in the acquisition of inventories were included in the cost of inventory.

(8) Leases: Under previous Colombian accounting laws, certain leas-es where the Group is lessee were classified as operating leas-es. Under NCIF, the Group analyzed the transfer of the risks and benefits of these contracts on the starting date of the obligation considering that IFRS 1 does not provide a voluntary exemption on the classification and measurement of IAS 17 – Leases. Product of it, some leases are classified as financial in the opening balance sheet, recognizing the corresponding assets and liabilities in the

statement of opening financial situation. During the transition period, the effect of the amortized cost

valuation of these financial liabilities was recognized in income for the period as a financial component. In the same way, a lower lease expense value for the payment for the use of the asset is presented under NCIF which under previous Colombian account-ing laws was recognized in the results and under NCIF as a lower value of the liability recognized.

(9) Provisions: The Group recognized existing obligations on the date of the opening balance in which it is probable that a resources out-flow is made for its cancellation. The registered value is the best estimate of the expenditure required for settlement. In addition, derecognition was demanded on provisions that did not meet the recognition criteria of IAS 37 - Provisions, contingent assets and liabilities. During the transition period, the provisions related effects were due to:

• The effects of money value over time recognized under NCIF in the period results as a financial component.

• The effect of changes in estimates and new provisions are recog-nized in income for the period.

(10) During the transition period, the Group recognized a further de-terioration of accounts receivable under NCIF derived from the implementation of policies of deterioration. The effect on the re-sults of the period was recognized as a lower value of operational expenditure.

NOTE 4 ACCOUNTING AND FINANCIAL INFORMATION STANDARDS ACCEPTED IN COLOMBIA. ISSUED, NOT APPLICABLE YET

Article 2.1.2 of Book 2, Part 1 of Decree 2420 of 2015 as amended by Decree 2496 of 2015 includes the rules that have been issued by the IASB and adopted in Colombia whose validity will be effective in later years to 2015.New Accounting and Financial Reporting Standards (NCIF) accepted in Colombia, effective from January 1, 2016.Disclosure of the recoverable value of nonfinancial assets amending IAS 36 Impairment of Assets (May 2013)This amendment reduces cases where disclosures about the recover-able value of assets or cash generating units are required, it clarifies such disclosures and introduces an explicit requirement to disclose the discount rate used in determining impairment (or reversals) in which the recoverable amount is determined using the present value.

CINIIF 21 Levies - new interpretation (May 2013)The interpretation aims to give guidance on the circumstances in which a liability for taxes must be recognized, in accordance with IAS 37. In this regard, the CINIIF can be applied to any situation that creates a present obligation to pay taxes or levies to the State.Novation of Derivatives and Continuation of Accounting Coverage amending IAS 39 Financial Instruments: Recognition and Measurement (June 2013)

132 133


Amendments to IFRS 10 and IAS 28: Asset Sale or Contribution between the Investor and its Associates or Joint VenturesThe amendments address the conflict between IFRS 10 and IAS 28 in the treatment of loss of control of a subsidiary that is sold or contrib-uted to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets constituting a business, as defined in IFRS 3, between the investor and the associ-ate or joint venture and is entirely recognized. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to the interests of unrelated investors in the associate or joint venture. These amendments must be applied prospec-tively and are effective for periods beginning on January 1, 2016, with early adoption permitted.

Annual Improvements 2012-2014 CycleThese improvements are effective for annual periods beginning on 1 Jan-uary 2016, with early adoption permitted. These include:

IFRS 5 Non-current Assets Held for Sale and Discontinued OperationsAssets (or disposal groups) are generally arranged either through sale or distribution to its owners. The amendment clarifies that the change of one of the other available methods would not be considered a new layout plan, but is a continuation of the original plan. Therefore, there is no interruption in the application of the requirements of IFRS 5. This amendment should be applied prospectively.

IFRS 7 Financial Instruments: Disclosures(i) Contracts for Provision of Services The amendment clarifies that a Provision of service contract which

includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the rate and according to the guide continued involvement in IFRS 7 in order to assess wheth-er the disclosures are required. Evaluation of provision of service contracts constitute a continuing involvement that must be done retrospectively. However, the disclosure requirement would not have to be provided for a period beginning before the annual period in which the entity first applies the amendments.

(ii) Applicability of the Amendments to IFRS 7 to the Interim Condensed Financial Statements.

The amendment clarifies that compensation disclosure require-ments do not apply to interim condensed financial statements, un-less such disclosures provide a significant update of the information reported in the most recent annual report. This amendment should be applied retrospectively.

IAS 19 Employee BenefitsThe amendment clarifies that the depth of the high quality corporate bond market is evaluated based on the currency in which the obligation is denominated, instead of the country where the obligation is. When there is not a deep high quality corporate bond market in that currency,

government bonds rates should be used. This amendment should be applied prospectively.

IAS 34 Interim Financial ReportingThe amendments clarify that required interim disclosures must be either in the interim financial statements or incorporated by cross-referencing between the interim financial statements and wherever interim financial information is included (eg in management commentary or risk reports). Other information in the interim financial information should be available to users on the same conditions as interim financial statements and at the same time. This amendment should be applied retrospectively.

Amendments to IAS 1 Disclosure InitiativeAmendments to IAS 1 Presentation of Financial Statements clarify, rath-er than changing significantly, the existing requirements in IAS 1. The amendments clarify:

• Materiality requirements in IAS 1.• What specific lines in the income statement and ORI and statement

of financial situation can be unbundled.• Entities have flexibility in the order in which the notes to the financial

statements are presented.• That the participation in the ORI of accounted associates and joint

ventures for using the equity method should be presented together in a single line, and classified between those items that will or will not subsequently reclassified to the income statement.

In addition, the amendments clarify the requirements that apply when additional subtotals are presented in the financial situation statement and income statements and ORI. These amendments are effective for annual periods beginning on January 1, 2017, with early adoption per-mitted.

