1 2018 ANNUAL REPORT LETTER FROM THE CHAIRMAN
2018 ANNUAL REPORT 2 2018 ANNUAL REPORT
CHAPTER 3 CONTENTS _CORPORATE ACTIVITIES AND BUSINESS 49 Description of the Industrial Sector 50 The Gaming Industry in Latin America 50 The Tourism and Hotel Industry in Latin America 56 Industry Trends 60 LETTER FROM THE CHAIRMAN 3 _ Description of the Business 62 CHAPTER 1 CHAPTER 4 5 ANNUAL PERFORMANCE 2018 65 _OUR COMPANY _
Information about the Entity 6 2018 Main Figures 66 About Enjoy 7 Financial Management 70 Our Operations 10 Material Events 74 Value Proposal 21 Market Information 77 Adding Value to the Business 28 Risk Factors 79 History 31 Investment Plans 83 Sustainable Management 84 CHAPTER 2 CORPORATE GOVERNANCE 33 CHAPTER 5 _ 109 _FINANCIAL STATEMENTS Board of Directors 34 Information on Subsidiaries/Associates and Investments with Senior Executives as of January 31, 2019 39 110 Corporate Governance Practices and Policies 42 other Companies Ownership Structure and Major Shareholders 43 Financial Statements 150 Summary of Comments and Proposals by Shareholders and Earnings Reports 48 Directors’ Committee Statement of Responsibility 3 2018 ANNUAL REPORT LETTER FROM THE CHAIRMAN LETTER FROM THE CHAIRMAN
Dear Shareholders: 2018 has been a year of major milestones for our Company and the first step in a transformation that marks the start of a new era for Enjoy.
Among the most important events, we presented very attractive proposals for 4 casino operating licenses and were granted all 4. The Coquimbo, Viña del Mar and Pucón casinos will remain under Enjoy operation, and they will be joined by our newest operating license for the Puerto Varas Casino. We were always confident that our commitment to the communities where we are present and our knowledge of the different markets we have acquired throughout the years would enable us to present winning bids.
Today we are starting development on the different projects with the same professionalism and precision with which we prepared the bids, renewing our commitment to the communities to continue to be a significant source of work and promoter of tourism in these destinations.
We are also convinced that these licenses are the source of value creation for Enjoy, both through the extension of the associated operating periods and due to the expected profitability of each project. We have embarked on an ambitious After a lengthy period of uncertainty, today Enjoy is consolidating its leadership in Chile “ with more casino operating licenses and a license duration that has grown from 7 years project to redesign our entertainment- to an average of 14. This lends stability and projection to our future cash flows and gives based value proposal in order to build us the space to focus on value creation. customer loyalty, take on the demands of The transformation process that began in 2018 has laid the foundations for the future future generations and attract new segments of Enjoy. We have embarked on an ambitious project to redesign our entertainment- based value proposal in order to build customer loyalty, take on the demands of future and markets.”. generations and attract new segments and markets. 4 2018 ANNUAL REPORT LETTER FROM THE CHAIRMAN
“Customer centricity, revenue growth, greater operational efficiency and a balanced financial structure are the pillars on which we will preserve and increase value creation and achieve our vision: to be recognized as a global leader in the entertainment industry.”.
We have made significant investment to ensure that our customers’ perception of security inside the We have a fantastic human team who makes this the Enjoy casinos have the world’s most cutting-edge casinos. We were also pleased to note a growth in the possible in Chile, Argentina and Uruguay. This team is gaming technology starting in 2019, incorporating promotion of healthy gaming at regional level, which the driving force behind the transformation and key to top-of-the-line slot machines, alongside modern is an issue that we have been promoting over the past achieving customer satisfaction. The cultural change interconnected audiovisual systems that transform decade, ever since we implemented our responsible in management, our experience in the business and the experience of all those who visit our casinos. entertainment program “Jugados Por ti/Jugados Por the rigor of our processes will be key pillars in the Vos” (Played by You). Company’s management at the highest level. In financial terms, in 2018 we made a capital increase of 170 million dollars, enabling us to begin a debt The major challenge for 2019 in Chile will be to Finally, I would like to take this opportunity to thank reduction process and improve our debt profile and take on illegal gambling. By operating outside the each of our employees, our customers and suppliers, rates. We were able to pre-pay a percentage of the law, illegal gambling exacerbates a negative image and each of the members of the Board for their international bond and place a bond for UF 3 million in among the public. However, we are pleased that the ongoing support, as well as our shareholders for the the local market. Throughout the implementation of authorities have decided to progress towards a total trust they have placed in the Company. the defined financial strategy, we expect to continue prohibition of illegal gambling. to see improvements in the risk rating. We are convinced that the strategic decisions we With over 40 years as stakeholders in the casino have made are the right ones for the future of industry in Chile, I believe that 2018 will go down Enjoy. Customer centricity, revenue growth, greater on record as being key to the future development operational efficiency and a balanced financial of Enjoy and the industry as a whole. In the first structure are the pillars on which we will preserve place, this was the year when the process of and increase value creation and achieve our vision: to municipalities granting casino operating licenses be recognized as a global leader in the entertainment came into effect, providing the necessary clarity to industry. the industry. And secondly, as major players, we were able to implement important measures to regain Javier Martínez Seguí Chairman ENJOY S.A. 5 2018 ANNUAL REPORT
“ A world-class 1. OUR company in the entertainment COMPANY business”. 6 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Information about the Entity
Name Enjoy S.A. Doing business as Enjoy Taxpayer ID Number 96.970.380-7 Main headquarters Avenida Presidente Riesco 5711, 15th floor, Las Condes, Santiago de Chile. Telephone (+56) 22 770 5000 Website www.Enjoy.cl Type of entity Publicly held corporation registered in the Securities Registry under number 1,033 on June 9, 2009.
The company ENJOY S.A. was incorporated as a LINE OF BUSINESS privately held corporation by public instrument INVESTOR QUERIES granted on October 23, 2001, signed before Santiago Notary Mr. Eduardo Diez Morello. The Company’s purpose shall be to undertake all Investor Relations ENJOY S.A.: Carolina Gálvez F. types of investment, in Chile or abroad, whether Telephone (+56) 22 770 5040 LEGALIZATION these are in personal property, tangible or intangible, E-mail: [email protected] shares in publicly or privately held corporations, www.inversionistas.Enjoy.cl An abstract of the aforementioned deed of joint stock companies, special or other companies, incorporation was recorded in the Commerce Registry rights in other companies, bonds, bills of exchange of the Santiago Real Estate Registrar in 2001 on page and other transferable securities, as well as buying, 29,692, number 24,230 and published in the Official selling, swapping, leasing, subleasing urban or Gazette on November 23, 2001. rural real estate or rights over this, exercising their administration and operation, building on these, on its own account or on behalf of others; operating these, directly or through third parties, in any way. The Company may participate in the formation of companies of any nature or incorporate into existing companies, be they domestic or foreign. Likewise, and specifically, the corporate purpose will be all activities related to tourism, hotel management, gaming casinos, and the food and entertainment industry in general. 7 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY About Enjoy We are one of the leading entertainment chains in Latin America.
10 3 1 8 10 NONSTOP destinations countries great brand casinos hotels Entertainment
Our company is focused on generating customer loyalty and value through a unique combination of entertainment, exceptional service and technological leadership.
From our origins in 1975, the Company has achieved a strong expansion in the region, with a customer-focused business model aimed at generating entertainment experiences.
We were pioneers in the creation of a responsible gaming program and we are committed to the healthy entertainment of our customers.
Enjoy’s sustainable approach is also present in our commitment to the environment and the communities where we operate. 8 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
What inspires us
COMMITMENT
MERIT WARMTH Our _Values EXCELLENCE INTEGRITY AND TRANSPARENCY
PASSION 9 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
_Vision
To be recognized as a global leader in the entertainment industry through managing the customer experience, profitability for our shareholders, mutual loyalty with our employees and ethical action.
_Mission
We will improve our customers’ well-being through a genuine concern for their entertainment, enjoyment and care, generating memorable and comprehensive experiences in gaming, hotels, gastronomy and tourism, in a culture of efficiency, profitability and responsibility. 10 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Our Properties
Enjoy has a regional presence, with operations and commercial offices in 4 countries
Antofagasta Sao Paulo
Coquimbo Rinconada Viña del Mar Santiago Mendoza1 Punta del Este Buenos Aires
Pucón Villarica
Puerto Varas Chiloé Casino & Hotel operations Corporate Commercial offices Hotel (Stand Alone)
Commercial offices: CHILE / TEL: (+56) 600 700 6000 ARGENTINA / TEL: (+5411) 5775 1900 / 0800 222 6672 URUGUAY / TEL: (+598 42) 491111 – 472400 BRASIL / TEL: (+5511) 3709 0000 1 Enjoy S.A. es dueño del 53% de la propiedad, no consolida en los Estados Financieros. 11 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Punta del Este PLAYA MANSA PARADA 4, PUNTA DEL ESTE / URUGUAY
World Travel Awards Uruguay’s Leading Resort 2017 2017 Tripadvisor Certificate of Excellence,
HOTEL 294 ROOMS
537 64 SLOT MACHINES TABLE GAMES
• CONVENTION CENTER • OVO CLUB 9 • OVO BEACH RESTAURANTS • SPA, SWIMMING POOL, AND BARS TENNIS
972 EMPLOYEES*
75.524 CONSTRUCTED SURFACE AREA (M2)
* 2017 Tripadvisor Certificate of Excellence, does not include fixed-term contents per season 12 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Antofagasta AV. ANGAMOS 01455, ANTOFAGASTA / CHILE
Q SEAL, Quality certification by the Chilean Tourism National Office
HOTEL 92 ROOMS
780 42 SLOT MACHINES TABLE GAMES
9 124 RESTAURANTS BINGO AND BARS POSITIONS
• CONVENTION CENTER • OVO DISCOTHEQUE 735 • SPA, PISCINA EMPLOYEES
37.116 CONSTRUCTED SURFACE AREA (M2) 13 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Coquimbo AV. PEÑUELAS NORTE 56, COQUIMBO / CHILE
Q SEAL, Quality certification by the Chilean Tourism National Office
HOTEL 111 ROOMS
919 28 SLOT MACHINES TABLE GAMES
9 70 RESTAURANTS BINGO AND BARS POSITIONS
• CONVENTION CENTER • OVO LOUNGE 805 • OVO BEACH EMPLOYEES • SPA, SWIMMING POOL
37.220 CONSTRUCTED SURFACE AREA (M2) 14 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Viña del Mar AV. SAN MARTÍN 199, VIÑA DEL MAR / CHILE
Q SEAL, Quality certification by the Chilean Tourism National Office
HOTEL 60 ROOMS
1.500 71 SLOT MACHINES TABLE GAMES
11 148 RESTAURANTS BINGO AND BARS POSITIONS
• CONVENTION CENTER • OVO CLUB 1.345 • SPA, SWIMMING POOL EMPLOYEES
34.000 CONSTRUCTED SURFACE AREA (M2) 15 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Santiago KM. 53 AUTOPISTA LOS LIBERTADORES, RINCONADA /CHILE
Q SEAL, Quality certification by the Chilean Tourism National Office
HOTEL 120 ROOMS
1.030 64 SLOT MACHINES TABLE GAMES
7 100 RESTAURANTS BINGO AND BARS POSITIONS
• CONVENTION CENTER • SPA, SWIMMING POOL, 899 TENNIS EMPLOYEES • OUTDOOR PARK
35.468 CONSTRUCTED SURFACE AREA (M2) 16 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Pucón MIGUEL ANSORENA 121, PUCÓN / CHILE
HOTEL 272 ROOMS AND APARTMENTS
453 31 SLOT MACHINES TABLE GAMES
7 • CONVENTION CENTER RESTAURANTS • SWIMMING POOL, TOUR AND BARS OPERATOR • SKI RESORT
676 EMPLOYEES
34.518 CONSTRUCTED SURFACE AREA (M2) 17 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Chiloé RUTA 5 SUR 20153, CASTRO / CHILE S Seal, Sustainable Tourism Certification by the Chilean Tourism National Office
Q SEAL, Quality certification by the Chilean Tourism National Office
HOTEL 72 ROOMS AND APARTMENTS
246 17 SLOT MACHINES TABLE GAMES
5 36 RESTAURANTS BINGO AND BARS POSITIONS
• CONVENTION CENTER 285 • OVO DISCOTEQUE EMPLOYEES • SPA, SWIMMING POOL
15.799 CONSTRUCTED SURFACE AREA (M2) 18 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Mendoza PRIMITIVO DE LA RETA 1009, MENDOZA / ARGENTINA
ECOETIQUETA HOTELES MÁS VERDES
HOTEL 180 ROOMS
529 19 SLOT MACHINES TABLE GAMES
4 RESTAURANTS • CONVENTION CENTER AND BARS • SPA, SWIMMING POOL
416 EMPLOYEES
38.000 CONSTRUCTED SURFACE AREA (M2) 19 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Park Lake CAMINO VILLARRICA / PUCÓN KM. 13, / VILLARRICA / CHILE
Q SEAL, Quality certification by the Chilean Tourism National Office
HOTEL 70 ROOMS
3 RESTAURANTS • CONVENTION CENTER AND BARS • SPA, SWIMMING POOL
91 EMPLOYEES
7.500 CONSTRUCTED SURFACE AREA (M2) 20 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Enjoy Puerto Varas KLENNER 349, PUERTO VARAS / CHILE
Q SEAL, Quality certification by the Chilean Tourism National Office
HOTEL 91 ROOMS
2 RESTAURANTS • CONVENTION CENTER AND BARS • SPA, SWIMMING POOL
97 EMPLOYEES
14.664 CONSTRUCTED SURFACE AREA (M2) 21 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Value Proposal
Enjoy’s value proposal in Latin America is broad and varied. In addition to being a role model for the casino industry, Enjoy has a full array of non- gaming products, including hotels, gastronomy, shows and tourist services.
ENTERTAINMENT SERVICE TECHNOLOGY
• Modern environments. • Excellence and high-quality service. • State-of-the-art systems. • High-quality hotels and a variety of dining • The best and most highly trained • Ongoing innovation to attract the customer of options. professionals in the industry. the future. • High-level shows and performances. • Differentiated service per type of business and segment. 22 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
Enjoy Club Loyalty Program
A key component in the communication of Enjoy’s value proposal is the Enjoy Club loyalty program, which helps us get to know our customers and better meet their needs.
Present in Chile, Argentina and Uruguay, the loyalty club adds new members every year and as of December 31, 2018, there were 1,755,773 accredited members.
In 2018, Enjoy Club promoted initiatives to reward the loyalty of the best customers of the chain. One of these was the launch of a new “Seven Stars” category targeting the VIP segment, who receive special benefits and discounts, including an annual trip to Enjoy Punta del Este for two people.
In addition, during the year, the Company implemented the differentiated accumulation system per category or segment, in recognition of the strategic value of each customer.
Current Enjoy Club strategic partnerships continued with LatamPass, Cencosud, West Rent a Car and Banco BBVA, and in 2018 were joined by a partnership with PrimeClass, which grants access to VIP rooms at the Santiago airport for preferential Club members.
Our customers are at the center of the Enjoy experience, with special, differentiating benefits, managed by our Enjoy club loyalty program. 23 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
Gaming
Since its founding in 1975, our company has contributed directly to the development of the casino industry in Chile and today is an important stakeholder in Latin America. 8 5.994 336 478 Casinos Slot machines Table games Bingo positions
State-of-The-Art _Gaming Technology
In 2018, Enjoy implemented a plan to bring the world’s most cutting-edge gaming technology to Latin America. This plan aimed to offer a unique variety of products in the region and meet the demanding requirements of future generations of customers.
With almost 6,000 slot machines, in 2018, Enjoy finalized the technological renovation and modernization plan for its current stock, which began in January 2019 with the incorporation of the latest platforms from leading manufacturers around the world. The continuity of this plan over the next few years will allow us to keep our current slot machine array at the vanguard of global trends.
The plan also included systems with the most modern technology currently available in casinos around the world. Not only have we been able to generate additional interaction between machines and customers - through additional games and on-line tournaments - but we have also optimized re-investment per customer category. Furthermore, through large modern screens, we have improved communication on everything that happens in the casino. 24 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
Most Important Poker Club in _Latin America
In 2018, ENJOY celebrated 10 years since the 379 launch of the Enjoy Poker Series (EPS) circuit, EPS TOURNAMENTS the first of its kind in Chile, which is also now present in Enjoy Punta del Este and Enjoy Mendoza.
As part of the celebration of the first decade of EPS in conjunction with “Team Enjoy”, made up of a group of poker players and ambassadors, the Company was able to show just how USD 3.569.566 professional this game has become at the IN PRIZES DELIVERED regional level. THROUGH EPS TOURNAMENTS
Nearly two thousand unique players participated in the tournaments, with jackpots totaling over 3.5 million US dollars.
In addition, in 2018, Enjoy once again hosted the World Series of Poker (WSOP) and the Latin American Poker Championship, both in 1.909 Enjoy Punta del Este. UNIQUE PLAYERS IN EPS TOURNAMENTS 25 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
Hospitality
Enjoy is present in major cities and in some of the foremost tourism centers in Chile, Argentina and Uruguay. Desert, ocean, mountains and valleys are part of the landscape around our hotels and are present in the careful interior design of each of our properties, which combines a high standard of quality with the unique hallmark of each location. An important milestone in 2018 was the change in hotel 10 1.362 353.145 742.324 branding in Punta del Este. The Enjoy brand was visibly Hotels Rooms and Nights of accommodation Guests launched and displayed on the hotel as of April 1. This apartments transformation was accompanied by the renovation of 71 rooms.
In Chile, renovation began on the Gran Hotel Pucón in 2018, which forms part of the bid presented to obtain the municipal casino operating license, and will bring the hotel up to a remodeled standard that will reflect all the warmth of southern Chile.
In terms of acknowledgments, in 2018 for the second year in a row, the Hotel Sheraton Mendoza & Enjoy Casino received the “Best Of” award, an international acknowledgment of best practices related to wine tourism. This year, it received the Gold Award for the best accommodations experience related to wine tourism.
In Chile, the Enjoy Coquimbo, Enjoy Santiago and Enjoy Chiloé hotels received the “Guest Review Awards 2018” from Booking.com, based on the comments and positive user ratings, which reflect their satisfaction with the Enjoy hotel experience. #GuestsLoveUs
In addition, Enjoy Coquimbo received the “Tripadvisor Certificate of Excellence 2018” and Enjoy Santiago received the “Loved by Guests Award 2018” from Hoteles.com
These awards reflect a professional management that is passionate about service. 26 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
Food And Beverages
As part of our value proposal at Enjoy, we have developed a The dining establishment OVO Beach at Enjoy Punta del Este varied selection of restaurants and bars for all tastes, where was awarded “Best beach club” on the Uruguayan coast buffet-style dining coexists with family pizza restaurants, during the first edition of the Sirí Awards, organized by the modern bars, inviting cafés and innovative beach clubs. prestigious Argentine magazine Cuisine & Vins. Located in a privileged spot on Playa Mansa, across from Enjoy Punta del In Chile, we added Santerra to Enjoy Antofagasta to our Este, it has become an unmissable stop for beach visitors existing successful range of food and drink options in 2018 who love music and good food. In addition to its varied menu, and it was soon positioned as the best buffet in town. the beach club is a meeting spot for renowned international DJs, who liven the sunset at Punta del Este with their music.
66 2 10 Restaurants and bars Beach clubs “OVO Beach” Convention centers
Large events represent another significant business line for Enjoy. These are held in the modern Enjoy convention centers and in 2018, we hosted a number of important international events, business conferences and private celebrations. 27 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
Entertainment
From its origins, Enjoy has been recognized for promoting the development of major shows and concerts and today is one of the main stages for both national and international artists.
Enjoy has also enhanced the OVO brand through nightclubs and discotheques, with important parties and some of the best DJs on the international scene.
5 Nightclub
Modern settings, high-level hotels and varied dining options make enjoy a meeting place for nonstop entertainment. 28 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY Adding Value to the Business
Enjoy’s leadership in the entertainment industry is the result of a robust work plan and a future vision based on creating shared value for shareholders, investors, customers, employees, suppliers and the communities where we develop our activities.
With this vision, and in line with its strategic pillars, the Company has adopted a sustainable model that balances maximizing economic value with our contribution to society, under five main dimensions:
Transparent and ethical leadership
Commitment to customers and responsible entertainment In our day-to-day activities, our sustainability strategy performance, renewing our commitment to the creation is brought to life through initiatives driven by different of sustainable value. Since 2016, we have integrated this Human capital management areas of the Company associated with the business and with our Annual Report. operations, and also by monitoring indicators associated with issues identified as material or relevant. Chapter 4 “Annual Performance” of this document reflects Community development the main aspects of sustainable management of Enjoy’s In 2008, Enjoy published its first sustainability report, operations in Chile, Argentina, and Uruguay between with the aim of establishing greater transparency in the January 1 and December 31, 2018, in keeping with provision of information on company activities in different company-defined indicators. This also includes diversity Sustainable operations management aspects. Every year since then, the Company information required under General Standard 385 of the has reported on our economic, social and environmental Financial Markets Commission. 29 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
_Enjoy Sustainability Model
Materiality Material aspects were defined through a process of surveying, systematizing and multidimensional analysis of information, which includes a review of secondary information (press articles, internal studies, regulations and global industry benchmarks) and interviews. The information surveyed was used to conduct an internal validation and prioritization process, which resulted in the identification of 23 material aspects associated with the five sustainability dimensions of Enjoy.
Transparent and ethical Commitment Human capital Community Sustainable operations leadership to customers management development and responsible entertainment • Ethical management • Responsible gaming • Talent management, training • Regional and local contribution • Financial performance and development. • Crime prevention • Customer data management • Community participation and • Safety of facilities and privacy • Working conditions, work development of initiatives in its • Corporate governance climate and employee benefit • Information security • Customer satisfaction engagement • Transparency • Direct economic impact • Environmental management • Occupational health and safety • Investor relations • Energy efficiency and renewable • Labor relations energy
• Diversity and inclusion • Sustainable construction • Operational efficiency 30 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
Strategic stakeholders Communication channels Partners Individuals or legal entities with joint ownership in an Enjoy • Boards operation. • Directors’ Committee • Shareholders’ Meeting • Annual Report / Integrated Report
Investors Individuals or legal entities that have acquired shares or • Investor Relations Area instruments that can be traded on the Financial Market. • Earnings presentation meetings • Shareholders’ Meeting • Investor website • Annual Report / Integrated Report • Road shows • Conference Participation
Employees All employees who work directly with the company, including • Informational panels (digital and traditional) senior executives, managers, deputy managers, administrative • Annual Report / Integrated Report staff, professionals, supervisors, operators, technicians, contact • Training workshops personnel. • SMS messenger • E-mail • Social Networks • Meetings • “Conecta” newsletter and other internal newsletters • Amigo (Module and App) • Confidential line _Stakeholder engagement • Labor relations meetings with unions Regulators The Company mainly interacts with the following regulators and • Annual Report / Integrated Report The Company has currently identified15 stakeholders. They and oversight oversight organisms: Financial Markets Commission (Comisión • Enjoy.cl website organisms para el Mercado Financiero, CMF), Superintendency of Gaming • Trades and response to these trades have been categorized and prioritized based on the power Casinos (Superintendencia de Casinos de Juegos, SCJ), Financial they may hold and the degree to which they may potentially Analysis Unit (Unidad de Análisis Financiero, UAF) show interest in company strategies, and a total of 7 strategic stakeholders has been identified Customers Customers are all those individuals or companies that make use • Enjoy.cl website of Enjoy’s comprehensive entertainment options (casino, hotel, • E-mail To ensure greater transparency in the provision of spa, restaurants, convention centers). • Social Networks • Satisfaction surveys information based on the characteristics of each group, • REALIZA the company has defined communication channels to identify their opinions, expectations and needs in relation to Suppliers These are all those companies that provide goods and services to • Purchasing area Company operations. the company, which are fundamental to business operations. • Enjoy.cl website • Email [email protected] • Confidential line • Meetings Media Public or private companies whose purpose is to publish current • Interviews, conferences and press releases information. • Visitors • Telephone and email • Enjoy.cl website • Social networks 31 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY History
1975 1994 1995 1997 1998 2000 2002 2005 Casino Casino Coquimbo. Casino Pucón. Opening of Hotel Operation of 3 Casino Puerto Opening of Hotel Creation of single Viña del Mar. del Lago, Pucón. casinos in Panama. Varas. del Mar, Viña del brand ENJOY. Mar.
FOUNDING AND EXPANSION
2006 2007 2008 2009 2010 2011 2012 Sale of 3 casinos in Opening of new Opening of Enjoy Opening of ENJOY Bonds issued for Sale of Puerto Opening of Hotel Opening of Casino Panama. casino Enjoy Antofagasta, Enjoy S.A. on the Stock USD 200 million in Varas Hotel and Enjoy Santiago. Enjoy Chiloé. Coquimbo and Mendoza and Casino Exchange. the local market Casino. Hotel de la Bahía, Colchagua. Purchase and acquisition of Coquimbo. of Gran Hotel Pucón. Enjoy Santiago.
BECOMING A PUBLIC CORPORATION 32 2018 ANNUAL REPORT CHAPTER 1 OUR COMPANY
2013 2015 2016 2016 2017 Enjoy enters Uruguay Opening of Hotel de Alliance with Opening of ENJOY Consolidation of the Issuance and Acquisition of 55% of Baluma S.A. Shares for as operating partner la Isla, Chiloé. Decameron. San Andrés, the stand-alone hotel placement of USD 196.8 million, leaving Enjoy with 100% of Hotel Casino first Enjoy casino in business: Hotel international bonds ownership of Enjoy Punta del Este. Conrad with 45% Colombia. Enjoy Park Lake in for USD 300 million, ownership. Villarrica and Enjoy under US standard Puerto Varas. 144A.
FOCUS ON PROFITABILITY & STABILITY
2017 2018 Purchase of BP Launch of Enjoy Capital increase of USD 184 million Awarding of 4 casino operating licenses in Closure of Issuance of local Private Investment Vacations club and entry of Advent International into Chile, in the cities of Coquimbo, Viña del operations in bond for UF Fund of the Series B ownership of Enjoy S.A. through subsidiary Mar, Pucón and Puerto Varas. Colombia. 3,000,000. shares of Inversiones Entretenciones Consolidadas SpA. Inmobiliarias Enjoy SpA.
FINANCIAL STRENGTHENING 33 2018 ANNUAL REPORT
“The Board of 2. CORPORATE Directors has a Corporate Governance GOVERNANCE Code that regulates its actions and establishes its main functions”. 34 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE Board
Enjoy has a Board of Directors that is responsible for the The nine members of the Board do not hold executive The Chairman of the Board is Francisco Javier Martínez company’s top-level management. It is made up of nine positions within the Company and no alternate directors are Seguí. The Legal Representative is the Chief Executive members, who remain in their posts for a three-year period contemplated. Mr. Francisco Javier Martínez Seguí held an Officer, Eliseo Gracia Martínez, Taxpayer ID Nº 14.167.518-4. and may be re-elected indefinitely. executive position in the subsidiary Enjoy Gestión Ltda. until January 9, 2018.
_ _ _ _ _ Francisco Javier Martínez Seguí Antonio Martínez Seguí Ignacio Guerrero Gutiérrez Ignacio Pérez Alarcón Lucas Marulanda López Chairman TAXPAYER ID (RUT) : 7.040.321-8 TAXPAYER ID (RUT) : 5.546.791-9 TAXPAYER ID (RUT) : 9.979.516-6 Foreign TAXPAYER ID (RUT) : 7.040.320-K Entrepreneur Degree in Business Administration from Degree in Industrial Engineering, Masters in Industrial Engineering from Degree in Business Administration and Date appointed: April 23, 2012 Pontificia Universidad Católica de Chile Pontificia Universidad Católica de Chile Universidad de los Andes de Colombia, Masters in Tax Law from Universidad and an MBA from Harvard Business Date appointed: April 28, 2016 MBA from Emory University Adolfo Ibáñez de Chile. School.. Date appointed: January 10, 2018 Date appointed: July 22, 2015 Date appointed: April 30, 2014
_ _ _ _ _ José Mauricio Salgar Hurtado Nicolás Bañados Lyon Ana María Orellana Johnson Ugo Posada Zabala Wilson Lourenço da Rosa Foreign TAXPAYER ID (RUT) : 9.669.005-3 TAXPAYER ID (RUT) : 6.867.840-4 Foreign Foreign Degree in Industrial Engineering from Degree in Economics and Masters in Degree in Business Administration, Degree in Systems Engineering from Degree in Aeronautical Infrastructure Universidad de los Andes de Colombia, Financial Economics from Pontificia Pontificia Universidad Católica de Chile Universidad de los Andes de Colombia, Engineering, summa cum laude, Instituto MBA from Massachusetts Institute Universidad Católica de Chile, and MBA and MBA from The Wharton School. MBA from JL Kellogg School of Tecnológico de Aeronáutica de Brasil, of Technology (MIT) Sloan School of from The Wharton School. Date appointed: April 18, 2018 Management at Northwestern University. MBA from Harvard Business School. Management. Date appointed: January 10, 2018 Date appointed: November 22, 2018 Date appointed: January 10, 2018 Date appointed: January 10, 2018 *Board member until November 22, 2018. 35 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
Board Member Compensation
During 2017 and 2018, the following total compensation was received as • Other compensation received by Board Members allowances for attending Board meetings: In 2018, Mr. Francisco Javier Martínez Seguí, through his BOARD MEMBER 2017 2018 company Inversiones Carmel Ltda., received a total of $345,187,500 from Enjoy S.A. in consulting fees. Francisco Javier Martínez Seguí $86,369,631 $44,751,036 The Company paid Ch$ 29,632,403 as compensation to Antonio Claudio Martínez Seguí $51,821,780 $36,675,164 Mr. Lucas Marulanda López to finance the costs of airfares Ignacio Guerrero Gutiérrez $51,821,780 $33,954,916 from Colombia and room and board in Chile to attend the board meetings. Ignacio Pérez Alarcón $47,869,710 $36,675,164 Lucas Marulanda López - The Company paid $19,768,231 as compensation to Mr. José Mauricio Salgar Hurtado to finance the costs of José Mauricio Salgar Hurtado - airfares from Colombia and room and board in Chile to Nicolás Bañados Lyon - $29,935,817 attend the board meetings.
Ana María Orellana Johnson - $21,860,892 The Company paid $742,602 as compensation to Mr. Ugo Posada Zabala - Ugo Posada Zabala to finance the costs of airfares from Colombia and room and board in Chile to attend the board Wilson Lourenço da Rosa - meetings. Thomas Jenkin* - The Company paid $1,398,774 as compensation to Mr. Octavio Bofill Genzsch** $47,802,318 - Wilson Lourenço da Rosa to finance the costs of airfares from Brazil and room and board in Chile to attend the board Ignacio González Martínez** $47,822,016 - meetings. Pier-Paolo Zaccarelli Fasce** $51,821,780 - • Board Advisory Expenses Vicente Domínguez Vial*** $47,822,016 $15,497,731
*Board member until September 11, 2017. During 2018, the Company did not incur Board advisory **Board member until January 10, 2018. expenses. ***Board member until April 18, 2018. 36 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
The duties of the Directors’ Committee are established Directors’ Committee in article 50 bis of the Corporations Law. The Committee meets at least four times a year and its main duties are to review the Company’s financial statements to recommend As stipulated in article 50 bis of Law 18,046 on Privately their approval or rejection to the Board of Directors prior Held Corporations, the Company must have a Directors’ to the Shareholders’ Meeting. Its duties also include El Comité se reúne Committee. For this reason, the Ordinary Shareholders’ examining operations with related parties. Meeting held on April 18, 2018, made the following constantemente para conocer decisions: Likewise, the Committee meets constantly to discuss other matters that fall under its attributes. The following de otras materias que también 1) It assigned a budget of 500 UF for 2018. se encuentran dentro de sus were the main Directors’ Committee activities in 2018: atribuciones. 2) It agreed to compensation for Committee members in • In its extraordinary session on Monday, January 8, 2018, the amount of 50 UF per session attended. the Committee acknowledged and approved the consulting contract between Enjoy S.A. and Inversiones Carmel Ltda. The Company’s current Directors’ Committee consists of: (“Carmel”) as an operation between related parties in keeping with article 147 of Law No. 18,046. This is due to NAME OF DIRECTOR TAXPAYER ID (RUT) PROFESSION the fact that Javier Martínez Seguí is partner with 99% share ownership in Carmel and is also Chairman of Enjoy Ana María 6.867.840-4 Business S.A. Orellana Johnson Administrator Ignacio 9.979.516-6 Industrial Civil • In its session held on March 6, 2018, the Committee Pérez Alarcón Engineer reviewed the Company’s Financial Statements and those of its subsidiaries as of December 31, 2017, which was Ignacio 5.546.791-9 Business Guerrero Gutiérrez Administrator prepared by Management and external auditors Deloitte Auditores y Consultores Limitada. The most important aspects of this review were the modification of corporate The Directors’ Committee is chaired by Mrs. Ana María bonds, issuance and placement of the International Bond, Orellana Johnson. The current Directors’ Committee has exercise of the purchase option for 55% of Baluma S.A., been in place since April 18, 2018. registration of a new increase in capital in Enjoy S.A. and OPA, among others. After analyzing the Financial Directors Ana María Orellana Johnson and Ignacio Guerrero Statements, the Committee agreed to propose approval of Gutiérrez hold the position of independent directors as these to the Company Board of Directors. established in article 50 of Law No. 18,046. 37 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
In this Session, the report from the Compliance and Corporate Governance Department was also shared, as well as information regarding records that must be kept with the system for preventing asset laundering and terrorism financing crimes. Other aspects shared included the amount of transactions registered above USD 3,000; the number of cash operations; the number of visits from politically exposed people; and the number of electronic transfers carried out as means of payment. Likewise, the report on suspicious operations sent to the Financial Analysis Unit (UAF) was also presented. Finally, inspections carried out by oversight organisms and obligatory staff training were also reported on.
In the same session, operations with related parties flagged as habitual were identified. Also, the report from the Legal Services Department was shared, with details on the minutes received by the Superintendency of Gaming Casinos (SCJ) per Business Unit, inspections made, amount of lawsuits and administrative processes. Management also submitted a proposal to maintain • In the session held on Thursday, August 23, 2018, the Later the Internal Audit Manager presented the results of current national risk rating agencies Humphreys Limitada Committee received the presentation from auditors the audit plan for 2017 and the program for 2018. and International Credit Rating Compañía Clasificadora Deloitte Auditores y Consultores Limitada, who presented de Riesgo Limitada ICR and Standard & Poor’s and Fitch the Financial Statements as of June 30 and the limited In this Committee session, the Human Capital and Rating for international issuance. review practiced. Mr. Rolf Lagos, the Deloitte partner Performance Management Officer gave a presentation on responsible for the external audit, indicated that everything company salaries and variable income or bonds. • In the session held on Wednesday, May 16, 2018, Ms. was going according to plan and delivered a progress Ana María Orellana Johnson was named Chairperson of report to date. Likewise, Mr. Lagos presented the Following this, the Committee reviewed the proposals the Directors’ Committee. The Financial Statements as following main issues covered in this limited review: debt received for auditing services. Quotes were received from of March 31, 2018, were approved at this session. The restructuring, including total prepayment of local bonds Deloitte Auditores y Consultores Limitada and Ernst & main issues analyzed were the increase in capital, the Series C and E; partial prepayment of the international Young. Finally, the Committee agreed to propose to the ownership structure and use of funds in bond prepayment bond; new financing; increase in capital, new IFRS 9 Board that it should propose to the Ordinary Shareholders’ and prepayment costs. and 15, closure of operations in Colombia. The Financial Meeting Deloitte as first choice, due to its background and Statements as of June 30 were approved at this session. lower cost, with Ernst & Young as second choice. The ICT Manager attended and gave a presentation on data security at Enjoy. Later, the Internal Audit Manager presented the results of the audit plan for 2018. 38 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
Also, the report from the Legal Services Department was • Compensation for the Directors’ Committee shared, with details on the minutes received by the SCJ per Business Unit, inspections made, amount of lawsuits During 2017 and 2018, the following total compensation was received for and administrative processes. attending Directors’ Committee sessions:
In this Session, the report from the Compliance and Director 2017 2018 Corporate Governance Department was also shared, as Compensation Compensation well as information regarding records that must be kept Vicente Domínguez Vial* Ch$6,654,658 Ch$2,689,592 As stipulated in article with the system for preventing asset laundering and terrorism financing crimes. Other aspects shared included Ignacio Guerrero Gutiérrez Ch$6,654,658 Ch$6,784,527 50 bis of Law 18,046 on the amount of transactions registered above USD 3,000; Ignacio Pérez Alarcón Ch$6,654,658 Ch$6,784,527 Privately Held Corporations, the number of cash operations; the number of visits from Ana María Orellana Johnson - Ch$4,094,935 politically exposed people; and the number of electronic the Company must have a *Board member until April 18, 2018. transfers carried out as means of payment. Likewise, the Directors’ Committee. report on suspicious operations sent to the UAF was also • Advisory fees for Directors’ Committee presented. In 2018, the Directors’ Committee did not use its budget. In the same session, operations with related parties flagged as habitual were identified. A modification to the consulting contract between Enjoy S.A. and Carmel was approved.
• In the session dated November 22, 2018, auditors Deloitte Auditores Consultores Limitada gave a presentation on the internal control report. On this occasion, the auditors commented that the observations in this report were less than in 2017, and they were confident about the control systems implemented. Regarding processes and systems, mention was made that the changes made by the company have been favorable in terms of improving the reliability of information.
In the second part of the meeting, the Financial Statements for September 30, 2018, were shared and approved, and sales, expenses, EBITDA, financial debt, accounts receivable, accounts payable and the earnings report were reviewed in detail. 39 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE Senior Executives as of January 31, 2019 *
_ _ _ _ _ Eliseo Ignacio Gracia Martínez César Daniel Romero Sáez Daniela Bawlitza Vásquez Esteban Rigo-Righi Baillie Marcelo Tapia Cavallo Chief Executive Officer Internal Audit Manager Compliance and Corporate Chief Financial Officer Controller TAXPAYER ID (RUT): 14.167.518-4 TAXPAYER ID (RUT): 14.044.892-3 Governance Officer TAXPAYER ID (RUT): 13.454.480-5 TAXPAYER ID (RUT): 10.220.513-8 Degree in Business Administration, Degree in Public Accounting, Universidad TAXPAYER ID (RUT): 13.333.127-1 Degree in Industrial Engineering with Degree in Public Accounting, Universidad Universidad de Los Andes and MBA, IE Tecnológica Metropolitana, MBA Attorney at Law Universidad Diego a major in Transportation Engineering, Andres Bello, MBA, Pontificia Universidad Business School, Spain Universidad Gabriela Mistral Portales, Masters in Corporate Law Pontificia Universidad Católica de Católica de Chile. Date Appointed: January 14, 2019 Date Appointed: September 23, 2015 Universidad Adolfo Ibáñez. Chile, MBA EGADE from Tecnológico de Date Appointed: August 28, 2018 Date Appointed: July 26, 2017 Monterrey, Mexico. Date Appointed: August 28, 2018
_ _ _ _ _ Sebastián Fernando Truffello Palau Javier Ghigliotto Caselli José Miguel Melo Pizarro Eduardo Andrés Sboccia Serrano Carlos Ureta Rechner Gaming Business Manager Hospitality Manager Strategic Development Manager Legal Services Manager People Manager TAXPAYER ID (RUT): 12.722.157-K TAXPAYER ID (RUT): 13.433.341-3 TAXPAYER ID (RUT): 12.244.974-2 TAXPAYER ID (RUT): 8.198.872-2 TAXPAYER ID (RUT): 12.661.103-K Degree in Business Administration, Degree in Business Administration, Degree in Industrial Engineering, Attorney, Universidad Adolfo Ibáñez Degree in Industrial Engineering, Universidad Gabriela Mistral Universidad Diego Portales, MBA IEDE Pontificia Universidad Católica de Chile Date Appointed: September 30, 2015 Universidad de Chile, Master’s Degree Date Appointed: August 24, 2018 Spain. Date Appointed: September 30, 2015 in Human Resources and Organizational Date Appointed: May 22, 2018 Management, Universidad Adolfo Ibañez. Date Appointed: January 28, 2019 40 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
_ _ _ _ _ Ignacio Sarmiento Rubén Ormazábal Sanhueza Mariano Sosa Roberto Andrés Mimica Godoy Juan Eduardo García Newcomb Enjoy Punta del Este General Antofagasta General Manager Coquimbo General Manager Viña del Mar General Manager Rinconada General Manager Manager TAXPAYER ID (RUT): 7.848.855-7 TAXPAYER ID (RUT): 26.422.852-2 TAXPAYER ID (RUT): 8.954.919-1 TAXPAYER ID (RUT): 13.333.115-8 Extranjero Degree in Business Administration, Degree in Information Sciences, UADE, Degree in Industrial Engineering, Degree in Business Administration Degree in Business Administration, Universidad Autónoma. Argentina. Universidad Técnica Federico Santa and Master of Science in Finance, Universidad Católica Argentina, MBA Date Appointed: August 04, 2018 Date Appointed: August 08, 2019 María, MBA Pontificia Universidad Universidad Adolfo Ibáñez. Universidad del Centro de Estudios Católica. Date Appointed: January 01, 2017 Macroeconómicos de Argentina. Date Appointed: June 29, 2018 Date Appointed: August 24, 2018
_ _ _ Gonzalo Grob Duhalde Rodrigo Ulloa Beyer Ariel Pérez Pucón General Manager Chiloé General Manager Mendoza General Manager TAXPAYER ID (RUT): 13.818.206-1 TAXPAYER ID (RUT): 12.151.405-2 Foreign National ID: 25144275 Degree in Business Administration, Degree in Business Administration, Degree in Tourism, Universidad del Universidad Andres Bello. Universidad Autónoma, Master’s Degree Salvador, Argentina. (*) Gerardo Cood Schoepke held the position of CEO until January Date Appointed: July 23, 2018 in Finance, Universidad del Desarrollo. January 01, 2015 14, 2019. Date Appointed: July 04, 2018 Gonzalo Ugarte Encinas was Innovation and Corporate Services Manager until January 28, 2019. 41 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
Management and Personnel
• Salaries for senior executives
The Company’s managers and senior executives received a gross global compensation of ThCh$1,527.079 in 2017.
The Company’s managers and senior executives received a Board of Directors gross global compensation of ThCh$1,048,598 in 2018. Compliance and Internal Corporate Governance Audit • Compensations for senior executives Chief Executive Office Currently, Enjoy operates a short-term incentives system (annual performance bonus), applicable to general managers and deputy managers, based on the current compensation model, approved by the Board of Directors, which establishes a compliance margin for its applicability. One of the fundamental aspects that influences Strategic Gaming & Human Corporate Legal Controlling Corporate Operations Hospitality this instrument is the Company’s profit and loss. Development Marketing Capital Finance Services And Communications There is also a long-term incentives system for senior Accounting executives, indexed at the value of the company share price.