Amendments to IFRS 10, 12 and IAS 28 Investment Entities: Application of Consolidation ExceptionThe amendments address issues that have arisen in the application of the consolidation exception in investment entities under IFRS 10.

Amendments to IFRS 10 clarify that the exception to present the consolidated financial statements applies to the matrix entity that is a subsidiary of an investment entity when the investment entity measures all its subsidiaries at fair value.

Moreover, amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and provides support services to the investment entity is consolidated. All other sub-sidiaries of an investment entity are measured at fair value. Amendments to IAS 28 allow the investor in applying the equity method, leaving the fair value measurement applied by the investment entity associate or joint venture to its participation in the subsidiaries.

These amendments should be applied retrospectively and are effec-tive for annual periods beginning on January 1, 2017, with early adoption permitted.

• Adds a new chapter on accounting coverage in which a new model is introduced, where accounting and risk management are aligned and introduces improvements in relation to the disclosure of these issues.

• Introduces improvements in reporting changes in fair value of an entity’s own debt contained in IFRS 9 with easier access.

• Removes the effective date of mandatory application of IFRS 9.

New Standards of Accounting and Financial Reporting (NCIF) accepted in Colombia, applicable from 1 January 2017, with the exception of IFRS 15 applicable from January 1, 2018

IFRS 9 Financial Instruments: Classification and ValuationIn July 2014, the IASB published the final version of IFRS 9 Financial Instruments that collects all project phases of financial instruments and replaces IAS 39 Financial Instruments: valuation and classifica-tion and all previous versions of IFRS 9. The standard introduces new requirements for classification, valuation, impairment and coverage accounting. IFRS 9 is effective for fiscal years beginning on January 1, 2018 although Decree 2420 has set it for January 1, 2017 and earlier application is permitted. retrospective application is required, but it is not required to modify comparative information. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is allowed if the initial implementation date is prior to February 1, 2015.

IFRS 14 Regulated Activities DeferralsIFRS 14 is an optional rule allowing an entity, when it adopts IFRS for the first time and whose activities are subject to rate regulation, to continue applying most of its existing accounting policy for deferred regulated accounts. Entities adopting IFRS 14 must present deferred regulated accounts as separate accounts in the statement of finan-cial situation and present movements such as separate accounts in the income statement and the global result statement. The standard requires disclosures regarding the nature and risks associated with the entity regulated tariffs as well as the impacts of regulated rates in the financial statements. IFRS 14 is applicable for annual periods beginning on January 1, 2016.

Annual Improvements of IFRS, cycle 2010 – 2012These improvements are effective from 1 July 2014. Improvements in-clude the following changes:

IFRS 15 Ordinary income activities Proceeding from Customer ContractsIFRS 15 was published in May 2014 and establishes a new five-step model applied to revenue from customer contracts. According to IFRS 15 revenue is recognized for an amount that reflects the consideration that an entity expects to be entitled to receive in exchange for transfer-ring goods or services to a customer. The principles of IFRS 15 represent a more structured approach to value and register income.

This new standard is applicable to all entities and abrogates all previ-ous revenue recognition standards. Full retroactive or partial retroactive application is required for periods beginning on January 1, 2018, allowing earlier application.

Amendments to IFRS 11: Accounting for acquisitions of interests in joint venturesAmendments to IFRS 11 require an operator to count the acquisition of participation in a joint operation, which is a business, applying the relevant principles of IFRS 3 for accounting the business combinations. The amendments also clarify that the shares previously held in the joint venture are not revalued on the acquisition of additional shares while joint control is maintained. Additionally, an exception to the range of these changes has been added to not apply when the parties sharing joint control are under the common control of an ultimate dominant society.

The changes apply to the initial acquisition of holdings in a joint op-eration and the acquisition of any additional interest in the same joint operation. They will apply prospectively for periods beginning on Janu-ary 1, 2016, although early application is permitted.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of DepreciationThese amendments clarify that revenues reflect an obtaining pattern arising from the operation of a business profit (which is part of the asset); more than the economic benefits that are consumed by the use of the asset. Therefore, it is not possible to amortize plant and equip-ment using an amortization method based on income and can only be used in very limited circumstances to amortize intangible assets. These amendments apply prospectively for fiscal years beginning on January 1, 2016, but can be applied in advance.

Amendments to IAS 16 and IAS 41: Biological assets that produce fruitThese modifications change the way of recording biological assets that produce fruit. According to these changes, biological assets that are used to produce fruit for several years are no longer in the range of IAS 41 and must be registered in accordance with IAS 16. After initial recognition, these biological assets are valued at amortized cost until maturity and using the cost model or revaluation after maturity. IAS 41 continues being applied on the fruit which will be valued at fair value minus sales costs. On the other hand, IAS 20 will be applied when relat-ed to plants that produce fruit. These modifications have to be applied retroactively for fiscal years beginning on January 1, 2016, although early adoption is permitted.

Amendments to IAS 27: Equity Method in Separate Financial StatementsThe amendments allow entities to use the equity method for account-ing subsidiaries, joint ventures and associates in its separate financial statements. Entities that have already implemented IFRS and choose the change to the equity method, will have to apply this change retro-actively. Entities applying IFRS for the first time and choose to use the equity method in its separate financial statements will have to apply the method from the date of transition to IFRS. These amendments must be applied to periods beginning on January 1, 2016, although early adoption is permitted.

134 135


Customers 2015 2014 01/01/2014

National* 76.735 56.168 77.705Abroad 33.787 27.463 34.108Subtotal 110.522 83.631 111.813Deterioration clients (8) (18.270) (19.410) (29.099)Total 92.252 64.221 82.714

* The increase in the balance of accounts receivable in 2015 relates mainly to the process of normalization of the cash flow that involved suspend-ing the portfolio discount, alternative used in previous periods.