Business Unit General Management
Enjoy Enjoy Enjoy Punta del Este Antofagasta Coquimbo
Enjoy Enjoy Enjoy Viña del Mar Santiago Pucón
Enjoy Enjoy Enjoy Chiloé Mendoza Puerto Varas 42 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE Corporate Governance Practices and Policies
Enjoy S.A. is a publicly held corporation that trades its shares At Enjoy, we also have a Crime Prevention Model in compliance capital, public debt issuance and reinvestment of operating on two Securities Exchanges: the Santiago Stock Exchange with Law No. 20,393, which establishes criminal liability cash flow. The above considers the Company’s capital and the Chilean Electronic Stock Exchange. The Financial for legal entities for crimes of asset laundering, financing structure, the long-term financial plan, operation projections, Markets Commission through Exempt Resolution N°4476 dated terrorism, bribery of a national or foreign public official, commitments undertaken or applicable restrictions and the October 5, 2018, revoked the authorization of the existence receiving stolen property and disloyal management. Enjoy cost of debt. of the Valparaiso Stock Exchange and on that date Enjoy S.A. prohibits any action or behavior that could give rise to criminal stopped trading its shares on this Stock Exchange. Enjoy S.A. charges under this law for actions committed by its owners, is overseen by the Financial Markets Commission and the controllers, chief executives. representatives or those who Dividend Policy Superintendency of Gaming Casinos regarding those casino perform administrative or supervisory activities and by any operations that are not regulated by a Municipal Concession Company employee or external party that represents it. As established in article 26 of the bylaws, dividends will Contract. be paid exclusively on net income for the year or retained Chapter 4 “Annual Performance” provides greater details on earnings from statements approved at shareholders’ The Company is governed by corporate governance principles the work developed during 2018 in this area by the areas of meetings. However, if the company has accumulated losses, established under current legislation and others adopted Compliance and Corporate Governance, Legal Services and net income for the year is primarily used to absorb this. as improvements for Enjoy. Among these, the Company Internal Auditing. is noteworthy for its transparency and timely provision Each year, Enjoy S.A.’s Board of Directors proposes that the of information, protection of the rights of our minority Shareholders’ Meeting distribute dividends in compliance shareholders, equal treatment for all shareholders, and a Investment and Financing with the minimum legal requirement of 30%. Board of Directors that permanently monitors the actions of Management. Policies During 2018, no dividends were distributed because the Company registered no accumulated net profits to be Enjoy’s Board of Directors has a Corporate Governance Code • Investment Policy distributed as dividends in 2017. that regulates its actions and establishes its main duties. Enjoy’s policy is to invest in the development and expansion of the gaming casino and tourism business, both in Chile The Company has a Code of Ethics, which establishes the and abroad. These investments involve real estate assets principles, values and behaviors that should govern the such as land and buildings necessary for the development performance of our employees and directors. of its activity, and the assets required for operation, such as slot machines, table games, hotel equipment, software, In addition, Enjoy has an Management Manual for Information equipment and other general goods. of Market Interest, which regulates the provision of accurate, sufficient and timely information to the market. Likewise, it • Financing Policy establishes the correct means of action for employees and The financing policy is based on obtaining short- and long- directors in the Securities Market. term financial resources with products and structures based on the investment made, which include real estate and personal property leases, bank loans, increases in 43 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE Ownership Structure and Major Shareholders
NAME ID % (a) Almonacid, Cumbres and Entretenciones Consolidadas Ownership ownership SpA will vote in the election of their corresponding board members in Enjoy S.A. in accordance with the law and • Company Controller Martínez Seguí, María Cecilia 7.040.319-6 25% their shareholding ownership. In the event that the sha- Martínez Seguí, Antonio Claudio 7.040.321-8 25% reholding ownership of Entretenciones Consolidadas SpA In keeping with the provisions of article 97, in relation Martínez Seguí, Ximena María 7.040.322-6 25% in Enjoy does not allow it to designate four directors, to article 99, both part of Law No.18,045, Enjoy S.A. with respect to a maximum of 281,697,595 shares in has no controlling group or shareholder, only majority Martínez Seguí, Francisco Javier 7.040.320-K 25% Enjoy, Almonacid and Cumbres have committed to de- shareholders. signate, implement or grant irrevocable power in favor The partners of Inversiones Cumbres Ltda. are: of Entretenciones Consolidadas SpA and/or vote in favor As of December 31, 2018, Entretenciones Consolidadas of the board member candidates proposed by this com- SpA held 34.4%, Inversiones e Inmobiliaria Almonacid Ltda. NAME ID % pany; 23.8% and Inversiones Cumbres Ltda. 4.9% shares in Enjoy ownership S.A. Martínez Seguí, María Cecilia 7.040.319-6 25% (b) Almonacid, Cumbres and Entretenciones Consolidadas SpA agreed to the creation of advisory committees to Entretenciones Consolidadas SpA, as of December 31, Martínez Seguí, Antonio Claudio 7.040.321-8 25% the Enjoy Board of Directors on issues related to audi- 2018, holds 34.4% of Enjoy S.A. shares. Martínez Seguí, Ximena María 7.040.322-6 25% ting, compliance with legal and regulatory standards, Martínez Seguí, Francisco Javier 7.040.320-K 25% human resources and compensation policy, financial and Entretenciones Consolidadas SpA is an entity controlled budgetary issues; and and owned by an investment fund named Advent Latin As a consequence, the Martínez Seguí siblings, through the America Private Equity Fund VI Limited Partnership aforementioned investment corporations, each indirectly (c) Entretenciones Consolidadas SpA will be entitled to (“LAPEF VI”), one of the largest venture capital investment hold, as of December 31, 2018, a 7.2% share in Enjoy S.A. remove the Chief Executive Officer (CEO) with or without funds focused on Latin America and managed by Advent Furthermore, on the same date, people related to the reason, at any time and, in conjunction with Inversiones International Corporation, one of the main private capital Martínez Seguí siblings hold 1.62% total shares in Enjoy S.A. e Inmobiliaria Almonacid Ltda. and Inversiones Cumbres investment fund managers in the world. Ltda., will require the Board of Directors to remove the CEO. Likewise, Entretenciones Consolidadas SpA will be LAPEF VI indirectly owns shares in Entretenciones It is important to note that Inversiones e Inmobiliaria entitled to select, designate and replace the Chief Finan- Consolidadas SpA. LAPEF VI property ownership is highly Almonacid Ltda. and Inversiones Cumbres Ltda. (Hereinafter cial Officer (CFO) of Enjoy. dispersed. In fact, LAPEF VI has 99 limited partners, of “Almonacid” and “Cumbres”, respectively) and Entretenciones which only four have over 5% ownership in LAPEF VI. Consolidadas SpA, signed a shareholders’ agreement (the (d) During the 24-month period starting on the date of sig- “Shareholders’ Agreement”) through a private instrument ning and payment of the remaining shares that were The partners of Inversiones e Inmobiliaria Almonacid in English entitled “Shareholders Agreement” and signed not signed immediately following the Preferential Option Limitada are: on August 21, 2017. This agreement is not a joint action Period (January 5, 2018), Entretenciones Consolidadas agreement, but it regulates interactions between the parties SpA will be entitled to buy any shares in Enjoy that Al- as shareholders in Enjoy S.A., and among other issues related monacid or Cumbres want to dispose of in any securities to its management, it establishes the following significant exchange where Enjoy shares are listed, insofar as the- matters: se are disposals of no more than 7% of shares in Enjoy. For this, Almonacid or Cumbres (whichever wants to sell shares in Enjoy) must notify Entretenciones Conso- 44 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
lidadas SpA, who will have a period of 15 business days If the notified party does not make a bid or if its offer is from the notification date to exercise its purchase option not accepted by the notifying party, the latter may freely for these shares. In addition, if Almonacid or Cumbres dispose of its shares to a third party within a 12 month wants to dispose of shares in Enjoy, and as a conse- period starting on the reception date of the bid of the quence of this disposal, Entretenciones Consolidadas notified party, or on the expiration of the 30-day term SpA is not able to exercise its right to carry forward as that such party had to make a bid. mentioned below, Almonacid or Cumbres must notify Entretenciones Consolidadas SpA of this intention and (g) In the event that Entretenciones Consolidadas SpA pro- refrain from disposing of shares for a 9 month period poses selling all or part of its shares in Enjoy to a third starting from the notification date. Once this term has party, and that certain conditions are met, Almonacid transpired, Almonacid or Cumbres may dispose of these and Cumbres will be entitled to participate in this sale, shares. and therefore dispose of to a third party, together with Entretenciones Consolidadas SpA, that part of all shares (e) Once Almonacid or Cumbres has disposed of up to 7% initially offered to such third party, which corresponds to of shares in Enjoy, or if the 24 month period indicated in the pro-rata of its shares in Enjoy. letter (d) above has transpired, they can only dispose of shares in Enjoy in the following cases: (I) if the disposal (h) To the extent that it is permitted under Chilean law, in is in a single block that exceeds 5% of shares in Enjoy, certain cases and when certain conditions are met, if whether through any securities exchange that lists Enjoy Entretenciones Consolidadas SpA wants to transfer to a shares or outside of these, once they have offered to third party shares it owns in Enjoy, it may obligate Al- Entretenciones Consolidadas SpA to dispose of these monacid and Cumbres to sell shares they own in Enjoy. shares, in accordance with the following letter; and (ii) if If as a result of this exercise, the third party to which the disposal does not exceed 5% of shares in Enjoy. the shares are to be transferred were required to make a public bid for share purchase in keeping with current (f) Where allowed by Chilean law, prior to the disposal by legislation, these standards would prevail and both En- any party to the Shareholders’ Agreement of all or part tretenciones Consolidadas SpA and Almonacid and Cum- of its shares in Enjoy, such party that wishes to dispose bres would be entitled to sell their shares in the cited of its shares must notify the other of its intention. The public tender for share purchase. notified party will have a 30 day period to make an irre- vocable bid on the shares the notifying party wishes to All prior operations, if undertaken, will be verified in full dispose of. In this case, if the notifying party accepts the compliance with any applicable provisions of Law No. 18,045. bid, the shares will be transferred to the notified party. 45 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
• Identification of the 12 largest shareholders • Enjoy S.A. shareholders by type
As of December 31, 2018, the 12 largest shareholders were:
NAME NUMBER OF NUMBER OF % 36.9% 34.4% SUBSCRIBED PAID-IN SHARES ownership Others Advent SHARES (*) International
Entretenciones Consolidadas SpA 1,615,261,900 1,615,261,900 34.40%
Inversiones e Inmobiliaria Almonacid Ltda. 1,116,590,430 1,116,590,430 23.78%
BTG Pactual Small Cap Chile Investment Fund (new account) 513,428,576 513,428,576 10.94%
Compass Small Cap Chile Investment Fund 332,332,502 332,332,502 7.08% 28.7% Inversiones Cumbres Ltda. 229,732,525 229,732,525 4.89% Martínez Family Chile Small Cap Investment Fund 147,388,092 147,388,092 3.14% • Shareholders Santander Small Cap Investment Fund 145,875,944 145,875,944 3.11% As of December 31, 2018, 132 shareholders were registered Siglo XXI Investment Fund 139,495,259 139,495,259 2.97% in the Shareholder Registry of Enjoy S.A.
BTG Pactual Chile Acción Mutual Fund 95,777,576 95,777,576 2.04% • Major changes in share ownership BTG Pactual Chile S.A. de C.B. 84,861,193 84,861,193 1.81% January 5, 2018 marked the end of a preferential option Banchile Administradora General De Fondos S. A. 59,167,681 59,167,681 1.26% period, which began on December 7, 2017, for 2,337,500,000 shares, of which 829,730,951 were subscribed. Regarding Larrain Vial S.A. Corredora de Bolsa 32,578,040 32,578,040 0.69% the 1,507,769,049 remaining shares, i.e., those that were not subscribed by shareholders during the preferential option period, on January 8, 2018, the Board of Directors agreed to offer these to Entretenciones Consolidadas SpA at a price of Ch$48 per share.
Thereby, as of December 31. 2018, Entretenciones Consolidadas SpA holds 34.4% of Enjoy S.A., Inversiones e Inmobiliaria Almonacid Ltda. holds 23.8%, and Inversiones Cumbres Ltda. holds 4.9% of Enjoy S.A. 46 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
• Share ownership percentage of Enjoy S.A. held by Senior Executives and Directors of the Company as of December 31, 2018
NAME POSITION SHARES IN ENJOY S.A. OWNERSHIP INTEREST (%) IN ENJOY S.A. Antonio Claudio Martínez Seguí Director i) Partner with 25% share in Inversiones e Inmobiliaria Almonacid Ltda., Indirectly, through Inversiones e Inmobiliaria Almonacid Ltda. and which holds 1,116,590,430 shares in Enjoy S.A. Inversiones Cumbres Ltda., he holds 7.169%. ii) Partner with 25% share in Inversiones Cumbres Ltda.., which holds 229,732,525 shares in Enjoy S.A.
Francisco Javier Martínez Seguí Director i) Partner with 25% share in Inversiones e Inmobiliaria Almonacid Ltda., i) Indirectly, through Inversiones e Inmobiliaria Almonacid Ltda. and which holds 1,116,590,430 shares in Enjoy S.A. Inversiones Cumbres Ltda., he holds 7.169%. ii) Partner with 25% share in Inversiones Cumbres Ltda., which holds ii) Directly, he holds 0.138% of shares. 229,732,525 shares in Enjoy S.A. iii) 6,483,107 shares.
Ignacio Guerrero Gutiérrez Director No Ignacio Pérez Alarcón Director 3,000,000 0.06% Lucas Marulanda López Director No Wilson Lourenço da Rosa Director No José Mauricio Salgar Hurtado Director No Nicolás Bañados Lyon Director No Ana María Orellana Johnson Director No Juan Eduardo García Newcomb Senior executive 401,646 0.01% Eduardo Andrés Sboccia Serrano Senior executive 113,707 0.002% Roberto Andrés Mimica Godoy Senior executive 51,933 0.001% Sebastián Fernando Truffello Palau Senior executive 537,761 0.011% Eliseo Ignacio Gracia Martínez Senior executive 40,000 0.001% César Daniel Romero Sáez Senior executive No Daniela Bawlitza Vásquez Senior executive No Marcelo Tapia Cavallo Senior executive 73,876 0.002% Esteban Rigo-Righi Baillie Senior executive 59,242 0.001% Ignacio Sarmiento Senior executive No Mariano Sosa Senior executive No Gonzalo Grob Duhalde Senior executive 6,000 0.0001% Rodrigo Ulloa Beyer Senior executive No Javier Ghigliotto Caselli Senior executive No 47 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE
Stock Performance and Shareholder Rights
• Description of share series STATISTICAL INFORMATION Year Mandatory dividend Additional dividend Enjoy S.A., as of December 31, 2018, has 6,700,937,641 shares, of which 4,694,959,928 are 2014 Ch$0.424248250 per share Ch$0.282832167 per share subscribed and paid and 2,005,977,713 are issued. Enjoy S.A. has a unique share series. 2015 Ch$0.7634828816 per share Ch$0.5089885880 per share 2016 Not distributed Not distributed 2017 Not distributed Not distributed
• Share transactions
During 2018, the following share transactions by senior executives and related companies were registered:
NAME / Number of Unit Price Total transaction % final Date of Transaction Type of Transaction % operating share REPORTING ENTITY NAME OF BUSINESS Units Traded (CH$) (CH$) obtained Rodrigo Andrés Borquez Soudy December 04, 2018 73,876 Transfer 55.58 4,106,028 Rodrigo Andrés Borquez Soudy November 15, 2018 80,163 Transfer 57 4,636,628 Ignacio Pérez Alarcón February 08, 2018 2,131,656 Transfer 61 130,052,333 Ignacio Pérez Alarcón February 01, 2018 1,838,710 Transfer 61 113,613,891 Entretenciones Consolidadas SpA January 12, 2018 107,492,851 Acquisition 48 5,159,656,848 2.29 34.4 Entretenciones Consolidadas SpA January 09, 2018 1,507,769.049 Acquisition 48 72,372,914,352 32.11 32.11 Iván Simunovic Petricio January 05, 2018 1,148,628 Capital Subscription 48 33,714,042 Marcelo Daniel Tapia Cavallo January 05, 2018 36,781 Capital Subscription 48 1,765,488 0 0 Ignacio Pérez Alarcón January 05, 2018 3,470,366 Capital Subscription 48 166,577,568 0.07 0.07 Inversiones Porto Cervo Ltda. January 05, 2018 31,374,909 Capital Subscription 48 1,505,995,632 0.66 0.66 Pier – Paolo Zaccarelli Fasce January 05, 2018 920,523 Capital Subscription 48 44,185,104 0.01 0.01 Rodrigo Andrés Borquez Soudy January 05, 2018 36,781 Capital Subscription 48 1,765,488 Manuel Antonio Yevenes Flores January 05, 2018 14,712 Capital Subscription 48 706,176 Inversiones Planix SpA January 04, 2018 31,374,908 Capital Subscription 48 1,505,995,584 0.66 0.66 Eduardo Andres Sboccia Serrano January 03, 2018 56,612 Capital Subscription 48 2,717,376 0 0 Inversiones Porto Cervo Ltda. January 03, 2018 3,164,820 Sale 53.01 1,677,646,403 1.34 0 Miguel Andrés Miranda Manzur January 03, 2018 635,994 Transfer 53.01 33,714,042 0 0 Miguel Andrés Miranda Manzur January 03, 2018 630,609 Capital Subscription 48 30,269,232 0 0 Pier - Paolo Zaccarelli Fasce January 03, 2018 928,383 Sale 53 49,204,299 0.03 0 Esteban Rigo-Righi Baillie January 02, 2018 29,495 Capital Subscription 48 1,415,760 48 2018 ANNUAL REPORT CHAPTER 2 CORPORATE GOVERNANCE Summary of Comments and Proposals by Shareholders and Directors’ Committee
Main Recommendations of the Related Party _Committee to Shareholders _Transactions
Among its duties, the Committee must propose to the Board There are contracts signed between companies within of Directors names for external auditors and private risk the Enjoy group for Comprehensive Management and rating companies, which must be subsequently suggested to Administration Service Provision (fee), business agreements, shareholders. merchant checking accounts, real estate lease agreements, among others, which are framed within the customary In keeping with this, the Committee in its session held on transactions policy. March 6, 2018, agreed to propose to the Board of Directors to agree to propose to the Shareholders’ Meeting the hiring There is a lease agreement for corporate offices located of Deloitte and Ernst & Young, in that order of priority as in the municipality of Las Condes, signed between Enjoy external auditors for the company. Gestión Ltda. and Inmobiliaria Bicentenario S.A. The latter is controlled by Enjoy S.A. board members Francisco Javier In addition, the Committee agreed to propose to the Board Martínez Seguí and Antonio Martínez Seguí. of Directors that the Shareholders’ Meeting should designate as Risk Rating Agency International Credit Rating Compañía In 2018, Enjoy S.A. signed a consulting contract with Clasificadora de Riesgo Ltda. ICR and Clasificadora de Riesgo Inversiones Carmel Ltda. Javier Martínez Seguí is partner Humphreys Limitada. with 99% share ownership in Inversiones Carmel Ltda. and is also Chairman of Enjoy S.A. 49 2018 ANNUAL REPORT
“Enjoy implemented 3. CORPORATE a plan to bring the world’s most ACTIVITIES cutting-edge gaming AND technology to Latin BUSINESS America” 50 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS Description of the Industry
The Gaming Industry in Latin America
The gaming industry is in constant growth and is an • Regulatory framework for gaming casinos in Chile important part of the economy in Latin American countries, mainly in association with tourism, as a In Chile, the casino industry began over 80 years ago with complement to the entertainment services available. the authorization to establish a casino in the city of Viña del It generates thousands of jobs and investments and Mar. Following this milestone, and through to the early 1990s, contributes significant tax revenues. six (6) additional licenses under the format of municipal concessions were authorized in different tourist cities, in the Currently Enjoy operates in three of the major gaming following chronological order: Arica, Puerto Varas, Coquimbo, markets in Latin America, each of which has its own Iquique, Pucón and Puerto Natales, thereby constituting an regulatory framework. A valuable component of Enjoy’s industry of seven casinos throughout Chile. leadership is the solid value proposal that, when combined with this geographical reach, makes us able to absorb In 2005, Law No. 19,995 was enacted, establishing the ongoing demand throughout the year as a chain, mitigating terms and conditions for the Authorization, Operation and seasonal variations. Oversight of Gaming Casinos, and defining (Art. 3) as games of chance only those contained in the Gaming Catalog of the Chile Superintendency of Gaming Casinos, such as: slot machines, _ roulette, card games - especially those derived from poker, blackjack and bacarrat - dice games, such as the traditional The Chilean gaming market is composed of lotteries, bingo craps and, finally, bingo. halls, casinos, slot machines and race tracks. In the casino industry there are currently 24 gaming licenses operating Through this law, the State of Chile promoted the gaming in Chile. Seven (7) of these are municipal concessions and casino industry, expanding with 18 new licenses, each with 17 are operating licenses granted under Law No. 19,995 a duration of 15 years and limiting the number of gaming from 2005, which were granted through bids for 15-year casinos that can operate to a maximum of 24 nationally. investment projects. In terms of geographic reach, Law No. 19,995 establishes There are currently two main players in the Chilean industry: that each region may have up to three casinos, with a Enjoy and Sun Dreams. geographical restriction that indicates they must be at least 70 km apart from each other, regardless of the region in which they are located. The only exception is in the city of Arica, a municipality where these criteria do not apply. 51 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
In 2018, Enjoy was awarded the licenses to continue casino operations in coquimbo, viña del mar and pucón and gained a new license for the city of puerto varas.
Between 2005 and 2008, following a licensing process, 18 In Chile, in accordance with Law No. 19,995 and its Regarding the process to grant operating licenses for gaming operating licenses were granted for new gaming casinos, regulations, the main rights and responsibilities of operating casinos in the municipalities where casinos are currently in located in the municipalities of Calama, Antofagasta, Copiapó, companies are the following: operation, i.e., Arica, Iquique, Coquimbo, Viña del Mar, Pucón, Ovalle, Rinconada, San Antonio, San Francisco de Mostazal, Puerto Varas and Puerto Natales, the technical and economic Santa Cruz, Talca, Pinto, Talcahuano, Los Ángeles, Temuco, • Develop games that have been officially incorporated in bids were heard on September 25 for the municipalities of Valdivia, Osorno, Castro, Coyhaique and Punta Arenas. It is the gaming catalog. Arica, Pucón and Puerto Natales; September 29 for Puerto important to note that in 2013, the casino operator located • Use slot machines and gaming implements that have Varas; October 4 for Iquique and Coquimbo and October 12 for in the municipality of Pinto waived the license, after which a previously been ratified in the registry kept by the Viña del Mar. tender process began, resulting in the granting of a gaming Superintendency of Gaming Casinos. casino license in Chillán in 2016. In 2017, construction began On June 8, 2018, the Economic Bid Opening Hearing was • Operate only in the establishment identified in the and its opening was announced for the first quarter of 2019. undertaken for all project bids. The following gaming casino operating license. operating licenses were granted to the Enjoy companies: Law No. 19,995 also establishes the creation of the • Keep a permanent liquidity reserve that is sufficient to Casino del Lago S.A (Pucón), Casino de Puerto Varas S.A. Superintendency of Gaming Casinos (SCJ), for the purpose respond to the daily bets placed in the establishment. (Puerto Varas), Casino de la Bahía S.A. (Coquimbo) and Casino of regulating the casino industry generated from the new • Operate every day of the year, except those days del Mar S.A. (Viña del Mar). In conclusion, Enjoy is retaining its regulation, with the mission of promoting an efficient, established as exceptions by law. In any case, no gaming three existing casino licenses and gaining one additional one. responsible and transparent development under high casino, whatever the day or time of year, may operate for standards of regulatory compliance. This Superintendency less than six hours a day. Notwithstanding the aforementioned, on February 15, regulates and oversees casino operations, with a jurisdiction • Keep a certain amount of minimum positions filled among 2017,the SCJ passed down Circular No. 084, which extends limited to gaming centers created as a result of Law No. its gaming personnel, which should be registered on the the concessions of municipal casinos, enabling the current 19,995. Casinos that operate under municipal concessions franchisees to operate after December 31, 2017, until the date payroll kept by the Superintendency of Gaming Casinos. fall under the regulatory and disciplinary powers of their on which the new licenses begin to operate, i.e., until the date • Offer and implement those additional services respective municipalities. All of this is in place until the on which the SCJ has extended the certificate that documents start of operations of the new licenses granted by the contemplated in the respective operating permit. compliance with all the legal and regulatory obligations Superintendency of Casinos is authorized, following the tender necessary to start up a gaming casino. process that culminated in 2018. On August 11, 2015, Law No. 20,856 was published, modifying Law No. 19,995, and among other aspects, extending the Kuden S.A. and the Municipality of Pucón signed an Extension As the entity responsible for granting, renovating and revoking operations of municipal casinos until December 31, 2017. In Agreement for the Municipal Casino Concession on November gaming casino operating licenses in Chile, SCJ is also addition, starting January 1, 2018, all casinos that until such 23, 2017. Likewise, Campos del Norte S.A. did the same with responsible for oversight and taking legal action regarding the a time were municipal will be subject to the same regulation the Municipality of Coquimbo on December 22, 2017. Antonio implementation or practice of games of chance developed as the rest of the industry, giving 10% of their revenues to Martínez y Cía signed the extension of the Viña del Mar Casino outside the law by unauthorized people or entities. the regional government and at least 10% to their respective Concession with the Municipality of Viña del Mar on December municipality. Law No. 20,856 grants the right to municipalities 27, 2017. that currently have municipal casinos to be home to casinos for 3 consecutive periods of 15 years each. 52 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
• Revenues from the Casino industry in Chile Market Share in Chile - Year 2018 Year 2018 Based on data from the Superintendency of Gaming Enjoy (6) Sun Dreams (6) Casinos (SCJ), gross revenues from gaming (Win) for Gross Gaming revenues (Win) - Total Industry 2018 exceeded Ch$481 billion (USD 754 million), which Ch$481,924,125,268 38.8% 37.6% represented a growth of 5.4% of the total win for the (USD 754,238,636) industry over 2017. Win SCJ Casinos Win Municipal Casinos Ch$335,698,618,938 Ch$146,225,506,259 Likewise, the SCJ reported that in 2018, the gaming (USD 524,572,964) (USD 229,665,673) casinos authorized under Law No. 19,995 generated tax revenue of Ch$54,436,963,612 (USD 85,063,251) through Average spend per visit 20181 specific gaming taxes, plus Ch$53,598,939,158 (USD Ch$61,139 83,755,347) from VAT on gaming. (USD 95.5) Clairvest-Sol (3) Tax collection SCJ Casinos 13.0% Ch$108,035,902,770 Latin Gaming (3) Others (4) (USD 168,818,599) 4.0% 8.6%
Source: SCJ, Casino Industry Statistical Bulletin (Dec. 2018 and Dec. Source: Dec. Industry Report 2018 2017)
1Note SCJ: It is not possible to compare, index or total the information provided by the municipal casinos regarding visit numbers with that registered by the authorized industry under Law No. 19,995, due to the fact that they do not measure them in a standard manner. For the same reason, average spend per person cannot be calculated for the municipal casinos. 53 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
Uruguay For casinos operated by a private entity, Decree No. 588/975 Likewise, the earnings obtained in games of chance and horse _ (dated July 24, 1974) and the amendments, rules and races (once the bet made has been subtracted) will be taxed procedures establish the rules that a franchisee should follow. by income tax (IRPF and IRNR). Insofar as the winnings are no The gaming industry in Uruguay is made up of lotteries, This decree also regulates the public tender process for greater than 100,000 Indexed Units (UR$ 402,700) or are lower casinos, game rooms, horse racing, and sports bets. selection of potential franchisees. than 71 times the amount of the bet, they will be exempted from paying this tax. National Lottery winnings, results from The gaming market in Uruguay is very well developed and The Enjoy Punta del Este casino obtained a license to operate raffles and registrations in tournaments of games of chance are shows one of the highest levels of penetration in comparison privately and signed a contract directly with the Uruguayan also exempted from IRPF and IRNR. In addition, in cases where with other markets in Latin America. A large part of the market government. The license granted has the sole purpose of the other tax applies, the IRPF is waived. is made up of Brazilian and Argentine tourists who travel to creating an entertainment complex with the exclusive purpose Uruguay due to its attractive tourist destinations and the lack of of operating a 5 star hotel. In keeping with the Franchise • Revenues from the Casino industry in Uruguay opportunities for gaming in Brazil, where it is currently illegal. Contract, to establish a new private gaming casino in Punta Based on Company estimates taken from public information, del Este (in areas clearly cited in this document), in addition bets made in Uruguay - through lotteries, casinos, sports bets The two only private operators in the Uruguayan industry are to complying with relevant legal requirements, it must have and horse races - represented 1.35% of GDP, reaching USD 813 Enjoy and Codere, with gaming operations in Punta del Este an investment in a luxury hotel equal to or greater than USD million and exceeding USD 809 million consigned in 2017. The and Montevideo, respectively. 150,000,000 for the selection procedure beginning between most popular State-owned games are Quiniela and Cinco de January 1, 2016, and December 31, 2020. If the selection Oro, but there has also been an increase in online gambling. • Regulatory framework for gaming casinos in Uruguay procedure begins between January 1, 2021 and December 31, In Uruguay, the right to operate a private gaming casino can 2036, the investment should be equal to or greater than USD Tax revenue from State casinos managed by the National be granted by the State (through Executive power) or by the 100,000,000. Casino Directorate grew 3% (measured in Uruguayan pesos) in 1 Inspectorate of Montevideo (IM). The State or the IM can 2018, reaching USD 204.3 million . develop casino activities, whether directly under concession or Enjoy Punta del Este currently has the minimum obligatory under a mixed system. In addition, the State has a monopoly payment obligation of USD 7.4 million or 7% of gross gaming In Enjoy Punta del Este, 2018 closed with gross gaming for the following activities, lotteries, casinos, game rooms and revenues in 2018. This structure will increase slightly over the revenues of USD 126,670,144. horse races. next 20 years, with 7% in 2019, reaching its highest level of 7.75% of gaming revenues at USD 8 million in 2036. For State Casinos, the competent authority for implementing and controlling their activities is the General Casino Directorate Starting in January 2018, a new specific tax added to those (Dirección General de Casinos, DGC), a department of the already mentioned went into effect, which taxes bets Ministry of Economy and Finance. Private casinos granted made on electronic machines used for games of chance or by the State (such as Enjoy Punta del Este) are supervised automatic bets with immediate payout installed in casinos or by the Ministry of Economy and Finance through the Internal entertainment rooms. The new tax applies a rate of 0.75% to Audit of the Nation, a department of the Ministry of Economy the amount of the initial bet, but does not consider future bets and Finance. The DGC can operate a State casino or can sign resulting from winnings obtained by the player. agreements with private parties (hotels), but the DGC will always be the casino operator. 1 Source: Diario El País, “In Uruguay, bets were placed for USD 813 million in 2018”, January 25, 2019. 54 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
Argentina The second regime contemplated in Provincial Law No. 5,775 is Market Share in Mendoza - Year 2018 _ privately operated, which enables the installation and operation of game rooms in hotels in the “International five stars” category, Arena Argentina is the leading gaming casino market in Latin America. which arise from new enterprises and are located within the IPJYC Its gaming industry includes lotteries, game rooms and horse urban fabric of the cities of Mendoza, Godoy Cruz, Las Heras and 17% 16% races, and its activities are regulated on a provincial level. Most Guaymallén. Based on this provincial law, only 4% of the total casinos and game rooms are directed by private operators. surface area of the establishment can be destined towards game In addition, in the provinces of Chaco, Misiones, San Luis, rooms. Seven casinos operate permanently under this system, one Tucumán, Neuquén, Río Negro, and Entre Ríos online gambling of them being Enjoy Mendoza. Licenses granted to private parties to is a regulated activity and starting in 2019, it will also be operate, including Enjoy, are extended for life, with the exception of regulated in the Province and City of Buenos Aires, following its the Casino located in Hotel Park Hyatt Mendoza, which has a license approval in December 2018. The city’s lottery was able to make that expires in 2033. Cóndor a call for tender and grant licenses for private companies to implement online gaming, and the amount of licenses will be During the second half of 2018, the Park Hyatt Mendoza casino 16% Sun Plaza determined based on the interested parties who bid. changed operator after Sun Dreams S.A. acquired the Argentine 24% company Nuevo Plaza Hotel Mendoza S.A. (Operated by Park Hyatt • Regulatory Framework for Gaming Casinos in Argentina Mendoza and its casino). and in the Province of Mendoza Enjoy In Argentina, the regulation of games of chance is a faculty of Since 2017, the income tax law and its rate (which is national) went 27% each province. Therefore, each jurisdiction establishes its own from 35% to 41.5%; and a specific tax for slot machine bets was rules and regulations that apply to all license holders. created.
In the province of Mendoza, where Enjoy operates a gaming In the province of Mendoza, clandestine gaming is considered a casino, granting of concessions for implementing games of serious offense chargeable with jail time of between 3 and 6 years. chance is regulated by Provincial Law No. 5,775 of 1991 and its Incorporation of this offense into criminal law is a useful tool in regulatory Decree No. 2235/1992, and the Provincial Institute of the fight against clandestine gambling and respects the Province’s Games and Casinos (IPJyC in Spanish) is the entity responsible monopoly over determining the scope and realm of gaming. for regulating gaming activities.
Currently, two casino operation models coexist in Mendoza. Casino industry revenues in Mendoza, Argentina - Year 2018 The first refers to those whose operation is the responsibility of IPJyC, who provides the machines and services to a third Casino Table games Slot machines Total % growth party through public tender. Currently, five game rooms operate (AR$) (AR$) (AR$) AA under this system: the Mendoza Casino headquarters and 4 Casino de Mendoza IPJyC 35,991,137 318,426,983 354,418,120 25% additional ones. Sun Plaza 38,464,844 491,641,595 530,106,439 19%
Enjoy Mendoza 95,936,964 497,578,802 593,515,765 36% Casino Cóndor 69,111,180 286,574,923 355,686,103 21% Arena Maipú 64,698,721 305,174,941 369,873,662 25% TOTAL 304,202,846 1,899,397,244 2,203,600,090 21% Source: IPJyC website 55 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
• Enjoy casinos operating licenses
CASINO LOCATION OPERATOR PERIOD OF VALIDITY FOR OPERATING LICENSE OR MUNICIPAL CONCESSION CHILE Antofagasta, Operaciones El November 11, 2023 Región de Antofagasta Escorial S.A. CHILE Coquimbo, Campos del Norte Until the startup date of the new Región de Coquimbo S.A. operator of the gaming casino.
CHILE Rinconada, Casino Rinconada August 29, 2024 Región de Valparaíso S.A. CHILE Viña del Mar, Slots S.A. Until the startup date of the new Región de Valparaíso operator of the gaming casino
CHILE Santa Cruz, Casino de September 12, 2023 Región del Libertador Bernardo O’Higgins Colchagua S.A.1 CHILE Pucón, Región de La Araucanía Kuden S.A. Until the startup date of the new operator of the gaming casino.
CHILE Castro, Rantrur S.A. May 08, 2027 Región de Los Lagos ARG Mendoza Cela S.A. Life
URU Punta del Este Baluma S.A. December 31, 2036
1 En 2017 Enjoy anunció su intención de vender la participación minoritaria (40%) en esta propiedad y traspasó la operación a contar del 1 de enero de 2018. 56 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
For Enjoy, being part of the tourism industry and reaffirming our commitment to its sustainable The tourism and hotel development is essential, as this sector is one of industry in Latin America the main engines for growth in the communities where we operate.
Tourism continues to be one of the fastest growing industries in the world. After record global growth (7%) in 2017, marked by historic numbers of visitors in countries like Chile and Uruguay, the arrival of international tourists reached 1.4 billion around the world in 2018.1
2018 closed with a 6% increase in the arrival of international tourists, above the 3.7% growth in the global economy, consolidating the strong results from 2017 and showing the second strongest year since 2010.
The long-term outlook of the World Tourism Organization (UNWTO) published in 2010 indicated that levels would only reach 1.4 billion in 2020; however, firmer economic growth, more affordable airfares, technological changes, new business models and greater ease in obtaining visas have accelerated this growth and moved up this milestone.
Based on UNWTO data, in relative terms, the Middle East (+10%), Africa (+7%), Asia Pacific and Europe (both with +6%) led this growth in 2018. The American continent (+3%) received 217 million international arrivals in 2018, with mixed results in all destinations. Growth was led by North America (+4%), followed by South America (+3%).
For 2019, UNWTO expects the growth to return to historic trends, with 3% to 4% increases.
1 Source: World Tourism Organization (UNWTO)’s Barometer 57 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
_Chile
In 2018, for the third year in a row, Chile was recognized as the best adventure tourism destination in the world by World International arrivals in Chile – year 2018 Travel Awards, strengthening its position as an attractive destination for people in distant markets. However, this acknowledgment is not enough to maintain the growth in numbers over the last few years.
In contrast with the global increase in tourism, between January and December 2018, Chile received 5.7 million 5,722,928 -11,3% (5,722,928) foreign tourists, which is a reduction of -11.3% growth compared to the same period in 2017.[1] Tourists
This drop was heavily influenced by the reduction in arrivals from Argentina. Between January and December 2018, Total arrival of tourists (in millions) 2.4 million (2,422,235) Argentine tourists came to Chile, a total reduction of -27.1% over the course of the year. This 2016 2017 2018 decrease is partly explained by the very high level of tourism TOTAL 5.64 6.45 5.72 in the previous year. Argentina 2.90 3.32 2.42 The drop in Argentine tourism was offset to a certain extent Brasil 0.44 0.54 0.59 by the increase in the arrival of tourists from other markets: EE.UU. 0.21 0.21 0.22 There was an +8.1% increase in Brazilian tourists to Chile for the period from January to November, while North American Europa 0.45 0.48 0.50 tourists increased +5.3%, those from Europe +4.4%, Australians +1.3% and tourists from China +12.4% during the same period. In fact, if Argentine tourists are excluded, Domestic tourism reaped the benefits of lower airfares, thanks foreign tourists increased by 5.6% over the course of the to the arrival of low cost airlines, which has generated an year. increase in travel within Chile.
Under the slogan “Chile es tuyo” (“Chile is yours”), Sernatur’s Department of Tourism Promotion has been carrying out a series of activities to promote domestic tourism. 58 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
_Uruguay
Tourism is an activity that has slowly been gaining ground in the Uruguay domestic product. There is a long-term national International arrivals in Uruguay – year 2018 tourism plan that offers a shared public-private vision of the development of tourism in Uruguay. The brand “Natural Uruguay” is carrying out an active promotional campaign to position Uruguay internationally as a tourist destination. In addition, specific tourist incentives have been designed, such as the reimbursement of VAT for many products and services. 3,711,948 -5,8% growth In 2018, 3,711,948 visitors entered Uruguay, 5.8% fewer Tourists than in the same period in 2017, when there were 3,940,790 visitors. Although the figures reflect the impact of the economic crisis in Argentina on Uruguayan tourism, the Total arrival of tourists (in millions) Uruguayan Ministry of Tourism rated this period as “more than satisfactory.”6 2016 2017 2018 TOTAL 3.32 4.20 3.71 In 2018, the average tourist stay was 5.7 days. The number of Argentine visitors recorded for this period was 2,319,640, Argentina 2.10 2.70 2.31 12.7% fewer than those recorded in 2017, when there Brasil 0.43 0.50 0.46 were 2,656,285 visitors. Brazilian visitors for the period EE.UU. 0.05 0.06 0.06 totaled 466,673, 7.5% fewer than in 2017, when there were 504,488. Paraguayan visitors totaled 38,685 compared to Europa 0.74 0.94 0.88 43,501 in 2017; and Chileans numbered 61,369, compared to 64,566 in 2017.
In 2018, Montevideo continued to be the main tourist destination chosen, with 1,051,593 visitors, followed by Punta del Este with 727,421 and the thermal coast with 605,547 visitors.
6 Source: statements by the Minister of Tourism in Uruguay, Liliam Kechichian, at a press conference in January 2019. 59 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
_Argentina
Between January and November 2018, a total of 2,465,400 non-resident tourists were recorded in International arrivals in Uruguay – year 2018 Argentina, equal to a 6.9% increase compared to the same period the previous year. 89.5% of all tourists to Argentina arrived at the Ezeiza and Aeroparque airports in Buenos Aires.1
Of all tourists, Brazilian visitors totaled 68,700, a figure that represents an inter-annual increase 2,465,400 6,9% of 16.9%; followed by people from Europe with a growth positive variation of 8% (60,200 people). This group Tourists was followed by the arrival of 44,800 tourists from the “Rest of America,” representing an inter-annual On the other hand, an important focus for Argentina is its consolidation as a increase of 13.3%; and finally a total of 35,900 tourist destination for events. In 2017 it ranked 21st among the top organizing Chilean tourists arrived, an increase of 34.0%. countries for international tourism events and meetings as reported by the International Congress and Convention Association (ICCA), surpassed in Latin The average stay of non-resident tourists was 11.7 America only by Brazil. nights. The longest average stay was registered by the “Rest of America” block of tourists, with 17.2 Argentina accounts for 17% of international conventions held in Latin America nights, followed by Europe with 15 nights. and has 28 locations for event tourism that are included in the ICCA ranking, including: CABA, Córdoba, Mendoza, Rosario, Salta, Mar del Plata, Resistencia, The currency devaluation in Argentina in May 2018 Bariloche.. began to impact travel abroad, and from June onwards, this represented a significant two-digit decrease starting in August. With regard to domestic tourism, between January and November 2018, over 1.49 million people took direct flights to other cities within the country, representing growth of 112% over the first eleven months of 2015. As a measure to promote domestic tourism, the Argentine Ministry of Transportation and the Secretariat of Tourism announced reduced prices on domestic flights for dates between March and June 2019.
1 Source: INDEC, International Tourism Statistics Estimated numbers through November 2018. 60 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
Industry trends
SUPPLY TRENDS • Increased supply of rooms • Incorporation of technologies in restaurant production Around the world today, there is an increased supply of processes • Consolidation of tourist destinations rooms not in traditional hotels, based on collaborative Restaurant kitchens and especially high-production The industry has tended to develop comprehensive economic models like Airbnb, which in Chile alone grew kitchens aimed at meeting the demands of convention entertainment projects that, in addition to casinos, offer a 77% between 2016 and 2017.1 This trend has not yet centers have been incorporating new technologies in their series of new complementary facilities and services, such affected room occupancy in hotels, nor has it affected production processes. For example, systems like Cook as hotels, restaurants, and convention centers, to name a prices, because it initially focuses on a customer segment & Chill, through which food maintains its organoleptic few. As a consequence of this, the cities that house these that looks for something other than the services and qualities and safety, leaving its flavor and texture intact facilities are strengthened as new vacation and urban comforts offered by the high-level hotel industry. In in preparations. Together with increased safety in food destinations for domestic, receptive and business tourism. addition, at least in Latin America, overcoming the distrust handling, these technologies also guarantee better culinary in virtual services is seen as a challenge for those offering quality. • More gaming technology for increased interaction these services. However, models like Airbnb are driving the Technological development and innovation have become traditional hotel sector to continuously improve its service DEMAND TRENDS the cornerstones of the gaming business, especially in slot levels in order to differentiate themselves, especially machines. This type of game is moving towards greater in Santiago, Chile, where there has been an important • Increase in the demand for entertainment interaction during the game, integrating elements of skill, increase in the five-star hotel category. Regardless of the economic cycles, the level of social making it attractive to different customer segments. In development reached in the region and primarily in Chile terms of form, this new technology tends to have an Asian • New customer communication strategies has resulted in greater demands and increased spending influence, with designs inspired by Asian cultures, always Aware of the growing competition in the industry to attract on leisure and recreational activities. The implementation linked to good luck. or retain customers, campaigns are moving away from the of gaming casinos under the modality of comprehensive traditional format to become an entertainment experience projects in Chile has meant that these entertainment • New market segments in and of themselves, using the advantages of today’s alternatives are considered centers of social recreation The gaming industry continues to grow and at the same digital channels. The incorporation of technologies in for the whole family, with multiple service and diversion time, new customer niches are emerging that will promote customer communications through apps or georeferencing options. Meanwhile, their consumption has become the development of an increasingly less homogeneous seems to be a global trend. In addition, from the popular and widespread, penetrating new market niches supply. The trend is towards customer fragmentation and artificial intelligence algorithms that profile the habits and diverse socioeconomic strata. segmentation, attending to diverse specific criteria and out and preferences of customers, the trend will be to build of this, designing proposals that meet the new needs. customer loyalty through a “tailor-made” offer. • Strengthening responsible gaming policies The public is placing increasing demands on operators in the gaming sector to make a commitment to research, publicize and apply responsible gaming policies. Currently only a few operators in the industry (including Enjoy) have a clear policy on this subject that goes beyond the
1 Information provided by FEDETUR, based on information available on the AirDNA platform. 61 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
legal requirements, and the trend is for all operators to • Digital tourism They prefer neutral information, like advice and work together on this matter so as to report, orient and Technological development has contributed to profiling suggestions from other tourists and how they rate hotels raise awareness among the population about the risks of a multiplatform, hyperconnected tourist with specific or destinations. addiction to gaming, its causes and preventive behavior. needs when booking his or her trip. This is leading to a review of the way in which the tourist industry is selling • Millennials • Increasing international travel and distributing its services, and the way in which it In a sector as dynamic and competitive as tourism, International tourist numbers around the world could embraces new technologies in order to meet the demands it is crucial to look ahead for opportunities to launch increase by 3.3% per year between 2010 and 2030 to for increasingly detailed information in real time and avoid products that are attractive to new groups of consumers. reach 1.8 billion in 2030, according to the long-term losing competitiveness. Millennials (the generation born between 1978 and 1999) forecast in the UNWTO report Tourism Towards 2030. are a segment that has shown an openness to connect To date, vacation or recreational travel or other forms of • Hotel 4.0 with other travelers and that operates strongly through leisure represent over half the arrivals of international The new needs of travelers are leading hotels to digital and social channels. It is a challenge for the industry tourists. innovate in the way in which they provide their services to charm this generation and incorporate them as future and experiment with new technologies. Mike Webster, workers in the industry. • Sustainable destinations and segmentation of the senior vice president and CEO of Oracle Retail & Oracle tourism services available Hospitality, gave a presentation at an international The tourist profile has changed and there is ever more conference in 2015 on the 7 transforming technologies value being placed on sustainable destinations, with for the Hospitality industry: the wearables (like the Magic a parallel demand for differentiated and specialized Band bracelets from the Disney parks and hotels); facial tourism services. There is a trend towards engagement recognition, voice-activated room services; 3D printing with destinations to create new routes or strengthen for modular constructions; robotic services, artificial particular elements in each region. This can be seen in intelligence and virtual reality. the development of tourist products such as wine tourism (in several regions of Chile and Mendoza, Argentina) or • Changes in the way we shop astrotourism (in cities in northern Chile like Coquimbo and Over the past few years, there has been a change in Antofagasta), where the tourist is key to the development purchasing habits in the hotel sector. On the one hand, model. Based on the conclusions of the enotourism there is less anticipation behind a purchase and electronic conference organized by UNWTO in 2016, while channels and social networks have joined full force. international tourism grows at an average annual rate of Tourism consumers are more demanding, increasingly 4%, wine tourism is growing at 16%.7 looking for more personalized tourist products and intelligent services that offer them high-quality, tailored information at any time and place almost in real time.
7 Source: FEDETUR, Tourism barometer. 62 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS Description of the business
Enjoy S.A. develops its business through three subsidiaries: BUSINESS SEGMENT GEOGRAPHIC SEGMENT
(i) Enjoy Gestión Limitada, which develops the areas of Corporate activities are mainly organized around its primary a) Domestic management, consulting, services, tourist operation, businesses. Based on this, Management has established b) International casinos, hotels, dining and shows. As a business agency, three operating segments and one corporate segment: this company provides comprehensive consulting on The geographic segment corresponds to the geographic area the management and administration of gaming casinos a) Gaming: Gaming casino operations, both in Chile and where the points of sale are physically located for Gaming, and hospitality and entertainment services. It also abroad. Hotel, Shows and Food & Drinks, both in Chile and abroad. provides consulting to the back office of Antonio Martínez b) Non-Gaming: Hotel and restaurant operations, both in y Compañía, Masterline S.A., Slots S.A., Campos del Chile and abroad. The Company and its subsidiaries do not have revenues to Norte S.A., Kuden S.A., Operaciones El Escorial S.A., c) Real Estate Investment: This represents real estate disclose associated with separate external customers. Inversiones Vista Norte S.A., Casino Rinconada S.A., business in Chile, including management and rental. All Rantrur S.A. revenues are to related companies in the Gaming and All revenues from regular activities of the companies that Non-Gaming segment. constitute the Enjoy group are generated in the country (ii) Inversiones Enjoy SpA develops investments and d) Corporate: This primarily includes the company’s back where they operate (Chile, Argentina and Uruguay), and no transactions abroad. office activities and the provision of services to the other revenue or service is undertaken with markets other than segments. those described above. (iii) Inversiones Inmobiliarias Enjoy SpA develops the real estate business. 63 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
Properties
Through subsidiaries of Inversiones Inmobiliarias Enjoy • Coquimbo Comprehensive Project, located in the • Chiloé Comprehensive Project, located in the SpA. the company holds real estate and land where municipality of Coquimbo, Region of Coquimbo (owned by municipality of Castro, Region of Los Lagos (owned by comprehensive gaming activities and projects are developed Inmobiliaria Proyecto Integral Coquimbo SpA). Inmobiliaria Proyecto Integral Castro SpA). in Chile. • Rinconada Comprehensive Project, located in the • Hotel Enjoy Park Lake located in the municipality of Real estate where comprehensive projects and casinos are municipality of Rinconada, Region of Valparaíso (owned by Villarrica, Region of La Araucanía (lease). located: Inmobiliaria Rinconada S.A.). • Hotel Enjoy Puerto Varas, located in the municipality of • Enjoy Pucón Casino & Resort, located in the municipality Puerto Varas, Region of Los Lagos (lease). • Antofagasta Comprehensive Project, located in the of Pucón, Region of La Araucanía (owned by Inmobiliaria municipality of Antofagasta, Region of Antofagasta Kuden SpA). • Hotel and Casino Enjoy Mendoza (owned by Cela S.A.). (financial lease agreement; Inmobiliaria Proyecto Integral Antofagasta S.A.). • Enjoy Punta del Este Resort & Casino (owned by Baluma S.A.).