Others debtors 2015 2014 01/01/2014

Notes receivable from non-customers * 15.119 16.558 17.219Accounts receivable from former shareholders 724 724 724Others 605 481 513Subtotal 16.448 17.763 18.456several debtors impairment (8) (13.668) (14.441) (13.318)Total 2.780 3.322 5.138

* It includes the balance of notes receivable for $12,870 to Konkord Textiles (2014 - $12.870 and 01/01/2014 - $12.870), former employees waiting for resolution $2.181 (2014 - $2.236 and 01/01/2014 - $1.710), DIAN balances for liquidation of subsidiaries $ - (2014 - $1.270 and 01/01/2014 - $2.213) and others for $68 (2014 - $ 182 and 01/01/2014 - $426)


Accounts receivable from employees 2015 2014 01/01/2014

Domestic calamity 46 549 73Housing 443 671 1.086Education 85 90 176Total 574 1.310 1.335

Rates and maturities of accounts receivable from employees are as follows:

Modality Employee Type Term in years Rate a.e.

Housing fundConventional 10 12,68%

Administrative 8 15,39%

Solidarity FundConventional 1

Administrative 1 12,68%Education Administrative minimum 2 DTF + 5 points


Income receivable 2015 2014 01/01/2014

Interests* 7.995 7.995 7.013Others 411 525 1.341Subtotal 8.406 8.520 8.354Impairment income receivable (8) (8.052) (7.638) (7.065)Total 354 882 1.289

* It corresponds to the different interests of portfolio loan to Textiles Konkord for $7.995 (2014 - $7.995 and 01/01/2014 - $7.013)

NOTES OF SPECIFIC CHARACTER

NOTE 5 CASH AND CASH EQUIVALENTS

Cash is represented by immediate liquidity resources like cash itself, bank deposits and other highly liquid investments.The following is the comprising available detail:

2015 2014 01/01/2014

Banks (1) 19.939 4.821 10.974Funds (2) 5.031 3.628 89Cash equivalents (3) 367 1.005 13Cash 22 97 518Savings accounts 23 26 544Total 25.382 9.577 12.138

(1) The increase in banks balances to 31 December 2015 is due in part to payments in advance from clothing manufacturing customers, because their business cycles generate liquidity excess in the last month of the year. Additionally, the balance is impacted by the process of normalization of the cash flow of the Parent Company and reflected good performance in operating results. This balance will be used to finance working capital for the first half of 2016.

Restricted balances relate to pension trusts for $66 (2014 - $131 and 01/01/2014 - $1.387) and bank accounts for $279 (2014 - $222 and 01/01/2014 - $ -).

(2) In 2015 and 2014 it includes deposits as a reserve for payroll and

social security in January 2016.(3) To December 31, cash equivalents are accounts corresponding to

an autonomous equity of collective portfolio investment of $367 (2014 - $1.005 and 01/01/2014 - $13).

NOTE 6 TRADE ACCOUNTS RECEIVABLE AND OTHER ACCOUNTS RECEIVABLE

The following is the detail comprising trade accounts receivable and other receivables.

2015 2014 01/01/2014

CostDeterioration

(8)Total Cost

Deterioration (8)

Total CostDeterioration

(8)Total

Customers (1) 110.522 (18.270) 92.252 83.631 (19.410) 64.221 111.813 (29.099) 82.714 Several debtors (2) 16.448 (13.668) 2.780 17.763 (14.441) 3.322 18.456 (13.318) 5.138 Accounts receivable from employees (3)

574 - 574 1.310 - 1.310 1.335 - 1.335

Income receivable (4) 8.406 (8.052) 354 8.520 (7.638) 882 8.354 (7.065) 1.289 Others (5) 1.324 - 1.324 966 - 966 1.379 - 1.379 Loans to individuals (6) 238 (213) 25 5.792 (5.720) 72 5.719 (5.714) 5 Claims (7) 55 (45) 10 51 (45) 6 49 (45) 4 Total 137.567 (40.248) 97.319 118.033 (47.254) 70.779 147.105 (55.241) 91.864 current portion 94.692 66.368 86.080Non-current portion 2.627 4.411 5.784


136 137


The age composition of the trade accounts receivable and other receivables balance to December is as follows:

December 31, 2015

Type of debtor unexpired Overdue 1 to



Deterioration Total

Customers 89.425 8.687 830 11.580 (18.270) 92.252

Others debtors 3.578 - - 12.870 (13.668) 2.780 Accounts receivable from employees

574 - - - - 574

Income receivable 277 54 16 8.059 (8.052) 354 Others 1.324 - - - - 1.324

Loans to individuals 3 16 8 211 (213) 25

Claims - 10 - 45 (45) 10

Total 95.181 8.767 854 32.765 (40.248) 97.319

December 31, 2014




Deterioration Total

Customers 65.682 8.731 2.392 6.826 (19.410) 64.221

Others debtors 4.869 24 - 12.870 (14.441) 3.322 Accounts receivable from employees

1.310 - - - - 1.310

Income receivable 266 687 493 7.074 (7.638) 882 Others 966 - - - - 966


Claims 6 - - 45 (45) 6

Total 78.690 9.511 2.888 26.944 (47.254) 70.779

1 de enero de 2014




Deterioration Total

Customers 99.046 6.494 894 5.379 (29.099) 82.714

Others debtors 18.456 - - - (13.318) 5.138 Accounts receivable from employees

1.335 - - - - 1.335

Income receivable 905 656 454 6.339 (7.065) 1.289

Others 1.379 - - - - 1.379


Claims 4 - - 45 (45) 4

Total 126.788 7.165 1.362 11.790 (55.241) 91.864

The guarantee portfolio balance is $2.420 (2014 - $4.406 and 01/01/2014 - $14.847). The conditions for this portfolio to be under warranty are given by a trust management.