ROOMS AND HOTEL’S STAR SLOT TABLE BINGO RESTAURANTS CONSTRUCTED COUNTRY BUSINESS UNIT OTHER SERVICES APARTMENTS. RATING MACHINES GAMES POSITIONS AND BARS SURFACE AREA (m2) Convention center, Spa, pool, OVO Enjoy Antofagasta 92 780 42 124 9 37,116 Nightclub Convention center, Spa, pool, OVO Enjoy Coquimbo 111 919 28 70 9 37,220 Lounge, OVO Beach Convention center, Spa, pool, OVO Enjoy Viña del Mar 60 1,500 71 148 11 34,000 Nightclub Convention center, Spa, pool, tennis, Enjoy Santiago 120 1,030 64 100 7 35,468 outdoor park Chile Convention center, pool, ski resort, Enjoy Pucón 272 453 31 - 7 34,518 tour operator
Enjoy Park Lane Villarrica 70 - - - 3 Convention center, Spa, pool 7,500
Convention center, Spa, pool, OVO Enjoy Chiloé 72 246 17 36 5 15,799 Nightclub
Enjoy Puerto Varas 91 - - - 2 Convention center, Spa, pool 14,664
Argentina Enjoy Mendoza 180 529 19 - 4 Convention center, Spa, pool 38,000
Convention center, Spa, pool, OVO Uruguay Enjoy Punta del Este 294 537 64 - 9 75,524 Nightclub, OVO Beach 64 2018 ANNUAL REPORT CHAPTER 3 CORPORATE ACTIVITIES AND BUSINESS
Equipment Insurance
The company Enjoy Gestión Limitada coordinates the All Enjoy subsidiaries have the respective associated operators of the casinos and auxiliary services and insurance and therefore the company has no owners of the gaming machines and equipment, and insurance policies of any type taken out or endorsed therefore the Company does not have any machinery in its name. and equipment among its assets. Trademarks and patents Main suppliers The company has no relevant dependence on brands, There are no suppliers who individually represent at patents, royalties, representations or other granted least 10% of all purchases made by Enjoy S.A. during by third parties. The Enjoy brand belongs to Enjoy the year for the supply of goods and services. Gestión Limitada, subsidiary of the company.
Main customers
None of the company’s customers represent more than 10% of its revenue.
Main domestic and foreign banks
ARGENTINA BRAZIL CHILE COLOMBIA UNITED STATES SWITZERLAND URUGUAY Banco Industrial y Comercial de China BRADESCO Banco Santander Banco Santander M.Y. Safra Bank Cim Banque Banco Itaú BBVA Frances S.A. Banco Santander Banco BTG Pactual Chile Banco Davivienda Citibank USA Banco Santander Banco Santander Rio S.A. Banco Security Banco República Oriental del Uruguay Banco de Crédito e Inversiones Banco de Chile BBVA/Scotiabank Chile Banco Consorcio Banco Estado Banco Internacional Banco Itaú/Corpbanca 65 2018 ANNUAL REPORT
“We take our 4. ANNUAL business practices to the highest PERFORMANCE standards”. 66 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
2018 in numbers
10 3 1 destinations countries great brand
New In June 2018, the tender process for casino operating licenses in Chile was finalized, and Enjoy wasawarded the 4 licenses that it applied for, and casinos therefore it will continue to operate the Coquimbo, Viña del Mar and Pucón casinos and will add a new license in Puerto Varas.
5,994 336 Slot machines Table games
Community development Most Important _ Poker Club Ch$52,102 million _ in contributions It has been 10 years since we launched Via gaming taxes and the ENJOY POKER SERIES circuit, which municipal shares today is present in Chile, Uruguay and Argentina. Almost 2,000 unique players celebrated alongside us in over 300 tournaments. 67 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
More than 1.7 million _Enjoy Club members
10 years Promoting responsible entertainment We celebrated the first decade of our Jugados Por Ti/ 34 168 Jugados por Vos (“We bet on you”) program, with orientation new counselors Active trained in responsible gaming counselors and support tools for customers and their families.
UF3 million Transparent was the amount of the local bond issued in 2018 and ethical _leadership
91 2,558 preventive employees trained in the prevention of money audits laundering and terrorism financing 68 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
10 1,432 350,000+ hotels Rooms and Guests per year apartments
Best Of Mendoza’s Wine S Distinction for “Loved by Guests Awards” Tripadvisor Certificate of #GuestsLoveUs Tourism Award for Hotel Sustainable Tourism, 2018 from Hoteles.com Excellence 2018 “Guest Review Awards” Sheraton & Casino Enjoy from the National Tourism Hotel Enjoy Santiago Hotel Enjoy Coquimbo 2018 from Booking.com Mendoza Service for the Enjoy Chiloé Hotel Enjoy Coquimbo “Accommodations” category Hotel Hotel Enjoy Santiago Hotel Enjoy Chiloé
“Best beach club” award for OVO Beach at Enjoy Punta del Este from Sirí Awards 66 5 1 2 from Cuisine & Vins Restaurants Nightclubs Ski ovo beach and bars resort clubs 69 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Human capital management _ 6,721 48.1% 83.3% employees Women with indefinite work contracts
Sustainable operation _ 234,201GH 611,570 m3 Energy Consumption Water Consumption
Ch$ 275,005 million in revenue 70 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018 Financial Management
Financial activities
In 2018, in the financial realm, the most significant changes • On November 6, 2018, the risk rating agency Humphreys that occurred as part of the consolidation process to align the increased the risk rating for bonds issued by Enjoy S.A. obligations profile with the generation of cash flows for the to “+BBB”. Company and to address the year’s cash needs, included: • On November 21, 2018, Enjoy S.A. issued a Bond in the • In January 2018, the Company carried out a capital local market for UF 3,000,000 without guarantees, 10 increase of Ch$112,200 million. As a result of the year bullet, at a nominal rate of 3.90% annually and transaction, on February 14, 2018, the company prepaid effective rate of 4.02% annually. In line with the ENJOY Series C of the local bond for UF 1,857,142.80; on strategy of continuing to strengthen its financial position, February 26, 2018, it prepaid 35% of the International 70% of the funds collected in this new placement were Bond 44ª/Reg S for USD 105 million; and on April set aside for bond payments and prepayment of bank 17, 2018, it prepaid series E of the local bond for UF debt and with short-term financial institutions. The 928,571.43. remainder will be used for financing investment projects that the Company is developing. This Bond lowers the • On July 5, 2018, the risk rating agency Fitch Ratings Company’s average debt rate from 10.1% to 9.7% and improved the international rating of Enjoy from “B” to increases the duration from 1.87 to 3.71 years. These “B+” and changed the outlook from “Positive” to “Stable”. instruments were placed by BTG Pactual Chile S.A. Corredores de Bolsa and Tanner Corredores de Bolsa • On July 2018, Bank Guarantees were issued for UF S.A. 4,800,000 and collateral for 30% of the total (mortgage and time deposits), under the framework of awarding • On November 23, 2018, ENJOY S.A. notified the total operating licenses for casinos in Coquimbo, Viña del early withdrawal of the Series F Bonds for a total Mar, Pucón and Puerto Varas, all for a 15-year term. The balance of UF 583,062, which was prepaid on December investment and implementation term will be between 2 10, 2018. and 3 years, and the taxes payable move from a variable format to 20% of gaming revenues, plus a fixed portion • On December 26, 2018, the risk rating agency S&P paid at the beginning of each year. Global Ratings maintained the international rating of Enjoy of “B+” and the “Stable” outlook. • On September 11, 2018, the risk rating agency ICR rated the new ENJOY S.A. bond line as BBB+ with a stable trend. 71 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
mainly due to exchange differences from the US dollars The increase in LIABILITIES as of December 31, 2018 Financial Results denominated Bond (144A). compared to December 31, 2017, is mainly due to an increase in current payables, for purchases associated with investments of the new casino licenses in Coquimbo, Viña REVENUES as of December 31, 2018 reached Ch$275,005 Enjoy S.A., as of December 31, 2018, reached an Adjusted del Mar, Pucón and Puerto Varas and liabilities for leases million, being this figure slightly lower by 3.06% to the EBITDA of Ch$58,469 million, being 5.88% lower than the related to the early application of IFRS 16 “Leases”. Ch$283,677 million registered in the same fiscal year of Ch$62,118 million recorded as of December 31, 2017. This 2017 due to lower revenues from the Non Gaming segment, variation is mainly explained by the decrease in revenues EQUITY presented an increase of 129.3%, from Ch$74,579 in Chile and Uruguay, and lower revenues from the Gaming and the increase in SG&A expenses, due to non-recurrent million as of December 31, 2017, to Ch$171,019 million as of segment in Uruguay. advisory expenses. December 31, 2018, as a result of the capital increase made in January 2018. Sales COSTS amounted to Ch$216,952 million as of Finally, Enjoy S.A. reached a loss of Ch$25,021 million as of December 31, 2018, decreasing by 2.96% compared to December 31, 2018, higher than the loss registered as of the same fiscal year of 2017, being slightly lower than the December 31, 2017 of Ch$776 million. The aforementioned, decrease in revenues, driven by the efficiencies initiatives Main Financial Ratios mainly due to non-recurring expenses associated with the _ plan. prepayments of the Series C, E, F bonds and the partial prepayment of the International Bond. SG&A EXPENSES amounted to Ch$28,257 million as of Liquidity Ratio December 31, 2018, increasing 1.82% compared to 2017, The liquidity ratio as of December 31, 2018 was 1.1 times, Total of ASSETS as of December 31, 2018 was Ch$640,667 generated mainly by an increase in advisory expenses. experiencing an increase with respect to the 0.72 times million, compared to Ch$522,187 million, this figure being recorded as of December 31, 2017. This increase is mainly 22.7% higher than December 31, 2017. This variation is OTHER EXPENSES, corresponding to restructuring plan, explained by the increase in cash and cash equivalents. mainly attributable to: amounted to Ch$4,082 million, higher than the Ch$1,526 In current assets, due to the increase in cash and cash million in 2017. Debt Ratio equivalent (financial investments held as collateral for The debt ratio experienced a decrease as of December Guarantee Notes (required in the new Casino licences of FINANCIAL COSTS amounted Ch$45,132 million as of 31, 2018, reaching 2.75 times, lower than the 6 times Coquimbo, Viña, Pucón and Puerto Varas. December 31, 2018, 36.83% higher than the Ch$32,985 registered as of December 31, 2017. This variation is mainly The variation of non-current assets, is explained by the million recorded as of December 31, 2017. This increase is explained by the prepayments of the series C, E, F and partial increase in Property, Plant and Equipment due to the mainly generated by non-recurring expenses of Ch$18,000 payment of the international Bond, and higher equity as a acquisition of slot machines for Ch$14,684 million, and the million associated with the total prepayments of the Series consequence of the capital increase carried out in January adjustment for conversion of the assets of the subsidiary C, E, F and partial payment of the International Bond. 2018. Short-term debt to total debt ratio as of December 31, Enjoy Punta del Este for Ch$21,300 million, because they 2018 increased, reaching 0.29 times, higher than the 0.28 are denominated in US Dollars (exchange rate is increased EXCHANGE RATE DIFFERENCES registered a loss of times reached as of December 31, 2017. from Ch$614.75 registered to December 2017, to Ch$694.77 Ch$2,164 million as of December 31, 2018, compared to the registered as of December 31, 2018). In addition to this, due Ch$7,339 million gain recorded as of December 31, 2017, to the increase in the use rights item of Ch$12,261 million, associated with the early application of IFRS 16 “Leases”. 72 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
_Financial evolution (CLP$MM)
Revenues EBITDA Adjusted EBITDA 61,870 62,118 58,615 58,469 57,100 55,213 273,564 283,677 275,005 52,766 54,518 19,675 16,713 233,238 71,529 17,229 19,100 18,505 70,980 67,143 17,580 16,817 17,226 13,125 65,561 9,042 65,171 9,748 8,254 58,121 59,827 7,918 8,851 11,377 7,231 5,940 50,883 9,775 8,725 3,137 7,156 8,696 54,099 60,742 58,692 11,342 11,569 50,570 25,303 27,213 22,985 21,338 21,706 22,505 90,364 86,236 89,343 16,690 18,198 66,224
2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 73 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Revenues EBITDA
1.1% 0.9% 0.1% 0.0% 0.0% 2.2% 2.4% 6.2% 0.3% 7.3% 7.7% 7.6% 31.0% 29.0% 25.1% 22.4%
11.1% 10.8% 16.0% 14.0%
2017 2018 2017 2018 CLP$ 283,677 CLP$ 275,005 CLP$ 57,100 CLP$ 55,213 millions millions millions millions
12.1% 13.0% 18.9% 14.6% 16.1% 21.7% 14.7% 20.5% 14.8% 21.5% 19.1% 18.6%
Viña Puerto Viña Puerto Uruguay del Mar Santiago Coquimbo Antofagasta Pucón Chiloé Varas Uruguay del Mar Santiago Coquimbo Antofagasta Pucón Chiloé Varas 74 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018 Material Events
On Tuesday, January 9, 2018, through a Material Event sent and Pier-Paolo Zaccarelli Fasce. The Board of Directors for its members for 2018; (7) Naming of external auditors. to the Financial Markets Commission (CMF), the following appointed Wilson Lourenço da Rosa, José Mauricio Salgar The proposal for external auditors will be made available to was reported: In a session of the Board of Directors of Enjoy Hurtado and Nicolás Bañados Lyon in replacement of the shareholders on the company websitehttp://inversionistas. S.A. held yesterday, the Board took into account the end of aforementioned. In addition, in consideration of the vacant Enjoy.cl starting April 13, 2018; (8) Election of the Newspaper the preferential option period that the company had begun on board position following the resignation last September of where company publications will be made; (9) Account of December 7, 2017. Therefore, of the 2,337,500,000 shares Mr. Thomas Jenkin, the Board of Directors agreed to appoint agreements adopted by the Board of Directors to approve that were placed, 829,730,951 shares were subscribed. With Mr. Lucas Marulanda López in replacement. The Enjoy operations cited in Title XVI of Law No. 18,046 on related regard to the 1,507,769,049 remaining shares, i.e., those S.A. Board of Directors therefore comprises the following operations; (10) Other matters corresponding to the Ordinary that were not subscribed by the shareholders during the members: Javier Martínez Seguí, Antonio Martínez Seguí, Shareholders’ Meetings. preferential option period, the Board of Directors agreed that Lucas Marulanda López, Wilson Lourenço da Rosa, José these were to be offered to Entretenciones Consolidadas Mauricio Salgar Hurtado, Nicolás Bañados Lyon, Vicente On April 18, 2018, through a Material Event sent to the SpA, entity controlled by and owned by an investment fund Domínguez Vial, Ignacio Guerrero Gutiérrez and Ignacio Pérez Financial Markets Commission, the following was reported: named Advent Latin America Private Equity Fund VI Limited Alarcón. These appointments will last until the next Ordinary Today the Ordinary Shareholders’ Meeting of the company Partnership, managed by Advent International Corporation Shareholders’ Meeting. Enjoy S.A. was held, and the following agreements were (Delaware, USA.) at a price of Ch$48 per share. made: (1) The Annual Report, Balance Sheet, Financial On January 23, 2018, through a Material Event sent to the Statements and external auditors report for 2017 were On January 9, 2018, through a Material Event sent to the Financial Markets Commission, the following was reported: approved; (2) The new Board of Directors of the Company CMF, the following was reported: Regarding the information Today, Entretenciones Consolidadas SpA (“EC”) has paid the for the next 3 year period was chosen, and is made up of the reported in the Material Event sent on this same date, I balance of the price of 266,322,799 shares in Enjoy S.A., following people: i. Javier Martínez Seguí. ii. Antonio Martínez communicate to you that Entretenciones Consolidadas SpA equivalent to Ch$12,783,494,352. With this payment, the Seguí. iii. Lucas Marulanda López. iv. Wilson da Rosa. v. José has accepted the offer to subscribe 1,507,769,049 shares shares that EC holds in Enjoy S.A. are now fully paid. Mauricio Salgar Hurtado. vi. Nicolás Bañados Lyon. vii. Ignacio in Enjoy S.A. at Ch$48 per share, and in consequence it has Pérez Alarcón. viii. Ana María Orellana Johnson (Independent subscribed the corresponding share subscription agreement On March 26, 2018, through a Material Event sent to the Director) ix. Ignacio Guerrero Gutiérrez. (Independent Director) today. Therefore, on this date, 1,507,769,049 shares have CMF, the following was reported: The meeting of the Board (3) Compensation for the Board of Directors was established; been wholly subscribed, pending payment of the subscription of Directors of this Company agreed to call an Ordinary (4) The budget of the Directors’ Committee and compensation price, which should occur within the next 15 days. Shareholders’ Meeting for April 18, 2018 at 10 am in the of its members was agreed; (5) Deloitte Auditores y Hotel Best Western Premier Marina Las Condes, located Consultores Limitada, was appointed as external auditors for On January 10, 2018, through a Material Event sent to the on Av. Alonso de Córdova 5727, Las Condes, to address the the annual audit of the 2018 Financial Statements; (6) It was CMF, the following was reported: On January 10, 2018, following issues: (1) Approval of the Annual Report, Financial agreed that company notifications will be published in the Entretenciones Consolidadas SpA paid the subscription Statements and auditors’ report for 2017; (2) Presentation electronic newspaper of La Tercera (http://www.latercera. price of 1,241,446,250 shares in Enjoy S.A., equivalent to of the dividend policy; (3) Distribution of earnings (dividends); com); (7). The agreements adopted by the Board of Directors Ch$59,589,420,000. The balance of the price corresponding (4) Election of the Board of Directors. A document containing to approve operations cited in Title XVI of Law No. 18,045 to the 266,322,799 subscribed shares will be paid within the professional profile and experience of the board member were acknowledged; (8) Other matters corresponding to the the next few days. Likewise, the company reported that the candidates will be made available to shareholders on the Ordinary Shareholders’ Meetings were identified, including the Board of Directors, in the session held today, acknowledges company website http://inversionistas.Enjoy.cl starting Annual Management Report of the Directors’ Committee and the resignations from their positions as board members April 13, 2018; (5) Compensation of Board Members for the election of the Risk Rating Agencies. presented Octavio Bofill Genzsch, Ignacio González Martínez 2018; (6) Directors’ Committee Budget and compensation 75 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
On May 25, 2018, through a Material Event sent to the CMF, On August 16, 2018, through a Material Event sent to the the following was reported: Today, Darío Amenábar Zegers CMF, the following was reported: On this date, Enjoy and its has presented his resignation from the position of Chief subsidiary Enjoy Gestión Limitada (the “Buyers”) have signed Financial Officer (CFO) of the Company. a Share Purchase Agreement (the “Purchase Agreement”) with Latin Gaming Chile S.A., Latin Gaming Investments Del On June 8, 2018, through a Material Event sent to the CMF, Norte S.A. and Inmobiliaria Polaris S.A. (the “Sellers”) for the following was reported: Today the Public Hearing took 100% of shares issued by Casino de Juegos del Pacífico S.A. place to open the Economic Bids of the companies that (“CDP”) and Casino Gran Los Ángeles S.A. (“CGLA”) owned had applied for gaming casino operating permits for the by the Sellers. In addition, it was agreed in the Purchase municipalities of Iquique, Coquimbo, Viña del Mar, Pucón Agreement to transfer to the Buyers all the shares in a new and Puerto Varas. The Company presented, through its company that will operate the San Antonio hotel, owned by applying subsidiaries, economic bids for the municipalities of the Sellers and where the gaming casino currently operates. Coquimbo, Viña del Mar, Pucón and Puerto Varas, achieving The total price for shares in CDP, CGLA and the operator of the best bid in all the aforementioned municipalities and the San Antonio hotel will be 159,455 UF, which will be paid was therefore awarded the corresponding operating permits by the Buyers once the suspensive conditions indicated herein for each of these. Within the next five business days, the are met. CDP holds a gaming casino operating license in the Superintendency of Gaming Casinos, must pass the Operating municipality of San Antonio, Valparaiso Region. This license Permit Granting and Denial Resolution, which must be was awarded by the Superintendency of Gaming Casinos published in the Official Gazette within 10 business days through Exempt Resolution No. 342, dated December 26, following its passage. 2006. The operating license is valid for 15 years starting August 27, 2009. CGLA holds a gaming casino operating On June 12, 2018, through a Material Event sent to the license in the municipality of Los Angeles, Biobío Region. Financial Markets Commission, the following was reported: This license was awarded by the Superintendency of Gaming Yesterday, the Company ended operations in the Gaming Casinos through Exempt Resolution No. 169, dated July 21, Casino located on San Andrés island, Colombia, following 2006. The operating license is valid for 15 years starting July the early termination of the Concession Agreement 28, 2008. The transfer of shares in the Purchase Agreement number C1325 dated February 19, 2016, signed between is subject to compliance with several suspensive conditions, Empresa Industrial y Comercial del Estado Administradora specifically: (a) approval by the Superintendence of Gaming del Monopolio Rentístico de los Juegos de Suerte y Azar – Casinos of the transfer of all the shares in CDP and CGLA to COLJUEGOS- and Enjoy Caribe SpA – Colombia Branch. The the Buyers in pure and simple terms in accordance with Law reason for closing was because the forecast results had not Number 19,995 on Gaming Casinos and (b) authorization by materialized. the National Economic Prosecutor’s Office (Fiscalía Nacional Económica, FNE) of the Buyer’s acquisition of all Shares in compliance with the provisions of Decree with Force of Law (DFL) No.1 of 2005 of the Ministry of Economy, Development and Tourism, which sets the consolidated, coordinated and systematized text of Decree Law No. 211 of 1973 on the defense of free competition. 76 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
On November 21, 2018, through a Material Event sent to the CMF, the following was reported: On November 21, 2018, Enjoy placed a corporate bond in the local market for a total of UF 3,000,000 at an annual nominal rate of 3.90%. The placement corresponds to all Bonds in Series I (mnemonic code BENJO-I) issued with charge to the Bonds Line for a 10-year term, registered in the Securities Registry of this Commission under No. 915 dated October 30, 2018. The Series I Bonds mature on October 1, 2028, will accrue interest on an unpaid capital expressed in Unidades de Fomento, at an annual interest of 3.9% and their payment will be in a single coupon at maturity. The funds from the placement of the Series I Bonds will be allocated: i. approximately 70% to the payment of obligations with the public, prepayment of bank debts and with the Issuer’s short- term financial institutions, and ii. the balance, to financing Issuer’s investment projects. These instruments were placed by BTG Pactual Chile S.A. Corredores de Bolsa and Tanner Corredores de Bolsa S.A.
On November 23, 2018, through a Material Event sent to the CMF, the following was reported: The Board of Directors, in session held yesterday, took notice of the resignation of Mr. Wilson da Rosa from his position as board member starting on that date. In accordance with the provisions of article 32 of Law No. 18,046, in the same session mentioned above, Mr. Ugo Posada was appointed as director in his stead. In On August 20, 2018, through a Material Event sent to the The Company will inform the public about any news regarding view of the foregoing, and in compliance with the provisions Financial Markets Commission, the following was reported: these matters whenever a concrete event should occur. of the already cited article 32, the Board of Directors must be Regarding the acquisition of the companies Casino de Juegos renewed in full at the next Ordinary Shareholders’ Meeting. del Pacífico S.A. (“CDP”), Casino Gran Los Ángeles S.A. On August 28, 2018, through a Material Event sent to the (“CGLA”) and a new company that will operate the hotel in CMF, the following was reported: Today, the Company has San Antonio, Enjoy is not considering an increase in capital appointed Mr. Esteban Rigo-Righi Baillie as Chief Financial for this purpose. Financing of this operation is planned Officer (CFO). He previously held the position of Enjoy considering the Company’s liquidity, its own generation of Corporate Financial Manager. Mr. Rigo-Righi will assume his flow and additional debt capacity that will enable it to have position starting today. sufficient funds to pay UF 159,455. 77 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018 Market Information
Enjoy is listed on the Santiago Stock Exchange, The Electronic Stock Exchange and the Valparaíso Stock Exchange, where it trades its shares.
Stock Exchange Transactions 2018 Stock Exchange Presence
Santiago Stock Exchange - Securities Exchange The stock exchange presence recorded during 2018 for shares in ENJOY S.A. is the following: Period Quantity (units) Amount (Ch$) Closing Price (Ch$)
1st Quarter 414,769,677 22,499,800,565 60.28 Santiago Stock Exchange - Securities Exchange 2nd Quarter 166,355,030 10,062,851,672 58.10 Period Market Presence (%): 3rd Quarter 114,342,469 6,146,086,986 56.80 1st Quarter 69.44 4th Quarter 63,320,388 3,679,738,895 56.50 2nd Quarter 62.78 3rd Quarter 50.56
Valparaíso Stock Exchange - Securities Exchange 4th Quarter 40.56 Period Quantity (units) Amount (Ch$) Closing Price (Ch$) Market Presence calculated in accordance with General 1st Quarter 100,000 6,000,000 60.00 Character Standard 327 issued by the Financial Markets 2nd Quarter No Transactions recorded during the year. Commission. It includes transactions on the Santiago Stock Exchange, the Chilean Electronic Stock Exchange and the 3rd Quarter No Transactions recorded during the year. Valparaíso Stock Exchange. 4th Quarter No Transactions recorded during the year. The Financial Markets Commission through Exempt Resolution N°4476 dated October 5, 2018, revoked the Chile’s Electronic Stock Exchange - Securities Exchange authorization of the existence of the Valparaiso Stock Exchange on that date. Period Quantity (units) Amount (Ch$) Closing Price (Ch$) 1st Quarter 17,122,191 986,851,929 59.90 Since June 2015, to generate greater share liquidity, ENJOY 2nd Quarter 366,857 22,178,560 62.50 hired the services of Market Maker with Credicorp Capital S.A. In accordance with general regulation N.C.G. No. 3rd Quarter 300,351 16,591,669 62.50 327 of the Financial Markets Commission. The regulation 4th Quarter 52,645 3,024,982 57.46 confers the category of stock exchange presence to share instruments from those companies that hire Market Maker, with the subsequent tax exemption on capital gains from these securities. 78 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Share price evolution Distributable profit
The graph below depicts the share price evolution of Enjoy in relation to the IPSA (Base index 100). As of December 31, 2018, the Company registered no accumulated net profits to be distributed as dividends
350 Enjoy 300 S&P CLX IPSA
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0 01-05-2010 01-05-2011 01-05-2012 01-05-2013 01-05-2014 01-05-2015 01-05-2016 01-05-2017 01-05-2018 79 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018 Risk factors
Enjoy S.A. and Subsidiaries are exposed to market risks and According to the provisions in the Gambling Casinos financial risks inherent in their businesses. Enjoy S.A. seeks legislation, the operation permit granted by the State to Market Risks, are risks related to to identify and manage these risks in the most appropriate operate a casino can be revoked by the Superintendency variations in variables that affect the manner in order to minimize potential adverse effects. of Gambling Casinos (hereinafter the “SCJ”), through a substantiated decision, any time grounds that are set forth company’s assets and liabilities in the Law take shape, where the operator would have to seriously breach its obligations to use the license by _Market Risks strictly adhering to the Casinos Law, its regulations and the instructions given by the authority. In the event of a breach, the SCJ could initiate a procedure to revoke the operation Market risks are risks related to variations in variables that permit, which could end with a resolution of revocation, affect the company’s assets and liabilities, among which we susceptible to a claim and later appeal to the respective can highlight: Court of Appeals. Likewise, the municipal concession contracts for gambling casinos also contemplate grounds A) Regulation for termination, extinction and expiration resulting from serious breaches of the obligations established in them for Any changes to the regulations established by the the concessionaire, similar to those established in the new Superintendency of Gambling Casinos, or contracts relating Law on Gambling Casinos. Enjoy S.A., as evidenced by more to the casino industry or in the interpretation of these than 40 years of experience in the entertainment industry, regulations or contracts by the administrative or municipal sets comprehensive regulatory compliance standards so authorities could affect the operation of casinos and in that regulatory risk is mitigated as much as possible. These particular, the company’s income. Regulatory changes that compliance standards are designed in accordance with may affect the industries in which the company operates, current regulations by the Legal Services Management and such as laws restricting the consumption of certain the Compliance and Corporate Governments Management products - like changes in the tobacco law and alcohol law and, in turn, are reviewed in their effectiveness and - could affect the revenue of the company. The company is implementation by Internal Audit on a regular basis. constantly developing and updating new products, making it easier to adapt its commercial and services offer to these • Gambling Casinos Municipal licenses changes and keep offering comprehensive entertainment On June 8, 2018, in successive sessions of the Resolutive to its clients. Enjoy S.A. has processes in place that ensure Council of the Superintendence of Gambling Casinos regulatory compliance. These processes are managed by the (hereinafter “SGC”), the Opening Hearings of the Economic Legal Services Management area, and the Compliance and Bids of the applicant projects were held, and the Enjoy Corporate Governments Management. Their implementation Group was awarded, through its subsidiaries, the operating and effectiveness is regularly reviewed by Internal Auditing. permits for the gambling casinos located in the districts of Coquimbo, Viña del Mar, Pucón and Puerto Varas. Accordingly, Enjoy maintained three of the gambling casinos whose administration it already had, and was additionally awarded the operations permit for the casino located in the • Revocation of operating licenses for casinos city of Puerto Varas. The Resolution that grants the operating 80 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
permit to the corresponding Companies was published in the Supreme Court of Justice would have incurred in a vice of decree orders not to innovate that suspend the deadlines of Official Gazette on June 29, 2018, date as of which the 2-year legality for having granted the Enjoy projects in Pucón and the process of start of operations in progress. As of the date period started, in accordance with Article 28 of Law 19.995, Puerto Varas a certain technical score in certain items of an of this report, and after the corresponding replies had been to develop the casino project and the rest of the works that urban nature, in circumstances in which both projects would made by the Superintendence of Gambling Casinos, as well make up the comprehensive project, respectively, and to not comply with the Urbanism and Construction regulations as the companies awarded by the Enjoy group having also give notice to the SGC in order to obtain the certificate that in force at the date of the application, which did not make taken part by presenting their discharges and presenting the enables it to start operations. In the particular case of the them worthy of those specific scores and would impede the corresponding antecedents, the Santiago Court of Appeals Casino located in the city of Viña del Mar, as this is a property development of the projects under the proposed conditions. recently decided not to establish a stage of evidence, owned by the Municipality of Viña del Mar, the Bid Bases On July 10, 2018, the SGC, through Exempt Resolutions, maintaining the supporting evidence already delivered to the established a special condition for the start of operations rejected in all its parts the petitions for reinstatement filed rapporteur, and both parties are therefore awaiting the date and therefore the final date must be set by the SGC through by “Sun Dreams” regarding the processes in both districts, for the allegations. Finally, note that no appeals have been a Supplementary Resolution to the Operating Permit, which denying both petitions filed by the claimant in his claims. filed with respect to the awards of the districts of Viña del to date has not yet been issued, despite the expiration Following the procedure established in article 27 bis of the Mar and Coquimbo, and that the deadlines for making such of the deadline of 60 days counted from the publication aforementioned Law on Casinos, on July 26, 2018 “Sun claims have expired in accordance with Article 27 bis of the made on June 29, 2018. As a subsequent events to the Dreams” filed a judicial claim against the resolutions of Law of Casinos. aforementioned awardings, note that the competitor that the Supreme Court of Justice that rejected its appeals for was defeated in these districts, which is the company “Sun reversal, consequently filing two appeals before the Santiago Dreams”, within the framework of the complaint procedure Court of Appeals. Both appeals basically reproduce the established in article 27 bis of the Law of Casinos No. 19.995, arguments already put forward before the SGC and seek that filed on June 28, 2018 two appeals for reinstatement against the final adjudications in favor of Enjoy with respect to the the resolutions of the Supreme Court of Justice that denied districts of Pucón and Puerto Varas be left without effect. permits to operate in the districts of Pucón and Puerto The procedure established by article 27 bis of the Law of Varas, granting such permits to the Companies applying for Casinos orders that the judicial instance be followed only the Enjoy group. Mainly, the complainant’s arguments refer before the Court of Appeals of Santiago, without subsequent to the fact that the Technical Evaluation Committee of the appeals, and without the possibility that such Court may 81 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
b) Income Volatility
• Gaming Tables Casino Conrad in Punta del Este of the project, requiring a higher investment. However, the Unlike the business model of Enjoy casinos in Chile, a higher significant investments made by Enjoy S.A. are completed, proportion of gaming revenue in Conrad comes from the reducing the relevance of this risk. gaming tables and their VIP lounges. Consequently, there is a short-term risk related to this type of operation. According FINANCIAL RISK to the provisions of the gaming rules, the casino has a _ theoretical advantage, which on a longer term means that this risk factor does not tend to affect the company’s gaming a) Risk Conditions in the financial market revenues. • Exchange rate risk c) International Markets - The hedging policy of exchange rate risk seeks to achieve a Argentina, Brazil, Uruguay natural hedge of its business flows by maintaining a debt in the functional currencies of each transaction and to match Entry of the company into foreign markets could cause significant obligations or payment decisions in currencies it to face political, economic, and judicial risks as well other than the Chilean peso. For this reason, in cases in as translation differences related to operations in other which it is not possible or advisable to achieve hedging countries. Currently, Enjoy S.A. has operations in Argentina, through the business’ own cash flows or debt, the Company and Uruguay, as well as a commercial office in Brazil, which takes derivative hedging instruments in the financial market. allows it to capture and keep customers of this market. Although these risks are inherent to any international • Exchange rate risk for investments in functional operation, Argentina has proved to be a market with volatile currency in Argentinean pesos and dollars. conditions and in some cases, unfavorable for business The Company has a joint controlling investment in the development. Thus, the revenue and assets of the company Argentine company Cela S.A., operator of the Gambling ventures abroad may be affected by intervening events, Casino, Hotel and Food & Beverages in (Mendoza) Argentina. regulatory changes, deterioration in inflation and interest This foreign investment is managed in the functional rates, exchange rate fluctuations, changes in government currency of such country (Argentine peso). As a result of the policies, expropriation, price and salary restrictions, and tax foregoing, Enjoy S.A. has at December 31, 2018 an exposure increases. On the other hand, the economy and politics of on its balance sheet equivalent to ThCh$ 7,963,208 (ARS 433 Colombia and Uruguay have proved to be stable over time. million). Additionally, Enjoy S.A. has investments in Uruguay through the company Baluma S.A. (Enjoy Punta del Este), d) Construction Project Risk operating company of the Gambling Casino, Hotel, Food & Beverages and tourist developer. This investment is handled The hotel and casino projects developed by the company in US dollars. As a result of the foregoing, Enjoy S.A. has at are subject to the risks faced by all construction projects in December 31, 2018 a net exposure in its balance equivalent terms of facing higher values in raw material costs during the to ThCh$ 94,834,129 (US$ 136 million). The Argentine peso development of the work and changes in the appearance and the U.S. dollar, with respect to the Chilean peso, can significantly affect the value of net investments abroad, as 82 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
a result of the translation adjustment recorded in the item to pre-judicial collection accounts. If the reclassification Other reserves of the equity of Enjoy S.A. warrants it, an impairment is recorded of amounts that Liquidity risk represents the risk that the Company will not have matured and that will mature. Each case of significant be able to meet its current obligations. As of December 31, • Interest Rate Risk delinquency is reviewed by a credit and collection committee 2018, the Company has a positive working capital of ThCh$ Fluctuations in interest rates can have a significant impact made up of different areas of the Company, applying 14,031,506. Management believes that this situation does on company’s financial costs. Enjoy S.A. and its subsidiaries additional impairments if necessary. Impairment is analyzed not affect its ability to meet its financial obligations, since keep short and long-term debt; the interest of these debts is and executed for each individual client. The maximum it has the capacity to generate operational cash flows and expressed at different rates: variables and fixed, expressed exposure to the credit risk at the dates of the reported available credit lines, which are sufficient to meet its financial on a TAB base. years is the book value of each kind of trade and other obligations. As a result of the nature of the business, the receivables. At the date of issue of this report, the Company Company maintains a significant cash collection capacity, B) Credit Risks has an investment grade as per the following: risk ratings daily and stable throughout the month, which allows it to of BBB+ (stable trend) for Financial Standing/Bonds and for manage and predict the availability of liquidity in a reliable Once the pre-judicial and judicial collection procedures negotiable instruments N2 / BBB+ (stable trend) according to manner. have been exhausted, the assets are derecognized against International Credit Rating, a Limited Risk Rating Company, the constituted impairment. The Company only uses the and BBB+ (stable trend), Rating Agency Humphreys Ltda. In impairment method and not the one of direct write-off for addition to the above, on December 26 S&P Global Ratings better control. The renegotiations currently in force are not maintains an international rating of Enjoy in B with a stable very relevant, the policy is to analyze them case by case trend, while Fitch Ratings classified it in B+. in order to classify them according to the existence of risk, determining whether their reclassification corresponds C) Liquidity Risk 83 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018 Investment plans
Investments Investment _made by the Company _plans
In 2018 investing activities were undertaken to cover the The Company has investment plans to comply with the maintenance of real estate and personal property assets, commitments made in the bids for the tender process so as to keep our facilities and services at the appropriate for operating permits for the Coquimbo, Viña del Mar and level of quality and incorporate new technologies available Pucón casinos (currently operated by Enjoy), and the new in the industry. license in Puerto Varas.
On August 16, 2018, the Company published a Material USD 29.4 million will be invested in Coquimbo. These Event reporting an agreement to acquire two new casino investments include the renewal of 100% of the slot operations, located in the Chilean cities of Los Angeles machines, exterior and interior remodeling of the casino, and San Antonio, plus a hotel next to the San Antonio expansion of smoking areas and a new event center. The Casino, owned by Latin Gaming, for an amount of UF Company expects these investments to be complete within 159,455. These acquisitions were approved by the National 3 years. Economic Prosecutor’s Office on November 15, 2018, and on February 15, 2019, the Superintendency of Gaming USD 31.8 million will be invested in Viña del Mar. These Casinos granted authorization to transfer the shares investments include the renewal of 100% of the slot through Exempt Resolution No. 112. machines, improvements to VIP lounges, renovation of Casino restaurants and bars, and a new VIP room for slot In 2018 investing activities machines in the deck area. The terms of investment are were undertaken to cover the currently under development. maintenance of real estate USD 31 million will be invested in Pucón. These and personal property assets, investments include the renovation of 100% of the slot machines, the construction of a new Casino integrated so as to keep our facilities and into the Hotel and the remodeling of the hotel up to 4-star category. The Company expects these investments to be services at the appropriate level complete within 3 years. of quality and incorporate new
USD 24.5 million will be invested in Puerto Varas. These technologies available in the investments include the purchase of slot machines, the industry. construction of a new Casino integrated into the hotel that Enjoy operates today in the city and the interior remodeling of the hotel, which will include a new deck and swimming pool, and new dining areas. The Company expects these investments to be complete within 3 years. 84 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018 Sustainable management
Transparent and ethical leadership _Internal auditing and risk management
Enjoy’s leadership is based on transparent action, which encourages ethical behavior and strict regulatory compliance in Enjoy has a Risk Management Model that provides relevant achieving the Company’s growth objectives. information to identify business risks, in order to manage them properly. During 2018, Enjoy continued to strengthen the joint work between the areas directly related to compliance: Compliance and Corporate Governance, Legal Services and Internal Auditing. The consolidation of work between these teams has Given the ongoing evolution of the environment in which Enjoy enabled the prevention of potential noncompliance risks and has strengthened internal control and the compliance culture operates in three Latin American countries, with a special focus on being prepared to face new risks and thereby fulfill our role in inside the Company. ensuring and protecting the value of the organization, in 2018 the Risk Management area reviewed and updated the Company’s Risk The practices and measures strengthened or implemented during 2018 in this area at Enjoy include: Map.
Ethical Management Through a process that involved the Corporate Managers of _ Enjoy and the Chief Executive Officers of the operation, validated by the Board of Directors, 63 risks were identified, of which 19 Enjoy has an Ethics Management System based on three interrelated and complementary pillars: were rated as “critical” given their impact on the organization and probability of occurrence. • A unique Code of ethics and best practices for all ENJOY employees. • A Confidential line to channel concerns or complaints in a confidential and reserved manner. Using this survey, prioritizing and rating as a base, concrete action • An Ethics and best practices committee responsible for investigating complaints received. plans were defined, which will be monitored during 2019.
In addition, Internal Auditing will include the risks defined in the ENJOY CODE OF ETHICS AND BEST respective map in its audit plan for 2019.
Business operations Conicts of interest Behavior and employees The primary focus of work in the Internal Auditing area is directly • Regulatory compliance • External activities • Relationship with peers, related to the Company’s strategic objectives, which translates • Confidentiality • Gaming activities subordinates and superiors into the periodic assessment of key business processes. Likewise, • Customer relations • Personal finances in 2018, the area continued to increase the level and demands • Care of company properties and resources required by the different reviews. • Supplier relations It is important to mention that the Internal Auditing area depends on and reports directly to the ENJOY S.A. Board of Directors, thereby ensuring the independence of its assessments. Its actions Condential line are therefore constantly monitored by the Board. Ethics Committee: Monitoring and feedback / Fines
Business philosophy Corporate values 85 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Enjoy Crime Prevention Model COMPLIANCE SYSTEM _compliance system In late 2018, Enjoy began to work on updating its Crime Prevention Model (Modelo de Prevención de Board of Directors Chief Executive Compliance Delitos, MPD) in accordance with the amendments Officer Because of the way in which the entertainment introduced by Law No. 21,121 to the regime for industry has developed over the years and its criminal liability of legal entities contemplated complexity, at Enjoy we have constantly renewed in Law No. 20,393. Notable changes include our ethical-professional commitment to the the incorporation of the following into the regulations governing this area by adopting a catalog of illicit business crimes: inappropriate Crime prevention model corporate compliance culture as a hallmark in our business dealings, corruption among individuals, way of doing business. misappropriation and disloyal management. Regulatory Compliance Manual Our allegiance to ethical and regulatory principles The Prevention Model, its respective policy, risk Risk matrix can be seen in the fact that we have developed matrix and manual (approved by the Board of a Compliance System, which is a program that Directors of ENJOY S.A. at the proposal of the serves as a universal guide for conduct for all our Directors’ Committee) are provided to all Company employees, whatever their level. This indicates personnel. It is a model that is applicable across that we must apply honesty and integrity when the different ENJOY S.A. companies and includes Prevention Detection Response carrying out our work. activities activities activities all the measures and controls necessary to • Communication • Control mechanisms • Crime response prevent its activities from being used for illicit This system, structured around tools and • Training • Complaints line protocol activities, in all the countries where it is present. documents developed within our Company, • Risk survey • Preventive controls enables us to mitigate risk in behaviors that could The risks detected are contained in a risk matrix lead to an infringement in matters of compliance. that forms part of the aforementioned model. We place special importance on those related The matrix that contains the risks is a tool for to the crimes of money laundering and financing exclusively internal use. Risks related to corruption Internal culture of regulatory compliance of terrorism, as established by Law No. 19,913, Code of ethics have been assessed in the 8 casinos owned by the (Chile, Argentina, Uruguay) as well as the crimes contemplated in Law No. Company (100%). 20,393 on the criminal liability of legal entities.
Reports (Board of Directors, Directors’ Committee, Grievances) 86 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Some relevant milestones for strengthening the regulatory compliance • Compliance control panel culture at Enjoy in 2018 include: In 2018, a Compliance Control Panel was maintained with excellent results. Its focus was on safeguarding - Training 2,558 employees on issues related to the Crime Enjoy’s compliance with the regulations that govern the industry in which the Company operates. This panel Prevention Model, mostly personnel from the gaming area who are has enabled Enjoy, and especially the Directors’ Committee, to increase awareness about the status of in constant contact with customers. regulatory compliance inside the organization in all its dimensions; the main challenges, the contingencies it faces in this area and areas for improvement and learning to be incorporated into the Company’s different - Updating the “Compliance” e-learning course, for appropriate legal, administrative and operational processes. outreach and training of ENJOY employees on issued related to Law No. 20,393 and the prevention of asset laundering and terrorism financing crimes, in accordance with the regulations required by Indicators for overseeable Indicators of the status Indicators of the status the Financial Analysis Unit (UAF). aspects of oversight in process of lawsuits
- Recertification process for the Crime Prevention Model for the next two years, through a process undertaken by an expert company registered with the Financial Markets Commission (CMF). Analysis and indicators on issues Analysis and indicators on the Analysis and indicators on the - Implementation of the “Annual Meeting of Compliance subject to oversight by the progress and results of the progress of any legal action Officers” which called on each of the employees who represent di erent oversight organisms in di erent oversight activities involving the Company. the di erent countries where the undertaken by the pertinent the Compliance Office in each operation, and are responsible for Company is present. organisms on di erent Company coordinating the prevention policies and procedures, as well as operations. detecting suspicious operations. The goal of the 2018 version of this meeting was to transfer the new guidelines of the Compliance Office and reinforce the methodologies and procedures for prevention of the crimes contemplated in Law No. 19,913. • “World Check One”
- Meeting with Advent International. In December 2018, Enjoy In 2018, the Company continued its work with “World Check One” to fulfill due diligence in knowing its teams met with Advent International Executives to exchange customers, thereby avoiding any problem associated with any customer who falls into the category of “PEP” practices and review internal policies and programs associated (“Politically Exposed Person”) or who is connected in any way to terrorism, based on international lists. with Compliance. With the participation of the management from Compliance, Internal Auditing, Communications, Supply Chain, and “World Check One” is a dynamic database provided by Thomson Reuters, which covers more than 240 Information Technologies, the meeting included a detailed review of countries and 100,000 sources of information. the procedures that the Company has developed and implemented for regulatory compliance, both internally and externally. This tool has been a huge support for our Compliance Officers. 87 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Enjoy updated its crime prevention model (mpd) in accordance with the amendments introduced by law no. 21,121 To the regime for criminal liability of legal entities contemplated in law no. 20,393. Notable changes include the incorporation of the following into the catalog of illicit business crimes: inappropriate business dealings, corruption among individuals, misappropriation and disloyal management.