Others 2015 2014 01/01/2014

Temporary unions 683 367 1.205For suppliers * 641 599 174Total 1.324 966 1.379

* It corresponds to advances made to suppliers of assemblies, transfers and adjustments at fairs or remodeling projects and facilities of the company.


Loans to individuals 2015 2014 01/01/2014

Personal guarantee * 238 5.792 5.719Subtotal 238 5.792 5.719Impaired loans to individuals (8) (213) (5.720) (5.714)Total 25 72 5

* $5.582 (01/01/2014 - $5.557) this is included from the Industrial Coal Company liquidated in 2015.


Claims 2015 2014 01/01/2014

For transporters 54 50 48Others 1 1 1Subtotal 55 51 49Impairment income receivable (8) (45) (45) (45)Total 10 6 4

(8). The total balance of impairment for different accounts receivable and other receivables, includes:

Opening balance January 1, 2014 (55.241)Provision (Note 21) (6.708)Portfolio punishments 10.002 Recovery (Note 21) 4.693 Closing balance December 31, 2014 (47.254)Provision (Note 21) (2.953)Portfolio punishments 8.679 Recovery (Note 21) 1.280 Closing balance December 31, 2015 (40.248)

138 139


Property, plant and equipmentThe following is the detail which includes property, plant and equipment:


Machinery and

equipment

Office equipment

Computer equipment

Transport equipment

TOTAL

Opening balance January 1, 2014

392.333 87.472 144.613 570 603 395 625.986

Additions and transfers (128.333) (14.596) 253 (170) 69 (12) (142.789)Sales - - (296) - - (13) (309)Casualties - (3.361) (593) - (4) - (3.958)Depreciation - (2.171) (14.570) (115) (353) (106) (17.315)Balance at the end of December 2014

264.000 67.344 129.407 285 315 264 461.615

Additions and transfers 9 763 16.327 - 77 51 17.227

Advance payments - - 2.063 - - - 2.063 Sales (1.026) (1.050) (309) - - - (2.385)Casualties - - (801) (5) - - (806)Depreciation - (2.021) (13.485) (68) (232) (117) (15.923)Balance at the end of December 2015

262.983 65.036 133.202 212 160 198 461.791

To December 31 there was property, plant and equipment with restrictions or burdens guaranteeing financial obligations as follows:

Type of Obligation

2015 2014 01/01/2014

Constructions, lands and buildings financial 279.802 280.988 220.001Machinery and equipment financial 1.079 1.079 3.815Total 280.881 282.067 223.816

The conditions for these assets to be guaranteed are given by mortgages and a guarantee contract (see Note 12).

Investment PropertiesThe following is the detail which includes investment properties:


TOTAL

Opening balance January 1, 2014 427 4.664 5.091

Additions and transfers 128.331 14.720 143.051

Sales (374) (713) (1.087)Depreciation - (68) (68)Balance at the end of December 2014 128.384 18.603 146.987Additions and transfers 14.651 (14.652) (1)Sales (9) (636) (645)Depreciation - (122) (122)Balance at the end of December 2015 143.026 3.193 146.219

As of December 31, 2015 and 2014, the balance of investment proper-ties consists mainly of a Pantex lot located in the municipality of Bel-lo for $ 124.692, which was taken as investment property in order to participate in a real estate project that includes housing construction, services and trade; additionally, the Group has an urban lot of approx-imately 55.116 m2 located at kilometer 2 pathway to Perales airport in

Ibague Tolima, which is intended to develop a real estate project with applications for housing, trade, services and other minor values, whose reasonable values correspond to the book value thereof.

At the end of activities, the Group estimated, by the method of dis-counted cash flow, the present value of cash flows for each of the Cash Generating Units, concluding that none of them requires impairment

NOTE 7 INVENTORIES

The following is a breakdown which includes inventories:

2015 2014 01/01/2014

Products in process 33.484 26.843 29.936Finished products 28.680 33.243 36.011Raw Materials 16.613 15.445 8.338Materials, parts and accessories 5.732 5.203 5.080Inventories in transit 5.938 1.863 6.023Advance payments 2.371 1.454 1.951Others 110 170 103Total 92.928 84.221 87.442

Other information: 2015 2014

Reduction of inventory value 9.297 17.600 Reversal of the reduction of inventory (1) (9.705) (20.172)

(1) The sale of impaired inventory generates reversal in net achievable value.Inventories pledged as liabilities guarantee are $9.844 (2014 - $9.844 and 01/01/2014 - $5.780). The conditions for these inventories to be guar-anteed are given by Merchandise Certificates of Deposit or pledge bonds.

NOTE 8 TAX ASSETS

The following is the detail that includes tax assets:

2015 2014 01/01/2014

Private tax settlement remains 9.799 7.191 7.825Tax Advance on industry and Commerce 460 56 -Industry and Commerce 3 - 3Sales tax withheld 2 1 -Others 1 - -Total 10.265 7.248 7.828

NOTE 9 ASSETS CLASSIFIED AS HELD FOR SALE, PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES Assets classified as held for saleThe following is the detail that includes the assets available for sale:

Net costMachinery and

equipmentBuildings and constructions

TOTAL

Opening balance January 1, 2014 4.258 13.359 17.617Sales (3.620) (13.359) (16.979)Balance at the end of December 2014 638 - 638Additions and transfers (193) - (193)Sales (422) - (422)Balance at the end of December 2015 23 - 23

140 141


Deferred tax effects recognized in the income statement for the period are as follows:

BALANCE SHEET STATEMENT OF INCOME

FOR THE PERIOD

OTHER COMPREHENSIVE

INCOME

2015 2014 01/01/2014 2015 2014 2015 2014

Fixed assets (69.776) (79.697) (83.066) (9.638) (3.295) - -

Other assets and liabilities 5.790 15.898 21.916 9.821 7.053 - -

Tax credits 42.478 40.950 37.039 (1.528) (3.911) - -

Actuarial calculations ORI 382 (189) - - - (571) 189

Total deferred tax (21.126) (23.038) (24.111) (1.345) (153) (571) 189

The conciliation for equity CREE, property and net income is as follows:

Equity CREE Income conciliation 2015 2014

Taxable Base COLGAAP 7.037 8.440 Tax rate 9% 9%Subtotal 633 759Surtax 312 - Subtotal 945 759Prior year tax adjustment 18 - Total Income tax 963 759

Liquid assets conciliation 2015 2014

Consolidated accounting equity NCIF 594.198 522.865Difference in COLGAAP profit after tax because of the change in accounting policy 19.852 3.604Reclassifications equity accounts 232.308 305.992Modification of assets and liabilities (165.828) (165.828)Consolidation effect (37.371) 1.014 Parent Company accounting equity COLGAAP 643.159 667.647Plus:Difference accounting and tax cost for investments 24.746 35.915 Difference in portfolio provision 80.944 76.530 Higher tax value on fiduciary rights 24.773 30.583 Assets tax adjustment 10.138 10.766 Higher deferred tax value 7.038 8.692 Actuarial calculation 514 (3.212)Asset provisions 34.977 34.888 Liabilities provisions 10.464 9.217 Others - 1.413 Subtotal 193.594 204.792Minus:Deferred tax depreciation 10.379 7.669Deferred taxes (1.475) 208Valuations 483.673 560.963Subtotal 492.577 568.840 Parent Company liquid equity 344.176 303.599

adjustment at December 31, 2015.The charge to income for the year depreciation of property, plant

and equipment and investment property amounted to $15.864 (2014 - $17.890).

The effect of the gain or loss on sale or retirement of assets classified as held for sale, property, plant and equipment and investment property in the income statement is as follows:

Effect on income (Note 22)2015 2014

Utility Loss Net Utility Loss Net

Assets held for sale 173 (20) 153 59 (29) 30

Investment Properties 31 (67) (36) - (302) (302)Property, plant and equipment 3.587 (1.386) 2.201 5.759 (1.379) 4.380 Total 3.791 (1.473) 2.318 5.818 (1.710) 4.108

The Group has insurance policies for real estate and machinery.

NOTE 10 DEFERRED TAX

The breakdown of deferred income tax is as follows:

2015 2014 01/01/2014

Deferred tax assets (1) 55.203 58.472 62.370Deferred tax liabilities (2) (76.329) (81.510) (86.481)Deferred tax liabilities, net (21.126) (23.038) (24.111)

(1) The following is the detail that corresponds to the balance of deferred tax assets:

2015 2014 01/01/2014

Tax credits 42.478 40.950 37.039Other assets and liabilities 11.855 16.848 24.684Actuarial calculations ORI 571 - -Fixed assets 299 674 647Total 55.203 58.472 62.370

(2) The following is the detail that corresponds to the balance of deferred tax liabilities:

2015 2014 01/01/2014

Fixed assets 70.075 80.371 83.713Other assets and liabilities 6.065 950 2.768Actuarial calculations ORI 189 189 -Total 76.329 81.510 86.481

142 143


The conciliation between the effective tax rate and the nominal rate for Income tax and CREE is:

Effective tax rate and nominal rate conciliation 2015

Consolidated accounting profit NCIF before income tax from continuing operations 35.427Difference in COLGAAP profit before tax because of the change in accounting policy 21.657Consolidation effect 269Parent Company Income before income tax 57.353The statutory tax rate of 39% 22.328Adjustment related to current income tax of last year 26Additional tax revenue 1.707Untaxed income (5.167)Use of tax losses not previously recognized (24.118)Not tax deductible expenses 7.954

Occasional earnings tax 140

The effective tax rate of 8.04% 2.870

For 2014, the tax base is a special income (presumptive), thus accounting clearance is not generated.

NOTE 11 OTHER FINANCIAL ASSETS

The following is the detail that corresponds to the balance of other financial assets:

2015 2014 01/01/2014

Fiduciary in management - Autonomous Equity (1) 1.299 1.299 1.299Other investments (2) 2.161 2.161 2.161Other financial assets (3) 670 9 45Total 4.130 3.469 3.505Current portion 670 9 45Non-current portion 3.460 3.460 3.460

(1). Investments in fiduciary administration as Autonomous Equity correspond to the following:

Number of shares

2015 2014 01/01/2014


Enka de Colombia (a)

154.059.736 13.184 (11.885) 1.299 13.184 (11.885) 1.299 13.184 (11.885) 1.299

Total 13.184 (11.885) 1.299 13.184 (11.885) 1.299 13.184 (11.885) 1.299

Liquid income conciliation 2015 2014

Accounting income NCIF before tax 35.427 (37.719)Consolidation effect 269 (9.254)Difference in COLGAAP profit before tax because of the change in accounting policy 21.657 941Parent Company COLGAAP Accounting profit before tax 57.353 (46.032)Plus additional tax revenue:Presumptive interest income 280 322Income deductions recovery - portfolio provision 53 1.319Income for productive assets 40% deduction refund 73 320Income for deductions recovery - tax actuarial calculation 3.972 541Subtotal 4.378 2.502Plus nondeductible expenses:Provisions 8.410 727Taxes 537 727Asset retirement 741 667Tax on financial movements 712 760Amortization retirement pension, actuarial calculation R.R.I.I 707 459Others 9.288 13.053Subtotal 20.395 16.393Minus untaxed income (loss):Untaxed dividends 375 271Utility on assets sale 712 (126)Amortization retirement pension, actuarial calculation 12.161 872Subtotal 13.248 1.017Minus compensation with tax credits 61.841 -Total income (loss) liquid 7.037 (28.154)Presumptive income 6.837 8.293Total net taxable income 7.038 8.293 Tax rate 25% 25%Current income tax 1.759 2.073Occasional earnings 1.396 1.853Tax rate 10% 10%Tax on occasional earnings 140 185Prior year tax adjustment 8 -Provision for income tax for subordinates 428 791Total Income tax 2.335 3.049

The detail of income tax expense is as follows:

Tax expense 2015 2014

Income tax 2.335 3.049CREE tax 963 759 Deferred tax (1.345) (153)Total 1.953 3.655

144 145


Rates and maturities of financial obligations are as follows:

Provider Obligation code Date from Date until balance 2015Effective

annual ratenominal rate Warranty

Banco Colpatria Red Multibanca

E021105000 3/12/15 3/03/16 2.353 11,83% 5,75% Mortgage F1

E051200023 20/11/15 18/02/16 5.906 11,83% 5,75%Representative signature

N021400001 23/11/15 19/02/16 3.617 13,54% 12,90% Mortgage F1N021400002 23/11/15 19/02/16 5.262 13,54% 12,90% Mortgage F1N031400636 29/10/15 27/01/16 4.127 13,54% 12,90% Mortgage F1

Intereses 3/12/15 3/03/16 44 - - Mortgage F121.309

Patrimonio Autónomo Fiduciaria Colpatria

PM01126780 5/01/12 5/01/17 225 10,09% 9,65% PortfolioPM01126781 13/01/12 13/01/17 375 10,09% 9,65% PortfolioPM05126790 4/05/12 4/01/17 306 10,07% 9,63% PortfolioPM09121023 21/08/12 21/08/17 710 9,56% 9,17% Portfolio

1.616Fiduciaria Bancolombia

L5501N0010 7/11/00 7/11/20 211 50%DTF T.V. 0,00%

211Banco de La República

L5502N6022 7/11/00 7/11/20 254 0,00% 0,00%

254Inversiones S&F S.A.

L5501NI005 7/05/13 7/11/20 1 0,00% 0,00%

1Servicios Generales Suramericana

N061500002 10/06/15 10/04/16 862 17,32% 0,00%

862Renting tecnológico 29Bancolombia 2Others 2

33Total 24.286

(2) Other investments correspond to the following:

Number of shares

%2015 2014 01/01/2014

Cost Impairment Total Cost Impairment Total Cost Impairment TotalEnka de Colombia 109.240.812 1,84 9.349 (8.428) 921 9.349 (8.428) 921 9.349 (8.428) 921

Promotora Nacional de

Zonas Francas S.A.63.826.441 16,77 1.125 - 1.125 1.125 - 1.125 1.125 - 1.125

Textiles Espinal S.A.* 20.366.920 24,52 - - - 3.916 (3.916) - 3.916 (3.916) -

Centro de Exposiciones y

Convenciones de Medellín250.000 0,34 82 (82) - 82 (82) - 82 (82) -

Industrial Hullera S.A.* 14.568.100 22,50 - - - 68 (68) - 68 (68) -

Setas Colombianas S.A. 191.151 0,02 75 - 75 75 - 75 75 - 75

Confecciones Toval S.A. 16.333.560 3,08 16 (16) - 16 (16) - 16 (16) -

Coltejer S.A. 30 (29) 1 30 (29) 1 30 (29) 1

Others 39 - 39 39 - 39 39 - 39

Total 10.716 (8.555) 2.161 14.700 (12.539) 2.161 14.700 (12.539) 2.161

* These companies were liquidated in 2015.

(3) Corresponds to Tax Refund Titles and Tax Refund Certificates that have no expiration date.

NOTE 12 FINANCIAL LIABILITIES

The following is the detail of financial obligations:

2015 2014 01/01/2014

National banks 14.624 18.599 15.878Foreign banks 8.259 6.927 21.467Law 550 466 508 574Other obligations 937 815 1.864Total 24.286 26.849 39.783Current portion 23.844 23.840 33.465Non-current portion 442 3.009 6.318

146 147


Estimates for retirement pensions are as follows:

2015 2014 01/01/2014

Cost method: Article 2 of Decree 2984 of August 2009 yes yes yesTechnical interest rate 4,80% 4,80% 4,80%Pension adjustment rate 2,88% 2,88% 2,88%

Estimates for the severance payment retroactivity, seniority premiums and deferred bonus are as follows:

2015 2014 01/01/2014

Cost method: Projected Credit Unit yes yes yesDiscount rate (nominal) between 6,50% - 7,66% 7,00% 7,00%Salary increase (nominal) 7,27% 3,00% 3,00%Inflation cost of living 6,77% 3,00% 3,00%

NOTE 14 OTHER PROVISIONS

The Group records some provisions arising from past events that can be estimated reliably every month. Such is the case of legal proceed-

ings, tender sales commissions, taxes on real estate, tax on Commerce and industry and income tax.

The following is the breakdown of other provisions:

2015 2014 01/01/2014

Other provisions * 6.765 5.008 8.523

Civil processes 965 965 965Industry and commerce tax obligations 29 19 -

Total 7.759 5.992 9.488

Current portion 1.682 595 2.138


* The balance relates to: provision obligations for subsidiaries liq-uidation for $2.257 (2014 - $2.257 and 01/01 / 2014- $2.257); provision for penalty on program balances demonstration in Plan Vallejo $1.554 (2014 - $ - and 01/01/2014 - $ -); legal pro-cess Empresas Publicas de Medellin for $1.122 (2014 - $642 and

01/01/2014 - $642); legal process restoring property with the third Textiles Konkord $910 (2014 - $910 and 01/01/2014 - $910); pro-vision tender fees $ - (2014 - $ - and 01/01/2014 - $1.453); other provisions $922 (2014 - $1.199 y 01/01/2014 - $3.261).