• Prevention of money laundering and terrorism financing _Investor relations All the countries where Enjoy operates have an oversight organization for the crimes of asset laundering and Transparency in the provision of information is also present in Enjoy’s relations with investors. terrorism financing. In Chile, based on Law No.19,913, the corresponding organization is the Financial Analysis Through its Investor Relations area, the Company aims to achieve effective and efficient communication so that the financial Unit (UAF), which has placed a series of obligations market can gain an understanding of Enjoy. Our goal is to develop credibility and consistency in the provision of information, on companies to prevent these crimes and report on seek increased liquidity and a fair value adjustment of the share price, as well as optimize the value adjustment of debt transactions they deem suspicious. instruments.
In Argentina, the corresponding entity is the Financial Among its transparency initiatives, Enjoy publishes quarterly Earnings Reports together with its Financial Statements, in both Information Analysis Unit (UAIF) and in Uruguay it is the English and Spanish, and holds meetings with Investors, where the Chief Executive Officer and the Chief Financial Officer Financial Intelligence Unit (UIF). share the quarterly earnings and clarify concerns.
The prevention of money laundering and terrorism financing Once a year, the Company reviews the investor relations strategy and defines key messages and the communications crimes is based on two pillars: knowing the customers strategy with different stakeholders, and identifies potential new investors and opportunities in debt markets, and the focus and reporting suspicious transactions, which are aimed at of the annual report. In addition, the Company defines market presence strategies, which include participation in national and analyzing and identifying suspicious operations related to international conferences, Non-deal Roadshows and visits to units, among other things. asset laundering and terrorism financing and reporting on these to the corresponding authority. All of this information is published on the Enjoy Investors website (http://inversionistas.enjoy.cl), which also includes an open information channel for the area through a contact button. 88 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Audits held as Audits held as Audits held as Audits held as of December of December of December of December 31, 2015 31, 2016 31, 2017 31, 2018
Chile 74 81 61 66
Argentina 5 7 5 7
Uruguay 16 9 22 18
Colombia N/A 3 3 N/A
Enjoy 95 100 91 91 Consolidated
“Crime Prevention” Actions
Percentage of employees (of all those to be trained) who were trained in the prevention of money laundering and terrorism financing:
Year 2018
91% 89 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Commitment to customers
and responsible In 2018, Enjoy had the opportunity to present the Jugados Por Ti (Jugados Por Vos in Argentina) program at the first National Hotels & Casinos Gathering organized by the Argentine Association of Hotels and Tourism (Asociación de entertainment Hoteles de Turismo de la República Argentina) in Mendoza.
As a founding member of the Responsible Gaming Corporation, a nonprofit organization that groups together The Enjoy value proposal places the customer at the center, different sectors around the development, research and promotion of best practice in Responsible Gaming in Chile, offering products and services with a high standard of quality, Enjoy continued to share best practices with other entities in the industry. satisfaction and safety, in a framework that guarantees responsible entertainment. Jugados Por Ti /Jugados Por Vos Program Tools Responsible Gaming _ INFORMATIONAL BROCHURES • Materials that provide information on the program characteristics and support tools that ENJOY makes In 2018, we commemorated 10 years since Enjoy started its available to its customers. Jugados por Ti (“We bet on you”) Program, a pioneer initiative in • They seek to educate customers in responsible entertainment. Available in all ENJOY game rooms. Chile that promotes responsible gaming. The cornerstone of this program is to provide customers with orientation and support tools to prevent risk behaviors associated with gaming. Jugados Por Ti /Por Vos Counselor Teams • A group of ENJOY employees who have been trained to assist any customer or family member who Enjoy’s responsible gaming program is present in every country needs information about the risks associated with compulsive gambling and on the Jugados Por Ti where the Company operates, i.e. Chile, Argentina and Uruguay, program. taking local circumstances into account to better respond to • They provide information on the self-exclusion procedure. specific needs and go beyond the regulatory requirements for • They provide access to whoever needs it to the free Phone Assistance Service provided by ENJOY the industry. through the Jugados Por Ti Program.
The engine behind this program is the team of Counselors, who PHONE ASSISTANCE SERVICE voluntarily train in order to provide information and orientation • A confidential, free, voluntary service providing professional guidance in psychological, legal, financial or to any customers who require it. In 2018, 34 new counselors informational areas. were trained and joined the team, which currently consists of • Available to ENJOY customers and their family members whenever they request it. 168 Enjoy employees. • Customers can access this service through a Counselor, Self-exclusion Form or through internal derivation. In the framework of the program’s 10th anniversary, Enjoy provided a special assistance service called “Más Jugados” SESELF-EXCLUSION FORM1 to the group of counselors. This service offers free and • Document used by customers to request that ENJOY staff limit their access to gaming facilities and to confidential phone support to counselors and their families to information on the Company’s products and services. help them achieve a better quality of life. 1 In Chile, the use of this document is regulated by the Superintendency of Gaming Casinos. 90 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
As a recruiting strategy among employees for the “jugados por ti” program, volunteering has been very positive. There is a high level of commitment among participants, high motivation with regard to tasks and the role of counselor, and an alignment with responsible entertainment principles.
Jugados CHILE 168 Por Ti 168 ARG 14 3 34 1 Counselors COUNSELORS New counselor training new counselors reinforcement workshop for previously _ in our casinos URU 15 seminars in 2018 trained trained counselors
Phone Assistance Service (Servicio de Asistencia Telefónica, SAT) 2018
Of the 47 occasions on which the Phone Assistance Service was offered, this was taken up by customers or family members on 11 occasions. The total number of orientations offered during the year to these 11 customers and/or families was 27.
Total SAT referrals Effective use of SAT service Type of assistance provided
Global 47 96% Psychological assistance Chile 13 4% Legal assistance Punta del Este 3 23.4% 0 Financial assistance Mendoza 31 91 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Customer satisfaction Customer data management • Internal platform known as REALIZA with a single form for all units in Chile. This platform responds to _management _and privacy a requirement from the Superintendency of Gaming Casinos (SCJ), Circular No. 51, through which all complaints or suggestions made in each unit are At ENJOY, we engage with our customers through a It is fundamental to us at ENJOY to maintain good notified online to the people responsible for responding quality service and promoting the satisfaction of each communications with our customers, complying strictly to them. The regulations specify the amount of time guest, customer and visitor through transparent and clear with the respective regulations regarding data privacy and they have to conduct an investigation and give a communications. For ENJOY, it is fundamental for us to provision of information in each country where we are formal response to the customer. Customers may measure the level of satisfaction of our customers in terms present. file a complaint or request directly through the of the experience they have when they visit one of our units, Superintendency of Gaming Casinos (SCJ) portal, and and we regularly monitor this through surveys to assess and As part of the customer communications processes, these will be treated the same as those filed in the identify the areas with room for improvement. we ensure access to the necessary feedback channels aforementioned system. so that any unsatisfied customer can leave a comment, In 2018, starting in May, customer satisfaction suggestion and/or complaint. This space contributes to • Grievances filed with the National Consumer Service measurements were developed with a new globally trending the construction and enhancement of future memorable (Servicio Nacional del Consumidor, SERNAC) are also tool, Qualtrics, which provides a measurement in real time experiences. addressed through a methodology, where, once the and favors customer loyalty management. Over the reporting complaint has been received, an internal investigation period, the Global Customer Satisfaction Index (CSI) showed In Chile, formal customer communication is regulated gets underway so that we can give a formal response a positive evolution resulting from efforts undertaken in each by the Consumer Law and the Law on Gaming Casinos. within the timeframe established by current legislation. business unit and constant technological innovations applied Likewise, we are also governed by Law 19,628 on the to be ever closer to our customers. Enjoy Mendoza was the protection of private life and personal data. In Uruguay, formal communication with customers is business unit that scored the highest during the period. ENJOY has the following tools and procedures for regulated by Law No. 17,250, Consumer Defense. Enjoy customer service and the resolution of complaints in Chile: Punta del Este has a complaints and suggestions form that is managed by the Hotel Director, who reviews and responds to all comments. Evolution of Global Customer Satisfaction Index for ENJOY Casinos 74 In Argentina, formal customer communications are regulated by the Provincial Institute of Gaming and Casinos 73 (IPJyC) and Enjoy Mendoza has a Consumer Defense 73 73 73 72 72 Complaints Book.
70
MAY/18 JUN/18 JUL/18 AGO/18 SEP/18 OCT/18 NOV/18 DIC/18 92 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Human capital Distribution by nationality Breakdown by country management Chilean 5,008 Chile Uruguayan 970 Employees and customers are part of a virtuous circle for Argentine 441 5,333 2,682 2,651 Enjoy and this vision challenges us as a Company as we Employees men Women are always looking to provide a better quality of life to the Colombian 81 members of our team, so they are really ready to generate Other nationalities 221 memorable experiences for our customers. Between 41 to 50 51 to 60 61 to 70 Over 70 Under 30 30 and 40 years years years years Distribution by years in the position The Enjoy team is a young, diverse team that mostly works 2,852 1,429 653 300 93 6 directly with our customers, guests and visitors, which makes their attitude towards service even more important. Served less than 3 years 3,552 Served between 3 and 6 years 1,059 Argentina Served more than 6 and less than 9 years 870 Served between 9 and 12 years 475 416 253 163 _Organizational diversity Served more than 12 years 765 Employees men Women
Between 41 to 50 51 to 60 61 to 70 Over 70 Distribution by type of position Under 30 Distribution by gender 30 and 40 years years years years Senior executives 20 200 172 40 4 0 0 Managers, Deputy Managers 62 Administrative 141 Uruguay Professionals 365 Supervisors 736 972 549 423 6,721 3,484 3,237 Employees men Women Employees men women Operators, technicians 1,811 Contact personnel 3,586 Between 41 to 50 51 to 60 61 to 70 Over 70 Under 30 30 and 40 years years years years Distribution by age Distribution by type of contract 88 293 464 117 10 0 Between 41 to 50 51 to 60 61 to 70 Over 70 Under 30 Employees with indefinite contracts 5,599 83.30% 30 and 40 years years years years men with indefinite contracts 2,992 85.87% 3,140 1,894 1,157 421 103 6 women with indefinite contracts 2,607 80.54% 93 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
_Total employees per type of position
Business unit Senior Manager, Supervisor Professionals Administrative. Operators, Contact TOTAL executive deputy technicians personnel manager
Enjoy Antofagasta 1 3 84 43 12 228 364 735
Enjoy Coquimbo 1 3 77 39 25 246 414 805
Enjoy Viña del Mar 1 4 112 36 16 371 805 134
Enjoy Santiago 1 4 108 47 18 205 516 899
Enjoy Pucón 1 3 58 25 11 210 368 676
Enjoy Park Lake (Villarrica) - 1 5 10 1 22 52 91
Enjoy Puerto Varas - 1 11 13 2 28 42 97
Enjoy Chiloé 1 2 30 24 3 80 145 285
Enjoy Central 12 32 58 91 25 70 112 400
Enjoy / CHILE 18 53 543 328 113 1,460 2,818 5,333
Enjoy Mendoza 1 4 61 11 14 90 235 416
Enjoy Punta del Este 1 5 132 26 14 261 533 972
Enjoy OVERALL 20 62 736 365 141 1,811 3,586 6,721 94 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Diversity of chief executive officer Board diversity _Salary gap by gender and other managers that report to _ _the ceo and board of directors
Distribution by gender Distribution by gender Nivel de cargo Femenino Executive level (managers and deputy managers) 56% Professionals 84% Operators 85% 20 19 1 9 8 1 Senior executives men woman Board Members men woman Percentile 50 has been used to calculate the salary gap in each category. When the information indicated is 0%, this Distribution by age Distribution by age indicates that there are no women in this category. When the value is 100%, there is no salary gap between men and Between 41 to 50 51 to 60 61 to 70 Over 70 Between 41 to 50 51 to 60 61 to 70 Over 70 women. A value greater than 100% indicates that the salary Under 30 Under 30 30 and 40 years years years years 30 and 40 years years years years gap favors women and a value lower than 100% indicates a favorable gap for men. 0 11 7 2 0 0 0 2 4 1 2 0
Distribution by nationality Distribution by nationality
Chilean 17 Chilean 6 Uruguayan 0 Foreign 3 Argentine 3 Distribution by years in the position Colombian 0 Other nationalities 0 Served less than 3 years 6 Served between 3 and 6 years 2 Distribution by years in the position Served more than 6 and less than 9 years 0 Served between 9 and 12 years 0 Served less than 3 years 8 Served more than 12 years 1 Served between 3 and 6 years 6 Served more than 6 and less than 9 years 3 Served between 9 and 12 years 2 Served more than 12 years 1 95 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
_Productivity _Engagement
In 2018, the People Division continued to work on the Work Engagement is one of the fastest-growing concepts Optimal Workforce Management Model. An important in the Human Resources industry in the last few milestone was the definition of workforce productivity years. When an organization’s employees are engaged, standards with the participation of each business manager, they are more active, motivated and enthusiastic on to guarantee the satisfaction of the final customer at all the job. People with a high level of engagement feel times. This effort implied that the back office team went passionate about what they do, which translates into back to work on the operation to understand how different them working harder at their tasks and being motivated positions worked and, based on this, it moved towards the to staying with the company. As a consequence, their systemization of demand models to reach a standardized performance and productivity improve, and as a result of process across Enjoy. This work was developed hand- this, so does customer satisfaction, which is ultimately in-hand with initiatives promoted under the Lean reflected in the organization’s bottom line. methodology. In 2018, Enjoy continued to make progress towards the A second milestone was the design of a work discipline work it had begun in the second half of 2017, which kicked control panel to manage important indicators for the off with the first Engagement survey implemented at that area, such as rotation, failures, delays, absenteeism, and time to analyze the status of the work teams. others, to continue to move forward in an organization increasingly focused on excellence in the workplace and The work plan undertaken in 2018 considered 6 pillars, business productivity. which were addressed under the auspices of the internal brand “Vive” (“Live”), launched in 2017 and very present The Productivity team has important technological tools, today in Chile, Argentina and Uruguay. Diverse initiatives such as the Shift tool, which uses expected demand, were developed under each of these work pillars, desired service level and the productivity of diverse explained in further detail below. positions to estimate the appropriate amount of employees at all times. This tool has been developed in conjunction with the Pontificia Universidad Católica de Chile. One of the goals in 2019 is to incorporate the Mendoza and Punta del Este units into this platform and to automate productivity standards across all units for a more exhaustive control. In addition, high performance teams will be formed for local management of labor productivity processes for each business unit. de productividad laboral de cada unidad de negocio. 96 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Vive There are benefits that apply across the board and others that vary from one location to Beneficios another. Employees have access to the updated details of their benefits through a special Number of training (Live Benefits) publication available in the mobile application Amigo, which registered an average of 20,000 monthly downloads in 2018. _hours at ENJOY Based on an internal study, the 3 most valued benefits across the board in 2018 were supplementary health insurance, the provision of school supplies and Christmas gifts to the children of employees. Training hours for back office staff Vive To promote a work environment that fosters great service, a range of activities were 2017 2018 Entretenido organized throughout the year for celebrations or to promote integration between different (Live Entertained) areas. Emblematic dates such as independence day, Christmas and Mothers’ day celebrations continued and these were joined by others such as Halloween and Valentine’s Day. Vive Over the course of the year, a total of 120,153 hours of training were provided across the 16,177 14,172 31,875 27,674 Desarrollo chain, mainly in areas related to gaming (croupier training academies), dining, leadership and (Live Development) technical training on tools like Excel and SAP. The courses offered are determined based on the annual process to detect training needs, which identifies training gaps across the board in employees and/or work teams. This provides the input for the annual work plan. Training hours for front office staff Vive In order to develop a profile that is in keeping with ENJOY, its values and the service 2017 2018 Actitud experience the Company aims to provide, training in service-related aspects was delivered (Live Attitude) to several units during 2018. In addition, a new corporate induction training program was developed to be applied across the entire chain. Vive Corporate values, service and discipline are the key pillars that ENJOY recognizes in its 14,155 12,012 34,299 26,305 Reconocimiento employees, through a program that takes on a different shape in each country. In Chile, the (Live Recognition) “Reyes y Reinas” (“Kings and Queens”) program is in operation in almost all the units in Chile and in 2019 it will reach Coquimbo, Puerto Varas (Chile) and Punta del Este (Uruguay). For several years, ENJOY Mendoza has offered the “Colaborador Estrella” (“Star Employee”) program, with quarterly awards. Vive Communications is central to management and the supervisor-employee bond is fostered Conectado so as to strengthen trust and teamwork. Each business unit also uses internal media that (Live Connected) adapt to its circumstances, which currently operate almost completely via digital platforms like Facebook or Instagram, alongside a digital bulletin board and informative newsletters. We seek to use visually attractive language with clear and precise information across all platforms. Vive Prevención This new engagement pillar arose in late 2018 out of the concrete need to give identity to the (Live Prevention) initiatives promoted to strengthen a culture of self-care.
10 Enjoy Punta del Este did not participate in the 2017 or 2018 study. 97 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
_Labor relations _Unions by countries with operations Listening to employees is a key process in understanding changes in the workforce and the needs of employees in the different countries where ENJOY operates. Currently there Chile Argentina Uruguay are diverse union activities and meetings with employees and management to stimulate dialog and interaction. At Enjoy Punta del Este, ongoing dialog is stimulated through 15 unions 2 unions 1 unions twice-monthly bipartite meetings, tripartite meetings and 42% union participation 52,16% union participation 59,5 % union participation labor stability agreements, among others. 47% of employees covered by 88,7% of employees covered by 95% of employees covered by collective bargaining agreements collective bargaining agreements collective bargaining agreements
Labor complaints
Number of complaints Number of complaints Total complaints received addressed resolved CHILE 2017 2018 2017 2018 2017 2018 Enjoy Antofagasta 7 4 7 3 2 2 Enjoy Coquimbo 8 4 5 1 5 4 Enjoy Viña 8 13 7 5 5 10 Enjoy Santiago 10 2 6 2 6 0 Enjoy Pucón 0 0 0 0 0 0 Enjoy Park Lake Villarrica 0 0 0 0 0 0 Enjoy Puerto Varas 0 0 0 0 0 0 Enjoy Chiloé 0 0 0 0 0 0 Enjoy Central 0 0 0 0 0 0
ARGENTINA 2017 2018 2017 2018 2017 2018 Enjoy Mendoza 7 7 36 27 5 6
URUGUAY 2017 2018 2017 2018 2017 2018 Enjoy Punta del Este 3 10 2 10 2 4 98 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Occupational health and safety Furthermore, during the year, a plan was implemented to media outreach campaigns, such as screensavers, posters, _ replace all safety signage with signs made from photo- social networks, and in person outreach. The most important luminescent material, which is supplemented with emergency campaigns included “Solar Protection,” “Let’s avoid the flu,” A self-care culture and plan aimed at preventive risk detection lighting, backup generators and lights on signage. “Caring for our eyesight,” “Washing our hands” and “Lower are the key pillars behind the management of occupational back pain.” safety at Enjoy. As a result, the Company has the lowest At Enjoy Punta del Este, as with the rest of the chain, accident rate in the hotel industry and a zero fatality record preventive actions across all safety dimensions are a The internal campaign “Hazard Hunters,” which began since its outset. significant part of the Company’s strategy and involve full several years ago, has made a significant contribution to team involvement and support. In 2018, Enjoy Punta del Este active participation of workers and middle management in Each year, the Company undertakes a series of informative renewed its UNIT-OHSAS 18001:2017 certification, marking the detection of different hazard situations, which adds to the and educational campaigns, together with the implementation a significant milestone in Occupational Safety. During the hazard condition surveys and onsite CPR (cardiopulmonary and ongoing update of protocols on occupational safety issues. year, the Company implemented important campaigns to resuscitation) training sessions. In addition, employees receive constant training through an prevent accidents and illnesses through diverse internal e-learning format.
As a result of the multiple activities that employees engage Chile Argentina Uruguay in on Enjoy property, some of the key risks of occupational accidents include kitchen cuts, falling and being hit by moving objects.
In July 2018 Enjoy chose the company Mutual de Seguridad through a tender process to implement its work accident and 11 1 2 1 occupational illnesses prevention and treatment plan in Chile. risk prevention experts risk prevention expert risk prevention occupational This strategic partnership also includes a joint work plan on experts doctor workplace inclusion and a Benefits Club for employees.
During the second half of the year, the Company promoted several preventive campaigns in its units, including “OJO con Employee participation in formal prevention organisms los ojos” (“Watch out with your eyes”) and “Paso a Paso” (“Step by Step”). It also implemented preventive management Chile Argentina Uruguay programs (PGP in Spanish), Competitive Company Program (PEC in Spanish) and the business unit joint committee 133 42 40 certification process. These programs created a better focus employees participate in Joint employees participate in employees participate in the Emergency Brigade for the analysis of preventive issues, which resulted in a Committees on Hygiene and Emergency Brigades 9.5% of employees participate in the Bipartite Committee reduction in the number of accidents and days lost. Safety through its committees Occupational Health and Safety Committee made up of Operations Managers and Staff 99 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Occupational health and safety performance indicators
Loss rate per year, Lost days per year, No. of occupational Total accidents per year, Accident rate per year, Mortality rate per year, per BU per BU diseases per year, per BU per BU per BU per BU
2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018
Enjoy Antofagasta 54 42 46 43 376 443 439 347 1 3 3 1 34 45 34 19 3.14 4.00 3.57 2.36 0.00 0 0 0
Enjoy Coquimbo 49 22 23 46 486 261 237 442 0 0 2 0 34 17 31 36 3.46 1.6 3.00 3.74 0 0 0 0
Enjoy Viña 15 22 23 15 213 452 332 216 0 1 0 1 22 14 20 21 1.52 1.9 1.36 1.48 0 0 0 0
Enjoy Santiago 87 55 45 40 960 519 459 366 4 4 1 2 26 35 46 40 2.35 3.70 4.52 4.37 0 0 0 0
Enjoy Pucón 21 39 59 18 175 601 611 176 0 0 0 0 11 27 57 26 1.29 2.5 5.52 2.63 0 0 0 0
Enjoy Chiloé 56 35 21 32 181 100 113 166 0 1 1 1 21 8 18 19 6.53 2.7 3.4 3.65 0 0 0 0
Enjoy Central 49 12 1 1 148 28 2 2 0 1 0 0 2 1 1 1 0.66 4.4 0.38 0.33 0 0 0 0
PROMEDIO CHILE 42 39 35 29 2618 2408 2228 1715 6 10 7 5 155 148 210 162 2.48 2.36 3.26 3 0.00 0.00 0.00 0.00
URUGUAY 18.3 24.4 37.5 91.80 231 297 449 1088 0 0 0 0 119 116 104 75 9.4 9.5 8.7 6.30 0 0 0 0
ARGENTINA 6.21 5.6 7.4 643 662 252 362 329 0 0 0 0 30 26 31 18 6.21 5.6 6.32 6.52 0 0 0 0 100 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Community development
From its outset, ENJOY has sought to contribute positively The Best Of awards are given to best practices related to to improving quality of life in the local communities where wine tourism once a year in the cities that make up the it has operations. This commitment between Enjoy and the Great Wine Capitals Global Network. In 2017, our property community has resulted in steady relationships based on also received an award in the “Services related to Wine a respect for local culture and needs, being a key agent Tourism” by the Entre Copas cycle. Once a month, on the of socio-economic development and source of local work. 17th floor of Enjoy Mendoza, a large table is set to receive a Likewise, Enjoy contributes to development through the winemaker from a local winery and members of the public payment of specific gaming-associated taxes levied on who are interested, not only in the technical features of the different activities as per regulations, as a direct contribution wines, but also in the anecdotes behind each vintage. to municipalities and regional governments. Chiloé Convention Bureau Below are further details on some of the initiatives In September 2018, Enjoy Chiloé hosted the launch of the undertaken in 2018 in this area: Chiloe Convention Bureau, a corporation made up of Enjoy and four other tourism companies from the district of Castro. This organization enables joint work between these companies to foster tourism and strengthen the destination, specifically promoting MICE tourism (Meetings, Incentives, Tourism and development Conventions and Exhibitions) in Chiloé as part of a project _ in association with Chile’s Economic Development Agency, Corfo. Tourism holds a key role as one of the fastest-growing industries at a global level, and Enjoy has always played an International events active role in the development and promotion of this activity. For the second year in a row, in October, Enjoy Punta del Este held the “Punta Bet on Music,” which attracted Promotion of wine tourism in Mendoza thousands of people, mostly from Brazil, as a result of a Since 2005, Mendoza has been one of the major Wine significant effort to promote and market the destination. In Capitals and in 2018 Enjoy Mendoza continued to foster 2018, Enjoy Pucón hosted important athletic events that initiatives that contribute to promoting the area and its drew athletes from across the continent, such as the Pucón famous wineries. For the second straight year, Enjoy Casino IronMan 70.3 and El Cruce Columbia, which connected Chile & Sheraton Mendoza Hotel received the award Best of and Argentina. Mendoza’s Wine Tourism, this time in the “Accommodations” category. 101 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Seals, awards and certifications The Company participates in all the major national and local groups and organizations that promote tourism in the countries CHILE Q Seal for Quality of Tourism, National Tourism and towns where it has a presence. In addition, ENJOY adheres to important initiatives that promote quality in the tourism Service (Sernatur) industry, as well as programs associated with sustainable tourism. In 2018, Enjoy Chiloé renewed its S Seal for Sernatur Hotel Enjoy Antofagasta Sustainable Tourism, which accredits it as a tourist service that meets global criteria on sustainable tourism in the socio- Hotel Enjoy Coquimbo cultural, environmental and economic areas. Hotel Enjoy Viña del Mar Hotel Enjoy Santiago Hotel Enjoy Puerto Varas Hotel Enjoy Chiloé
“Guest Review Awards 2018” from Booking.com Hotel Enjoy Coquimbo Hotel Enjoy Santiago Hotel Enjoy Chiloé
Tripadvisor Certificate of Excellence 2018 Hotel Enjoy Coquimbo
“Loved by Guests Awards 2018” from Hoteles.com Hotel Enjoy Santiago
S Distinction for Sustainable Tourism, from the National Tourism Service (Sernatur) Hotel de la Isla, Enjoy Chiloé
ARG Eco label for Sustainable Management of Greener Hotels, Argentine Association of Tourist Hotels (Asociación de Hoteles de Turismo de la República Argentina, AHTRA) Hotel Sheraton & Casino Enjoy Mendoza
Best Of Mendoza´s Wine Tourism, “Accommodations” category Hotel Sheraton & Casino Enjoy Mendoza
URU “Best beach club” Sirí Awards, Argentine magazine Cuisine & Vins. Ovo Beach 102 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Social responsibility meeting halls for the “Ronda de Amigos” (“Round of Friends”) _ event, a key fundraising activity for the foundation.
In 2018, ENJOY took part in different events with benefit Access to snow foundations and charitable entities of local importance. Of Once again, Enjoy Pucón activated a 50% discount on ski lift the multiple demands received annually, priority was given tickets to the Pucón ski resort operated by Enjoy for people to help local communities where Enjoy operates who live in Pucón and Villarrica. It also organized free trips for low-income schools in neighboring communities. Annual Dinner at Ronald Mac Donald House in Mendoza Enjoy Casino & Sheraton Mendoza Hotel once again hosted Workplace inclusion the Annual Dinner of the Ronald McDonald House, offering _ up its rooms and service staff for this benefit event to raise funds for families and help keep them together during ENJOY promotes equal work opportunities for differently- critical times such as the illness of a child. The Casa Ronald abled people, and for several years the Company has Mc Donald Asociación Argentina de Ayuda a la Infancia developed partnerships with different institutions to develops and leads programs that have an impact of the incorporate people with disabilities into its work teams. health and well-being of children undergoing highly complex In some cases, this takes place through professional medical treatment and also supports families by providing internships with a defined duration and in others, it involves support, containment and accommodations. training for definitive incorporation into the workforce. Enjoy Mendoza, Enjoy Coquimbo and Enjoy Chiloé have all worked Promoting a healthy lifestyle hard in this area. For the sixth year in a row, Enjoy Punta del Este joined forces with Sanatorio Mautone to hold informative workshops on breastfeeding. In addition, it participated in Heart Week Local employment with a gastronomic activity in Punta Shopping, developed _ in conjunction with Cardiomóvil and Sanatorio Mautone. Furthermore, in coordination with the National Drug Board, For Enjoy, job creation is one of the ways we can effectively the Maldonado Youth Council and the Maldonado Department contribute to the development of our communities, of Sports, Enjoy Punta del Este organized a workshop for especially in sectors of the population that find it more teens during “Mes Saludable” (“Healthy Month”), where difficult to enter the formal workplace. young model athletes from different sporting activities shared their personal experiences with work and overcoming In 2018, for example, we worked in partnership with different obstacles. public organisms and organizations for the promotion of youth employment, to train them and integrate them as Fundación María Ayuda employees in different areas of Enjoy throughout Chile. In Chile, Enjoy Antofagasta and Enjoy Viña del Mar collaborated with Fundación María Ayuda by donating its 103 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
As a Company, we are committed to providing opportunities Support for Organizations and Trade Associations for our workers to train and prove that they are capable of progressing in their careers and achieving personal and CHILE GREMIO professional goals. Enjoy Chilean Federation of Tourism Companies (Federación de Empresas de Turismo de Chile, FEDETUR) Hotel Operators of Chile Chilean Responsible Gaming Corporation (Corporación de Juego Responsable de Chile) *Carmen Luz Cultural contributions Castro, Vice president _ Chilean Chamber of Commerce Chamber of Commerce, Services and Tourism of Antofagasta • For the fourth year in a row, Enjoy Viña del Mar held its Enjoy ANTOFAGASTA Antofagasta Industrial Association (Asociación de Industriales de Antofagasta) Antofagasta free Christmas Concert that is open to the community on Convention Bureau Member the frontis of the casino, with presentations from artists Antofagasta Cultural Corporation (Corporación Cultural de Antofagasta) such as Andrea Tessa and Nicole as well as Orquesta Antofagasta Ruins Foundation (Fundación Ruinas de Antofagasta) *3 Enjoy Board Members Mapocho. Enjoy COQUIMBO Cidere Coquimbo • In Enjoy Mendoza, the magic of Christmas lights up with Enjoy VIÑA DEL MAR Valparaíso Regional Chamber of Commerce (Cámara Regional del Comercio de Valparaíso, CRCP) the “Silent night, jazz night” concert by the Sparkling Big Valparaíso Industrial Association (Asociación de Industriales de Valparaíso, ASIVA) Band and the Mendoza City Chorus, where members of Enjoy SANTIAGO Aconcagua Tourist Trade Association (Asociación Gremial de Turismo Aconcagua) the audience are asked to bring a toy to donate. Each Pro Aconcagua Development Corporation (Corporación de Desarrollo Pro Aconcagua) year, nearly 2,000 people come out in solidarity for this Enjoy PUCÓN Pucón Chamber of Tourism event, and in 2018, the beneficiary organizations were Cumbres and Vínculos Estratégicos. Villarrica Chamber of Tourism Enjoy CHILOÉ Castro Chamber of Commerce • To promote artists from the province, for several years Chiloé Hotel Operators’ Trade Association (Asociación Gremial de Hoteleros de Chiloé) Enjoy Mendoza has been organizing ART&WINE, a Chiloé Convention Bureau cycle defined as the pairing of art, wine and the five ARGENTINA GREMIO senses, where a regional artist exhibits her/his work Enjoy MENDOZA Hotel and Restaurant and other Business Association of Mendoza (Asociación Empresaria Hotelero in conjunction with a winery that sponsors the event Gastronómica y afines de Mendoza, AEGHA / FEHGRA) with its wines. The activity has no business purpose but Tourism Hotel Association of Argentina (Asociación de Hoteles de Turismo de la República Argentina, participants are asked to bring a non-perishable food item AHTRA) or a toy to donate to non-profit entities. Martín Villalonga, *Ariel Pérez, President Belén Spir, Marta Zirulnik de Kotlik and Atilio Spinello Mendoza Bureau inspired attendees with their creations in 2018. Mendoza Chamber of Hotel Operators Argentina Workers’ Union of Games of Chance, Entertainment, Recreation and Other Similar Activities (Sindicato de trabajadores de Juegos de Azar, Entretenimiento, Esparcimiento, Recreación y Afines de la República Argentina, ALEARA) URUGUAY GREMIO Enjoy PUNTA Association of Hotels and Restaurants of Uruguay (Asociación de Hoteles y Restaurantes de Uruguay, DEL ESTE AHRU) Destino Punta del Este Marketing Leaders Association of Uruguay (Asociación de Dirigentes de Marketing del Uruguay, ADM) Punta del Este Convention Bureau Maldonado Development Agency 104 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Safety of facilities In Chile, in 2018, the Company continued to work towards Sustainable operation _ the implementation of technological measures in keeping with Decree Law No. 1,521 of the Ministry of the Interior that 2018 Economic performance Enjoy has always considered safety as a cornerstone declared in 2017 that casinos are “strategic companies.” _ of its operations and under this premise, the Company Some of the elements that are now in place in the ENJOY continuously strives to implement initiatives to ensure safe casinos include metal detector wands and arches, scanner/ physical spaces for its customers and employees. X-ray machines, bulletproof vests and portable cameras. 2018 Economic The Safety corporate area oversaw compliance with Decree Enjoy has a Preventive Management Model that uses risk Law No. 1,521 on safety standards in casinos in Chile, and _value retained matrices and ongoing inspection processes to continuously trained its teams on the use and handling of new associated improve its processes associated with safety and constantly technology. The cooperation agreement on crime prevention review standards throughout the chain. There is a corporate was also extended with the stolen vehicle report and search supervisor, who is responsible for implementing emergency section (SEBV in Spanish). MM$ 23,569 prevention and control plans and overseeing compliance by each unit. _Data security 2018 Economic The Emergency Plan includes risk prevention and value distributed intervention protocols, whether these risks are the Adapting the business model to new technologies and _ consequence of crimes or the outcome of natural disasters. customer needs is at the base of Enjoy’s business A key area of work in 2018 was the review and update of philosophy. Faced with market challenges in 2018, the these internal protocols, which were supplemented with Company began a technological transformation process M$ 251,437 safety training sessions and talks, both with specialized for its value proposal, which saw its first results in January Enjoy staff and all team employees. Many of the training 2019 with the initial renovation of slot machines at Enjoy sessions designed to prevent criminal events are held with Viña del Mar and Enjoy Coquimbo. officials from the state organizations responsible for public safety and order in each country. Behind this transformation, there is a cyber-security strategy with a focus on guaranteeing operational systems continuity, Likewise, the Company works together with the Risk outfitting new tools to strengthen collaborative efforts Prevention area and institutions such as the Fire Department throughout the chain, and minimizing the risk of threats and to hold workshops on emergency and evacuation plans for leaks of a very important asset at our company: data. each district, to guarantee an impeccable implementation in the event of an emergency. This includes drills held in Enjoy’s Annual Information Security Plan, which was coordination with emergency organizations and government presented to the Company’s Directors’ Committee, includes entities. 105 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
periodical preventive audits carried out by the IT Security Operational efficiency in the supply records, traceability and transparency and generating area to check for potential vulnerabilities in systems and savings. During the year, Enjoy generated 20% savings on equipment. These tests include testing communications chain those transactions made through the electronic bidding links, autonomy in electricity generation, information back- _ system. The experience was considered a “success case” in up, unauthorized data access and disaster recovery testing, the SAP company internationally, as it was implemented in among others. There is also a Cyber-security Committee In 2018, the area responsible for suppliers continued to a very short period of time. Thanks to the positive impact, responsible for following up on potential incidents and implement technologies to improve processes associated in 2019, we hope to expand the variety of tenders and add designing preventive activities, which holds monthly with procurement and supply, with clearly defined other methodologies available in Ariba. meetings and generates weekly data security reports with compliance standards. operational, tactical and strategic monitoring. Enjoy has a clear Procurement Policy which the people As part of the plan, in 2018, the Data Loss Prevention (DLP) responsible for procurement throughout the chain and key tool was put in place to monitor information flow from the internal customers in the different business areas are aware company outwards. An Ethical Hacking program was carried of. Strict adherence to this policy and the transparency with out twice during the year to test systems, and an anti- which supply chain processes carried out have been key ransomware tool was implemented on all Company laptops factors in reaching high standards of operational efficiency. and servers to prevent malicious information gathering. In 2018, the Company updated its Procurement Policy to Alongside the Data Security Plan, in 2018, Enjoy renovated incorporate information on the purchase of gaming and key server technology, enabling it to migrate information slot machine technology, due to Enjoy’s modernization to the cloud with greater levels of data security and processes. control. In terms of systems, the Company made progress toward the implementation of Google’s G Suite tools to Another relevant pillar has been the provision of a better strengthen collaborative work within the chain. During the experience for the final customer as an end goal of the year, Videoconferencing and the Hangout system were supply chain. During the year, the area continued to implemented, and Design Thinking sessions were held in make progress on the digitalization and automation of its The main tools used by Google’s offices in Chile for the co-creation of solutions. most relevant processes to reach maximum traceability the Enjoy supply chain to throughout the chain. Furthermore the procurement and supply processes for all units were centralized, enabling reach maximum operational us to unify the process, improve control and generate efficiency and customer efficiencies. satisfaction are SAP ariba In 2018, the use of SAP Ariba as a key Enjoy Procurement tool was consolidated in Chile and Uruguay. This tool is a and the SAP MRP and PM major business network with cloud-based procurement modules. solutions and innovative business models, improving 106 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
In regard to procurement contract management, the SAP Environmental management sunset event to be held in Uruguay. Together with “Uruguay Ariba Contract Management module was piloted in 2018 and _ Recycles,” the entity responsible for waste management and area supervisors in the Chilean units were trained. The goal, environmental education, all glass containers discarded at once this module is implemented, is to ensure that once With environmental care as a key value, Enjoy promotes the end of the event were processed and transformed into the negotiation has been completed, there is an associated environmental awareness both among its guests and with its ecological concrete bricks, for subsequent donation to the contract, with a unique record that is always available and own team, with concrete measures to promote recycling and organization “Animales Sin Hogar” (“Animals without a Home”), completely traceable, to mitigate risks resulting from the the responsible use of energy resources. which provides shelter, veterinary assistance and responsible absence of contracts. adoption for hundreds of animals. In all business units, the Company continued with its After an analysis that started in December 2017, during monitoring and registration system to guarantee regulatory In Chile, a supplier approved by the regional health authority the first quarter of 2018, the company joined forces with compliance. In 2018, we drew up the letters of project removes used oil for treatment and subsequent disposal in Aquanima to implement a “Strategic Sourcing project, pertinence to the Environmental Impact Assessment System sites authorized by the respective authority. aimed at identifying savings in Enjoy’s main procurement (Sistema de Evaluación de Impacto Ambiental, SEIA) for the categories. new Pucón and Puerto Varas casinos, and submitted them in Another relevant factor for operational efficiency in a chain 2019. like Enjoy is the timely supply of its multiple business units, in keeping with operational requirements. In 2018, Uruguay In Argentina, Enjoy Mendoza has the Greener Hotels implemented the MRP tool in SAP, a system that optimizes Ecolabel, granted by the Asociación de Hoteles de Turismo the planning of needs for materials to guarantee availability de la República Argentina (Argentine Association of Tourism based on historic demand and forecast future demand. Hotels). This label certifies a hotel’s sustainability in terms of In the first half of 2018, the Enjoy Punta del Este team adherence and compliance with the requirements related to received training for autonomous operation and in Chile, the conservation, improving the surroundings, energy and water process has been centralized since the second half of the management, prevention of air and noise pollution, waste year. management and sustainable development.
Finally, the SAP tool PM was implemented in the Waste Maintenance area, which enables the company to plan, process and finish tasks associated with maintenance of Most of the waste generated by Enjoy is domestic waste. Each business units, with a focus that is not just corrective but business unit is empowered to manage waste removal and also preventive. recycling locally. In Viña del Mar, for example, the Company has an advanced repair system and donates paper waste to a charity.
Enjoy Punta del Este undertakes internal solid and liquid waste recycling campaigns for paper, cardboard, batteries, oil, clothing/uniforms, fluorescent tubes, ethylene perchloride, plastic, lids and containers. In 2018, Ovo Beach at Enjoy Punta del Este and Nat Geo joined forces with the first sustainable 107 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
In 2018, ENJOY Coquimbo Preventive actions were undertaken to mitigate events that planted with native species, which were reforested in 2011, designed a project to change could negatively affect the environment, such as: with the inauguration of the comprehensive project. underground fuel tanks for • Implementation of a pilot program in ENJOY Antofagasta Enjoy Punta del Este also has a water plant located in the gravitational tanks that minimize to renovate kitchen fans with ultraviolet filter-based garage, which reuses the water for garden irrigation, air technology. This innovative system reduces oil waste by conditioners (chillers) and staff bathroom sewage systems. the risk of seepage into the ground. turning it into dust. As a result, it reduces the consumption of water used for cleaning, reduces electricity consumption In Chiloé, in 2018, the company undertook a study to improve Work will begin in 2019. and reduces smoke emissions through increased absorption. the rainwater discharge system and redirect this for irrigation. In addition, UV technology minimizes fire hazards by eliminating the oil from upper ducts. After a pilot period, the Enjoy Mendoza reduced its water consumption after changing implementation of this new technology will be assessed for the regulator pressure valves and flow regulators. other kitchens. Universal accessibility • In 2018, ENJOY Coquimbo designed a project to change _ underground fuel tanks for gravitational tanks that minimize the risk of seepage into the ground. Work will begin in 2019. Starting in March 2019, it will be mandatory to implement Decree 50 of the Ministry of Housing and Urban Planning. This • Enjoy Coquimbo implemented a hazardous waste cage decree dictates that all existing buildings must adapt their (perchloride, fluorescent tubes, paint cans, paint thinners facilities to “be independently accessible and usable without or detergents), together with a removal program designed difficulty by people with disabilities, especially those with to meet the regulations. This contributes to environmental reduced mobility.” care by preventing seepage into the soil and avoiding people coming into contact with these materials. In 2018, Enjoy conducted a thorough survey to design accessibility projects for its different projects in Chile, • To minimize the risk of percolated solution spills and the to ensure that people can access, circulate, use and existence of foul odors, the garbage rooms at the Pucón leave facilities safely, comfortably, autonomously and hotel and casino were modernized, and in 2019, the independently. The design considers the installation of access Company expects to finish modernizing the garbage room in ramps, access rails, tactile paving, exclusive elevators for Puerto Varas. people with reduced mobility and installation of signage, among other elements. Water management The first accessible design pilot was implemented in the In 2018, Enjoy continued to self-generate potable water and Santerra restaurant in Enjoy Antofagasta and in 2019 this generate a sewage system for Enjoy Santiago, located in the work will extend to the other properties. distinct of Rinconada. With the expansion of the treatment plant, which began in 2017 and finalized in 2018, the Company obtains water to irrigate 13 hectares of green areas 108 2018 ANNUAL REPORT CHAPTER 4 ANNUAL PERFORMANCE 2018
Key figures for environmental performance11 Main recycling figures
Total water consumption Year Year Year Year Quantity of waste Year Year Year Year (m3) 2015 2016 2017 2018 recycled (Kg) 2015 2016 2017 2018 Chile 339,992 437,493 460,129 472,808 Paper 264,55 12,856 5,259 9,900 Argentina 92,475 73,260 64,204 29,422 Cardboard 11,14 35,795 35,089 49,040 Uruguay 97,700 104,392 112,224 109,340 Newspapers and No No TOTAL 530,165 615,145 636,557 611,570 900, 42 420 magazines management management Consumption of groundwater Year Year Year Year Plastic 66,93 898 506 105 (m3) 2015 2016 2017 2018 Aluminum 35,7 262,30 7,963,60 8,070 Chile 224,547 211,574 229,395 237,000 Batteries - 197,30 205,50 130 Argentina 0 0 0 0 Uruguay 78,998 94,770 106,057 108,601 Oil (Used cooking oil) - 17,124,29 7,500 47,141 TOTAL 303,545 306,344 335,452 345,601 Total volume of oil Year Year Year Year Direct consumption of electrical Year Year Year Year waste (m3) 2015 2016 2017 2018 energy (GJ) 2015 2016 2017 2018 Oil 1,769 1,996 2,166 1,830 Chile 156,317 150,119 162,622 157,331 Argentina 30,434 29,856 28,638 28,815 Uruguay 52,757 52,687 49,010 48,055 TOTAL 239,508 232,662 244,372 234,201
Direct consumption of petroleum Year Year Year Year (L) 2015 2016 2017 2018 Chile 308,080 289,097 583,139 641,452 Argentina 800 750 400 400 Uruguay 788,509 867,033 788,216 827,444 TOTAL 1,097,389 1,156,880 1,371,755 1,469,296
Gas consumption Year Year Year Year (m3) 2015 2016 2017 2018 Chile 2,838,730 2,839,004 3,382,293 3,158,886 Argentina 157,203 187,000 220,611 224,624 Uruguay 95,109 94,404 94,539 83,644 TOTAL 3,091,042 3,120,408 3,697,443 3,467,154
11 In Chile, the increase in indicators is due to the entry of a new operation in Puerto Varas. 109 2018 ANNUAL REPORT
5. FINANCIAL STATEMENTS 110 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS
Stock Inversiones Inversiones e Inmobiliaria Entretenciones market Cumbres Ltda. Almonacid Ltda. Consolidadas SpA Information 36.9% 4.9% 23.8% 34.4%
regarding Enjoy S.A. subsidiaries, 99.98% 0,02% 100% 100% Inversiones Inmobiliarias affiliate Enjoy Gestión Ltda. Inversiones Enjoy SpA. Enjoy SpA 99.98% Enjoy Consultora S.A. 0.02% 75% IPI Antofagasta S.A. companies and 75% Inv. Vista Norte S.A. 100% Latino Usluge d.o.o. (Croacia) 99% Op. El Escorial S.A. 0.75% 99,99% IPI C oquimbo SpA. 0.01% 46.54% Casino Grad d.d investments (Croacia) 89.44% Operaciones Integrales Coquimbo Ltda. 10.56% 70% Inm. Rinconada S.A. Inv. Andes Entretención Ltda. 0.09% with other 87.5% Campos del Norte S.A.12.5% 99,55% Inm. Kuden SpA. 0.45% Casino Rinconada S.A. companies 70% 53% Cela S.A. (Argentina) 99% IPI Castro SpA. 1.00% 70% Inv. y Ser. Guadalquivir S.A.