NOTE 13 EMPLOYEE BENEFITS

The following is the detail of labor obligations and provisions for employee benefits:

2015 2014 01/01/2014

Retirement pensions (1) 109.769 114.207 121.260Severance payable retroactively 3.851 7.858 10.075Severance payable without retroactivity 3.229 3.428 3.819Work processes (2) 2.478 4.781 2.238Seniority bonus 2.305 1.816 1.634Deferred bonus 3.654 1.705 1.941Performance bonus 1.443 - -Payable wages 1.274 1.338 1.588Vacation 1.514 1.106 1.203Vacation bonus 594 949 146Interest on severance pay 1.020 573 690Employee death insurance 213 112 136Extralegal benefits 532 404 758

Total 131.876 138.277 145.488

Current portion 27.331 23.701 24.933


(1). Corresponds to the benefit employees have with retirement and survival income under Colombian law, which are not covered by the pension system of the Colombian state or had at least 10 years of service before 1 January 1967, which were valued in accordance with Article 7 “Explanatory Notes” Decree 2420, is-sued by the Ministry of Commerce, Industry and Tourism, which provides that for the calculation of post-employment liabilities addressed by IAS 19, the parameters established in Decree 2783 of 2001 should be used as best market approach, instead of the

requirements established by IAS 19.(2). Corresponds to work processes of the Company that are in the

labor jurisdiction currently enrolled in judicial offices and mostly obey to Decree 2025 of 2011 and the jurisprudential change on operation and its ability to contract with third parties.

The following is the detail of the obligations of short and long term valued using actuarial techniques:

2015Initial


Payments throughout

the year

(Gains) Losses

Final balance

Retirement pensions 114.207 7.382 - (13.385) 1.565 109.769

Retroactive Severance 7.858 472 216 (1.087) (3.608) 3.851

Seniority bonus 1.816 84 600 (195) - 2.305

Deferred bonus 1.705 - 3.566 (1.617) - 3.654

Life insurance 112 5 96 - - 213

Total 125.698 7.943 4.478 (16.284) (2.043) 119.792

2014 Initial balance Financial cost Service costPayments

throughout the year

(Gains) Losses Final balance

Retirement pensions 121.260 8.394 - (15.010) (437) 114.207

Retroactive Severance 10.075 1.365 - (887) (2.695) 7.858

Seniority bonus 1.634 107 384 (309) - 1.816

Deferred bonus 1.941 - 739 (975) - 1.705

Life insurance 136 9 167 (19) (181) 112

Total 135.046 9.875 1.290 (17.200) (3.313) 125.698

148 149


Legal reserveThe Companies of the group within the Colombian territory are required to appropriate, as a legal reserve, 10% of its annual net profits until the balance of the reserve is equal to 50% of the subscribed capital, as long as the Company does not present accumulated losses to be amortized. The legal reserve is not distributable before the liquidation of the Com-pany and should be used to absorb or reduce losses. Appropriations in excess of 50% mentioned above are unrestricted by the Shareholders.

Reserve for tax dispositionsThis reserve was constituted in the Controlling Company and is to ob-tain tax deductions for depreciation in excess of accounted deprecia-tion, according to legal provisions (Article 130 of the Tax Code); as far as tax depreciation exceeds accounted tax depreciation, a reserve of 70% of such excess should be constituted.

Accumulated earningsThe balance from accumulated earnings is as follows:

2015 2014 01/01/2014

Loss of previous years (399.784) (359.958) (370.865)Change in accounting policy NCIF

Equity accounts reclassifications 772.503 772.503 772.503 Assets and liabilities Modification (189.135) (189.135) (189.135)Subtotal * 583.368 583.368 583.368Accumulated earnings 183.584 223.410 212.503

According to paragraph 1.2 of the External Circular 036 of December 12, 2014, the net differences generated in the first application of the NCIF will not be distributed to absorb losses, perform capitalization process-

es, share profits and/or dividends, or be recognized as reserves, they will only be available when they have been performed effectively.

NOTE 18 ORDINARY ACTIVITIES INCOME

The balance of revenue includes:

2015 2014

National sales (1) 296.699 272.055Sales abroad (2) 69.564 64.984Total 366.263 337.039

(1) Domestic sales correspond to the following:

2015 2014

Sales 304.277 279.713Discounts (99) (157)Quality rebate (788) (1.158)Return on sales (6.691) (6.343)Total 296.699 272.055

(2) Sales abroad correspond to the following:

2015 2014

Sales 73.881 69.467Quality rebate (1.164) (785)Return on sales (3.153) (3.698)Total 69.564 64.984

NOTE 15 TRADE ACCOUNTS PAYABLE AND OTHER ACCOUNTS PAYABLE

The following is the detail of trade and other payables

2015 2014 01/01/2014

National providers 15.109 25.941 28.837Foreign providers 21.670 15.432 23.771Advance payments received 9.087 11.316 6.067Costs and expenses to pay 3.653 6.626 8.319Payroll withholdings and contributions 1.186 1.099 1.627Provision for public services 794 320 873Accounts payable law 550 839 908 1.073Various creditors 316 481 1.073Law 550 providers 263 214 186Revenues received for third parties 44 189 48Contractors 12 - 1Total 52.973 62.526 71.875Current portion 43.239 53.596 58.610Non-current portion 9.734 8.930 13.265

NOTE 16 TAX LIABILITIES

The following is the detail of current tax liabilities:

2015 2014 01/01/2014

Sales tax to be paid 6.539 5.177 7.498Income and complementary 100 383 502Withholding tax 385 545 452Sales tax withheld 116 96 39Real estate tax 6 34 22Industry and Commerce (96) 4 59

Total 7.050 6.239 8.572

NOTE 17 EQUITY

The authorized capital of the Company is represented by 13.500.000.000 shares with a nominal value of $4 Colombian pesos each, from which, 9.201.848.397 shares are subscribed and paid for 2015, 2014 and 01/01/2014.

The capital surplus balance in 2015, 2014 and 01/01/2014 is $207.194.

ReservesAppropriations approved by the General Assembly of Shareholders are recorded as reserve, charged to the results of the year for regulatory compliance or to meet expansion plans or financing needs.

The total balance of reserves in 2015, 2014 and 01/01/2014 is $97.896.The legal dispositions that provide for the constitution of applicable

reserves to the Company are as follows:

150 151


NOTE 21 IMPAIRMENT LOSSES

The detail of the reversion of impairment losses is as follows:

2015 2014

Debtors Recovery (Note 6) 1.280 4.693 Property, plant and equipment Impairment - (3.361)Debtors Impairment (Note 6) (2.953) (6.708)Total (1.673) (5.376)

NOTE 22 OTHER INCOME AND OTHER EXPENSES

The detail of other income is as follows:

2015 2014

Drawback other costs and expenses (1) 6.329 5.188 Utility on sale of property, plant and equipment (Note 8) 3.791 5.818 Other sales (3) 3.720 1.872 Leasing (2) 2.301 2.214

Indemnifications 1.232 783

Diverse 934 1.489 Dividends and / or participations 375 270 Total 18.682 17.634

The detail of other expenses is as follows:

2015 2014

Various expenses (4) 8.250 9.334 Extraordinary expenses (5) 2.551 2.998 Loss on sale of property, plant and equipment (Note 8) 1.473 1.710

Total 12.274 14.042

(1). Includes reimbursement of actuarial calculation (Severance) $3.608 (2014 - $2.695) and other costs and expenses $2.721 (2014 - $2.493).

(2). Includes leases to Lindalana S.A. $1.383 (2014 - $1.357) and $918 (2014 - $857).

(3). Relates to sale of surplus and other products.(4). Various expenses correspond to labor demands by $ - (2014

- $2.720) early retirees payment $ 3.102 (2014 - $ 1.023) re-

lated activities costs $2.017 (2014 - $1.946), surplus and oth-er byproducts cost $1,228 (2014 - $637), fines, penalties and litigation $786 (2014 - $ -) and other expenses $1.117 (2014 - $3.008).

(5). Includes the tax on financial transactions $1.423 (2014 - $1.648), taxes paid for $521 (2014 - $546) and costs and expenses from previous $607 (2014 - $804).

NOTE 19 DISTRIBUTION, ADMINISTRATION AND SALES EXPENSES

The detail of distribution, administration and sales expenses is as follows:

2015 2014

Diverse (1) 4.836 4.185Services (2) 3.534 3.664Taxes 2.387 2.927Fees 1.224 1.875Insurance 759 824Legal expenses 717 111Contributions and affiliations 635 579Leases 570 618Travel expenses 549 393Depreciation 347 445Maintenance and repairs 249 207Amortization 6 116Adaptation and installation 4 -Subtotal 15.817 15.944Distribution costs (3) 2.286 3.476Total 18.103 19.420

(1) Diverse expenses relate to fees for $3.238 (2014 - $2.309), freight export expenses $652 (2014 - $889) software and hardware costs $323 (2014 - $253), samples and own products $202 (2014 - $231) and $421 (2014 - $503).

(2) The service charges consist of publicity, advertising and promotion $902 (2014 - $866), toilet and surveillance $651 (2014 - $823),

transport, freight and hauling $905 (2014 - $566), others $1.076 (2014 - $1.409).

(3) Distribution costs correspond to the expenses incurred in the Dis-tribution Center (CEDI), which is responsible for final delivery of the products of the Parent Company to customers.

NOTE 20 COSTS PER EMPLOYEE BENEFITS

The detail of costs for employee benefits is as follows:

2015 2014

Wages 9.352 12.530Bonuses 1.993 673Contributions Pension funds and / or severance pay 1.165 1.310Aid 896 980Extralegal bonuses 699 764Premium bonus 601 747Severance 560 706Vacation 522 618Contributions to compensation funds 352 399Contributions EPS 255 254Contributions ARP 162 150Workers' compensation 117 291Interest on Severance 92 99Contributions ICBF 80 71SENA 54 47Endowments and supplies for employees 49 59Staff training 26 8Insurance 16 -Cultural and sporting activities 11 10

Total 17.002 19.716

152


NOTE 23 FINANCIAL INCOME AND COSTS

The detail of finance income is as follows:

2015 2014

Interests 606 1.368 Conditioned trade discounts 586 94 Others 13 75

Total 1.205 1.537

The detail of finance costs is as follows:

2015 2014

Interests 13.301 15.771 Conditioned trade discounts 1.678 2.300 Commissions 464 301 Banking expenses 118 178

Total 15.561 18.550

NOTE 24 EARNING OR LOSS DERIVED FROM NET MONETARY POSITION

The detail of gains or monetary losses is as follows:

2015 2014

Exchange difference income 48.298 35.578 Exchange difference (expense) (48.054) (35.738)

Total 244 (160)

NOTE 25 OTHER INCOME FROM SUBSIDIARIES

As of December 31, 2015, other income from subsidiaries relate to the sale of 30% of fiduciary trust rights “354.170 - Lot Pantex” to the Group responsible for developing the real estate project Pantex Lot. The value of the sale was $70.000, generating a gain on sale in subsidiaries for $32.593.

NOTE 26 EVENTS AFTER THE PERIOD IN WHICH REPORTED

No significant events occurred after the closing of the financial state-ments that may significantly affect the financial situation of the Group reflected in the financial statements up to December 31, 2015.

NOTE 27 APPROVAL OF FINANCIAL STATEMENTS

The issuance of the financial statements of Fabricato S.A., for the year that ended on 31 December 2015 was authorized by the Management Board, as stated in Act No. 3094 of the Board of Directors February 9, 2016, to be presented to the General meeting of Shareholders in accor-dance with the requirements of the Commercial Code.

A C C O M P A N I E S Y O U

accompanies you - fabricato · • at delima marsh s. a.ceo and executive vice president at holasa...

Documents