Operaciones Integrales 90% Yojne S.A.10% The following is a schematic chart showing the direct 70% Chacabuco S.A. (Argentina) and indirect ownership relationships between the parent company, subsidiaries and affiliates, as well as those 90% Slots S.A. Baluma S.A. (Uruguay) 0.11% between them: 99% Masterline S.A. 1% 100% Baluma Cambio 40% Casino de Colchagua S.A. S.A. (Uruguay)
99% Kuden S.A. 1% 99.999% Baluma Ltda. (Brasil) 99,37% Operaciones Turísticas S.A.0.63%
99% O. Int. Isla Grande S.A. 1% Enjoy Caribe SpA 99% Rantrur S.A.1% Enjoy Caribe SpA Sucursal Colombia 99% Casino de Iquique S.A. 1%
99% Casino de la Bahía S.A. 1%
99% Casino del Mar S.A. 1%
99% Casino del Lago S.A. 1%
99% Casino de Puerto Varas S.A. 1%
Antonio Martínez y Cía. 111 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _ENJOY GESTIÓN LIMITADA
Taxpayer ID: 96.976.920-4 Type of Entity: Limited liability company Subscribed capital: Ch$ 50,249 million| Paid-in capital: Ch$ 50,249 million
Purpose: The management and administration of businesses or operations linked to the field of entertainment, leisure time, and Senior executives: tourism; as well as the provision of services and professional and technical advice in different areas, and of investments of Francisco Javier Martínez Seguí. all kinds in tangible and intangible assets. To develop the abovementioned, the company may especially manage or operate Antonio Martínez Seguí. gaming casinos, bingo, hotels, food and beverage services, and in general all types of business, whatever their nature, related to entertainment, leisure and tourism. It may also provide all kinds of professional and technical advice and services, Current ownership percentage of the parent in the legal, financial, accounting, commercial, human resources, public relations, sales management and brokerage, and IT, subsidiary and variations occurred in the period: among others, that are necessary for the research, commissioning, and operation of businesses and projects in general. The Enjoy S.A. participates directly with 99.98% and indirectly company may also carry out all the operations of a tourism agency, such as the promotion and sale of tourism products and through its direct subsidiary Inversiones Enjoy SpA with entertainment in general, the development, production and sale of promotional and advertising media and materials; buying, 0.02% in the capital of the company. selling and booking tickets and earning a fee for tickets and tourism packages for activities done by land, sea, air, rivers, seas This participation has not changed during the year. and lakes, national and international; the study, implementation, and promotion of charters and excursions on its own account or on behalf of a third party, national or international, hire travel insurance on its own account or on behalf of a third party; Percentage Of The Parent Company’s Assets Represented the production and organization, booking, purchase and sale of tickets or access to shows, events and artistic and cultural By The Investment In The Subsidiary: demonstrations, social and sports events; the representation or intermediation, consignment, purchase and reservation of any -0,96% right or service related to travel, tours, hotels, spas and tourism, individual or collective, anywhere in the world. In addition, to operate as a tourist agency it may carry passengers in its own vehicles or others, leased, in leasing or under any other form, Representatives who work in the parent and the both in Chile and abroad. Finally, the company may develop, license and market, on its own account or on behalf of a third subsidiary: party, all kinds of software, and generally carry out all the activities aforementioned either through written media, graphics, Francisco Javier Martinez Seguí: President of parent Board technology, computer, electronic, or any other means; and do any related activity, currently or in the future with the above; and and subsidiary manager. any other business agreed upon by the partners. Antonio Martinez Seguí: Director of parent Board and subsidiary manager.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts with parent Commercial current account agreement. 112 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INVERSIONES ENJOY SpA
Taxpayer ID: 76.001.315-3 Type of Entity: Joint stock company. Subscribed capital: Ch$ 13,512 million | Paid-in capital: Ch$ 13,512 million
Purpose: The object of the company is specified as follows; A) the real estate business, construction, operation, development, leasing Senior executives: and/or management of real estate located in Chile or abroad, either directly or indirectly, on its own account or on behalf of Francisco Javier Martínez Seguí. a third party, individually or in association with others; B) general trade activity, through purchase, sale or lease of all kinds of Antonio Martínez Seguí. goods, properties or securities, and the provision of services, on its own account or on behalf of a third party, individually or in association with others; especially the commercial exploitation of casinos and related services such as hotels and tourism Current ownership percentage of the parent in the in general, convention centers, restaurants and related activities, which may operate directly or indirectly through related subsidiary and variations occurred in the period: companies; c) investment in Chile and abroad, in any type of goods, financial instruments and commercial and in particular, in Enjoy S.A. participates directly with 100% in the company shares or rights in incorporated companies, through the subscription and payment of first issue shares, acquisition of shares capital. or rights of others, and making contributions for the constitution or capital increase in companies or associations, on its own This participation has not varied during the year. account or on behalf of a third party, individually or in association with others. Percentage Of The Parent Company’s Assets Represented By The Investment In The Subsidiary: -4.49%
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary manager. Antonio Martínez Seguí: Director of parent Board and subsidiary manager.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts with parent: Commercial current account. 113 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INVERSIONES INMOBILIARIAS ENJOY SpA
Taxpayer ID: 76.242.574-2 Type of Entity: Joint stock company Subscribed capital: Ch$ 43,499 million | Paid-in capital: Ch$ 43,499 million
Purpose: The purpose of the company shall be: A) the real estate business, construction, operation, development, leasing and / or Director, senior executives and ceo: management of real estate located in Chile or abroad, either directly or indirectly, on its own account or on behalf of a Antonio Martínez Seguí. third party, individually or in association with others; B) general trade activity, through purchase, sale or lease of all kinds of Francisco Javier Martínez Seguí. goods, properties or securities, and the provision of services, on its own account or on behalf of a third part, individually or in José Miguel Melo Pizarro. association with others: especially the commercial exploitation of casinos and related services such as hotels and tourism in general, Congress Centers, restaurants and related activities, which may operate directly or indirectly through related Current ownership percentage of the parent in the companies; and C) investment, both in Chile and abroad, in any type of goods, financial and commercial instruments and subsidiary and variations occurred in the period: in particular, in shares or rights in incorporated companies, through the subscription and payment of first issue shares, the Enjoy S.A. has a direct participation of 100 % in the company acquisition of shares or rights of others, and making contributions for the constitution or capital increase in companies or capital. associations, on its own account or on behalf of a third party, individually or in association with others. Percentage of the parent company’s assets represented by the investment in the subsidiary: 14,24%.
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager of the parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Acts and significant contracts with parent: There are no contracts between parent and subsidiary. 114 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _ENJOY CONSULTORA S.A.
Taxpayer ID: 76.470.570-K Type of Entity: Closed corporation Subscribed capital: Ch$ 725 million | Paid-in capital: Ch$ 725 million
It is the company that provides consultancy services to some of the casinos and hotels of Enjoy group, both nationally and Senior executives and ceo: internationally, in legal, financial, and administrative areas and, in some cases, to develop the brand for some businesses. Antonio Martínez Seguí. Francisco Javier Martínez Seguí. Purpose: Eduardo Sboccia Serrano. The purpose of the company is to provide advisory and consultancy services in business administration and management, José Miguel Melo Pizarro, CEO. especially to companies whose line of business is hospitality, tourism and casinos, both domestic and foreign, to which end the consultancy services are related to commercial, economic, financial, technical, accounting, tax, administrative Current ownership percentage of the parent in the management, human resources, marketing and internal control issues of the counseled entities, including the selection and subsidiary and variations occurred in the period: training of personnel of those entities. Enjoy S.A. participates directly with 0.02% and indirectly through its direct subsidiary Enjoy Gestión Limitada with 99.98% in the capital of the company. Such participation has not changed during the year.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0,38%.
Representatives who work in parent and subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Eduardo Sboccia Serrano: Legal Services Manager of parent and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Acts and significant contracts with parent: There are no contracts between parent and subsidiary. 115 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INVERSIONES VISTA NORTE S.A.
Taxpayer ID: 99.595.770-1 Type of Entity: Closed corporation Subscribed capital: Ch$ 6,614 million | Paid-in capital: Ch$ 1,804 million
It is the company that operates Hotel del Desierto services: food and beverage and other supplementary services such as the Directors, senior executives and ceo: spa and the convention center of Enjoy Antofagasta. Regular Director: Antonio Martínez Seguí. Regular Director: Francisco Javier Martínez Seguí; Alternate Purpose: Director: José Miguel Melo Pizarro. The purpose of the company shall be: Capital investment in all kinds of movable property, shares and right in all types of Regular Director: Iván Simunovic Petricio; Alternate Director: companies, whether commercial or civil, communities or associations and in all kinds of titles or securities. To administer, Rodrigo Marín. on its own account or on behalf of a third party, capture rents; take part in other companies, domestic or foreign, of any Regular Director: Eduardo Sboccia Serrano. kind, modify and take over their administration, whichever their line of business. In addition, the company will aim to, Juan Carlos Vásquez Pereira, CEO. directly or indirectly, operate restaurants, cafes, bars, and general premises aimed at the provision of entertainment and leisure services; as well as museum management and the creation of internet sites. In addition, the construction, operation, Current ownership percentage of the parent in the give and take in lease or loan, on its own account or on behalf of a third party, of hotels, motels, inns, lodging, and others subsidiary and variations occurred in the period: related to accommodating people and tourism, with all hotel and tourism facilities. Furthermore, the start-up, organization, Enjoy S.A. participates indirectly through its direct subsidiary management, distribution, advertising, development, production and sale, on its own account or on behalf of a third party, of Enjoy Gestión Limitada with 75% in the company’s capital. literary, social, sports, tourism, scientific, artistic and cultural activities, and all kinds of events in general. Finally, acquisition, sale, investment, purchase, sale, exchange, lease, sublease of real and personal property, or rights over them, their Percentage of the parent company’s assets represented by administration and operation, construct in them, exploit them, either directly or through third parties in any form. The sale, the investment in the subsidiary: 0,89% import, export, distribution, consignment, representation or intermediation in any kind of change in a property’s ownership or attributes, in regard to any class of goods or related activity, now or in the future with the aforementioned; and any other Representatives who work in the parent and the business agreed by the partners. subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Eduardo Sboccia Serrano: Legal Services Manager of parent and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: Commercial current account contract. 116 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _OPERACIONES EL ESCORIAL S.A.
Taxpayer ID: 99.597.870-9 Type of Entity: Closed corporation subject by law to the supervision of the commission for the financial market, and registered in the register of reporting entities with the number 155. Subscribed capital: Ch$ 4,090 million | Capital pagado: Ch$ 3,528 million
It is the company that operates the gaming casino of Antofagasta. Director, senior executives and ceo: Iván Simunovic Petricio, Director. Purpose: Antonio Martínez Seguí. The purpose is the exploitation of Antofagasta gaming casino in the terms established by Law 19,995 and its regulations, for Francisco Javier Martínez Seguí. which gambling games, machines, tools and related services can be developed, by authorization in the respective operating Lucas Marulanda López. permit or in the future by the Superintendencia de Casinos de Juego (Gaming Casinos Superintendence of Chile) or a replacing Rubén Ormazábal Sanhueza, CEO. authority. Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. participates directly with 0.75% and indirectly through its indirect subsidiary Inversiones Vista Norte S.A. with 99% in the capital of the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 2,36%
Representatives who work in parent and subsidiary: Francisco Javier Martínez Seguí: Director of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Lucas Marulanda López: Director of parent Board and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts held between parent and subsidiary. 117 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _OPERACIONES INTEGRALES COQUIMBO LIMITADA
Taxpayer ID: 96.940.320-K Type of Entity: Limited liability company Subscribed capital: Ch$ 7,155 million | Paid-in capital: Ch$ 7,155 million
It is the company that operates Hotel de la Bahia services, providing food and beverage and other supplementary services for Managers: Enjoy Coquimbo, including spa and convention center. Antonio Martínez Seguí. Francisco Javier Martínez Seguí. Purpose: Capital investment in all kinds of movable property, as rights and shares in all types of companies, whether commercial or Current ownership percentage of the parent in the civil, communities or associations and in all kinds of titles or securities. Manage such investments on its own account or on subsidiary and variations occurred in the period: behalf of a third party, receive earnings; take part in other companies, domestic or foreign, of any kind or legal status; modify, Enjoy S.A. participates directly with 10.56% and indirectly and takeover their management, whatever their line of business. In addition, the company will aim to the direct or indirect through its direct subsidiary Enjoy Gestión Limitada with operation of restaurants, cafes, bars, and premises dedicated to the provision of entertainment and leisure in general, museum 89.44%. management and the creation and management of internet sites. In addition, to construct, operate, give and take on lease Such participation has not changed during the year. or loan, on its own or on behalf of a third party: hotels, motels, inns, hostels and other accommodation related to people and tourism. Furthermore, the creation, organization, management, distribution, advertising, development, production and sale, Percentage of the parent company’s assets represented by on its own or on behalf of a third party, of literary, social, sports, tourism, scientific, artistic, cultural activities, and all kinds the investment in the subsidiary: 2,08%. of events in general. Finally, the acquisition, sale, investment, purchase, sale, exchange, lease, sublease of real and personal property, or rights over them, their administration and operation, construct in them, on its own account or on behalf of a third Representatives who work in parent and subsidiary party; exploit, directly or through third parties in any form. The sale, import, export, distribution, consignment, representation Francisco Javier Martínez Seguí: President of parent Board or intermediation in any kind of changes in ownership or attributes, in regard to any class of goods; and any related activity, and subsidiary director. now or in the future with the above; and any other business agreed by the shareholders. Antonio Martínez Seguí: Director of parent Board and subsidiary director.
Description of business relationship with parent: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts held between parent and subsidiary. 118 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CAMPOS DEL NORTE S.A.
Taxpayer ID: 79.981.570-2 Type of Entity: Closed corporation Subscribed capital: Ch$ 428 million | Paid-in capital: Ch$ 428 million
It is the company that operates the gaming casino of Coquimbo. Senior executives and ceo: Antonio Martínez Seguí. Purpose: Francisco Javier Martínez Seguí Commercial exploitation of the Casino located in the city of Coquimbo and its ancillary services, as well as the commercial Lucas Marulanda López exploitation of dining rooms, kitchens, bar, boîtes, self-service, cabaret, discotheque, and other related services operating in Eduardo Sboccia Serrano the aforementioned establishment and generally all exploitations or acts that are granted or authorized by the proposal that Mariano Sosa, CEO was awarded by the Municipality of Coquimbo, that are related to the main object aforementioned. Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. directly participates with 12.5% and indirectly through its indirect subsidiary Operaciones Integrales Coquimbo Limitada with 87.5% in the capital of the company. Such participation has not changed during the year.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0,4%.
Representatives who work in parent and subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent and subsidiary director. Eduardo Sboccia Serrano: Legal Services Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts held between parent and subsidiary. 119 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO RINCONADA S.A.
Taxpayer ID: 99.598.900-K Type of Entity: Closed corporation subject by law to the supervision of the commission for the financial market, and registered in the register of reporting entities with the number 176 Subscribed capital: Ch$ 575 million | Paid-in capital: Ch$ 575 million It is the company that operates the gaming casino of Rinconada. Directors, senior executives and ceo: Purpose: Regular Director: Antonio Martínez Seguí. The purpose of the company is the operation of a casino in the city of Rinconada, located at Los Andes province, Valparaiso Regular Director: Francisco Javier Martínez Seguí; Alternate Region, pursuant to the provisions of the law 19,995 and in its regulations, as well as providing, either directly or through Director: Eduardo Sboccia Serrano. third parties, complementary services to the operation of such casino games such as restaurants, bars, theaters and events, Regular Director: Ricardo Salguero Lesure; Alternate Director: currency exchange and, in general, all other ancillary services allowed by the law and regulations mentioned above. Stephen Salguero. Regular Director: Jeffrey Salguero; Alternate Director: Linda Salguero. Regular Director: Lucas Marulanda López. Juan Eduardo García Newcomb, CEO.
Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. participates indirectly through its subsidiary Enjoy Gestión Limitada with 70% in the capital of the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 1,30 %.
Representatives who work in parent and subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent and subsidiary director. Lucas Marulanda López: Director of parent and subsidiary director. Eduardo Sboccia Serrano: Legal Services Manager of parent and subsidiary alternate director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts held between parent and subsidiary. 120 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INVERSIONES Y SERVICIOS GUADALQUIVIR S.A.
Taxpayer ID: 76.837.530-5 Type of Entity: Closed corporation Subscribed capital: Ch$ 2,211 million | Paid-in capital: Ch$ 2,111 million
It is the company in charge of supplying water to Enjoy Santiago. Directors, senior executives and ceo: Antonio Martínez Seguí. Purpose: Francisco Javier Martínez Seguí. The purpose of the company will be: a) To make investments in property, tangible or intangible, corporate shares, rights in Ricardo Salguero. other companies, bonds, commercial paper and other securities; manage, transfer and exploit the earnings produced; b) To Jeffrey Salguero. invest in real estates, tangible or intangible, urban or rural; manage, transfer, use them and collect earnings, being able to, José Miguel Pizarro. divide, divide into lots, urbanize and make buildings on them; c) construct and operate all kinds of water supply and irrigation Juan Eduardo García Newcomb, CEO. networks, including construction of pipes or ducts, construction and operation of pumping stations, measuring centers, storage tanks; provide and sell water and provide all kinds of services related to the construction and operation of pipelines, pumping Current ownership percentage of the parent in the stations, measuring centers, storage tanks and in general, any other accessories for the design, engineering, transportation, subsidiary and variations occurred in the period: supply and sale of water. To fulfill its social purpose, the Company may participate in other companies, whatever their nature; Enjoy S.A. participates indirectly through its subsidiary Enjoy perform activities or investments decided by their partners, and, in general, perform all acts and enter into all contracts Gestión Limitada with 70% in the capital of the company. necessary for the stated purposes and development of company objects. Percentage of the parent company’s assets represented by the investment in the subsidiary: 0,31%.
Representatives who work in parent and subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: President of parent Board and subsidiary director. José Miguel Melo Pizarro, Strategic Development Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts held between parent and subsidiary. 121 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _OPERACIONES INTEGRALES CHACABUCO S.A.
Taxpayer ID: 76.141.988-9 Type of Entity: Closed corporation Subscribed capital: Ch$ 100 million | Paid-in capital: Ch$1 million
It is the company that operates Hotel del Valle services: food and beverage and other services for Enjoy Santiago, such as spa Directors, ceo and senior executives: and restaurants. Regular Director: Antonio Martínez Seguí. Regular Director: Francisco Javier Martínez Seguí; Alternate Purpose: Director: Eduardo Sboccia Serrano. Capital investment in all kinds of movable property, and rights and shares in all kinds of businesses, whether commercial or Regular Director: Ricardo Salguero; Alternate Director: civil, communities or associations in any kind of securities and marketable securities. To manage these investments directly or Stephen Salguero. through a third party, earn income; form part of other foreign or domestic businesses, of any type or legal status, modify and Regular Director: Jeffrey Salguero; Alternate Director: Linda assume management thereof, whatever its line of business. The company shall also, directly or indirectly, operate restaurants, Salguero. cafes, bars and other establishments that provide entertainment and leisure services, administer museums, create and Regular Director: José Miguel Melo Pizarro. manage websites. Build, operate, lease, let, or rent, directly or through a third party, hotels, motels, hostels, lodges, and Alejandra Álvarez González, CEO. other activities related to accommodations and tourism, with all the hotel and tourism services. Create, organize, manage, communicate, advertise, produce, and sell, directly or through a third party, cultural literary, social, sporting, tourist, scientific, Current ownership interest of the parent company in the artistic activities and other types of events in general. Perform the acquisition, disposal, investment, purchase, sale, exchange, subsidiary’s capital and changes during the period under let, sublet immovable and movable property, or rights thereto, manage and use or build on the property, directly or through review: a third party; in whatever way possible. Purchase, sell, import, export, distribute, consign, represent, or act as broker of any Enjoy S.A. holds a 70 % indirect interest through its subsidiary type, make changes in ownership or its functions, regarding any type of property; and any related activity now or in the future; Enjoy Gestión Limitada. and any other business agreed by shareholders. Percentage of the parent company’s assets represented by the investment in the subsidiary: -2,29%.
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. José Miguel Melo Pizarro, Strategic Development manager of parent and subsidiary director. Eduardo Sboccia Serrano: Legal Services Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 122 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _SLOTS S.A.
Taxpayer ID: 96.907.730-2 Type of Entity: Closed corporation. Subscribed capital: Ch$ 3,421 million | Paid-in Capital: Ch$ 3,421 million
It is the company that owns the slot machines in Viña del Mar Casino, under an operation and maintenance contract. The Officers, senior executives and ceo: company makes these machines available to the license holder of Casino Viña del Mar, Antonio Martinez y Cia., in exchange for Antonio Martínez Seguí. 35.75% of net income earned from those machines, after deducting municipal interest. Francisco Javier Martínez Seguí. José Miguel Melo Pizarro. Purpose: The purpose of the company is to purchase, sale, lease, sublease, marketing, import and export, in general, slot machines, Current interest percentage of parent in the subsidiary’s spare parts and all accessories for their use, enjoyment, administration and right to exploiting by the Casino Municipal de Viña capital and changes during the period under review: del Mar, all in accordance with the tender rules for the concession and the corresponding concession contract. Enjoy S.A. participates indirectly through its direct subsidiary Enjoy Gestión Limitada with 90% in the capital of the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 1%
Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts with parent: Commercial current account contract. 123 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _MASTERLINE S.A.
Taxpayer id: 79.646.620-0 Type of entity: Closed corporation Subscribed capital: Ch$ 666 million | paid-in capital: Ch$ 666 million
It is the sub-concessionaire for food & beverage and hotel services of the Casino de Viña del Mar. Under the existing Officers, senior executives and ceo: contractual relationship with the concessionaire Antonio Martinez y Cia., Masterline S.A., pays an annual rent of 50,000 UF to Antonio Martinez Seguí the former. Francisco Javier Martínez Seguí Roberto Mimica Godoy, CEO Purpose: The purpose of the company is to commercially operate, directly or indirectly, restaurants, cafes, tearooms, kitchens, Current interest percentage of the parent in the bars, theaters and events, discos, boîtes, supermarkets, cinemas, living rooms, playground, parking, spa, and all types of subsidiary’s capital and changes during the period under commercial services related to the above. To develop commercial exploitation, give and take on lease or loan, on its own review: account or on behalf of third parties, hotels, motels, inns, lodging, and related hosting people and tourism, including all related Enjoy S.A. participates directly with 1% and indirectly through services of the hospitality and tourism. The creation, organization, management, distribution, advertising, development, its direct subsidiary Enjoy Gestión Limitada with 99% in the production and sale or self of any literary, social, sport, tourism, scientific, artistic, cultural activities account, and all kinds capital of the company. of events in general, as well as services advertising, swaps and similar activities. In addition, production, manufacturing, distribution, import, export, marketing and provision of services for all kinds of products, especially those related to the food Percentage of the parent company’s assets represented by sector, catering services or others. Lastly, import, export, acquisition, sale, investment, purchase, sale, exchange, lease, the investment in the subsidiary:-0,07%. sublease of real, and personal property, or rights to them, their administration and operate them directly or through third parties, in any form Official representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí, Director of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 124 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO DE COLCHAGUA S.A.
Taxpayer ID: 99.598.660-4 Type of Entity: Closed corporation subject by law to the supervision of the commission for the financial market, and registered in the register of reporting entities with the number 167. Subscribed capital: Ch$ 2,379 million | Paid-in Capital: 2,379 million
Is it the company that operates the gaming casino located in Santa Cruz. Directors, senior executives and ceo: Regular Director: Carlos Cardoen Cornejo; Alternate Director: Purpose: Marcia Inés González Carvajal. The company’s objective is the exploitation of a gaming casino in the district of Santa Cruz, province of Colchagua, Region Regular Director: Andrés Eduardo Cardoen Aylwin; Alternate de O’Higgins, under the terms stated in the law No 19,995 and its regulations, which authorizes it to develop gambling Director: Juan Correa Ruiz. machines, implements and ancillary services, authorized in the respective operating permit, authorized in the future by the Regular Director: Diego Cardoen Délano; Alternate Director: Superintendencia de Casinos de Juegos or another relevant authority. Claudia Avaria Garibaldi. Regular Director: José Miguel Melo Pizarro. Regular Director: Eduardo Sboccia Serrano. Héctor Salas Núñez, CEO.
Current interest percentage of the parent in the capital of the investee and changes during the period under review: Enjoy S.A. participates indirectly through its direct subsidiary Enjoy Gestión Limitada with 40% in the capital of the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0,44%
Representatives who work in the parent and the associated company: There are none.
Description of business relationship with parent company: There is no business relationship between the parent and the subsidiary.
Significant acts and contracts held with parent: There are no contracts between the parent and subsidiary. 125 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _KUDEN S.A.
Taxpayer ID: 96.725.460-6 Type of Entity: Closed corporation Subscribed capital: Ch$ 2,450 million | Paid-in Capital: Ch$ 2,450 million It is the company that operates the gaming casino of Pucón and Gran Hotel Pucón. Directors, senior executives and ceo: Purpose: Antonio Martinez Seguí, Commercial operation of Casino de Juegos de Pucón and its complementary services, as well as the commercial exploitation Francisco Javier Martinez Seguí of dining rooms, kitchens, bar, boîtes, self-services, cabaret, disco, and other services or by-products that operate in the Lucas Marulanda López aforementioned establishment and, in general, all operations or acts that are granted or authorized by the Municipality Eduardo Sboccia Serrano of Pucón. Moreover, the construction, operation, give and take in lease, on its own account or on behalf of third parties, Gonzalo Grob Duhalde, CEO of hotels, motels, inns, lodges, boats, and others, related to hosting people and tourism, with restaurant, bar, cinema, tearooms, and all services related to hotels, spas and tourism, either domestic and foreign, present or future; excursions, Current interest percentage of parent in subsidiary’s exploiting of retail establishments of products or services or to lease these commercial establishments to third parties, capital of the subsidiary and changes during the period transportation of people or cargo, whether for tourism or not; buy, sell reserve land, air, or lacustrine tickets. In addition, to under review create, organize, manage, disseminate, develop, produce and sell, on its own account or on behalf of third parties, literary, Enjoy S.A. participates directly with 1% and indirectly through social, sport, tourism, scientific, artistic, and cultural activities, and all kinds of events in general; including banquets, parties, its direct subsidiary Enjoy Gestión Limitada with 99%, in the demonstrations; the representation of other domestic or foreign companies in the area; hiring all kinds of artists, athletes, and capital of the company. other celebrities; booking premises, theaters, restaurants, hotels, booking shows, and everything related to communications between businesses, professionals, and stakeholders or the public, in terms of courses, symposia, conferences, field trips, Percentage of the parent company’s assets represented by meetings; consultancy services any kind; acting as press, advertising, broadcasting and tourism agency; everything that now the investment in the subsidiary: -0,63% or in the future is related with such matters or with art, leisure, trade, hotels, sports and recreational activities, for which it can buy, give and take in lease, manage, establish and build sports fields, marinas, jetties, swimming pools, gyms, camping Official representatives who work in the parent and the and other buildings, facilities and services that necessary or conducive to such purposes. subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director. Lucas Marulanda López: Director of parent Board and subsidiary director. José Miguel Melo: Strategic Development Manager of parent and subsidiary director. Eduardo Serrano Sboccia: Legal Services Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 126 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _OPERACIONES TURÍSTICAS S.A.
RUT: 96.824.970-3 Type of Entity: Closed corporation Capital suscrito: Ch$ 1,723 million | Capital pagado: Ch$ 790 million
It is the company that develops the touristic and general complementary services for hotels. It operates the ski center located Directors, ceo, and senior executives: in the Villarrica volcano, and provides tour operator services for the business unit in Pucón. It is also the operating company of Francisco Javier Martinez Seguí Villarrica Park Lake Hotel located in the city of Villarrica. Antonio Martinez Seguí Gonzalo Grob Duhalde, CEO Purpose: The purpose of the company is the commercial exploitation of tourism-related activities and entertainment; specifically the Current interest percentage of the parent in the operation, administration, organization and execution, on its own account or on behalf of third parties, of ski resorts, spas, subsidiary’s capital and changes during the period under hotels, tours, events and all matters relating to tourism in general and especially with adventure tourism, whether carried review: out in the mountains, rivers, lakes, sea, forest, desert, airspace, beach, countryside or city; being able to exploit the various Enjoy S.A. participates directly with 0.63% and indirectly activities that can be performed in such places, whether they are sporting, recreational, competition, medical, social, cultural, through its direct subsidiary Enjoy Gestión Limitada with a and others that can be operated commercially. In addition, the company may commercially exploit bars, restaurants, shops, 99.37% interest in the company’s capital. cafes and other premises of this nature, as well as the leasing any implement or input that is necessary for the development Such participation has not changed during the year. of activities to be implemented in the above places. The company may also provide services of passenger transport in its own or other vehicles, leased, in leasing or under any other form, both in Chile and abroad, on its own account or on behalf of third Percentage of the parent company’s assets represented by parties, whether they are paid or not. The company may also make all kinds of investments in different assets, whether real the investment in the subsidiary: 0,29%. estate or not, especially if they relate to the materialization of the main line of business. Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held between parent and subsidiary: There are no contracts between parent and subsidiary. 127 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _OPERACIONES INTEGRALES ISLA GRANDE S.A.
Taxpayer ID: 99.597.250-6 Type of Entity: Closed corporation. Subscribed capital: Ch$ 582 million | Paid-in capital: Ch$ 239 million
It is the operating company of Hotel de la Isla, food and beverage services and other supplementary services for Enjoy Chiloé. Directors, ceo and senior executives: Antonio Martínez Seguí. Purpose: Francisco Javier Martínez Seguí. Capital investment in all types of movable property such as rights in all types of companies, whether commercial or civil, José Miguel Melo Pizarro. communities or associations and all kinds of titles or securities. Administer, on its own account or on behalf of third parties, Eduardo Sboccia Serrano. earn income; take part in other companies, domestic or foreign, of any type, modify them, and take over their administration, whatever their line of business. In addition, the company will aim at the direct or indirect exploitation of restaurants, cafes, Current interest of parent in the subsidiary’s capital and bars, and in general to premises that provide entertainment and leisure services; as well as museum management and the changes during the period under review: creation and administration of internet sites. Moreover, construct, operate, give and take on lease or loan, on its own account Enjoy S.A. participates directly with 1% and indirectly through or on behalf of third parties, hotels, motels, inns, lodges, and others related to hosting people and tourism, with all relevant its direct subsidiary Enjoy Gestión Limitada, with 99% in the hotel and tourism services. In addition, the creation, organization, management, distribution, advertising, development, company’s capital. production and sale on their own account or on behalf of third parties, of literary, social, sport, tourism, scientific, artistic, cultural activities, and all kinds of events in general. Lastly, the acquisition, sale, investment, purchase, sale, exchange, Percentage of the parent company’s assets represented by lease, sublease of real and personal property, or rights to them, their management and operation, build on them, for itself the investment in the subsidiary: -5,16% or for others; exploit them, directly or through third parties, in any form. The sale, import, export, distribution, consignment, representation or intermediation in any kind of change or domain attributes in relation to any kind of property; and any related Official representatives who work in the parent and the activity, at present or in the future with the aforementioned; and any other business that shareholders may agree upon. subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of the parent Board and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary director. Eduardo Sboccia Serrano: Legal Services Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 128 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _RANTRUR S.A.
Taxpayer ID: 99.598.510-1 Type of Entity: Closed corporation subject by law to the supervision of the commission for the financial market, and registered in the register of reporting entities with the number 194. Subscribed capital: Ch$ 1,432 million | Paid-in capital: Ch$ 1,432 million
It is the company that operates Casino de Castro. Directors, senior executives and ceo: Antonio Martinez Seguí Purpose: Francisco Javier Martinez Seguí The operation of a gaming casino in Castro in the terms established in Law No 19,995 and its regulations, allowing the Lucas Marulanda López development of gambling machines, implements, and ancillary services authorized in the respective operating permit or Eduardo Sboccia Serrano authorized in the future by the Superintendence of Casinos or another relevant authority that replaces it. Rodrigo Ulloa Beyer, CEO
Current interest of parent in the subsidiary’s capital and changes during the period under review: Enjoy S.A. participates directly with 1% and indirectly through its subsidiary Operaciones Integrales Isla Grande S.A, with 99% in the capital of the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: -3,76%
Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Lucas Marulanda López: Director of parent Board and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary director. Eduardo Sboccia Serrano: Legal Services Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 129 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _ANTONIO MARTÍNEZ Y COMPAÑÍA
Taxpayer ID: 77.438.400-6 Type of Entity: Commercial partnership Subscribed capital: Ch$ 5,036 million | Paid-in capital: Ch$ 5,036 million
It is the Company that operates Casino de Viña del Mar. Directors, managers and ceo Purpose: Francisco Javier Martínez Seguí The object of the company will be exclusively the commercial exploitation of the Casino Municipal de Viña del Mar and others Antonio Martínez Seguí expressly authorized by the Municipality of Viña del Mar, in the terms established in N°1 of the Public Tender Bases to grant Roberto Mimica Godoy, CEO the Casino Municipal of Viña del Mar in Concession, approved by the Mayor’s Decree number five thousand two hundred and twenty, on October 15th, 1999, as amended by the Mayor’s Decree number six thousand one hundred thirteen, on December Current interest percentage of the parent in the 7th, 1999, both of the Lord Mayor of the Municipality of Viña del Mar. subsidiary’s capital and changes occurred in the period under review: Through an agreement, the partners of Antonio Martínez y Cía. assign to Enjoy Gestión Ltda., a subsidiary of Enjoy S.A., the control of the company and the rights to receive all profits or profits generated and / or distributed by the company, to a greater extent, which does not yield (i) the operation and exploitation of the Casino (ii ) The fulfillment of the obligations assumed by the Partnership with the Municipality under the Concession Contract and Slots S.A. Under the sub-contract, all of which shall remain unchanged from the position and responsibility of the Company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: -0,59%
Representatives who work in the parent company and the subsidiary : Francisco Javier Martínez Seguí: President of parent Board and partner on subsidiary. Antonio Martínez Seguí: Director of parent Board and partner on subsidiary.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 130 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _LATINO USLUGED.o.o.
ID number: MB-2375796 Type of Entity: Closed corporation Subscribed capital: HRK 20.000 | Paid-in capital: HRK 20.000
Croatian company that owns 46.5% of Sociedad Casino Gradd.d. shares.. Managers: Francisco Javier Martínez Seguí. Purpose: Antonio Martínez Seguí. Design, build, use and demolish buildings, supervise construction, perform works specialized in land-use planning; real estate business, housing management and maintenance, buy and sell property, foreign and domestic market trading agency Current ownership percentage of the parent in the activities, transport domestic and international passengers and cargo on highways, marketing (advertising and promotion), subsidiary and variations occurred in the period: market research and communications media, business and management consulting, represent foreign companies. Enjoy S.A. participates indirectly, through its direct subsidiary Enjoy SpA with 100% in the company’s capital. Such participation has not varied during the reporting period.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0,53 %.
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary manager. Antonio Martínez Seguí: Director of parent Board and subsidiary manager.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 131 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO GRADD.d. (Croatian company)
ID number: MB-1454692 Type of Entity: Closed corporation Subscribed capital: HRK 16.000.000 | Paid-in capital: HRK 16.000.000
This company had a license to operate casinos in Croatia, which is currently in the process of dissolution. Managers: Francisco Javier Martínez Seguí Purpose: Antonio Martínez Seguí Gambling and betting establishment, exchange operations, preparation, and provision of food, drink, and beverage services. Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. holds a 46.54 % indirect interest through its indirect subsidiary Latino Usluged.o.o. This ownership interest has not changed during the period under review.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0%.
Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director.
Description of business relationship with parent company: There is no business relationship between the parent company and subsidiary.
Significant acts and contracts held with parent: There are no contracts between the parent and affiliate. 132 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INVERSIONES ANDES ENTRETENCIÓN LIMITADA
Taxpayer ID: 76.043.559-7 Type of Entity: Closed corporation Subscribed capital: M USD 34.837 | Paid-in capital: M USD 34.837
It owns a 53 % interest in Cela S.A., operating company of the Mendoza casino, located at Sheraton Hotel in Mendoza. Managers: Inversiones Andes Entretención Limitada holds a 90% interest in Sociedad Yojne, company that provides the consulting Francisco Javier Martínez Seguí. services required by Cela S.A. to operate the Mendoza casino. Antonio Martínez Seguí.
Purpose: Current ownership interest of the parent company in the The corporate purpose shall be: a) Foreign investment, investment in all kinds of tangible intangible, movable, immovable subsidiary’s capital and changes during the period under property, including, but not limited to, all kinds of marketable securities, such as shares in public corporations, options in review: other companies, bonds, debentures and any kind of foreign currency deposits and any other contract that the partners Enjoy s.A. Directly participates with 0.09% And indirectly consider necessary to fulfill the corporate object; and, b) civil and commercial use, through lease, license or any other way of through its direct subsidiary inversiones enjoy spa with transferring the temporary enjoyment and use of trademarks, patents, industrial models, computer development, software 99.91% In the company’s capital. and other related services. This ownership interest has not changed during the period under review.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 2,01%.
Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary manager. Antonio Claudio Martínez Seguí: Director of parent Board and subsidiary manager.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 133 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CELA S.A.
ID Number: 30-69468373-4 Type of Entity: Closed corporation Subscribed capital: ARG$ 34.048.016,00 | Paid-in capital: ARG$ 34.048.016,00
Argentinean Company that operates the Mendoza casino. Directors, ceo and senior executives: Julio Rodolfo Camsen, Director. Purpose: Francisco Javier Martínez Seguí, Director. The corporate object is to directly, or through a third party or third-party partners, in any part of the Republic or overseas, Natalio Camsen, Director. directly or through hiring of professionals, technicians or any other person for such purpose; conduct the following activities: Eduardo Marticorena, Director. a) Hotel Management: hotel business activity in general, and particularly commercial activities; commercial use of buildings Ramon Moyano, Director. dedicated to hotel, hostel, accommodations, restaurant and bar services, its additional and/or complementary facilities, for María Anahí Cordero, Alternate Director; Paola Sofía Camsen, customer service. b) Use buildings dedicated to gaming: bingos, casinos, slot machines, or similar games duly authorized by Alternate Director; Eliseo Gracia Martínez, Alternate Director; the competent authority. c) Shows: through public and private entertainment organizations, especially for wine and tourism Ronit A. Camsen, Alternate Director. sector events, hiring wine tasters, groups, artists, designers, organizing conferences, wine tasting, presentations, exhibitions, Ariel Pérez, CEO. fairs, agreements and confrontations and sports events in the country and abroad; promote regional articles, especially related to the wine and tourism industry, films, programs, shows, conference and symposium rooms, show films and production Current ownership percentage of the parent in the thereof; organize radio and television shows, and theatre performances. d) Real estate activity: purchase rural and/or urban subsidiary and variations occurred in the period: movable property for construction projects or other initiatives or subsequent marketing, including or not buildings, divisions Enjoy S.A. participates indirectly with 53% through its indirect and plots, private urban neighborhoods and division of own or third-party land. Condominium property holding or others, and subsidiary Inversiones Andes Entretención Limitada. subsequent marketing for rental, sales, lease or any other type of legal contract or business. e) Refurbishment or modification of real property with purchased or third party buildings. f) Power of attorney and representatives: representing and Percentage of the parent company’s assets represented by implementing all kinds of powers of attorney and representations, directly or indirectly, to private individuals, private or mixed, the investment in the subsidiary: 1,16% public, domestic, regional or municipal companies, independent government or decentralized agencies, domestic or foreign companies related to its activity, service billing and collecting in any and all aspects, any type of remuneration in different Representatives who work in the parent and the terms or methods expected thereof. It could also provide its services, through services in bids and/or private or public tenders subsidiary: in the country or overseas, accepting and implementing the contracts awarded under the conditions stipulated for each case. Francisco Javier Martínez Seguí, President of parent board g) Financial object: through secure or non-secured loans, short or long-term, capital contribution to individuals or companies and subsidiary director. incorporated or to be incorporated, to finance operations conducted or to be conducted, trading shares, government bonds, Eliseo Gracia Martínez, CEO of parent and subsidiary director. debentures and any and all marketable securities and commercial papers for any of the current or future financial facilities available. Except for financial operations set out in the Financial Entities Act, and any other law requiring a public bid process. Description of business relationship with parent company: h) Export and import products derived from the abovementioned activities.” There is no business relationship between the parent and the associated company.
Significant acts and contracts held with parent: There are no contracts between the parent and associated company. 134 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _YOJNE S.A.
ID number: 30-7104780-5 Type of Entity: Closed corporation Subscribed capital: ARG$ 54.000 | Paid-in capital: ARG$ 54.000
This company provides consulting services required by Cela S.A. to operate the Mendoza casino. Officers, senior executives and ceo: Ramón Moyano. Purpose: Ricardo Vicente Seeber. a) Real Estate Activity: Purchase rural and/or urban real property for construction projects and subsequent marketing including or not buildings, divisions and plots, private urban neighborhood and division of own or third-party land. Condominium Current ownership percentage of the parent in the property holdings or others, and subsequent marketing for rental, sales, lease or any other type of legal contract or subsidiary and variations occurred in the period: business. Enjoy S.A. participates indirectly with 90% through its indirect b) Refurbishment or modification of real property with purchased or third party buildings. subsidiary Inversiones Andes Entretención Limitada. c) Housing construction: of any kinds on own or third-party land. d) Hotel business activity: use hotel establishments directly or through a third party. Percentage of the parent company’s assets represented by e) Use establishments dedicated to gaming: bingos, casinos, slot machines, and similar games duly authorized by the the investment in the subsidiary: 0,17% competent authority. Representatives working in the parent and the subsidiary: There are none.
RELEVANT CONTRACTS AND ACTS HELD BETWEEN PARENT AND SUBSIDIARY: There are no contracts between parent and subsidiary. 135 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS
BALUMA S.A. _ Officers, senior executives and ceo: Regular Director: Francisco Javier Martínez Seguí; Alternate Director: Ramón Moyano. Taxpayer Id: 212303260013 Regular Director: Antonio Martínez Seguí; Alternate Director: Type Of Entity: Public corporation Esteban Rigo-Righi Baillie. Subscribed Capital: USD 147,052,990 | Paid-In Capital: USD 147,052,990 Regular director: Marcelo Tapia Cavallo. Regular Director: Eduardo Sboccia Serrano It Is The Company That Operates The Casino And Resort Located At Punta Del Este, Uruguay. Regular Director: José Miguel Melo Pizarro. Regular Director: Eliseo Gracia Martínez; Alternate Director: Purpose: Juan Eduardo García Newcomb. Its Corporate Object Is To Carry Out The Following Activities In The Eastern Republic Or Abroad, Directly Or Through A Third Ignacio Sarmiento, CEO. Party, And In Third-Party Partnerships: A. Develop And Operate Hotel Services, Gambling Games And Congress Centers, As Well As Related Services And Activities, Current ownership percentage of the parent in the Such As Restaurants, Bars, Shopping Centers, Clubs, Health And Sports Organizations, Directly Or Through A Third Party, subsidiary and variations occurred in the period: Under Concession Or Operation Conditions Permitted For Such Purposes; Enjoy S.A. participates indirectly, through its subsidiary Enjoy B. Carry Out Maintenance And Repair Work At Facilities And Other Related Activities, Such As Employee Training For The SpA with 99.89% in the company’s capital, and also with Operations; 0.11% through its direct subsidiary Enjoy Consultora S.A. C. Develop Infrastructure And Provider Services To Users; D. Market Products Related To Implementing The Business Objectives Referred To In Section A) Above; Percentage of the parent company’s assets represented by E. Conduct Technical And Consulting Studies, Build And Manage All Kinds Of Specific Or Additional Facilities To The Business the investment in the subsidiary: 42,50% Objectives Specified In This Clause; F. Import And Export All Kinds Of Components, Equipment And Material Required To Achieve Its Objectives; Representatives who work in the parent and the G. Operate And Market Tourism Services In Whatever Way Possible, By Providing And Marketing Tourism Services Such As subsidiary: Excursions, Land, Sea And Air Trips For Individuals In Uruguay And Abroad, And Sell Tickets, Package Tours Or Excursions, Francisco Javier Martínez Seguí, President of parent Board and Book Hotel Rooms, And Also Act As A Travel Agent In Uruguay Or Abroad And Request, If Necessary, The Pertinent subsidiary director. Authorizations; Antonio Martínez Seguí, Director of parent Board and subsidiary H. Carry Out Any Additional Activities, Related And Concurrent To The Abovementioned Activities. director. I. In Order To Fulfill Its Object, The Company Is Duly And Legally Authorized To Acquire Rights And Assume Obligations, Marcelo Tapia Cavallo, Accounting Officer of parent and subsidiary Incorporate Or Have An Ownership Interest In Companies; Import Or Export; Form Part Of Economic Interest Groups Or director. Holdings And Of Any Interest Community With Entities Or Individuals; And, In General, Implement Any Type Of Legal Action Eduardo Sboccia Serrano, Legal Services Manager of parent and And Contract That Is Forbidden By Law subsidiary director. José Miguel Melo Pizarro, Strategic Development Manager of parent and subsidiary director. Eliseo Gracia Martínez, CEO of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held between parent and subsidiary: There is no business relationship between parent and subsidiary. 136 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _BALUMA CAMBIO S.A.
Taxpayer ID: 100239580016 Type of Entity: Public corporation Subscribed capital: URU$ 5,100,000 | Paid-in capital: URU$ 5,100,000
Uruguayan company duly incorporated under the company trade law, which operates exclusively as a currency exchange Directors, ceo and senior executives: bureau inside the casino. This is why it has to be approved by the BCU. This approval was issued on 2 January 1997. Ignacio Sarmiento. Esteban Rigo Righi Baillie. Purpose: Ismael Pignatta Sánchez. The contract object is only and exclusively, to directly perform currency exchange activities, in compliance with the content and scope set out by legal provisions and regulations, inside the Casino premises that operate at the property on Padrón 803, Current ownership percentage of the parent in the Punta del Este, First Judicial District of Maldonado. subsidiary and variations occurred in the period: Enjoy S.A. participates indirectly through its indirect subsidiary Baluma S.A. with 100% in the company’s capital.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0,07%.
Representatives who work in the parent and the subsidiary: Esteban Rigo Righi Baillie, Corporate Finance Officer of partner and subsidiary director.
Description Of Business Relationship With Parent Company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 137 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _BALUMA VIAGENS E TURISMO LTDA.
Taxpayer ID: 02.334.323/0001-47 Type of Entity: Limited company Subscribed capital: R$136,100 | Paid-in capital: R$100,000
Limited Brazilian company. Directors, ceo and senior executives: Anay Josette Gremaud. Purpose: Sandra Lucía de Almeida. The company’s corporate object is to engage in travel and tourism agency activities, operating manual exchange and have a stake in other domestic and foreign companies, as a shareholder or quota holder. Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. participates indirectly through its indirect subsidiary Baluma S.A. with 99.99% in the company’s capital
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0.03%.
Representatives who work in the parent and the subsidiary: There are none.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 138 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INMOBILIARIA PROYECTO INTEGRAL ANTOFAGASTA S.A.
RUT: 76.306.290-2 Type of Entity: Closed corporation Subscribed capital: Ch$ 9,479 million | Paid-in capital: Ch$ 9,479 million
Under a leasing contract with Banco de Crédito e Inversiones and Banco de Chile, the company rents the building where Enjoy Directors, ceo and senior executives: Antofagasta is located. That property is subject to a sublease for Inversiones Vista Norte S.A. for UF 17,200 plus monthly VAT. Iván Simunovic Petricio Antonio Martinez Seguí Purpose: Francisco Javier Martinez Seguí The purpose of the company is: a) Making investments in all kinds of tangible assets, movable and immovable, or intangible Eduardo Sboccia Serrano, CEO assets, including the acquisition of shares, rights in companies, whether they are of people or capital, debentures, bonds , time deposits, fund shares, commercial paper and all kinds of titles or securities and investment instruments, and management Current ownership percentage of the parent in the and marketing of these investments and their earnings; b) Carry out real estate businesses, for which it can buy, sell, subsidiary and variations occurred in the period: negotiate and arrange in any form and for any reason, urban or rural real estate, even furnished, and may make subdivisions, Enjoy S.A. participates indirectly through its direct subsidiary land development, construction of any kind and to sell and / or exploit them by or self-employed; give and take in lease, loan, Inversiones Inmobiliarias Enjoy SpA with 75% in the lease, sublease and give and give to others in any capacity, the use and enjoyment of real estate; manage these investments company’s capital. and receive earnings from them; c) The provision of consulting services, especially in matters of real estate investments; and d) Generally perform all kinds of investments. To fulfill its purpose, the company can carry out and celebrate all kinds of acts, Percentage of the parent company’s assets represented by even incorporate other companies or join them, and undertake their administration. the investment in the subsidiary: 2.19%.
Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of the parent Board and subsidiary director. Eduardo Serrano Sboccia: Legal Services Manager of parent and CEO of subsidiary.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 139 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INMOBILIARIA PROYECTO INTEGRAL COQUIMBO SpA
Taxpayer ID: 76.528.170-9 Type of Entity: Joint stock company Subscribed Capital: Ch$ 16,846 million | Paid-in Capital: Ch$ 16,303 million
It is the company that owns the building where Casino of Coquimbo and Hotel de La Bahía are located. This building is Directors, ceo and senior executives subleased to Sociedad Campos del Norte S.A. for UF 13,800 per month plus VAT. This Company does not have a Board, but it is managed by the Board of Directors of Inversiones Inmobiliarias Enjoy SpA: Purpose: Antonio Martínez Seguí The purpose of the company is: a) Making investments in all kinds of tangible assets, movable and immovable, or intangible Francisco Javier Martinez Seguí assets, including the acquisition of shares, rights in companies, whether they are of people or capital, debentures, bonds , time José Miguel Melo Pizarro deposits, fund shares, commercial paper and all kinds of titles or securities and investment instruments, and management and marketing of these investments and their earnings; b) Carry out real estate businesses, for which it can buy, sell, Current ownership percentage of the parent in the negotiate and arrange in any form and for any reason, urban or rural real estate, even furnished, and may make subdivisions, subsidiary and variations occurred in the period: land development, construction of any kind and to sell and/or exploit them on their own account or through third parties; give Enjoy S.A. participates directly with 0.01% and indirectly and take in lease, loan, lease, sublease and give and transfer to others in any capacity, for use and enjoyment of real estate; through its direct Inversiones Inmobiliarias Enjoy SpA with manage these investments and receive their earnings; c) The provision of consulting services, especially in matters of real 99.99% in the capital of the company. estate investments; d) The lease, sublease, and any form of transfer of use and enjoyment of furnished temporary buildings or having facilities or machinery that allows the exercise of commercial or industrial activities; and e) generally perform all kinds Percentage of the parent company’s assets represented by of investments. To fulfill its purpose, the company can carry out and celebrate all kinds of acts, even form other companies or the investment in the subsidiary:5.25% join them, and undertake their administration. Official representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí, President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 140 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INMOBILIARIA RINCONADA S.A.
Taxpayer ID: 96.929.700-0 Type of Entity: Closed corporation Subscribed capital: Ch$ 19,342 million | Paid-in capital: Ch$ 19,342 million
It is the company that owns the property on which Enjoy Santiago project is located. Directors, senior executives an ceo: Director: Antonio Martinez Seguí Purpose: Director: Francisco Javier Martinez Seguí; Alternate Director: The purpose of the company is: a) Making investments in all kinds of tangible assets, movable and immovable, or intangible Eduardo Sboccia Serrano. assets, including the acquisition of shares, rights in companies, whether they are of people or capital, debentures, bonds , time Director: Ricardo Salguero; Alternate Director: Stephen deposits, fund shares, commercial paper and all kinds of titles or securities and investment instruments, and management Salguero. and marketing of these investments and their earnings; b) Carrying out real estate businesses, for which it can buy, sell, Director: Jeffrey Salguero; Alternate Director: Linda Salguero. negotiate and arrange in any form and for any reason, urban or rural real estate, even furnished, and may make subdivisions, Director: José Miguel Melo Pizarro land development, construction of any kind and to sell and / or exploit them by or self-employed; give and take in lease, loan, Eduardo Sboccia Serrano, CEO lease, sublease and give and give to others in any capacity, the use and enjoyment of real estate; manage these investments and receive earnings from them; c) The provision of consulting services, especially in matters of real estate investments; and Current ownership percentage of the parent in the d) Generally perform all kinds of investments. To fulfill its purpose, the company can carry out and celebrate all kinds of acts, subsidiary and variations occurred in the period: even incorporate other companies or join them, and undertake their administration. Enjoy S.A. participates indirectly through its direct subsidiary Inversiones Inmobiliarias Enjoy SpA with 70% in the capital of the company. Such participation has not changed during the year.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 1.93%.
Official representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary. Eduardo Serrano Sboccia: Chief Legal Counsel of parent and CEO of subsidiary. Darío Amenábar Zegers, CFO of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 141 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INMOBILIARIA KUDEN SpA
Taxpayer ID: 96.929.700-0 Type of Entity: Joint stock company Subscribed capital: Ch$ 12,777 million | Paid-in Capital: Ch$ 9,902 million
It is both owner and tenant of the property where the current Pucón Casino is located. These buildings are leased and Directors, senior executives and ceo subleased to Sociedad Kuden S.A. for a total sum of UF 6,940 plus monthly VAT. The company also acquired the assets of Gran This company does not have a Board but is managed by the Hotel Pucón. Board of Directors of Inversiones Inmobiliarias Enjoy SpA. Antonio Martínez Seguí Purpose: Francisco Javier Martinez Seguí Real estate activity in general, for which it will manage the real estate to be awarded on the property, and invest in all kinds José Miguel Melo Pizarro of urban and rural real estate and the rights to these assets, being able to especially divide, subdivide, urbanize, build , repair, rebuild, restore, alienate, encumber, lease, manage them, as already stated, use them and collect their earnings; and in Current ownership percentage of the parent in the general, perform and enter into all acts and contracts necessary for the fulfillment of the corporate purpose and for the subsidiary and variations occurred in the period: development of its business. Enjoy S.A. participates directly with 0.45% and indirectly through its direct subsidiary Inversiones Inmobiliarias Enjoy SpA with 99.55% in the capital of the company. Such participation has not changed during the year.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 2.45%
Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 142 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _INMOBILIARIA PROYECTO INTEGRAL CASTRO SpA
Taxpayer ID: 76.307.270-3 Type of Entity: Joint stock company Subscribed capital: Ch$ 12 million | Paid-in Capital: Ch$ 12 million
This company owns the property in which the Casino of Castro and Hotel de la Isla are located. These buildings are leased to Directors, senior executives and ceo Rantrur Company S.A. and to Operaciones Integrales Isla Grande S.A. for a total of UF 9,166 plus monthly VAT. This company does not have a Board but is managed by the Board of Directors of Inversiones Inmobiliarias Enjoy SpA. Purpose: Antonio Martínez Seguí The purpose of the company is: a) Making investments in all kinds of tangible assets, movable and immovable, or intangible Francisco Javier Martinez Seguí assets, including the acquisition of shares, rights in companies, whether they are of people or capital, debentures, bonds , time José Miguel Melo Pizarro deposits, fund shares, commercial paper and all kinds of titles or securities and investment instruments, and management and marketing of these investments and their earnings; b) Carrying out real estate businesses, for which it can buy, sell, Current ownership percentage of the parent in the negotiate and arrange in any form and for any reason, urban or rural real estate, even furnished, and may make subdivisions, subsidiary and variations occurred in the period: land development, construction of any kind and to sell and / or exploit them by or self-employed; give and take in lease, loan, Enjoy S.A. participates directly with 1% and indirectly through lease, sublease and give and give to others in any capacity, the use and enjoyment of real estate; manage these investments its direct subsidiary Inversiones Enjoy SpA Estate with 99% in and receive earnings from them; c) The provision of consulting services, especially in matters of real estate investments; and the capital of the company. d) Generally perform all kinds of investments. To fulfill its purpose, the company can carry out and celebrate all kinds of acts, Such participation has not changed during the year. even incorporate other companies or join them, and undertake their administration. Percentage of the parent company’s assets 0.06%
Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director. José Miguel Melo Pizarro: Strategic Development Manager and subsidiary director.
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary.. 143 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _ENJOY CARIBE SpA
Taxpayer ID: 76.472.831-9 Type of Entity: Joint stock company. Subscribed capital: Ch$ 200 million | Paid-in Capital: Ch$ 200 million
Joint stock Company, whose Colombian subsidiary operates Casino of San Andres, Colombia. Directors, senior executives and ceo Antonio Martinez Seguí Purpose: Francisco Javier Martinez Seguí The object of the company is: The development and operation of localized games of chance through gaming casinos in the Republic of Colombia, pursuant to the provisions of Law 643 of 2001 in this country and other applicable regulations in their Current ownership percentage of the parent in the territory and the provision either directly or through third parties, of services complementary to the operation of such casino subsidiary and variations occurred in the period: games such as restaurants, bars, theaters and events, foreign exchange services. In fulfilling its main purpose, the company Enjoy S.A. does not participate directly, but it indirectly may negotiate, sign, celebrate, execute and settle concession contracts with government entities and private property, participates through its direct subsidiary Inversiones SpA, including without limitation the Industrial and Commercial Company of the State Administrator of the Profit Monopoly of with 100% interest in the company’s capital. Games of Chance and Luck - COLJUEGOS, so it can operate any type of game element, such as electronic slot machines, Such participation has not changed during the year. casino tables and other betting implements it deems appropriate. It may also develop the exploitation and operation of games of chance online through any virtual platform. Within its object, it may provide all kinds consulting, professional and Percentage of the parent company’s assets represented by technical services, as well as legal, financial, accounting, commercial, human resources, public relations, sales and trading the investment in the subsidiary: management in them, and computer services, among others, that are necessary for the study, implementation, and operation -0.48% of businesses and projects in general. The company may buy, sell, lease, sublicense, market, export and import, games of chance or “slot machines” and other gaming elements it considers relevant, with all their parts and accessories. Representatives who work in the parent and the subsidiary: Francisco Javier Martinez Seguí: President of parent Board and subsidiary director. Antonio Martinez Seguí: Director of parent Board and subsidiary director
Description of business relationship with parent company: There is no business relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 144 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO DE IQUIQUE S.A.
Taxpayer ID: 76.607.278-K Type of Entity: Joint stock company Subscribed capital: Ch$ 460 million | Paid-in capital: Ch$ 230 million
This company was established with the purpose of applying to an operating license for a gaming casino and ancillary services Directors, senior executives and ceo in Iquique. However, by analyzing the bidding conditions, this was not done. Antonio Martínez Seguí Francisco Javier Martínez Seguí Purpose: Eduardo Sboccia Serrano The purpose of the Company is to operate the Gaming Casino of Iquique, located in Tarapacá Region, in the terms set forth in José Miguel Melo Pizarro, CEO. Law N° 19.995 and in its Regulations, where games of chance, machines, devices, and services authorized in the respective operation permit can be developed or that in the future are authorized by the Superintendencia de Casinos de Juego or another Current ownership percentage of the parent in the similar authority. subsidiary and variations occurred in the period: Enjoy S.A. directly participates with 1% and indirectly through its direct subsidiary Inversiones Enjoy Gestión Limitada with 99%.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0.04%
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Eduardo Sboccia Serrano: Strategic Development Manager of parent and subsidiary director José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary CEO.
Description of business relationship with parent company: There is no commercial relationship between parent and subsidiary.
Significant acts and contracts held with parent company: There are no contracts between parent and subsidiary. 145 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO DE LA BAHÍA S.A.
Taxpayer ID: 76.596.732-5 Type of entity: Joint stock company Subscribed capital: Ch$ 500 million | Paid-in capital: Ch$ 500 million
It is the company that applied for an operation license for a gaming casino and ancillary services in the city of Coquimbo. Officers, senior executives and ceo: Antonio Martínez Seguí Purpose: Francisco Javier Martínez Seguí The purpose of the Company is to operate the gaming casino of Coquimbo, located in the Coquimbo Region of Chile, in the Eduardo Sboccia Serrano terms set forth in Law N° 19.995 and in its Regulations, which allows developing games of chance, machines, devices, and José Miguel Melo Pizarro, CEO. services authorized in the respective operation permit or that in the future are authorized by the Superintendencia de Casinos de Juego or another relevant authority. Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. directly participates with 1% and indirectly through its direct subsidiary Inversiones Enjoy Gestión Limitada with a 99% stake in the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0.08%
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Eduardo Sboccia Serrano: Strategic Development Manager of parent and subsidiary director José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary CEO.
Description of business relationship with parent company: There is no commercial relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 146 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO DE LA MAR S.A.
Taxpayer ID: 76.598.536-6 Type of Entity: Joint stock company Subscribed capital: Ch$ 500 million | Paid-in capital: Ch$ 500 million
This is the company that applied for an operation license for a gaming casino in the city of Viña del Mar. Officers, senior executives and ceo: Antonio Martínez Seguí Purpose: Francisco Javier Martínez Seguí The purpose of the company is to operate the gaming Casino of Viña del Mar, located in the Valparaiso Region of Chile, in the Eduardo Sboccia Serrano terms set forth in Law N° 19.995 and in its Regulations, for the development of games, equipment, and annexed services José Miguel Melo Pizarro, CEO. authorized in the respective permit of operation or that in the future are authorized by the Superintendencia de Casinos de Juego or another relevant authority Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. directly participates with 1% and indirectly through its direct subsidiary Inversiones Enjoy Gestión Limitada with a 99% stake in the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0.08%
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Eduardo Sboccia Serrano: Strategic Development Manager of parent and subsidiary director José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary CEO.
Description of business relationship with parent company: There is no commercial relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 147 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO DEL LAGO S.A.
Taxpayer ID: 76.596.746-5 Type of Entity: Joint stock company Subscribed capital: Ch$ 500 million | Paid-in capital: Ch$ 500 million
It is the Company that applied for the operation license of a gaming casino and ancillary services in the city of Pucón. Francisco Javier Martínez Seguí Purpose: Eduardo Sboccia Serrano The purpose of the Company is to operate the Gaming Casino of Pucón, located in the Araucanía Region of Chile, in the terms José Miguel Melo Pizarro, CEO set forth in Law N° 19.995 and in its Regulations, allowing the development of games of chance, machines, devices, and annexed services authorized in the respective permit of operation or that in the future are authorized by the Superintendencia Current ownership percentage of the parent in the de Casinos de Juego or another relevant authority subsidiary and variations occurred in the period: Enjoy S.A. directly participates with 1% and indirectly through Officers, senior executives and ceo: its direct subsidiary Inversiones Enjoy Gestión Limitada with a Antonio Martínez Seguí 99% stake in the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0.09%
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Eduardo Sboccia Serrano: Strategic Development Manager of parent and subsidiary director José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary CEO.
Description of business relationship with parent company: There is no commercial relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. 148 2018 ANNUAL REPORT CHAPTER 5 FINANCIAL STATEMENTS _CASINO DE PUERTO VARAS S.A.
Taxpayer ID: 76.607.165-1 Type of Entity: Joint stock company Subscribed capital: Ch$ 500 million | Paid-in capital: Ch$ 500 million
It is the Company that applied for an operation license of a gaming casino and ancillary services in the city of Puerto Varas. Officers, senior executives and ceo: Antonio Martínez Seguí Purpose: Francisco Javier Martínez Seguí The purpose of the Company is to operate the gaming casino of Puerto Varas, located at Los Lagos Region in Chile, in the Eduardo Sboccia Serrano terms set forth in Law N° 19.995 and in its Regulations, allowing the development of games, equipment, and annexed services José Miguel Melo Pizarro, CEO. authorized in the respective operation permit or that in the future are authorized by the Superintendencia de Casinos de Juego or another relevant authority. Current ownership percentage of the parent in the subsidiary and variations occurred in the period: Enjoy S.A. directly participates with 1% and indirectly through its direct subsidiary Inversiones Enjoy Gestión Limitada with a 99% stake in the company.
Percentage of the parent company’s assets represented by the investment in the subsidiary: 0.08%
Representatives who work in the parent and the subsidiary: Francisco Javier Martínez Seguí: President of parent Board and subsidiary director. Antonio Martínez Seguí: Director of parent Board and subsidiary director. Eduardo Sboccia Serrano: Strategic Development Manager of parent and subsidiary director José Miguel Melo Pizarro: Strategic Development Manager of parent and subsidiary CEO.
Description of business relationship with parent company: There is no commercial relationship between parent and subsidiary.
Significant acts and contracts held with parent: There are no contracts between parent and subsidiary. Visit us in www.enjoy.cl Seeking to facilitate reading and reduce the environmental footprint, for the third consecutive year Enjoy made its Annual Report in digital format.
For more information on the 2018 Report or on the Financial, Social and Environmental Performance of Enjoy, contact us.
Carolina Galvez F. Investor Relations [email protected]
Carmen Luz Castro M. Communications [email protected] www.enjoy.cl
Design and layout Grupo Oxigeno www.grupoxigeno.cl
ENJOY S.A. AND SUBSIDIARIES
Consolidated financial statements as of and for the years ended December 31, 2018 and 2017 and independent auditors’ report
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2018 AND 2017 ALL AMOUNTS ARE EXPRESSED THOUSANDS OF CHILEAN PESOS (THCH$)
12-31-2018 12-31-2017 Assets Note ThCh$ ThCh$
Current assets Cash and cash equivalents 8 84,409,844 30,344,365 Other current non-financial assets 9 1,720,038 2,590,271 Trade and other current receivables 10 43,929,623 39,486,657 Accounts receivable from related parties, current 11 636,418 2,047,207 Inventories 12 3,716,064 4,176,302 Current tax assets 13 14,701,124 7,262,621 Current assets other than assets or disposal groups classified as held 149,113,111 85,907,423 for sale or as held for distribution to owners. Non-current assets or disposal groups classified as held for sale or as held for distribution to owners. 36 3,005,119 3,315,916 Non-current assets or disposal groups held for sale. 3,005,119 3,315,916 Total current assets 152,118,230 89,223,339
Non-current assets Other non-current financial assets 14 13,101 10,723 Other non-current non-financial assets 9 234,516 295,490 Trade and other non-current receivables 10 1,105,969 5,467 Investments accounted for using equity method 16 6,944,633 3,871,439 Intangible assets other than goodwill 18 76,385,636 72,201,770 Goodwill 19 3,310,727 3,310,727 Property, plant and equipment 20 343,677,229 313,333,315 Right-of-use assets 38 12,261,464 - Deferred tax assets 21 44,615,888 39,934,424 Total non-current assets 488,549,163 432,963,355
Total assets 640,667,393 522,186,694
The accompanying notes are an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2018 AND 2017 ALL AMOUNTS ARE EXPRESSED THOUSANDS OF CHILEAN PESOS
12-31-2018 12-31-2017 Equity and liabilities Note ThCh$ ThCh$
Current Liabilities Other current fiancial liabilities 22 63,655,932 66,242,587 Current lease liabilities 38 3,040,360 - Trade and other current payables 24 55,558,601 39,891,303 Account payable to related parties, current 11 1,127,863 3,564,590 Current tax liabilities 13 1,808,293 2,837,942 Current provisions for employee benefits 25 - 799,929 Other current non-financial liabilities 26 10,868,931 9,288,149 Total current liabilities other than liabilities included in disposal groups classified as held for sale 136,059,980 122,624,500 Liabilities included in disposal groups classified as held for sale or discontinued operations 36 2,026,744 1,924,656 Total current liabilities 138,086,724 124,549,156
Non-current liabilities Other non-current financial liailities 22 272,768,530 279,088,169 Non-current lease liabilities 38 9,499,532 - Deferred tax liabilities 21 48,004,417 43,970,344 Non-current provisions for employee benefits 25 192,723 - Other non-current non-financial liabilities 26 1,096,205 - Total non-current liabilities 331,561,407 323,058,513
Total liabilities 469,648,131 447,607,669
Equity Issued capital 27 231,644,842 120,083,643 Retained earnings 27 (46,322,934) (23,352,019) Share premium 5,465,901 5,465,901 Other reserves 27 (28,072,539) (37,554,744) Equity attributable to owners of parent 162,715,270 64,642,781 Non-controlling interests 27 8,303,992 9,936,244 Equity 171,019,262 74,579,025
Equity and liabilities 640,667,393 522,186,694
The accompanying notes are an integral part of these Consolidated Financial Statements.
STATEMENTS OF INCOME AND STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 EXPRESSED IN THOUNSANDS OF CHILEAN PESOS (THCH$) EXCEPT EARNINGS PER SHARE PRESENTED IN PESOS
Accumulated
Income Statements Note 12-31-2018 12-31-2017 ThCh$ ThCh$ Revenue 28 275,005,232 283,676,958 Cost of sales 28 (216,952,264) (223,575,466) Gross profit 58,052,968 60,101,492 Administrative expenses (28,256,971) (27,752,879) Other expenses 37 (4,081,780) (1,526,054) Other gains (losses) 28 (3,236,506) (3,111,532) Profit (loss) from operating activities 22,477,711 27,711,027 Finance income 513,619 250,653 Finance costs 28 (45,131,761) (32,984,671)
Share of profit (loss) of associates and joint ventures accounted for using the equity method 16 503,664 1,383,404 Foreign exchange 29 (2,164,492) 7,339,108 Indexation for designated aasets/liabilities for inflation 28 (1,958,451) (3,171,206) Profit (loss) before tax (25,759,710) 528,315 Income tax (expense) benefit 21 2,220,438 3,569,521 Profit (loss) from continued operations (23,539,272) 4,097,836 Profit (loss) from discontinued operations 36 (862,279) - Profit (loss) (24,401,551) 4,097,836
Profit (loss) atributable to Profit (loss) atributable to owners of parent 30 (25,020,549) (776,385) Profit (loss) atributable to non-controlling interest 27 618,998 4,874,221 Profit (loss) (24,401,551) 4,097,836
Earnings per share Basic earnings per share Basic earnings (loss) per share from continuing operations (5.388) (0.327) Basic earnings (loss) per share in discontinued operations - - Basic earnings (loss) from shares 30 (5.388) (0.327) Gain per diluted share Diluted gains (losses) per share from continuing operations (5.388) (0.327) Diluted gains (losses) per share from discontinued operations - - Diluted gains (losses) per share 30 (5.388) (0.327)
Accumulated
Statement of Comprehensive Income Note 12-31-2018 12-31-2017 ThCh$ ThCh$ Profit (loss) (24,401,551) 4,097,836 Components of other comprehensive income that will be reclassified to profit or loss before tax Exchange differences on translation Gains (losses) on exchange differences on translation before tax 11,576,803 (8,556,096) Other comprehensive income before tax exchange differences on translation 27 11,576,803 (8,556,096)
Cash flow hedges Gains (losses) on cash flow hedges before tax - 775,172 Other comprehensive income before tax cash flow hedges 23 - 775,172 Other components of other comprehensive income before tax 11,576,803 (7,780,924)
Other comprehensive income 11,576,803 (7,780,924) Comprehensive income (12,824,748) (3,683,088)
Comprehensive income atributable to Comprehensive income atributable to owners of parent (13,443,746) (8,557,309) Comprehensive income atributable to non-controlling interests 618,998 4,874,221 Comprehensive income (12,824,748) (3,683,088)
The accompanying notes are an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
Reserve of Equity Atributable Exchange Total Other Retained Non-Controlling Issued Capital Share premium Other Reserves To Owners Of Equity Differences On Reserves Earnings Interest Parent Translation ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Equity at opening of term 120,083,643 5,465,901 (4,661,051) (32,893,693) (37,554,744) (23,352,019) 64,642,781 9,936,244 74,579,025 Increase (decrease) through changes in accounting policies (ii) - - - - 2,049,634 2,049,634 2,049,634 Initial equity restated 120,083,643 5,465,901 (4,661,051) (32,893,693) (37,554,744) (21,302,385) 66,692,415 9,936,244 76,628,659
Changes in equity Issue of equity (i) 111,561,199 111,561,199 111,561,199 Comprehensive income Profit (loss) - (25,020,549) (25,020,549) 618,998 (24,401,551) Other comprehensive income 11,576,803 - 11,576,803 - 11,576,803 - 11,576,803 Comprehensive income 111,561,199 - 11,576,803 - 11,576,803 (25,020,549) (13,443,746) 618,998 (12,824,748) Dividends - - - - - (2,251,250) (2,251,250) Increase (decrease) through transfers and other changes equity (i) - - - (2,094,598) (2,094,598) - (2,094,598) - (2,094,598) Changes in equity 111,561,199 - 11,576,803 (2,094,598) 9,482,205 (25,020,549) (15,538,344) (1,632,252) (17,170,596) Equity 231,644,842 5,465,901 6,915,752 (34,988,291) (28,072,539) (46,322,934) 162,715,270 8,303,992 171,019,262
(i) See note 27, b)2. (ii) See note 6 point (ii) and note 39.
Reserve of Reserves Of Exchange Total Other Equity Atributable To Non-Controlling Issued Capital Share premium Cash Flow Other Reserves Retained Earnings Equity Differences On Reserves Owners Of Parent Interest Hedges Translation ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Equity at opening of term 119,444,842 5,465,901 3,895,045 (775,172) (29,273,120) (26,153,247) (22,129,512) 76,627,984 35,126,149 111,754,133 Increase (decrease) through changes in accounting policies ------Initial equity restated 119,444,842 5,465,901 3,895,045 (775,172) (29,273,120) (26,153,247) (22,129,512) 76,627,984 35,126,149 111,754,133
Changes in equity Issue of equity (i) 638,801 638,801 638,801 Comprehensive income Profit (loss) - (776,385) (776,385) 4,874,221 4,097,836 Other comprehensive income (8,556,096) 775,172 - (7,780,924) - (7,780,924) - (7,780,924) Comprehensive income 638,801 - (8,556,096) 775,172 - (7,780,924) (776,385) (8,557,309) 4,874,221 (3,683,088) Dividends - - - - - (2,033,406) (2,033,406) Increase (decrease) through transfers and other changes equity (i) - - - - (3,620,573) (3,620,573) (446,122) (4,066,695) (28,030,720) (32,097,415) Changes in equity 638,801 - (8,556,096) 775,172 (3,620,573) (11,401,497) (1,222,507) (12,624,004) (25,189,905) (37,813,909) Equity 120,083,643 5,465,901 (4,661,051) - (32,893,693) (37,554,744) (23,352,019) 64,642,781 9,936,244 74,579,025
(i) See note 27.
The accompanying notes are an integral part of these Consolidated Financial Statements. CONSOLIDATED CASH FLOW STATEMENTS, DIRECT METHOD FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 ALL AMOUNTS ARE EXPRESSED IN THOUNSANDS OF CHILEAN PESOS (THCH$)
Note 12-31-2018 12-31-2017 Cash flow statements ThCh$ ThCh$
Cash flows from (used in) operating activities Collection from operating activities Receipts from the sale of goods and services 327,572,334 327,130,343 Payments Payments to suppliers for goods and services (117,311,895) (132,421,289) Payments to and account of employees (84,902,023) (77,400,393) Other payments for operating activities (68,393,172) (71,936,860) Net cash flows provided by (used in) the operation 56,965,244 45,371,801 Paid (reimbursed) income tax (8,734,949) (2,949,632) Cash flows from (used in) operating activities 48,230,295 42,422,169 Cash flows from (used in) investing activities Cash flows used in the purchase of non-controlling interests (i) - (153,200,000) Purchase of property, plant and equipment (21,570,316) (8,721,610) Purchase of Intangible assets (7,464,764) (95,566) Dividends received 487,865 827,875 Interest received 513,619 250,653 Other cash inflows (outflows) - 3,360 Cash flows from (used in) investing activities (28,033,596) (160,935,288) Cash flows from (used in) financing activities Proceeds from issuance of shares 111,561,199 638,801 Amounts from loans, classified as financing activities 240,113,808 232,853,625 Proceeds from long-term loands received 162,341,511 200,409,000 Proceeds from short-term loands received 77,772,297 32,444,625 Loans from related parties 80,000 1,842,914 Repayments of loans received (268,457,740) (92,890,356) Payment of liabilities under finance leases (4,151,015) (3,760,241) Payment of lease liabilities (3,864,003) - Repayments of loans from related parties (1,002,175) (2,111,453) Dividends paid (2,251,250) (2,033,406) Interest paid (22,296,155) (20,267,489) Other cash inflows (outflows) (17,129,097) (5,084,650) Cash flows derived from (used in) financing activities 32,603,572 109,187,745 Increase (decrease) in cash and cash equivalents, before effects of the exchange rate 52,800,271 (9,325,374) changes Effects of the exchange rate changes on cash and cash equivalents Effects of the exchange rate changes on cash and cash equivalents 1,265,208 (1,919,844) Net increase (decrease) of cash and cash equivalents 54,065,479 (11,245,218) Cash and cash equivalents at the beginning of the year 8 30,344,365 41,589,583 Cash and cash equivalents at the end of the year 8 84,409,844 30,344,365
(i) Includes cash flows used in the acquisition of 55% of the shares of Baluma S.A. and 36.8% of the shares of Inversiones Inmobiliarias Enjoy S.p.A.
The accompanying notes are an integral part of these Consolidated Financial Statements.
INDEX NOTE 1 - CORPORATE INFORMATION ...... 1 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ...... 8 NOTE 3 - RISK MANAGEMENT POLICIES ...... 21 NOTE 4 - MANAGEMENT ESTIMATES, JUDGMENTS, AND CRITERIA ...... 27 NOTE 5 - ACCOUNTING CHANGE AND RECLASSIFICATIONS ...... 28 NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS...... 29 NOTE 7 - FINANCIAL INFORMATION PER SEGMENT ...... 33 NOTE 8 - CASH AND CASH EQUIVALENTS ...... 38 NOTE 9 - OTHER CURRENT AND NON-CURRENT NON-FINANCIAL ASSETS ...... 39 NOTE 10 - TRADE AND OTHER CURRENT AND NON-CURRENT RECEIVABLES ...... 39 NOTE 11- BALANCES AND TRANSACTIONS WITH RELATED ENTITIES ...... 42 NOTE 12 - INVENTORIES ...... 45 NOTE 13 - CURRENT TAX RECEIVABLE AND PAYABLE ...... 46 NOTE 14 - OTHER NON-CURRENT FINANCIAL ASSETS ...... 46 NOTE 15 - INTEREST IN SUBSIDIARIES ...... 47 NOTE 16 - INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD AND JOINT VENTURES ...... 47 NOTE 17 - SHARES IN JOINT VENTURES ...... 49 NOTE 18 - INTANGIBLE ASSETS OTHER THAN GOODWILL ...... 50 NOTE 19 - GOODWILL ...... 55 NOTE 20 - PROPERTY, PLANT AND EQUIPMENT ...... 57 NOTE 21 - DEFERRED TAXES AND INCOME TAXES ...... 62 NOTE 22 - OTHER CURRENT AND NON-CURRENT FINANCIAL LIABILITIES ...... 65 NOTE 23 - FINANCIAL INSTRUMENTS ...... 69 NOTE 24 - TRADE AND OTHER PAYABLES ...... 72 NOTE 25 - CURRENT AND NON-CURRENT PROVISIONS FOR EMPLOYEE BENEFITS ...... 72 NOTE 26 - OTHER CURRENT AND NON-CURRENT FINANCIAL LIABILITIES ...... 73 NOTE 27 - EQUITY ...... 74 NOTE 28 - COMPOSITION OF RELEVANT RESULTS ...... 78 NOTE 29 - TRANSLATION DIFFERENCES ...... 80 NOTE 30 - EARNINGS PER SHARE ...... 80 NOTE 31 - CONTINGENCIES AND ENGAGEMENTS ...... 81 NOTE 32 - ADJUSTED EBITDA, ADJUSTED ANNUALIZED EBITDA AND FINANCIAL DEBT . 94 NOTE 33 - GUARANTEES RECEIVED FROM THIRD PARTIES ...... 97 NOTE 34 - GUARANTEES RECEIVED ...... 97 NOTE 35 - ASSETS AND LIABILITIES BY CURRENCY ...... 98 NOTE 37 - OTHER EXPENSES ...... 102 NOTE 38 - RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS ...... 102 NOTE 39 - HYPERINFLATION IN ARGENTINA ...... 103 NOTE 40 - SUBSEQUENT EVENTS ...... 104
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 1 - CORPORATE INFORMATION
Enjoy S.A. is a corporation that uses the name “Enjoy” (www.enjoy.cl) henceforth Enjoy company, Taxpayer ID No. 96,970,380-7, located at Avenida Presidente Riesco No. 5,711, 15th Floor, Las Condes, Santiago, Chile. Enjoy was incorporated as a limited company by public deed dated 23 October 2001. On 9 June 2009, the company was registered in the Securities Register of the Chilean Securities and Insurance Commission under No. 1,033 and is subject to audit.
At December 31, 2018, the shareholders with the largest ownership interest in Enjoy S.A. are the companies Entretenciones Consolidadas S.p.A., Inmobiliaria Almonacid Limitada e Inversiones Cumbres Limitada, none of which controls the Company by itself, nor is there an agreement for joint action between Entretenciones Consolidadas S.p.A. and Inmobiliaria Almonacid Limitada and Inversiones Cumbres Limitada.
On 8 July 2009, Enjoy S.A. placed 30% of the total shares of the company in the Stock Exchange of Santiago.
Direct and indirect subsidiaries are represented by closed corporations, limited liability companies, and joint stock companies.
With the enactment of Law No. 20,382 governing Corporate Governance of companies and according to Circular No. 600 of the Chilean Securities and Insurance Commission; it is set that the registration for entities other than issuers of Public-Offering Securities will be removed from the Register of Securities, as of 1 January 2010, becoming part of and enrolled in the new Special Register of Reporting Entities, and shall be subject to the preparation and delivery of continuous information in accordance with the provisions of the General Regulation No. 364 which repealed the General Rule No. 284. Subsidiaries and associates of Enjoy S.A. enrolled in the Special Register of Reporting Entities are; Operations El Escorial S.A., company awarded the license to operate the Casino of Antofagasta, under No. 155, the company Rantrur S.A., awarded the license from the Casino de Castro, under No. 194, the company Casino Colchagua S.A., awarded the license from the Casino de Santa Cruz, under No. 167 and Casino Rinconada S.A. before Salguero Hotels Chile S.A., awarded the license from the Casino de Rinconada, under No. 176.
Currently, Enjoy S.A. indirectly holds ownership to develop and operate seven Casinos in Chile. Of these casinos, the gambling venues located in the cities of Coquimbo, Viña del Mar, and Pucon, abide by municipal concessions granted prior to the enactment of Law No.19,995, which are in force until 2015. On 11 August 2015, law No. 20,856 was enacted, modifying law No. 19,995, which promotes the operation of municipal casinos up to 31 December 2017. In turn, gaming casinos located in the cities of Antofagasta, Santa Cruz, Castro and Rinconada de los Andes, were awarded operating licenses by the Superintendency of Casinos under said Act, which remain valid for a period of 15 years counting from the date of commencement of operations. Lastly, Enjoy S.A. has an unlimited license to operate a gaming casino in the city of Mendoza, Argentina through Cela S.A., a joint venture, and on 23 April 2013 the Ministry of Economy and Finance of the Eastern Republic of Uruguay authorized Enjoy Consultora S.A. as operator of Conrad Casino in Punta del Este whose license extends until 31 December 2036. Finally, as of February 19, 2016, Enjoy Caribe S.p.A. - Sucursal Colombia, a subsidiary of Enjoy, holds a license for the operation of a gaming casino on the island of San Andrés in Colombia, whose license has a 5-year duration up to 2021. On June 11, 2018, the operations of this Gambling Casino were terminated.
1
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
BOARD
The company’s current directors are:
Name Taxpayer ID Position Francisco Javier Martínez Seguí 7,040,320-K Chairman Antonio Claudio Martínez Seguí 7,040,321-8 Director Ugo Posada Zabala Foreign Director Lucas Marulanda López Foreign Director José Mauricio Salgar Hurtado Foreign Director Nicolás Bañados Lyon 9,669,005-3 Director Ana María Orellana Johnson 6,867,840-4 Director Ignacio Guerrero Gutiérrez 5,546,791-9 Director Ignacio Perez Alarcón 9,979,516-6 Director
DIRECTORS COMMITTEE
The current directors committee is composed of:
Name Taxpayer ID Position Ana María Orellana Johnson 6,867,840-4 Chairman Ignacio Guerrero Gutiérrez 5,546,791-9 Director Ignacio Perez Alarcón 9,979,516-6 Director
The chief executive officer of the Company is Mr. Eliseo Gracia Martínez.
SHAREHOLDER INFORMATION
The 12 largest shareholders of the company at 31 December 2018 are the following:
No. No. Percentage Name subscribed paid 1 ENTRETENCIONES CONSOLIDADAS SPA 1,615,261,900 1,615,261,900 34.40% 2 INV E INMOB ALMONACID LTDA 1,116,590,430 1,116,590,430 23.78% 3 BTG PACTUAL SMALL CAP CHILE FONDO DE INVERSION 513,428,576 513,428,576 10.94% 4 COMPASS SMALL CAP CHILE FONDO DE INVERSION 332,332,502 332,332,502 7.08% 5 INVERSIONES CUMBRES LIMITADA 229,732,525 229,732,525 4.89% 6 CHILE FONDO DE INVERSION SMALL CAP 147,388,092 147,388,092 3.14% 7 FONDO DE INVERSION SANTANDER SMALL CAP 145,875,944 145,875,944 3.11% 8 SIGLO XXI FONDO DE INVERSION 139,495,259 139,495,259 2.97% 9 FONDO MUTUO BTG PACTUAL CHILE ACCION 95,777,576 95,777,576 2.04% 10 BTG PACTUAL CHILE S A C DE B 84,861,193 84,861,193 1.81% 11 BANCHILE ADM GENERAL DE FONDOS S A 59,167,681 59,167,681 1.26% 12 LARRAIN VIAL S A CORREDORA DE BOLSA 32,578,040 32,578,040 0.69% Total 4,512,489,718 4,512,489,718 96.11%
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
The subsidiaries included in these consolidated financial statements are as follows:
Functional 12-31-2018 12-31-2017 Consolidation Country Company Taxpayer ID Relationship Currency Direct Indirect Total Total Method Chile Inversiones Andes Entretención Ltda. 76,043,559-7 Subsidiary USD 0.00% 100.00% 100.00% 100.00% Global Chile Campos del Norte S.A. 79,981,570-2 Subsidiary CLP 12.50% 87.50% 100.00% 100.00% Global Chile Enjoy Consultora S.A. 76,470,570-K Subsidiary CLP 0.02% 99.98% 100.00% 100.00% Global Chile Enjoy Gestión Ltda. 96,976,920-4 Subsidiary CLP 99.98% 0.02% 100.00% 100.00% Global Chile Inmobiliaria Rinconada S.A. 76,236,642-8 Subsidiary CLP 0.00% 70.00% 70.00% 70.00% Global Chile Inmobiliaria Kuden S.p.A. 96,929,700-0 Subsidiary CLP 0.45% 99.55% 100.00% 100.00% Global Chile Inmobiliaria Proyecto Integral Antofagasta S.A. 76,306,290-2 Subsidiary CLP 0.00% 75.00% 75.00% 75.00% Global Chile Inmobiliaria Proyecto Integral Castro S.p.A. 76,307,270-3 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Inmobiliaria Proyecto Integral Coquimbo S.p.A. 76,528,170-9 Subsidiary CLP 0.01% 99.99% 100.00% 100.00% Global Chile Operaciones Integrales Isla Grande S.A. 99,597,250-6 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Operaciones Integrales Coquimbo Ltda. 96,940,320-K Subsidiary CLP 10.56% 89.44% 100.00% 100.00% Global Chile Inversiones Enjoy S.p.A. 76,001,315-3 Subsidiary CLP 100.00% 0.00% 100.00% 100.00% Global Chile Inversiones Inmobiliarias Enjoy S.p.A. 76,242,574-2 Subsidiary CLP 100.00% 0.00% 100.00% 100.00% Global Chile Inversiones Vista Norte S.A. 99,595,770-1 Subsidiary CLP 0.00% 75.00% 75.00% 75.00% Global Chile Kuden S.A. 96,725,460-6 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Masterline S.A. 79,646,620-0 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Operaciones El Escorial S.A. 99,597,870-9 Subsidiary CLP 0.75% 74.25% 75.00% 75.00% Global Chile Operaciones Turísticas S.A. 96,824,970-3 Subsidiary CLP 0.63% 99.37% 100.00% 100.00% Global Chile Rantrur S.A. 99,598,510-1 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Casino Rinconada S.A. 99,598,900-K Subsidiary CLP 0.00% 70.00% 70.00% 70.00% Global Chile Slots S.A. 96,907,730-2 Subsidiary CLP 0.00% 100.00% 100.00% 100.00% Global Chile Operaciones Integrales Chacabuco S.A. 76,141,988-9 Subsidiary CLP 0.00% 70.00% 70.00% 70.00% Global Chile Inversiones y Servicios Guadalquivir S.A. 76,837,530-5 Subsidiary CLP 0.00% 70.00% 70.00% 70.00% Global Argentina Yojne S.A. Foreign Subsidiary ARS 0.00% 100.00% 100.00% 100.00% Global Croacia Latino Usluge D.O.O Foreign Subsidiary HRK 0.00% 100.00% 100.00% 100.00% Global Uruguay Baluma S.A. Foreign Subsidiary USD 0.00% 100.00% 100.00% 100.00% Global Chile Enjoy Caribe S.p.A. 76,472,831-9 Subsidiary CLP 0.00% 100.00% 100.00% 100.00% Global Colombia Enjoy Caribe S.p.A. Sucursal Colombia (1) Foreign Subsidiary COL 0.00% 100.00% 100.00% 100.00% Global Chile Antonio Martínez y Cía. 77,438,400-6 Subsidiary CLP 0.00% 100.00% 100.00% 100.00% Global Chile Casino de Iquique S.A. 76,607,278-K Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Casino de La Bahía S.A. 76,596,732-5 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Casino del Mar S.A. 76,598,536-6 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Casino del Lago S.A. 76,596,746-5 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global Chile Casino de Puerto Varas S.A. 76,607,165-1 Subsidiary CLP 1.00% 99.00% 100.00% 100.00% Global
(1) On June 11, 2018, the operations of the Gambling Casino located on the Island of San Andrés, Colombia, were terminated.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Comprehensive Projects
Next, the Companies that make up each one of the comprehensive projects of Gambling Casinos, understanding these as those that in addition to the Gambling Casino, include buildings and facilities that will be developed in a complementary manner with the operation of the Casino, indicating the Companies that exploit the Casinos and Hotels respectively, as corresponding:
Infrastructures Companies
Casino Operaciones El Escorial S.A. Antofagasta Hotel, Food & Beverages Inversiones Vista Norte S.A. Property and Facilities Inmobiliaria Proyecto Integral Antofagasta S.A.
Casino Campos del Norte S.A. Coquimbo Hotel, Food & Beverages Operaciones Integrales Coquimbo Ltda. Property and Facilities Inmobiliaria Proyecto Integral Coquimbo S.p.A.
Casino Casino Rinconada S.A. Rinconada Hotel, Food & Beverages Operaciones Integrales Chacabuco S.A. Property and Facilities Inmobiliaria Rinconada S.A.
Lease of slot machines Slots S.A. Viña del Mar (i) Casino Antonio Martínez y Cía. Hotel, Food & Beverages Masterline S.A.
Colchagua Casino Casino de Colchagua S.A.
Casino Kuden S.A. Pucón Hotel, Food & Beverages Kuden S.A. Property and Facilities Inmobiliaria Kuden S.p.A.
Casino Rantrur S.A. Chiloé Hotel, Food & Beverages Operaciones Integrales Isla Grande S.A. Property and Facilities Inmobiliaria Proyecto Integral Castro S.p.A.
Casino Cela S.A. Mendoza Hotel, Food & Beverages Cela S.A. Property and Facilities Cela S.A.
Casino Baluma S.A. Uruguay Hotel, Food & Beverages Baluma S.A. Property and Facilities Baluma S.A.
Casino Enjoy Caribe S.p.A. - Sucursal Colombia Colombia (ii) Food & Beverages Enjoy Caribe S.p.A. - Sucursal Colombia
(i) The Municipality of Viña del Mar owns the operation facilities for these comprehensive projects.
(ii) On June 11, 2018, the operations of the Gambling Casino located on the Island of San Andrés, Colombia, were terminated.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
CONDITIONS FOR THE OPERATIONS OF GAMBLING CASINOS
Below are the operating conditions for gaming Casinos subject to Municipal Licensing and Gaming Casinos according to Law No.19,995 (modified by Law No.20,856): i) Municipal licensing On 11 August 2015, law No.20,856 was enacted, modifying law N" 19,995, which promotes the operation of municipal casinos up to 31 December 2017. Through an extension agreement signed with the respective municipalities, the concession of municipal casinos was extended from January 1, 2018, until the date on which the Superintendency of Casinos issues the certificate referred to in Article 28 of Law No. 19,995 and Article 47 of the Regulations, Supreme Decree No.287 of 2016, Regulations on Operation and Supervision of Casinos, that authorizes the holder of the operating license of the corresponding district when starting the operation of a casino.
On June 8, 2018, in successive sessions of the Resolutive Council of the Superintendence of Gambling Casinos (hereinafter "SGC"), the Opening Hearings of the Economic Bids of the applicant projects were held, and the Enjoy Group was awarded, through its subsidiaries, the operating permits for the gambling casinos located in the districts of Coquimbo, Viña del Mar, Pucón and Puerto Varas. Accordingly, Enjoy maintained three of the gambling casinos whose administration it already had, and was additionally awarded the operations permit for the casino located in the city of Puerto Varas.
Coquimbo Casino According to the licensing agreement signed with the Municipality of Coquimbo, the subsidiary company Campos del Norte S.A. is the operator of Coquimbo Casino games. Additionally, the subsidiary Operations Integral Coquimbo Ltda. is the operator of the Hotel de la Bahía, food and beverage services and other supplementary services for the comprehensive project Enjoy Coquimbo, including the spa and convention center. The Municipality of Coquimbo gave these companies the commercial operation of Coquimbo city’s casino and its annexes, as well as the commercial operation of dining rooms, kitchens, bar, nightclubs, catering, cabaret, discos, and other related services provided by said facilities and generally all operations or acts authorized by grant or proposal awarded by the Municipality of Coquimbo. Enjoy owns the land, buildings and operational assets of this business unit. This comprehensive project is subject to a municipal participation of 20%, calculated on the gambling income (WIN) reduced from VAT. On December 22, 2017, Campos del Norte S.A. signed with the Municipality of Coquimbo the extension of the Gambling Casino Concession from January 1, 2018 and until the SGC issues the new operating permit. When the SGC issues the certificate that enables it to start operations, Casino de la Bahía S.A., the company that was awarded the operating permit for the Coquimbo Casino, must pay a guaranteed annual tax of UF 481,501 plus a tax of 20% on the income from games won (WIN) reduced from VAT.
Viña del Mar Casino The company Slots S.A. owns slot machines of Casino Viña del Mar under an operating and maintenance contract. The company makes these machines available to the licensee of Casino de Viña del Mar, Antonio Martinez y Cia. Additionally, the company Masterline S.A. is the sub–licensee of the food and beverage business and hotel of Viña del Mar Casino. By the exempt Decree No. 2,769, of 24 May 2000, the Municipality of Viña del Mar, granted trade operation rights of Casino Games Viña del Mar and the food and beverage franchise thereof to Antonio Martinez and company. This comprehensive project must give the Municipality of Viña del Mar a guaranteed percentage not below 24% of the net income from the operation of table games and bingo of the three seasons (Law 4,940 , Law 17,169 and Law 18,001), and 60% of the net income for the operation of slot machines. The food and beverage franchise has a fixed value revenue of UF 50,000, which is paid quarterly in advance. On December 27, 2017, Antonio Martínez y Cía. signed with the Municipality of Viña del Mar the extension of the Gambling Casino Concession from January 1, 2018 and until the SGC issues the new operating permit. When the SCJ issues the certificate that enables it to start operations, Casino del Mar S.A. The company that was awarded the
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 operating permit for the Casino de Viña del Mar must pay a guaranteed annual tax of UF 831,123 plus a tax of 20% on the income from games won (WIN) reduced from VAT.
Pucón Casino The franchise agreement signed between the Municipality of Pucon and the company Kuden S.A. (operator of Casino Pucón and the Gran Hotel Pucón) enables the commercial operation of Pucon Casino Games and its by-products, as well as the commercial operation of dining rooms, kitchens, bar, nightclubs, self-service, cabaret, discos, and other services or by-products provided in the mentioned property and, in general, all holdings or acts authorized by grant or tender awarded by the Municipality of Pucon. By exempt decree No. 387, dated March 27, 1995, the Municipality of Pucon, granted the franchise of the commercial operation of the gaming casino in Pucon to Kuden S.A. Finally, through Exempt Decree No. 392 of 17 February 2006, the City Council awarded an extension of the concession agreement until 31 December 2015 (See Note 1i Municipal licensing). Enjoy controls the land, buildings and operational assets of this business unit, which strengthens its chance to renew this concession. This comprehensive project is subject to a municipal share of 10% on gaming revenue (WIN), VAT discounted, and a fixed annual payment of 25,000 UF. On November 23, 2017, Kuden S.A. signed with the Municipality of Pucón the extension of the Gambling Casino Concession from January 1, 2018 and until the SGC issues the new operating permit. When the SCJ issues the certificate that enables it to start operations, Casino del Lago S.A. Company that was awarded the operating permit of the Casino de Pucón, must pay a guaranteed annual tax of UF 121,000 plus a tax of 20%, on the income from games won (WIN) reduced from VAT. ii) Gaming casinos subject to Law 19,995, (modified by Law 20,856) The operating permit is a formal authorization issued by the government of Chile, through the Resolution Council of the Superintendency of Casinos to operate a gaming casino and games of chance. The operating permit includes operating licenses for games of chance and related services. Games of chance and related bets can only be carried out by an incorporated operating company, constituted pursuant to Law No. 19,995, in the gaming enclosure authorized by that Superintendency and only after the authorized casino has received an operational startup certificate that accounts for compliance with all legal and regulatory requirements.
Antofagasta Proyecto Integral By Resolution No. 175 of 21 July 2006, the Superintendency of Casinos granted the operating license to Operaciones el Escorial S.A., to operate a casino in the city of Antofagasta. Said permit is valid for a period of 15 years from the issuance date of a certificate referred to in Clause No. 28 of Law No.19,995. On 11 November 2008, the Superintendency of Casinos issued a certificate stating that the company is authorized to operate casino games and related services, mentioned in the said operating permit. The operating permit is valid until 11 November 2023. This comprehensive project is subject to a tax of 20% on game win revenues (WIN), VAT discounted.
Proyecto Integral Colchagua By resolution no. 346 of 27 December 2006, the Superintendency of Casinos, granted the operating license to Casino de Colchagua S.A, to operate a casino in the town of Santa Cruz. That license has a term of 15 years from the granting date of the certificate referred to in Article No. 28 of Law No. 19,995; this is from the 12 September 2008. This certificate states that the Company is authorized to initiate the operation of casino gaming and complementary services, included in the operating permit authorized for a period of 15 years, expiring on 12 September 2023. This comprehensive project it is subject to a tax of 20% on income from games won (WIN) less VAT.
Rinconada Proyecto Integral By Resolution No. 343 of 26 December 2006, the Superintendency of Casino Games granted the operating license to Casino Rinconada S.A., to operate a casino in the city of Rinconada. Said permit will have a term of 15 years from the date of issuance of a certificate referred to in Clause No. 28 of Law No. 19,995. On 29 August 2009 the Superintendency of Casinos issued a certificate allowing the company to start the operation of casino gaming and related services, included in the said operating permit. The operating permit of Casino Rinconada
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
S.A. is valid until August 29, 2024. This comprehensive project is subject to a tax of 20% on game win revenues (WIN), VAT discounted.
Castro Proyecto Integral By exempt resolution No. 278 of 20 August 2008, the Superintendency of Casinos, granted permission to Rantrur S.A., to operate a casino in the city of Castro. Said permit will have a term of 15 years from the date of issuance of the certificate referred to in Article No. 28 of Law No. 19,995. By exempt Resolution No. 640 of December 24, 2009, the Superintendency of Casinos (SCJ) granted Rantrur S.A. an extension of deadlines to finish the gaming casino of Castro and the rest of the project’s works, so the new delivery date of the gaming casino was set to expire on 8 May 2011 and its complementary works on 8 September 2012. The Superintendency of Casinos (SCJ ) gave Rantrur S.A. (Enjoy Castro ) an extension of 12 months to complete the works of its gaming casino and 18 months for additional works of its comprehensive project, so the new dates for the final delivery of the works were 8 May 2012 and 8 March 2014, respectively. This decision considered the earthquake that struck the country on 27 February 2010. By exempt Resolution No. 299 of 7 May 2012, the Superintendency of Casinos (SCJ) granted the license to operate Enjoy Chiloe casino from the same date and for the next 15 years. The operating permit Casino Chiloe is valid until 8 May 2027. This comprehensive project is subject to a tax of 20% on game win revenues (WIN), VAT discounted.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
APPROVAL OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been approved by its Board of Directors of Enjoy S.A. on March 28, 2019.
Below is a description of the key accounting policies adopted in preparing the consolidated financial statements of Enjoy S.A. and its subsidiaries. a) Basis of Preparation and Period
These consolidated financial statements of Enjoy S.A. and Subsidiaries comprise the consolidated statements of financial position as of December 31, 2018 and 2017, the statements of income by function and the statements of comprehensive income for the 12-month periods ended December 31, 2018 and 2017, the statements of changes in equity and the statements of direct cash flows for the 12-month periods ended December 31, 2018 and 2017, and their corresponding notes.
The consolidated financial statements of Enjoy S.A. and Subsidiaries as at December 31, 2018 and 2017 have been prepared in conformity with International Financial Reporting Standards (“IFRS”), issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements have been prepared on a historical cost basis, except for some entries that are recorded at fair value, such as options, derivatives, customer loyalty liabilities, employee benefit obligations and share-based payment obligations, which are measured at fair value.
In preparing the consolidated financial statements, certain accounting estimates have been made by company management in order to quantify some of the assets, liabilities, revenues, expenses and commitments recorded in them. Note 4 discloses the most important estimates used by the company. Although these judgments and estimates have been based on the best information available on the issuance date of these consolidated financial statements, future events may occur that would require a change to these judgments and estimates in subsequent periods. This change would be made prospectively, recognizing the effects this change of judgments and estimates in the corresponding future consolidated financial statements. Figures in the accompanying consolidated financial statements are expressed in thousands of Chilean pesos. All companies except for the following use the Chilean peso as their functional currency: Yojne S.A. and Cela S.A. whose functional currency is Argentinian pesos, the company Latino Usluge d.d.o., whose functional currency is the Croatian Kunas, the company Enjoy Caribe S.p.A., a Colombian branch, whose functional currency in Colombian Pesos and the companies Andes Entretención Ltda., and Baluma S.A. whose functional currency is in US Dollars, as explained in Note 2, d, number 1. b) Basis of Consolidation
The consolidated financial statements of Enjoy S.A. and its subsidiaries include the following basis of consolidation: b.1) Subsidiaries
Subsidiaries are all the entities over which Enjoy S.A. has control.
In accordance with IFRS 10 "Consolidated Financial Statements", an investor has control over an investee only if it meets all of the following elements:
(a) it has the power over the investee;
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
(b) exposure, or right, to variable returns arising from its involvement in the investee; and (c) the ability to use its power over the investee to influence the amount of the investor's returns.
An investor will consider all facts and circumstances when assessing whether it controls an investee. The investor will reassess whether it controls an investee when facts and circumstances indicate changes in one or more of the three control elements. The existence and effects of the potential voting rights that are presently exercisable are considered when assessing whether Enjoy controls another entity. Subsidiaries are consolidated from the date on which control is transferred to Enjoy S.A. and cease to be consolidated from the date that control is lost. Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, the liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and liabilities assumed are recognized at their fair value, except the following:
• Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 respectively; • Liabilities or equity instruments related share-based payment arrangements of the acquiree or share- based payment arrangements of the Group entered into or to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date, and • Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Consolidation of entities with less than 50% ownership control
As of April 30, 2017, Enjoy S.A. directly and indirectly had a 45% interest in Sociedad Baluma S.A., which was considered a Subsidiary, since Enjoy S.A. exercised control over the entity through contracts or agreements with shareholders that empower it to appoint 5 out of 8 directors, appoint the Chairman of the Board of Directors, the right to appoint, dismiss or reassign key personnel with the capacity to perform and direct strategic activities. As a result of the foregoing, Enjoy S.A., which likewise exercised control over Sociedad Baluma S.A., on May 16, 2017, the direct subsidiary Inversiones Enjoy S.p.A. acquired the remaining 55% of such Company. As per the stated above, Inversiones Enjoy S.p.A. had a 99.88% stake in Sociedad Baluma S.A. as of December 31, 2018. b.2) Non-consolidated entities with an ownership interest of more than 50%
Although Enjoy S.A., directly and indirectly, holds a 53% ownership in the company Cela S.A., it does not exercise control over this entity, due to the fact that Enjoy S.A. holds less than 50% of voting rights in the entity (Note 17). b.3) Transactions with Non-Controlling Interests
Non-controlling interests are a portion of profits or losses and net assets in the subsidiaries that are not 100% owned by Enjoy S.A. Non-controlling interests related to the amount attributable to the non-controlling interest is presented in the income statement, but are included in the equity presented in the consolidated financial statement, separated from the parent company’s equity.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b.4) Associates
Associates are entities over which Enjoy S.A. holds between 20% and 50% of the voting rights, over which it has significant influence, but which it does not control. Investments in associates or joint ventures are accounted for using the equity method of accounting and are initially recognized at fair value. The investment of Enjoy S.A. in associates, includes goodwill identified on acquisition, net of any accumulated impairment loss. The share of Enjoy S.A. from post-acquisition profits or losses of its associates or joint ventures is recognized in the income statement and its interest in post-acquisition equity movements that are not P&L related, are recognized in the corresponding equity reserves (and/or are shown, as applicable, in the statement of other comprehensive income). When the losses of an associate equal or exceed the interest in the associate, including any other unsecured receivables, Enjoy does not recognize further losses, unless it has to incur obligations or make payments on behalf of the associate. Unrealized profits of transactions between Enjoy S.A. and its associates are derecognized based on the extent of Enjoy’s interest in these associates. Unrealized losses are also derecognized, unless the transaction provides evidence of an impairment of the asset transferred. b.5) Joint Ventures
Joint Control entities are considered to be those in which Enjoy S.A. has common control of the Company, thanks to the agreement with other shareholders and jointly with them, as indicated in IFRS 11 "Joint Agreements". This standard redefines joint ventures and joint operations, using the control principle of IFRS 10. The treatment of joint agreement depends on the type and requires the determination of rights and obligations. Enjoy S.A. registers the Argentine company under joint control Cela S.A. under the equity method and it has been recorded in a single line in the Statement of classified financial position and in the Statement of income by function (see note No. 16). c) Financial Information by Segments
The information by segments is consistently presented in the internal reports provided by the Management who makes decisions over the assigning of resources and the assessing of the performance of operating segments. The company has defined its operating segments based on the development of its businesses through its subsidiaries, identifying its operating segments as Gaming, Non Gaming, Real Estate and Corporate; and its national and international geographic segments.
This Financial Information by Segments is disclosed in Note No. 7. d) Transactions in Foreign Currency d.1) Functional and Presentation Currency
Items included in the consolidated financial statements of the company are measured using the currency of the primary economic environment in which the entity operates (functional currency). The financial statements of Enjoy S.A. are presented in Chilean pesos, which is the company’s functional currency. The presentation currency of the company and all its subsidiaries, including foreign companies, is the Chilean peso.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Functional and Presentation Currency:
Country Functional Currency Presentation Currency Chile Chilean peso (ThCh$) Chilean peso (ThCh$) Argentina Argentinean pesos (ARS) Chilean peso (ThCh$) Uruguay American dollar (USD) Chilean peso (ThCh$) Croacia Kuna (HRK) Chilean peso (ThCh$) Colombia Colombian Peso (COL) Chilean peso (ThCh$) Brasil Brazilian real (BRL) Chilean peso (ThCh$) d.2) Transactions and Balances in Foreign Currency
Transactions in foreign currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the transaction dates. Foreign currency gains and losses resulting from the settlement of these transactions and from the translation at closing exchange rates of monetary assets and liabilities denominated in foreign currency are recognized in the income statement by function under the item Exchange rate differences. d.3) Basis of Translation
Assets and liabilities denominated in foreign currency or readjustable units are measured in functional currency at the current exchange rate, based on the following parities:
Currency / Date 12-31-2018 12-31-2017 American dollar (USD) 694.77 614.75 Argentinean pesos (ARS) 18.41 33.11 Euro (EUR) 794.75 739.15 Kuna (HRK) 107.23 99.22 Uruguayan Peso (UYU) 21.46 21.39 Colombian Peso (COL) 0.21 0.21 Indexed Unit (CLF) 27,565.79 26,798.14 Brazilian real (BRL) 179.59 185.64
d.4) Group Entities
Income statements and financial position of all entities in Enjoy S.A., that have a functional currency different from the presentation currency, are translated into the presentation currency as follows: i. The assets, liabilities, and equity are translated at the exchange rates prevailing at the end of the reporting period. ii. The income and expenses for each income statement account are translated at the average monthly exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the existing exchange rates at the transaction dates, in which case income and expenses are translated using the exchange rate at the transaction date), and iii. All the resulting exchange differences are recognized as a separate component of net equity, in the item Other Reserves.
In the consolidation process, exchange rate differences arise from the translation to presentation currency of an investment in foreign entities (or domestic entities with a functional currency other than the one used by the parent company). When the investment is sold or disposed of (all or in part), such translation differences are recognized in the income statement as part of the profit or loss. Goodwill and fair value adjustments of assets
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 and liabilities arising from the acquisition of foreign entities (or entity with a functional currency different than the one used by the parent company) are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate, or as appropriate. e) Property, Plant, and Equipment
Property, plant, and equipment assets are measured at acquisition cost, less accumulated depreciation and less any potential impairment losses, in accordance with the IAS 16 and IAS 36, respectively. Interest and other financial expenses incurred and directly attributable to the acquisition or construction of the qualifying assets are capitalized in accordance with the IAS 23. The costs of improvements that represent an increase in productivity, capacity or efficiency, or an extension of the useful life of the assets, are capitalized as higher cost when they meet the requirements to recognize these as an asset according to IAS 16. All repair and maintenance costs are charged to the income statement during the reporting period in which they are incurred. There are no provisions for dismantling, removal, or restoration of property, plant, or equipment. Implementation works include, but are not limited to, the following expenses only during the construction period: i. Financial expenses related to external funding and specific expenses directly attributable to the construction. ii. Directly related staff expenses and other operating expenses attributable to the construction. iii. Works in progress are transferred to property, plant, and equipment once the test period has finished and the asset is available for use, which is when depreciation begins.
Depreciation of Property, Plant, and Equipment The depreciation of property, plant, and equipment is measured on a straight-line basis, by calculating their cost less the residual value over its economic useful life. The residual value and the useful life of an asset is reviewed and adjusted, if necessary, at each the closing of the financial statements, so that its remaining useful life is in keeping with the estimated use of the asset. When the value of an asset is higher than the estimated recoverable amount, its value is immediately reduced to its recoverable amount, by recognizing impairment losses. Gain/ losses for sales of property, plant and equipment, are measured through the difference between proceeds and the carrying amount and recognized in the income statement under other gains (losses). The company depreciates property, plant, and equipment assets from the moment an asset is available for use, distributing the asset costs on a straight-line basis over the years of its estimated useful life. Land is not depreciated. The estimated useful life, in years, is summarized as follows:
During the period, and principally at the end of each reporting period, the Company’s management evaluates whether there is any indication that an asset of property, plant and equipment has been impaired. If any such indication exists, the Company’s management estimates the recoverable amount of that asset to determine the amount of the impairment loss. In the case of identifiable assets that do not generate cash flows independently, the Company’s management estimates the recoverable amount of the Cash Generating Unit (CGU) to which the asset belongs, which is understood to be the smallest identifiable group of assets that generates independent cash inflows. Recoverable amount is the higher of fair value less costs of disposal and value in use, which is defined as the present value of the estimated future cash flows. In order to calculate the recoverable amount of Property, plant, and equipment, the Company uses value-in-use criteria in all cases,
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 except by CGU Chiloe. To estimate value in use, the Company prepares future pre-tax cash flow projections based on the most recent budgets available. Future cash flows are discounted to calculate their present value at a pre-tax rate that covers the cost of capital. If the recoverable amount of the CGU is estimated to be less than its carrying amount, an impairment loss is recognized in the income statement. Impairment losses recognized for an asset in prior periods are reversed when there are indications that the impairment loss no longer exists or may have decreased, thus increasing the asset’s carrying amount with a credit to earnings. The increase in the asset’s carrying amount shall not exceed that carrying amount that would have been determined had no impairment loss been recognized for the asset. f) Intangible Assets other than Goodwill
Intangible assets are non-monetary assets with no physical substance which may be individually identified, whether because they are separable or because they arise from a legal or contractual right. Assets whose cost can be reliably measured and over which Enjoy S.A. expects future economic benefits are recognized in the balance sheet, in accordance with IAS 38. To account for intangible assets that have an indefinite useful life, the company considers that they should keep their value over time, therefore they are not subject to amortization; however, they are annually tested for impairment. An intangible asset with a finite useful life is reviewed for impairment indicators, and if indicator exist, the intangible is tested for impairment. i. Casino Operating Permits
The operating permits for casinos that have made single payments in conformity with the municipal concession contract are in the item Intangible assets, as well as the licenses to operate casinos purchased as a business combination recognized at their acquisition cost less accumulated amortization and impairment loss, if any. The casino operating permit has a finite useful life and is amortized on a straight-line basis over its estimated useful life. The estimated useful life is of a maximum period of 15 years and/or during the length of the concession period and its amortization is recognized in the income statement in Cost of Sales, except if by legal modifications such permits are extended or postponed. ii. Other Intangibles required for Operating Permits
Intangible Assets presents the rights to provide consulting services for casino operations acquired through a business combination and other costs necessary to obtain operating permits for casino operations. These are recognized under acquisition costs less accumulated amortization and less any accumulated impairment loss. Other intangibles required to obtain a permit to operate casinos have a finite useful life and are amortized on a straight-line basis over their estimated useful life. The estimated useful life is for a maximum period of 15 years and/or for the length of the operating permit and its amortization is recorded in the income statement in Cost of Sales. iii. Software
Software licenses are in the item Intangible Assets and are measured at acquisition cost less accumulated amortization and accumulated impairment loss. Software licenses have a finite useful life and are amortized on a straight-line basis over their estimated useful lives. The estimated useful life is 3 to 5 years and its amortization is recorded in the income statement in the item Cost of Sales. g) Goodwill
Goodwill represents the excess of acquisition price over fair value of the interest held by Enjoy S.A in the net identifiable assets, obligations, and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill is not amortized but it is annually tested for impairment and is recorded at cost less accumulated impairment. Goodwill is allocated to the cash generating units (CGU) to test their impairment. Allocation is made to the CGUs expected to benefit from this goodwill acquired in the business combination. The cash generating units, defined by the company to determine potential impairment loss in accordance with IAS 36, paragraphs 68 and 69 are as follows: Proyecto Integral Coquimbo, Proyecto Integral Mendoza, Proyecto Integral Rinconada in Los Andes and Casino de Colchagua. Each Proyecto Integral includes the Casino
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 operation, Hotel and Food & Drinks. Negative goodwill arising from the advantageous acquisition of an investment or business combination is directly recognized in the income statement as earnings. h) Financing Costs
Interest expenses are recognized in the income statement, except for costs incurred in the construction of any qualifying asset, which are capitalized during the period required to complete and prepare an asset for its intended use in accordance with IAS 23. i.1) Impairment of the value of non-financial assets
Intangible assets can have finite or indefinite useful lives. Intangibles assets with an indefinite useful life are not amortized, but are annually tested for impairment either individually or at the cash generating unit level (“CGU”). Intangible assets with finite lives are amortized over their useful lives and their impairment is assessed every time indicators exist that the intangible asset might be impaired. Assets that are not amortized should be reviewed annually for impairment, regardless of whether there are indications or not. An impairment loss is recognized for the excess carrying amount of the asset over its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell or value in use. To assess impairment loss, assets are grouped at the lowest level in which there are separately identifiable cash flows (cash generating units). Non- financial assets that have previously suffered impairment are annually reviewed for possible reversal of impairment loss at the end of each reporting period. i.2) Impairment of financial assets (Trade receivables)
In relation to impairment of financial assets, IFRS 9 requires a model of expected credit losses, as opposed to the model of incurred credit losses under IAS 39 (Note 6 a.ii). The expected credit loss model requires an entity to account for losses and changes in those expected losses at each reporting date to reflect changes in credit risk since initial recognition. The Company has evaluated applying the simplified approach to recognize expected credit losses over the life of the asset for its trade and other receivables, as required by IFRS 9. Estimated expected credit losses were calculated based on actual credit loss experience.
The model considers the following variables:
• Segmentation: credit risk exposures were segmented based on common risk characteristics such as:
o The geographic region (Chile - Uruguay), and o Industry (gaming and non-gaming)
• Determination of the recovery curves, to generate the supply curves. • Forward looking projections: to reflect differences between economic conditions during the period in which historical information was collected and the Company's view of economic conditions over the expected lives of accounts receivable. The factors were based on projections of GDP for Chile and dollar exchange rate for Uruguay. The actual credit loss experience was adjusted for these factors.
The effects of the adoption of the model under IFRS 9 are detailed in Note 6 a.ii).
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 j) Financial instruments
A financial instrument is any contract that gives rise to both a financial asset in one entity and a financial liability or equity instrument in another entity. As from January 1, 2018, the Company classifies and measures its financial assets and liabilities as indicated in Note 6i. At 31 December 2017, the Company classified and measured its financial assets and liabilities in accordance with the requirements of IAS 39 detailed below: j.1) Non-derivative financial assets
The Company determines the classification of its financial assets at the time of initial recognition and, when permitted and appropriate, reassesses this designation at the end of each financial year. The classification and measurement for financial assets reflects the business model of the Enjoy Group in which the assets are managed and their cash flow characteristics, according to the following three categories:
Measured at amortized cost. Debt instruments that are held within a business model whose objective is to collect contractual cash flows, and that have contractual cash flows that are only payments of principal and interest on outstanding principal are generally measured at amortized cost at the end of subsequent accounting periods. Financial assets that meet the conditions set out in IFRS 9 to be measured at amortized cost are: cash equivalents, accounts receivable and loans. These assets are recorded at amortized cost, corresponding to the initial fair value less principal repayments made, plus uncollected accrued interest calculated by the effective interest rate method. The effective interest rate method corresponds to the method of calculating the amortized cost of a financial asset and the allocation of interest income during the corresponding period. The effective interest rate corresponds to the rate that exactly discounts the estimated future cash flows receivable (including all charges on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) during the expected life of the financial instrument.
J1i) Trade and other receivables
Trade accounts receivable are recognized initially at fair value and subsequently at amortized cost in accordance with the effective interest rate method, less the provision for impairment losses, if any. The Company determines an impairment loss on trade and other receivables based on an expected loss model in accordance with IFRS 9 and an incurred loss in accordance with IAS 39 at December 31, 2018 and 2017, respectively. Trade and other current receivables include income from sales receivable, which are mainly in cash, except sales related to Hotel, Food & Beverages and Events, which may be in cash and on credit. That is why Enjoy S.A. and Subsidiaries manage these credit risk exposures through the permanent review and evaluation of its clients' payment capacity, based on information from various alternative sources and through the transfer of risk.
Measured at fair value with changes in other comprehensive income. Debt instruments that are held within a business model whose objective is achieved through the collection of contractual cash flows and the sale of financial assets, and that have contractual terms that give rise on specified dates to cash flows that are only principal and interest payments on outstanding principal, are generally measured at fair value with changes in other comprehensive income.
Measured at fair value through profit or loss. This category includes financial assets that qualify in the business model, are held for trading and are acquired mainly for the purpose of being sold in the short term. Derivative instruments are also classified as held for trading unless they are designated as hedge accounting. These instruments are initially measured at fair value. Subsequent valuation is performed by determining fair value and changes in value are recorded in the Consolidated Statement of Comprehensive Income under "Other gains (losses)".
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 j.2) Non-derivative financial liabilities
Financial liabilities are initially recorded at fair value, net of transaction costs incurred. In subsequent periods, these obligations are measured at amortized cost using the effective interest rate method (described above). For the purpose of calculating the fair value of debt, it has been divided into fixed interest rate debt and variable interest rate debt. Fixed debt is debt that over its life pays interest coupons fixed from the beginning of the operation, either explicitly or implicitly. Variable debt is debt issued with a variable interest rate, i.e. each coupon is fixed at the beginning of each period according to the reference interest rate. j.2i) Other financial liabilities
Other financial liabilities, including loans, are initially valued at the amount of cash received, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method, recognizing interest expense based on the effective rate in the statement of income by function. Financial obligations are presented as non-current liabilities when their maturity is more than 12 months. j.3) Derivatives and hedging transactions
IFRS 9 introduced a new hedge accounting model, with the aim of aligning accounting more closely with companies' risk management activities and establishing a more principles-based approach. When applying IFRS 9 for the first time, the Company could choose as its accounting policy to continue to apply the hedge accounting requirements of IAS 39, instead of the requirements of IFRS 9, until such time as the "macro- hedging" standard is published and adopted. As of January 1, 2018, the Company has decided to continue applying IAS 39 for the measurement and recognition of its hedges, in accordance with IFRS 9 (7.2.21). Derivatives are initially recognized at fair value on the contract origination date and are subsequently valued at fair value through the income statement, except for specific treatment under hedge accounting. During the first half of 2017, Enjoy S.A. carried out a swap unwind whose purpose was to hedge two lines of national bonds expressed in units of development and exercised a Call option for 55% of the shares of Baluma S.A. As of December 31, 2018, the Company and its subsidiaries do not hold derivatives and/or implicit derivatives. j.4) Fair value measurement
The fair value of an asset or liability is defined as the price that would be received for selling an asset or paid for transferring a liability, in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the transaction to sell an asset or transfer a liability takes place in the principal market, i.e. the market with the largest volume and level of activity for the asset or liability. In the absence of a principal market, it is assumed that the transaction takes place in the most advantageous market to which the entity has access, i.e. the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability. j.5) Derecognition of financial assets and liabilities
Financial assets are derecognized when:
- The rights to receive cash flows related to the assets have expired or have been transferred or, even if retained, contractual obligations have been assumed that determine the payment of those flows to one or more recipients. - The company has substantially transferred the risks and rewards of ownership or, if it has not substantially transferred or retained them, when it does not retain control of the asset.
Transactions in which the Company retains substantially all the risks and rewards of ownership of a transferred financial asset are recorded as a liability for the consideration received. Transaction expenses are recorded in
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 income using the effective interest rate method. Financial liabilities are derecognized when they are extinguished, i.e. when the obligation arising from the liability has been paid, canceled or has expired. j.6) Offsetting of financial assets and liabilities
The Enjoy Group offsets financial assets and liabilities, and the net amount is presented in the statement of financial position, only when: - There is a legally enforceable right to offset the amounts recognized; and - there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.
These rights can only be legally enforceable in the normal course of business, or in the event of default, insolvency or bankruptcy of one or all of the counterparts. k) Inventories
Inventories are measured at the lower value between the acquisition price or production cost and the net realizable value. The net realizable value is the estimated selling price during the normal course of business, less estimated costs necessary to complete production and carry out the sale. The valuation method for inventories is the weighted average cost. The cost of inventory includes all acquisition costs, conversion costs and other costs incurred to define the current location and condition of inventories. l) Cash and Cash Equivalents
Cash and cash equivalents, recognized in the financial statements, comprise cash on hand, checking accounts, time deposits, fixed-rate investment funds, Central Bank instruments with low risk and original maturities of three months or less. Bank overdrafts are shown in the item Other Current Financial Liabilities on the classified statement of financial position. m) Other non-financial assets, current and non-current
These assets are prepaid disbursements whose benefit is expected in a year or more. n) Accounts Payable
This item primarily contains balances payable to suppliers, which are subsequently valued at amortized cost using the effective interest rate. o) Issued capital
The capital stock is represented by ordinary shares which are subscribed and paid. In addition, costs directly attributable to the issuance of new shares are reducing total equity. p) Income taxes and deferred taxes
Enjoy S.A. and its Subsidiaries in Chile determine the taxable base and calculate their income tax in accordance with current legal provisions. The foreign Subsidiaries do it according to the rules of the respective countries. As of December 31, 2018 and 2017, deferred taxes arising from temporary differences and other events that create differences between the accounting and tax bases of assets and liabilities are recorded in accordance with the standards established in IAS 12 "Income taxes". Deferred tax assets and liabilities in the statement of financial position are classified as non-current assets or non-current liabilities, as appropriate. In determining the amount of current and deferred taxes, the Company considers the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment depends on estimates and assumptions and may involve a number of judgments about future events. New information may arise that causes the
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Company to change its judgment about the appropriateness of current tax liabilities; such changes in tax liabilities will impact tax expense in the year in which they are determined. q) Employee Benefits
The company records short-term benefits, such as wages, bonuses, vacations and other items, on an accrued basis and includes benefits arising from an obligation of the collective work agreements, according to the IAS 19. The company does not have defined benefit policies or long-term contractual obligations with its employees. r) Provisions
Provisions are recognized in the balance sheet when: a. The company has a current binding present obligation (either legal or implicit), due to a past event, b. An outflow of resources is likely, requiring economic benefit to settle the obligation, c. A reliable estimate can be made for the obligation amount.
The provisions are measured at the current value of expenditures required to settle the obligation, using the discount rate that reflects the evaluations of the present market value of the money and the specific risks of the obligation. s) Revenue Recognition
Revenue is recognized under the accrual method, i.e., when there is flow of goods and services, regardless of the collection thereof, when these are reliably quantifiable, and it is likely that any future economic benefits relating to the transaction will flow to the company. Revenue is measured at the fair value of the compensation received or receivable for the sale of goods and rendering of services during the normal course of the business of the company and its subsidiaries. Revenue arising from ordinary activities are presented net of tax over added value, returns, rebates, discounts and after writing off the sales between the company and its subsidiaries and vice versa. As of January 1, 2018, the Company has analyzed and taken into consideration all relevant facts and circumstances when applying each step of the model established by IFRS 15 to contracts with its customers (identifying the contract, identifying performance obligations, determining the transaction price, allocating the price, recognizing revenue). Revenues generated as a result of a contractual relationship with customers are only from the Non-Gaming operation segment, from the realization of events, sales of vacation programs and commercial agreements with suppliers, and are not significant with respect to the Company's total consolidated revenues. Revenue from ordinary activities is classified as follows: i. Sale of Goods
The company recognizes as income from sales the sale of products relating to food, beverages, and stores. Stock sales are recognized when risks and rewards related to the ownership of the goods are substantially transferred; the revenue amount can be reliably determined and is likely to be collected. ii. Rendering of Services
The company recognizes as income from the rendering of services, the gaming, and hotel revenue. Gaming revenues (win) that increase the company’s revenue are presented net of prizes paid and correspond to the gross sum from table games and slot machines, in which such gross revenue is the difference between the opening and closing value, considering the corresponding additions or deductions. Revenues from ordinary activities only include gross earnings from the economic benefits received or receivable. Proceeds received from third parties, such as sales tax, product or service tax or added value tax, are not earnings from economic benefits for the entity. Therefore, such earnings are not included in revenues from ordinary operating activities.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 iii. Customer Loyalty Program
The company has a customer loyalty program named “Enjoy Club”, whose goal is to increase customer loyalty through the services provided by Enjoy S.A., which award Enjoy Club points that are exchangeable for products and services, within a certain period. These Consolidated Financial Statements include deferred income, in accordance with the estimate of the valuation established for the accumulated points pending to be used at that date, in accordance with the provisions of IFRS 15 "Revenue from contracts with customers" ("IFRIC 13 "Customer loyalty programs", in 2017). t) Leases
The Company early adopted IFRS 16 "Leases", for which it measured Lease Liabilities and Right-of-Use Assets in leases previously classified as operating leases by reference to lease payments for the remainder of the lease term, using the option to record the asset in an amount equal to the liability as permitted by IFRS 16: C8 (b); and also determined the interest rate on the date of initial application (January 1, 2018) in accordance with the term of the lease and the nature of the right-of-use assets. Right of use assets recorded at the initial application date will incur amortization expense, depreciation and interest over the shorter of the contract period or the useful life of the asset. u) Earning (loss) per share
Under IAS 33, earnings per share are calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary outstanding shares during the respective financial period. v) Distribution of dividends
At the end of each financial year, the company creates a provision for 30% of the year’s earnings, according to Law No. 18,046 as minimum dividend, since the Law requires the distribution of at least 30% of the financial earnings of the year, unless the Board of Shareholders unanimously agrees otherwise. The distribution of dividends among company shareholders is recognized as a liability and its corresponding decrease in net equity in the consolidated annual accounts of Enjoy S.A, in the financial year where the dividends are approved by the company’s board of shareholders. v.1) Distributable Liquid Income
Distributable net income means the income attributable to holders of equity in the Company, considered for the calculation of the minimum mandatory and, if approved by the shareholders, the distribution of additional dividends. This amount must be adjusted for all the adjustments that the Company considers necessary to perform to determine an income base to be distributed. In this regard, the Company may deduct or add the relevant changes in the fair value of assets and liabilities. Those fair values shall be reintegrated to the calculation of the Distributable Net Income in the year that such fluctuations in fair value are recorded. Notwithstanding the foregoing, for the Company to determine the net income to distribute, it must consider the deduction of debit balances for the item Accumulated Losses in Assets. The policy used to determine the distributable net income must be applied consistently. In the event that the Company justifiably requires a variation in the aforementioned policy, this must be reported to the Financial Market Commission as soon as the Board of Directors opts for the decision. w) Customer prepaid income
The Company records in liabilities, under the item Other non-financial current liabilities, the obligation contracted with its customers, due to the fact that they make deposits for the services contracted.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 x) Available-for-sale assets
Non-current assets the book value of which will be recovered through a sales transaction and not through their future use are classified as available for sale and discontinued operations. This condition is considered met only when the sales transaction is highly probable and the asset is available for immediate sale in its current condition. These assets are valued at the lower of their book value and fair value of sale. A discontinued operation is a component of the Group that has been disposed of, or that has been classified as held for sale; it represents a line of business or a geographical area, which is significant and can be considered separated from the rest; it is part of an individual and coordinated plan to have a line of business or a geographical area of the operation that is significant and can be considered separated from the rest; or it is a subsidiary entity purchased exclusively for the purpose of reselling it. y) Stock-based compensation plan
The Company has implemented a compensation plan for a limited group of executives granting them a right to receive a cash payment if they achieve certain objectives in Enjoy's equity valuation. The fair value of the liability is determined in accordance with IFRS 2 "Share-based Payment" for cash-settled share-based payment transactions. This plan is recognized in the item "Non-current provisions for employee benefits" of the Classified Statement of Financial Position and the charge to the Statement of Income by Function is recorded in the item "Cost of Sales" in the Company where the executive provides the related services.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 3 - RISK MANAGEMENT POLICIES
Enjoy S.A. and subsidiaries are exposed to market risks and financial risks inherent to their business. Enjoy S.A. seeks to identify and manage these risks in the most appropriate manner in order to minimize the potential adverse effects.
1. MARKET RISKS:
Market risks are risks related to variations in variables that affect the company’s assets and liabilities, among which we can highlight: a) Regulation
Any changes to the regulations established by the Superintendency of Gambling Casinos, or contracts relating to the casino industry or in the interpretation of these regulations or contracts by the administrative or municipal authorities could affect the operation of casinos and in particular, the company’s income. Regulatory changes that may affect the industries in which the company operates, such as laws restricting the consumption of certain products - like changes in the tobacco law and alcohol law - could affect the revenue of the company. The company is constantly developing and updating new products, making it easier to adapt its commercial and services offer to these changes and keep offering comprehensive entertainment to its clients. Enjoy S.A. has processes in place that ensure regulatory compliance. These processes are managed by the Legal Services Management area, and the Compliance and Corporate Governments Management. Their implementation and effectiveness is regularly reviewed by Internal Auditing. a.1) Revocation of operating licenses for casinos
According to the provisions in the Gambling Casinos legislation, the operation permit granted by the State to operate a casino can be revoked by the Superintendency of Gambling Casinos (hereinafter the “SCJ”), through a substantiated decision, any time grounds that are set forth in the Law take shape, where the operator would have to seriously breach its obligations to use the license by strictly adhering to the Casinos Law, its regulations and the instructions given by the authority. In the event of a breach, the SCJ could initiate a procedure to revoke the operation permit, which could end with a resolution of revocation, susceptible to a claim and later appeal to the respective Court of Appeals. Likewise, the municipal concession contracts for gambling casinos also contemplate grounds for termination, extinction and expiration resulting from serious breaches of the obligations established in them for the concessionaire, similar to those established in the new Law on Gambling Casinos. Enjoy S.A., as evidenced by more than 40 years of experience in the entertainment industry, sets comprehensive regulatory compliance standards so that regulatory risk is mitigated as much as possible. These compliance standards are designed in accordance with current regulations by the Legal Services Management and the Compliance and Corporate Governments Management and, in turn, are reviewed in their effectiveness and implementation by Internal Audit on a regular basis. a.2) Gambling Casinos Municipal licenses
On June 8, 2018, in successive sessions of the Resolutive Council of the Superintendence of Gambling Casinos (hereinafter "SGC"), the Opening Hearings of the Economic Bids of the applicant projects were held, and the Enjoy Group was awarded, through its subsidiaries, the operating permits for the gambling casinos located in the districts of Coquimbo, Viña del Mar, Pucón and Puerto Varas. Accordingly, Enjoy maintained three of the gambling casinos whose administration it already had, and was additionally awarded the operations permit for the casino located in the city of Puerto Varas. The Resolution that grants the operating permit to the corresponding Companies was published in the Official Gazette on June 29, 2018, date as of which the 2-year period started, in accordance with Article 28 of Law 19.995, to develop the casino project and the rest of the works that make up the comprehensive project, respectively, and to give notice to the SGC in order to obtain the certificate that enables it to start operations. In the particular case of the Casino located in the city of Viña del Mar, as this is a property owned by the Municipality of Viña del Mar, the Bid Bases established a special
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 condition for the start of operations and therefore the final date must be set by the SGC through a Supplementary Resolution to the Operating Permit, which to date has not yet been issued, despite the expiration of the deadline of 60 days counted from the publication made on June 29, 2018. As a subsequent events to the aforementioned awardings, note that the competitor that was defeated in these districts, which is the company "Sun Dreams", within the framework of the complaint procedure established in article 27 bis of the Law of Casinos No. 19.995, filed on June 28, 2018 two appeals for reinstatement against the resolutions of the Supreme Court of Justice that denied permits to operate in the districts of Pucón and Puerto Varas, granting such permits to the Companies applying for the Enjoy group. Mainly, the complainant's arguments refer to the fact that the Technical Evaluation Committee of the Supreme Court of Justice would have incurred in a vice of legality for having granted the Enjoy projects in Pucón and Puerto Varas a certain technical score in certain items of an urban nature, in circumstances in which both projects would not comply with the Urbanism and Construction regulations in force at the date of the application, which did not make them worthy of those specific scores and would impede the development of the projects under the proposed conditions. On July 10, 2018, the SGC, through Exempt Resolutions, rejected in all its parts the petitions for reinstatement filed by "Sun Dreams" regarding the processes in both districts, denying both petitions filed by the claimant in his claims. Following the procedure established in article 27 bis of the aforementioned Law on Casinos, on July 26, 2018 "Sun Dreams" filed a judicial claim against the resolutions of the Supreme Court of Justice that rejected its appeals for reversal, consequently filing two appeals before the Santiago Court of Appeals. Both appeals basically reproduce the arguments already put forward before the SGC and seek that the final adjudications in favor of Enjoy with respect to the districts of Pucón and Puerto Varas be left without effect. The procedure established by article 27 bis of the Law of Casinos orders that the judicial instance be followed only before the Court of Appeals of Santiago, without subsequent appeals, and without the possibility that such Court may decree orders not to innovate that suspend the deadlines of the process of start of operations in progress. As of the date of this report, and after the corresponding replies had been made by the Superintendence of Gambling Casinos, as well as the companies awarded by the Enjoy group having also taken part by presenting their discharges and presenting the corresponding antecedents, the Santiago Court of Appeals recently decided not to establish a stage of evidence, maintaining the supporting evidence already delivered to the rapporteur, and both parties are therefore awaiting the date for the allegations. Finally, note that no appeals have been filed with respect to the awards of the districts of Viña del Mar and Coquimbo, and that the deadlines for making such claims have expired in accordance with Article 27 bis of the Law of Casinos. b) Income Volatility
Gaming Tables Casino Conrad in Punta del Este
Unlike the business model of Enjoy casinos in Chile, a higher proportion of gaming revenue in Conrad comes from the gaming tables and their VIP lounges. Consequently, there is a short-term risk related to this type of operation. According to the provisions of the gaming rules, the casino has a theoretical advantage, which on a longer term means that this risk factor does not tend to affect the company’s gaming revenues. c) International Markets - Argentina, Brazil, Uruguay
Entry of the company into foreign markets could cause it to face political, economic, and judicial risks as well as translation differences related to operations in other countries. Currently, Enjoy S.A. has operations in Argentina, and Uruguay, as well as a commercial office in Brazil, which allows it to capture and keep customers of this market. Although these risks are inherent to any international operation, Argentina has proved to be a market with volatile conditions and in some cases, unfavorable for business development. Thus, the revenue and assets of the company ventures abroad may be affected by intervening events, regulatory changes, deterioration in inflation and interest rates, exchange rate fluctuations, changes in government policies, expropriation, price and salary restrictions, and tax increases. On the other hand, the economy and politics of Colombia and Uruguay have proved to be stable over time.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 d) Construction Project Risk
The hotel and casino projects developed by the company are subject to the risks faced by all construction projects in terms of facing higher values in raw material costs during the development of the work and changes in the appearance of the project, requiring a higher investment. However, the significant investments made by Enjoy S.A. are completed, reducing the relevance of this risk.
2. FINANCIAL RISK a) Risk Conditions in the financial market a.1) Exchange rate risk
The hedging policy of exchange rate risk seeks to achieve a natural hedge of its business flows by maintaining a debt in the functional currencies of each transaction and to match significant obligations or payment decisions in currencies other than the Chilean peso. For this reason, in cases in which it is not possible or advisable to achieve hedging through the business' own cash flows or debt, the Company takes derivative hedging instruments in the financial market. a.2) Exchange rate risk for investments in functional currency in Argentinean pesos and dollars.
The Company has a joint controlling investment in the Argentine company Cela S.A., operator of the Gambling Casino, Hotel and Food & Beverages in (Mendoza) Argentina. This foreign investment is managed in the functional currency of such country (Argentine peso). As a result of the foregoing, Enjoy S.A. has at December 31, 2018 an exposure on its balance sheet equivalent to ThCh$ 7,963,208 (ARS 433 million). Additionally, Enjoy S.A. has investments in Uruguay through the company Baluma S.A. (Enjoy Punta del Este), operating company of the Gambling Casino, Hotel, Food & Beverages and tourist developer. This investment is handled in US dollars. As a result of the foregoing, Enjoy S.A. has at December 31, 2018 a net exposure in its balance equivalent to ThCh$ 94,834,129 (US$ 136 million). The Argentine peso and the U.S. dollar, with respect to the Chilean peso, can significantly affect the value of net investments abroad, as a result of the translation adjustment recorded in the item Other reserves of the equity of Enjoy S.A. a.3) Interest Rate Risk
Fluctuations in interest rates can have a significant impact on company’s financial costs. Enjoy S.A. and its subsidiaries keep short and long-term debt; the interest of these debts is expressed at different rates: variables and fixed, expressed on a TAB base. b) Credit Risks
Once the pre-judicial and judicial collection procedures have been exhausted, the assets are derecognized against the constituted impairment. The Company only uses the impairment method and not the one of direct write-off for better control. The renegotiations currently in force are not very relevant, the policy is to analyze them case by case in order to classify them according to the existence of risk, determining whether their reclassification corresponds to pre-judicial collection accounts. If the reclassification warrants it, an impairment is recorded of amounts that have matured and that will mature. Each case of significant delinquency is reviewed by a credit and collection committee made up of different areas of the Company, applying additional impairments if necessary. Impairment is analyzed and executed for each individual client. The maximum exposure to the credit risk at the dates of the reported years is the book value of each kind of trade and other receivables. At the date of issue of this report, the Company has an investment grade as per the following: risk ratings of BBB+ (stable trend) for Financial Standing/Bonds and for negotiable instruments N2 / BBB+ (stable trend) according to International Credit Rating, a Limited Risk Rating Company, and BBB+ (stable trend),
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Rating Agency Humphreys Ltda. In addition to the above, on December 26 S&P Global Ratings maintains an international rating of Enjoy in B with a stable trend, while Fitch Ratings classified it in B+. c) Liquidity Risk
Liquidity risk represents the risk that the Company will not be able to meet its current obligations. As of December 31, 2018, the Company has a positive working capital of ThCh$ 14,031,506. Management believes that this situation does not affect its ability to meet its financial obligations, since it has the capacity to generate operational cash flows and available credit lines, which are sufficient to meet its financial obligations. As a result of the nature of the business, the Company maintains a significant cash collection capacity, daily and stable throughout the month, which allows it to manage and predict the availability of liquidity in a reliable manner. The following is a liquidity index as of December 31, 2018 and 2017:
12-31-2018 12-31-2017 ThCh$ ThCh$ Current Asset 152,118,230 89,223,339 Current Liability 138,086,724 124,549,156 Liquidity ratio 1.10 0.72 Below is the liability maturity chart at 31 December 2018:
12-31-2018 Current Non Current Total Non- Total Current Total liabilities Liabilities Up to three From three to From one to From three to Over five years Current months twelve months three years five years ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Other financial liabilities 24,812,648 38,843,284 63,655,932 48,059,655 140,954,946 83,753,929 272,768,530 336,424,462 Lease liabilities 1,355,857 1,684,503 3,040,360 1,886,312 2,934,356 4,678,864 9,499,532 12,539,892 Trade payables and other payables 55,371,247 187,354 55,558,601 - - - - 55,558,601 Accounts payable to related parties - 1,127,863 1,127,863 - - - - 1,127,863 Current tax liability, current - 1,808,293 1,808,293 - - - - 1,808,293 Deferred tax liabilities - - - - - 48,004,417 48,004,417 48,004,417 Current provisions for employee benefits - - - - - 192,723 192,723 192,723 Other non-financial liabilities 10,868,931 - 10,868,931 1,096,205 - - 1,096,205 11,965,136 Liabilities included in groups of assets for disposal classified as held for sale or discontinued operations - 2,026,744 2,026,744 - - - - 2,026,744 Total liabilities 92,408,683 45,678,041 138,086,724 51,042,172 143,889,302 136,629,933 331,561,407 469,648,131
The following table shows the maturity of financial liabilities with undiscounted maturities as of December 31, 2018:
12-31-2018 Current Non Current Total Non- Up to three From three to Total Current From one to From three to Total liabilities Over five years Current months twelve months three years five years ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Other financial liabilities 24,957,753 56,657,938 81,615,691 83,648,502 161,855,214 99,725,272 345,228,988 426,844,679 Total liabilities 24,957,753 56,657,938 81,615,691 83,648,502 161,855,214 99,725,272 345,228,988 426,844,679
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
The table below shows the maturities of future disbursements for operating leases in force, which are not reflected in the Statement of Financial Position of Enjoy S.A. and Subsidiaries as of December 31, 2018:
Maturities 2019 2020 onwards Total 2019 Total 2019 Total January to March April to December 2020 and 2021 2022 and 2023 2024 and more onwards ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Lease payment (*) 295,268 885,802 1,181,070 1,034,671 1,034,671 445,748 2,515,090 3,696,160 Total 295,268 885,802 1,181,070 1,034,671 1,034,671 445,748 2,515,090 3,696,160
(*) Contracts that do not qualify under IFRS 16
2. SENSITIVITY OF VARIABLES
Company management determines the parameters used to calculate sensitivity, based on the following: i) Industry growth variables for gambling revenue, using a measurement parameter of 15%, which is the maximum variation suffered by the industry in highly volatile periods, such as the crisis caused by the tobacco law, are management´s most reasonably considered estimation of the potential increase/decrease in gaming income. ii) Volatility of the banking system’s interest rates for financial costs, where 2% is considered a critical variation up or down. The sensitivity is based on the assumption that the applicable TAB interest rate will increase or decrease by no more than two percentage points, as a higher valuation is not expected to be highly probable. iii) Volatility of the US dollar obtained from the Central Bank for exchange rate exposure. Given the high volatility of this factor, the Company considers that the variations of more than 8% (7% for Uruguay) are critical, in addition to being the real variation of 2017. The sensitivity is based on the assumption that the exchange rate will increase (decrease) by no more than 6% (7% for Uruguay), as high valuation is not expected to be highly probable. a) Gaming income
The main component of the Company's income is the income from gambling, which represents 77% of the Company's total income. In turn, the group's income denominated in US$ represents 29% of the Consolidated gambling income and 29% of the total Consolidated income. Next is disclosed the impact of an increase or decrease in the amount bet on the gaming halls in Chile and Uruguay and its impact on Consolidated revenues:
Actual As of December 2018 Cosolidated Chile Uruguay THCh$ THCh$ THCh$ Gaming income 210,546,273 148,879,291 61,666,982
Sensitivity As of December 2018 Cosolidated Chile Uruguay THCh$ THCh$ THCh$ Gaming income 188,214,379 126,547,397 61,666,982 Variation -10.6% -15.0% 0.0%
Sensitivity As of December 2018 Cosolidated Chile Uruguay THCh$ THCh$ THCh$ Gaming income 201,296,226 148,879,291 52,416,935 Variation -4.4% 0.0% -15.0%
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
b) Finance Costs
The Company holds fixed and variable rate loans. Among the variable rate loans, there are loans with compound rates of a fixed spread and TAB in UF, 90 days. The variable composition of these loans, particularly the TAB rate, makes financial costs susceptible to change from one year to the next. Of the Company's total financial costs, 1.75% is subject to these variations. The following discloses the impact of increases and decreases in TAB rates on compound credits with such rate and their impact on the Company's financial costs as of December 31, 2018:
Real to December 2018 ThCh$ Finance costs (791,144)
TAB - 2% Real to December 2018 TAB + 2% ThCh$ ThCh$ ThCh$ (775,321) (791,144) (806,967) c) Exchange Rate
The main flows and transactions of Enjoy S.A. and its subsidiaries are conducted in local currency where the operations are located, i.e., in Chilean pesos for the companies within Chile and Argentinean pesos for companies in Argentina. The exception to the rule is Uruguay, since revenues are in dollars and most of the costs, such as wages, are in Uruguayan pesos. The company’s policy is to monitor its exchange rate exposure and hedge this risk exposure accordingly. The following is a chart of sensitization to fluctuations in the exchange rate of the position in US dollars exposed in Chile and Uruguay, which would have an impact on the statement of income, but not on cash flows:
a) Chile:
Real to December 2018 8 % (-) 8 % (+) ThCh$ ThCh$ ThCh$
Liabilities in dollars (net) 36,206,477 39,301,888 42,397,300
b) Uruguay:
Real to December 2018 Parity - 7% Parity + 7% ThCh$ ThCh$ ThCh$
Asset in dollars (net) 10,627,742 11,427,679 12,227,617
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 4 - MANAGEMENT ESTIMATES, JUDGMENTS, AND CRITERIA
USE OF ESTIMATES
In certain cases, assumptions and estimates are presented in conformity with accounting principles and estimates. This implies assessments that require professional judgment and estimates based on events that, due to their nature, are uncertain and may be subject to changes. The valuation method, subject to estimates and assumptions, may change over time and considerably affect equity, financial and income position.
The company applies the following estimates: i) Impairment of Trade receivables
The use of prospective information and assumptions about the probability of default and expected loss rates. ii) Deferred Income Tax
The company measures the recoverability of deferred tax assets based on estimates of future performance. This recoverability ultimately depends on the company’s capacity to generate taxable profit over the reporting period when the deferred tax assets are deductible. The appropriate classification of the taxable amounts depends on several factors, including the estimate at the time and realization of the deferred tax assets and expected time of tax settlement. Real collection flows and income tax payments could differ from the company’s estimates, because of changes in tax legislations or unexpected future transactions that may affect tax balances. Deferred tax is measured by applying different tax rates in force at the end of each reporting period. iii) Provisions for litigation and other contingencies
The Company regularly evaluates the possibility of losses from litigation and contingencies, based on estimates made by management. No provision has been made for those cases where management estimates that no resources will probably be disbursed, economic benefits have been incorporated to settle the obligation or when the amount cannot be reliably estimated. iv) Impairment
Measurement of asset impairment losses is based on the recoverability of the estimated future cash flows of the cash-generating unit or the asset being tested for impairment. v) Deferred Revenue from Customer Loyalty Programs
In order to determine the recognition of loyalty points earned and awarded to customers who have subscribed to the loyalty program, the estimate is based on different factors reflected in an expected probability rate and related costs (see note 26). vi) Property, Plant, Equipment, and Intangibles
The accounting treatment for property, plant, equipment and intangibles involves estimating the useful life used to calculate depreciation, amortization and relevant residual values.
vii) Determination of fair value for valuing financial assets
In determining the fair value for valuing financial assets that are valued at changes in their fair value, management conducts independent third-party studies when the financial asset is of significant value or complex to value.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 viii) Share-based payments
The Company determines the fair value of share-based payment plans delivered to its executives. Such value is estimated at the granting date using an appropriate valuation model, taking into consideration the terms and conditions under which the instruments were granted. ix) Leases
The Company uses its judgment mainly in determining the lease term and the associated discount rate.
However, future events may make it necessary to change estimates in future years in which such a change would be made prospectively.
NOTE 5 - ACCOUNTING CHANGE AND RECLASSIFICATIONS i) Accounting changes
The Consolidated Financial Statements as of December 31, 2018, do not present changes in accounting policies with respect to the same period of the previous year: ii) Reclassifications
To improve comparability with the Consolidated Financial Statements as of December 31, 2018, the Company has made certain reclassifications in the Consolidated Financial Statements as of December 31, 2017.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS
The New IFRS, improvements and amendments to IFRS, as well as the interpretations that have been published during the period, are detailed below: a) The following amendments to IFRS were adopted in these financial statements:
New IFRS Date of mandatory application
IFRS 9, Financial Instruments Annual periods beginning on or after January 1, 2018. IFRS 15, Revenue from Contracts with Customers Annual periods beginning on or after January 1, 2018. IFRS 16, Leases Annual periods beginning on or after January 1, 2019. (Early adoption as of January 1, 2018). Allows early adoption only if IFRS 15 is applied. Amendments to IFRS Date of mandatory application
Classification and measurement of share-based payment Annual periods beginning on or after January 1, transactions (amendments to IFRS 2) 2018. Applying IFRS 9 "Financial Instruments" with IFRS 4 "Insurance Overlay approach to be applied when IFRS 9 is Contracts" (amendments to IFRS 4) first applied. Deferral approach effective for annual periods beginning on or after 1 January 2018 and only available for three years after that date.
Transfers of Investment Property (amendments to IAS 40) Annual periods beginning on or after January 1, 2018. Annual improvements cycle 2014-2016 (amendments to IFRS 1 Annual periods beginning on or after January 1, and IAS 28) 2018. New Interpretations Date of mandatory application
IFRIC 22 "Foreign Currency Transactions and Advance Annual periods beginning on or after January 1, Consideration" 2018.
IFRS 9 Financial Instruments: Changes in accounting policies that result from the adoption of IFRS 9, replacing IAS 39, shall be applied retrospectively, except as follows: The Company has opted for an exemption that allows it not to restate comparative information from prior periods with respect to changes in classification and measurement (including impairment); therefore, the information presented for 2017 does not reflect the requirements of IFRS 9, but rather those established in IAS 39. The differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of this standard were recognized as at January 1, 2018 in Retained earnings (Accumulated losses) in the Consolidated Statements of Financial Position. The Company has evaluated to apply the simplified approach to recognize expected credit losses over the life of the asset for its trade and other receivables, as required by IFRS 9. In relation to related party loans, Management has assessed that there has not been a significant increase in the credit risk of related party loans from initial recognition through December 31, 2018. In general, Management has evaluated that the application of the expected credit loss model of IFRS 9 does not result in the anticipated recognition of significant credit losses for the corresponding items in the financial statements.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
The assessment of the three aspects of the standard and their impact on the Consolidated Financial Statements is detailed below:
(i) Clarification and measurement
IFRS 9 introduced a new classification approach for financial assets, based on two concepts: the contractual cash flow characteristics of the financial asset and the Company's business model. Under this new approach, the four classification categories of IAS 39 were replaced by the following three categories: amortized cost; fair value with changes in other comprehensive income; or fair value with changes in income. With respect to financial liabilities, IFRS 9 retains to a large extent the accounting treatment provided for in IAS 39, making limited amendments, under which most of these liabilities are measured at amortized cost, allowing a financial liability to be designated at fair value through profit or loss if certain requirements are met. The Enjoy Group has determined that the new classification requirements do not have an impact on the accounting for its financial assets. Financial assets classified as 'held to maturity' and 'loans and receivables' under IAS 39 that were measured at amortized cost continue to be measured at amortized cost under IFRS 9 because they are held within a business model to collect contractual cash flows, and these contractual cash flows consist solely of principal payments and interest on outstanding principal. Financial assets that were measured at fair value through profit or loss under IAS 39 continue to be measured as such under IFRS 9. None of the changes in the classification of financial assets have had an impact on the Company's financial position, results of operations, other comprehensive income or comprehensive results.
(ii) Impairment
The new impairment model in IFRS 9 is based on expected credit losses, unlike the incurred loss model in IAS 39. This means that under IFRS 9, impairments are generally recognized earlier than under the previous model. The new impairment model is applied to financial assets measured at amortized cost or measured at fair value with changes in other comprehensive income, except for investments in equity instruments. Impairment provisions are measured on the basis of:
- the expected credit losses in the next 12 months, or - the expected credit losses over the life of the asset if, at the reporting date of the financial statements, there is a significant increase in the credit risk of a financial instrument from initial recognition.
The standard allows to apply a simplified approach for trade receivable, contractual assets or lease accounts receivable, so that impairment is always recorded by reference to expected losses over the life of the asset. The Enjoy Group chose to apply this policy for the indicated financial assets. As of January 1, 2018, as a result of the application of the new impairment model, the Company recognized a charge, net of taxes, of ThCh$ 328,062 in retained earnings.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
(iii) Hedge accounting
IFRS 9 introduced a new hedge accounting model, with the aim of aligning accounting more closely with companies' risk management activities and establishing a more principles-based approach. The new approach allows risk management activities to be better reflected in the financial statements, allowing more elements to be eligible as hedged elements: risk component of non-financial items, net positions and aggregate exposures (i.e. a combination of a non-derivative exposure and a derivative). The most significant changes with respect to hedging instruments, in comparison with the hedge accounting method used in IAS 39, relate to the possibility of deferring the time value of an option, the forward points of the forward contracts and the monetary base differential in Other Comprehensive Income, until the moment in which the hedged item impacts results. IFRS 9 eliminated the quantitative requirement for effectiveness testing in IAS 39, whereby results must be within the range 80%-125%, allowing the assessment of effectiveness to be aligned with risk management by demonstrating the existence of an economic relationship between the hedging instrument and the hedged item, and provides the possibility of rebalancing the hedging relationship if the risk management objective remains unchanged. However, retrospective ineffectiveness must continue to be measured and recognized in profit or loss. When applying IFRS 9 for the first time, the Group could choose as its accounting policy to continue to apply the hedge accounting requirements of IAS 39, rather than the requirements of IFRS 9, until such time as the "macro-coverage" standard is published and adopted. As of January 1, 2018, the Company has decided to continue applying IAS 39 for the measurement and recognition of its hedges, in accordance with IFRS 9 (7.2.21).
IFRS 15 Revenue from Contracts with Customers
As of January 1, 2018 the Company has adopted the new accounting standard IFRS 15 related to the revenue recognition from contracts with customers. This new standard provides a single principles-based model through five steps that will apply to all contracts with customers, i) identify the contract with a customer, ii) identify the performance obligations in the contract, iii) determine the transaction price, iv) allocate the transaction price to the contract performance obligations, v) recognize revenue when (or as) the entity satisfies a performance obligation. The new standard is based on the principle that the Company must recognize revenue from ordinary activities when (or as) it satisfies a performance obligation by transferring the committed goods or services (i.e. one or more assets) to the customer. An asset is transferred when (or as) the customer obtains control of that asset and/or performance of a service, and simultaneously receives and consumes the benefits provided as the entity realizes them. The standard permits two methods of adoption: (i) retrospectively to each prior reporting period in accordance with IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors", or (ii) retrospectively to the cumulative effect of the initial application of this Standard as an adjustment to the opening balance of retained earnings recognized at the date of initial application. The Company will adopt the new standard using the second method. The Company has analyzed and taken into consideration all relevant facts and circumstances when applying each step of the model established by IFRS 15 to contracts with its customers. Revenues generated as a result of a contractual relationship with customers are only from the Non- Gaming operation segment, from carry out events, sales of vacation programs and commercial agreements with suppliers, and are not material with respect to the Company's total consolidated revenues.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
IFRS 16 Leases
The Company has early adopted IFRS 16 "Leases" on January 1, 2018, such leases were previously classified as operating leases, by reference to lease payments for the remainder of the lease term, using the option to record the asset in an amount equal to the liability as permitted by IFRS 16: C8 (b); and also determined the interest rate on the date of initial application (January 1, 2018) in accordance with the term of the lease and the nature of the right-of-use assets. Right-of-use assets recorded at the initial application date will incur in amortization and depreciation expense over the shorter of the contract period or the useful life of the asset. b) The following new Standards and Interpretations have been issued, although their application date is not yet effective:
New IFRS Date of mandatory application
IFRS 17 "Insurance Contracts". Annual periods beginning on or after January 1, 2021. Amendments to IFRS Date of mandatory application
Sale or contribution of assets between an Investor and its Effective date indefinitely postponed Joint Venture or Associate (amendments to IFRS 10 and IAS 28) Prepayment features with negative compensation Annual periods beginning on or after January (amendments to IFRS 9) 1, 2019. Long-term interest in associates and joint ventures Annual periods beginning on or after January (amendments to IAS 28) 1, 2019. Annual improvements cycle 2015-2017 (amendments to Annual periods beginning on or after January IFRS 3, IFRS 11, IAS 12 and IAS 23) 1, 2019. Plan amendment, reductions and settlements Annual periods beginning on or after January (amendments to IAS 19) 1, 2019. Definition of a business (amendments to IFRS 3) Annual periods beginning on or after January 1, 2020. Definition of Material (amendments to IAS 1 and IAS 8) Annual periods beginning on or after January 1, 2020. Revised Conceptual Framework for Financial Report Annual periods beginning on or after January 1, 2020. New Interpretations Date of mandatory application
IFRIC 23 Uncertainty over income tax treatments Annual periods beginning on or after January 1, 2019.
The Company's management is evaluating the initial effects of the application of these new standards and amendments.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 7 - FINANCIAL INFORMATION PER SEGMENT
Operating segments are identified from internal reports on components of the Company that are reviewed periodically by the principal operating decision maker in order to allocate resources to the segment and evaluate its performance.
The Company measures information on operating segments in accordance with IFRS.
The activities of the Company are organized mainly in its main businesses. Based on this, the Management has established 3 operating segments and 1 corporate segment: a) Gaming Segment:
Business of operation of casinos, both in Chile and abroad b) Non-Gaming Segment:
Business for hotel and restaurant operations, both in Chile and abroad c) Real Estate Investment Segment:
This segment represents business with real estate in Chile, including management and rent of real estate. All of the revenues are for companies related to the gaming and non-gaming segments. d) Corporate Segment:
This segment mainly includes the back office activities of the Company and the provision of services to the other segments.
The disclosures are made based on the geographic area in which the revenue is generated.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
7.1.1) Operating segments a) Information at 31 December 2018:
12-31-2018 Intercompany Consolidated Income Statement Gaming No Gaming Real Estate Corporate Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Revenue 210,546,273 61,356,365 21,428,407 13,944,454 (32,270,267) 275,005,232 Cost of sales (164,360,005) (67,489,527) (5,663,441) (6,728,583) 27,289,292 (216,952,264) Gross margin 46,186,268 (6,133,162) 15,764,966 7,215,871 (4,980,975) 58,052,968 Administration expenses (16,062,850) (2,656,352) (1,684,981) (12,894,586) 5,041,798 (28,256,971) Other expenses by function (2,455,063) (1,100,153) - (526,564) - (4,081,780) Other gains (losses) 138,113 191,520 63,367 (3,396,412) (233,094) (3,236,506) Operating Margin 27,806,468 (9,698,147) 14,143,352 (9,601,691) (172,271) 22,477,711 Financial income 1,841,578 499,104 831,454 35,558,729 (38,217,246) 513,619 Financial costs (3,502,776) (1,800,507) (4,075,859) (74,202,951) 38,450,332 (45,131,761) Share of profit (loss) of associates and joint ventures recorded through the equity method 503,664 - - - - 503,664 Foreign exchange gain/loss (2,020,953) 887,000 (80) (1,030,459) - (2,164,492) Indexation for designated assets/liabilities for inflation (194,883) 8,829 (869,390) (903,007) - (1,958,451) Net Income before tax 24,433,098 (10,103,721) 10,029,477 (50,179,379) 60,815 (25,759,710) Income tax expenses (6,782,676) 900,301 (1,748,332) 9,851,145 - 2,220,438 Income (loss) from continued operations 17,650,422 (9,203,420) 8,281,145 (40,328,234) 60,815 (23,539,272) Income (loss) from discontinued operations (862,279) - - - - (862,279) Net Income attributable to non-controlling interests 209,655 469,869 (583,093) - (715,429) (618,998) Net income, attributable to owners of parent 16,997,798 (8,733,551) 7,698,052 (40,328,234) (654,614) (25,020,549)
12-31-2018 Intercompany Assets / liabilities of the segment Gaming No Gaming Real Estate Corporate Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Assets of the segment 203,659,695 58,304,084 364,012,893 685,482,297 (670,791,576) 640,667,393 Property, plant and equipment 17,692,638 5,451,787 308,655,762 11,299,870 577,172 343,677,229 Intangible assets other than goodwill 64,067,329 394,424 1,024,028 10,899,855 - 76,385,636 Non-current assets or groups of assets for disposal 3,005,119 - - - - 3,005,119 Others 118,894,609 52,457,873 54,333,103 663,282,572 (671,368,748) 217,599,409 Liabilities of the segment 160,204,253 79,819,058 109,860,618 528,160,900 (408,396,698) 469,648,131 Other current financial liabilities 3,465,362 812,863 4,148,277 55,229,430 - 63,655,932 Other non-current financial liabilities - - 17,179,925 255,588,605 - 272,768,530 Liabilities included in groups of assets for disposal classified as held for sale 2,026,744 - - - - 2,026,744 Others 154,712,147 79,006,195 88,532,416 217,342,865 (408,396,698) 131,196,925
12-31-2018 Intercompany Cash flows Gaming No Gaming Real Estate Corporate Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Cash flows derived from (used in) operating activities 21,695,060 761,582 22,369,487 3,614,904 (210,738) 48,230,295 Cash flows derived from (used in) investment activities (50,245,190) (5,079,952) (7,470,598) 14,866,551 19,895,593 (28,033,596) Cash flows derived from (used in) financing activities 22,208,679 3,026,257 (14,895,575) 41,949,066 (19,684,855) 32,603,572
34
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) Information at 31 December 2017:
12-31-2017 Intercompany Consolidated Income Statement Gaming No Gaming Real Estate Corporate Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Revenue 213,333,904 67,381,077 24,501,270 14,081,421 (35,620,714) 283,676,958 Cost of sales (172,001,887) (70,875,522) (5,671,452) (13,265,095) 38,238,490 (223,575,466) Gross margin 41,332,017 (3,494,445) 18,829,818 816,326 2,617,776 60,101,492 Administration expenses (16,462,412) (3,083,161) (1,586,435) (4,003,095) (2,617,776) (27,752,879) Other expenses by function (345,553) (169,793) - (1,010,708) - (1,526,054) Other gains (losses) (1,265,027) (670,885) 138,745 (1,314,365) - (3,111,532) Operating Margin 23,259,025 (7,418,284) 17,382,128 (5,511,842) - 27,711,027 Financial income 1,976,777 360,219 1,024,308 29,987,134 (33,097,785) 250,653 Financial costs (3,962,498) (1,239,927) (4,375,993) (56,504,038) 33,097,785 (32,984,671) Share of profit (loss) of associates and joint ventures recorded 1,397,231 (13,827) - - - through the equity method 1,383,404 Foreign exchange gain/loss 965,938 (478,213) (22) 6,851,405 - 7,339,108 Indexation for designated assets/liabilities for inflation (115,199) 19,821 (604,739) (2,471,089) - (3,171,206) Net Income before tax 23,521,274 (8,770,211) 13,425,682 (27,648,430) - 528,315 Income tax expenses (1,593,636) 1,416,661 (2,874,787) 6,621,283 - 3,569,521 Income (loss) 21,927,638 (7,353,550) 10,550,895 (21,027,147) - 4,097,836 Net Income attributable to non-controlling interests (2,300,310) 19,429 (856,750) (561,694) (1,174,896) (4,874,221) Net income, attributable to owners of parent 19,627,328 (7,334,121) 9,694,145 (21,588,841) (1,174,896) (776,385)
12-31-2017 Intercompany Assets / liabilities of the segment Gaming No Gaming Real Estate Corporate Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Assets of the segment 300,080,233 62,122,515 347,452,147 593,531,569 (780,999,770) 522,186,694 Property, plant and equipment 16,050,145 5,386,525 290,207,421 1,413,228 275,996 313,333,315 Intangible assets other than goodwill 64,121,181 435,420 1,210,142 6,435,027 - 72,201,770 Non-current assets or groups of assets for disposal 3,315,916 - - - - 3,315,916 Others 216,592,991 56,300,570 56,034,584 585,683,314 (781,275,766) 133,335,693 Liabilities of the segment 259,704,391 73,678,280 131,536,578 515,740,452 (533,052,032) 447,607,669 Other current financial liabilities 1,987,402 465,277 9,138,328 54,763,669 (112,089) 66,242,587 Other non-current financial liabilities - - 34,343,318 245,025,074 (280,223) 279,088,169 Liabilities included in groups of assets for disposal classified as held for sale 1,924,656 - - - - 1,924,656 Others 255,792,333 73,213,003 88,054,932 215,951,709 (532,659,720) 100,352,257
12-31-2017 Intercompany Cash flows Gaming No Gaming Real Estate Corporate Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Cash flows derived from (used in) operating activities 29,106,470 (267,541) 19,001,296 (8,128,684) 2,710,627 42,422,168 Cash flows derived from (used in) investment activities (102,733,992) (10,903,734) (4,559,595) (468,971,288) 426,233,321 (160,935,288) Cash flows derived from (used in) financing activities 73,311,943 10,760,196 (14,926,955) 468,986,524 (428,943,963) 109,187,745
35
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
7.1.2) Additional information of sub-groups of income statements: a) Information at 31 December 2018:
12-31-2018
Statement of income - subgroups of operations of: Casino Foood & Beverages Hotel Total
ThCh$ ThCh$ ThCh$ ThCh$ Operating income 210,546,273 30,192,064 22,295,313 263,033,650 Financial costs (3,502,776) - (1,800,507) (5,303,283) b) Information at 31 December 2017:
12-31-2017
Statement of income - subgroups of operations of: Casino Foood & Beverages Hotel Total
ThCh$ ThCh$ ThCh$ ThCh$ Operating income 213,333,904 33,401,995 22,832,203 269,568,102 Financial costs (3,962,498) - (1,239,927) (5,202,425)
7.2) Geographic segments: a) Information at 31 December 2018:
12-31-2018 Intercompany National International Total Consolidated Income Statement eliminations ThCh$ ThCh$ ThCh$ ThCh$ Revenues 198,124,957 78,769,944 (1,889,669) 275,005,232
12-31-2018 Assets of the Segment National International Total ThCh$ ThCh$ ThCh$ Assets of the Segment 342,270,373 298,397,020 640,667,393 Current assets 85,709,168 66,409,062 152,118,230 Non-current assets 211,946,656 231,986,619 443,933,275 Deferred tax assets 44,614,549 1,339 44,615,888
12-31-2018 Intercompany Cash flows National International Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ Cash flows derived from (used in) operating activities 40,277,743 8,163,290 304,618 48,745,651 Cash flows derived from (used in) investment activities (33,396,545) (15,020,510) 19,895,593 (28,521,461) Cash flows derived from (used in) financing activities 51,520,080 1,256,212 (20,200,211) 32,576,081 b) Information at 31 December 2017:
12-31-2017 Intercompany National International Total Consolidated Income Statement eliminations ThCh$ ThCh$ ThCh$ ThCh$ Revenues 197,491,017 87,857,968 (1,672,027) 283,676,958
12-31-2017 Assets of the Segment National International Total ThCh$ ThCh$ ThCh$ Assets of the Segment 257,569,394 264,617,300 522,186,694 Current assets 34,062,912 55,160,427 89,223,339 Non-current assets 183,587,560 209,441,371 393,028,931 Deferred tax assets 39,918,922 15,502 39,934,424
36
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
12-31-2017 Intercompany Cash flows National International Total eliminations ThCh$ ThCh$ ThCh$ ThCh$ Cash flows derived from (used in) operating activities 32,123,323 7,588,218 2,710,627 42,422,168 Cash flows derived from (used in) investment activities (576,325,169) (10,843,440) 426,233,321 (160,935,288) Cash flows derived from (used in) financing activities 538,161,092 (29,385) (428,943,962) 109,187,745
7.3) Gaming Revenue, Hotel revenue, Food & Beverage and others, by country: a) Information at 31 December 2018:
(i) See note 36. b) Information at 31 December 2017:
12-31-2017 Revenue Chile Uruguay Colombia Total ThCh$ ThCh$ ThCh$ ThCh$ Gaming Revenue 144,272,961 68,453,829 607,114 213,333,904 Hotel revenue, AA&BB and other 51,546,029 18,600,767 196,258 70,343,054 Total 195,818,990 87,054,596 803,372 283,676,958
There are no external customers who individually represent more than 10% of the total income from ordinary business activities for each reporting period.
37
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 8 - CASH AND CASH EQUIVALENTS
The composition of cash and cash equivalents on the balance sheet is as follows:
Item 12-31-2018 12-31-2017 ThCh$ ThCh$ Cash 13,477,760 12,293,880 Balance in Banks 13,386,867 15,104,259 Term deposits 30,512,867 1,845,996 Other short term investments 27,032,350 1,100,230 Total 84,409,844 30,344,365
Cash included cash, cash equivalents, time deposits, and other short-term investments with an original maturity of 90 days or less.
Time deposits and mutual funds mature in less than 90 days from the acquisition date and accrue interest.
The composition by cash currency and cash equivalent balance is as follows:
Currency 12-31-2018 12-31-2017 ThCh$ ThCh$ Pesos (CLP) 72,936,115 15,525,259 Dollar (USD) 10,389,922 14,459,951 Argentinean Pesos (ARS) 1,077,549 293,617 Euro (EUR) 6,258 17,361 Colombian peso (COL) - 48,177 Total 84,409,844 30,344,365
At December 31, 2018, Enjoy S.A. and Subsidiaries had a cash and cash equivalent restriction of ThCh$ 29,655,577, being this mainly the Time Deposit taken as collateral for the issuance of Performance bonds.
As of December 31, 2018, are detailed changes in liabilities arising from financing activities of Enjoy S.A. and Subsidiaries, including changes representing cash flows and changes not representing cash flows. Liabilities arising from financing activities are those for which cash flows were, or will be, classified in the statement of cash flows as cash flows from financing activities.
Changes that do not represent cash flows Balance at Cash flows from financing activities Balance at Income by Exchange Liabilities from financing activities 12/31/2017 indexation Interest accrued Others (*) 12/31/2018 difference Obtained Paid Total unit ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Bank loans 26,176,100 70,663,411 (73,728,410) (3,064,999) - 185,619 3,001,581 (143,405) 26,154,896 Other financial institutions - 51,353,319 (21,518,591) 29,834,728 - 696,697 1,134,666 (387,483) 31,278,608 Waranty papers ------506,490 - 506,490 Obligations with the national public 92,669,914 82,067,746 (97,235,059) (15,167,313) - 977,954 3,852,740 255,863 82,589,158 Obligations with the international public 179,162,616 - (77,290,509) (77,290,509) 13,168,950 - 18,998,880 (601,985) 133,437,952 Finance leases 28,352,138 - (5,132,341) (5,132,341) - 751,589 955,619 - 24,927,005 Promissory notes 18,969,988 36,029,332 (20,000,000) 16,029,332 - - 2,718,736 (187,703) 37,530,353 Loans from related companies 3,564,590 80,000 (1,029,666) (949,666) (489,663) - (997,398) 1,127,863 Total 348,895,346 240,193,808 (295,934,576) (55,740,768) 12,679,287 2,611,859 31,168,712 (2,062,111) 337,552,325
(*) Obligations with the domestic and international public and bank loans include the placement costs of the respective bonds and credits, which are subsequently amortized in the Statement of Income by Function through the effective rate method.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 9 - OTHER CURRENT AND NON-CURRENT NON-FINANCIAL ASSETS a) The breakdown of other current non-financial assets is as follows:
12-31-2018 12-31-2017 Item ThCh$ ThCh$ Prepaid expenses (i) 1,131,070 2,150,738 Other non-financial assets 588.968 439.533 Total 1,720,038 2,590,271
(i) Mainly includes contractual rights for insurances, Performance Bonds and anticipated leasing. b) The breakdown of other non-current non-financial assets is as follows:
12-31-2018 12-31-2017 Item ThCh$ ThCh$ Prepaid expenses 234.516 295.490 Total 234.516 295.490
NOTE 10 - TRADE AND OTHER CURRENT AND NON-CURRENT RECEIVABLES a) The composition of trade and other current receivables is as follows:
12-31-2018 12-31-2017 Current Current Item Allowance for Allowance for Gross Value bad debt Net Value Gross Value bad debt Net Value ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Trade accounts receivable, undocumented (i) 11,731,636 (659,682) 11,071,954 12,984,639 (617,196) 12,367,443 Notes receivable, documented 37,772,367 (10,263,898) 27,508,469 33,182,515 (9,267,031) 23,915,484 General accounts receivable (ii) 5,349,200 - 5,349,200 3,203,730 - 3,203,730 Total 54,853,203 (10,923,580) 43,929,623 49,370,884 (9,884,227) 39,486,657
(i) Includes invoices and accounts receivable from Transbank (corresponds to the collection for the acceptance of bank debit and credit cards at points of sale). (ii) Includes VAT Fiscal credit of ThCh$ 3,839,662 as of December 31, 2018 and ThCh$ 1,599,655 as of December 31, 2017. b) Breakdown of Trade and other non-current receivables:
12-31-2018 12-31-2017 Non-Current Non-Current Item Allowance for Allowance for Gross Value bad debt Net Value Gross Value bad debt Net Value ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Notes receivable, documented 1,105,969 - 1,105,969 5,467 - 5,467 Total 1,105,969 - 1,105,969 5,467 - 5,467
39
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) The composition of trade receivables with uncollected, outstanding, and unimpaired balances, according to their issue date, is as follows:
Balances at 31 December 2018 are as follows:
from 0 to 30 from 31 to 60 from 61 to 90 from 91 to for more than Item days days days 120 days 120 days 12-31-2018 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Trade accounts receivable, undocumented 8,311,226 1,016,068 443,471 115,363 1,185,826 11,071,954 Trade accounts receivable, documented 14,699,415 2,393,257 1,368,298 881,958 8,165,541 27,508,469 General accounts receivable 5,044,782 304,418 - - - 5,349,200 Total 28,055,423 3,713,743 1,811,769 997,321 9,351,367 43,929,623
Balances at 31 December 2017, are as follows:
from 0 to 30 from 31 to 60 from 61 to 90 from 91 to for more than Item days days days 120 days 120 days 12-31-2017 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Trade accounts receivable, undocumented 8,997,291 1,114,855 351,180 117,688 1,786,429 12,367,443 Trade accounts receivable, documented 13,061,423 3,162,307 805,354 339,997 6,546,403 23,915,484 General accounts receivable 2,880,611 323,119 - - - 3,203,730 Total 24,939,325 4,600,281 1,156,534 457,685 8,332,832 39,486,657
d) Breakdown of trade non-current receivables, which have unpaid and uncollected balances that are not impaired in accordance with their age (maturity date of the document), is as follows:
Balance at December 31, 2018 are as follows:
from 2 to 4 Item years 12-31-2018 ThCh$ ThCh$ Trade accounts receivable, documented 1,105,969 1,105,969 Total 1,105,969 1,105,969
Balance at December 31, 2017 are as follows:
from 2 to 4 Item years 12-31-2017 ThCh$ ThCh$ Trade accounts receivable, documented 5,467 5,467 Total 5,467 5,467
40
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 e) The movement of the allowance for doubtful accounts, is as follows:
12-31-2018 12-31-2017 Transactions THCh$ ThCh$ Initial balance (9,884,227) (10,183,507) Increase (decrease) due to changes in accounting policies (i) (454,394) - Initial balance restated (10,338,621) (10,183,507) Other increases (decreases) due to variation in Foreign currency (839,091) 801,439 Reversal (impairment) of the reporting period (3,450,326) (4,973,480) Write-offs for the period 3,704,458 4,471,321 Closing balance (10,923,580) (9,884,227)
(i) See note 6 ii.
41
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 11- BALANCES AND TRANSACTIONS WITH RELATED ENTITIES
Accounts receivables and payables at 31 December 2018 and 2017, respectively, are broken down in the following charts: a) Accounts receivable from related entities, current
Country of Currency Nature of the Taxpayer ID Name of related Party 12-31-2018 12-31-2017 Origin Type relationship THCh$ ThCh$ Foreigner Cela S.A. Argentina ARS Joint Venture 636,418 1,249,058 Foreigner Casino Grad D.D. Croacia HRK Affiliate - 798,149 Total 636,418 2,047,207 b) Accounts payable to related entities, current:
Country of Currency Nature of the Taxpayer ID Name of related Party 12-31-2018 12-31-2017 Origin Type relationship THCh$ THCh$ Various Key executives (1) Chile CLP Executives - 1,002,175 Foreigner Cela S.A. Argentina ARS Joint Venture 1,127,863 1,617,526 Foreigner Baluma Holding S.A. EEUU USD Common shareholder - 944,889 Total 1,127,863 3,564,590
Current accounts payable correspond to commercial operations under market conditions, agreed in Chilean pesos, some accrue interest and have a readjustment clause.
1. As of December 31, 2017, it includes the provision corresponding to performance bonuses associated with the executive team's remuneration scheme based on compliance with a series of predefined indicators and objectives, the settlement of which occurs in the month of March of each year. As of December 31, 2018, these indicators were not met.
Balances receivable from and payable to related entities correspond to normal operations with respect to their object and conditions, some accrue interest and do not have an associated payment amortization table, except for those contracted in current financing accounts. Transactions with related companies are for immediate payment or at 30 days.
These transactions make up the provisions of Title XVI of Law No. 18.046 on Corporations.
42
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) Transactions
At 31 December 2018 and 2017, the main transactions with related parties were as follows:
12-31-2018 12-31-2017
Effect on Effect on Taxpayer ID Nature of the income income Name of related party Description of the transaction Country Currency related party relationship (debit) credit (debit) credit
ThCh$ ThCh$ ThCh$ ThCh$
99,598,660-4 Casino de Colchagua S.A. Affiliate Sale of management services Chile Pesos 4,850 4,076 375,855 220,945 99,598,660-4 Casino de Colchagua S.A. Affiliate Collection of management services Chile Pesos 47,535 - 349,180 - 99,598,660-4 Casino de Colchagua S.A. Affiliate Merchant interest Chile Pesos 11,686 (11,686) - - 99,598,660-4 Casino de Colchagua S.A. Affiliate Loans obtained Chile Pesos 80,000 - 560,000 - 99,598,660-4 Casino de Colchagua S.A. Affiliate Merchant interest Chile Pesos 59,356 (59,356) 99,598,660-4 Casino de Colchagua S.A. Affiliate Transfer to assets for disposal classified as held for sale Chile Pesos 42,685 - 69,093 - 99,598,660-4 Casino de Colchagua S.A. Affiliate Transfer to liabilities for disposal classified as held for sale Chile Pesos 91,686 - 1,924,656 - 99,598,660-4 Casino de Colchagua S.A. Affiliate Payments to suppliers Chile Pesos - - 494 - 96,956,110-7 Hotel Santa Cruz Plaza S.A. Affiliate Transfer to assets for disposal classified as held for sale Chile Pesos - - 637,139 - Foreign Baluma Holding S.A. Common Shareholder Transfer of balance (write-offs) EEUU USD 944,889 - - - Valuation of obligation for PUT 55% shares Baluma S.A. (exchange Foreign Baluma Holding S.A. Common Shareholder EEUU USD - - 9,330,127 - difference) Foreign Baluma Holding S.A. Common Shareholder Purchase 55% share of Baluma S.A. (Enjoy Punta del Este). EEUU USD - - 116,396,339 - Foreign Baluma Holding S.A. Common Shareholder Initial balances Baluma S.A. (exchange difference) EEUU USD - - 84,107 84,107 Foreign Casino Grad D.D. Affiliate Exchange difference Croacia Kunas - - 60,609 60,609 Foreign Casino Grad D.D. Affiliate Impairment (i) Croacia Kunas 798,149 (798,149) - - Various Ejecutivos claves Key executives Increase during the period Chile Pesos - - 1,002,175 (1,002,175) Various Ejecutivos claves Key executives Payment of the period Chile Pesos 1,002,175 - 746,645 - Foreign Cela S.A. Joint venture Sale of services and others Argentina ARG$ 182,783 182,783 1,241,488 1,241,488 Foreign Cela S.A. Joint venture Collection of trade receivables Argentina ARG$ 243,194 - 826,707 - Foreign Cela S.A. Joint venture Exchange difference Argentina ARG$ 11,725 11,725 267,187 267,187 Foreign Cela S.A. Joint venture Loans obtained Argentina ARG$ - - 1,282,914 - Foreign Cela S.A. Joint venture Purchase of services and others Argentina ARG$ 19,020 (19,020) 3,453 (3,453) Foreign Cela S.A. Joint venture Payments to suppliers Argentina ARG$ - - 18,619 - Foreign Cela S.A. Joint venture Accrued interest Argentina ARG$ 55,271 (55,271) - - Foreign Cela S.A. Joint venture Payment of loans obtained Argentina ARG$ - - 1,364,808 - 76,569,690-9 Inmobiliaria Bicentenario S.A. Common Shareholder Purchase of services and others (leases) Chile Pesos 218,984 (184,020) 106,754 (89,709) 76,569,690-9 Inmobiliaria Bicentenario S.A. Common Shareholder Payments to suppliers Chile Pesos 218,984 - 106,754 - 77,780,560-6 Bofill Mir & Alvarez Jana Director Purchase of services and others Chile Pesos - - 453,907 (187,561) 77,780,560-6 Bofill Mir & Alvarez Jana Director Payments to suppliers Chile Pesos - - 441,833 - 78,518,080-1 Inversiones Carmel SPA. Chairman of board Purchase of services and others Chile Pesos 343,689 (343,689) - - 78,518,080-1 Inversiones Carmel SPA. Chairman of board Payments to suppliers Chile Pesos 107,748 - - -
(i) See note 28 letter e).
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
IAS 24 provides that it will disclose that transactions between related parties have been carried out in equal conditions to the transactions with mutual independence between the parties, only if such terms can be substantiated.
Charges and payments have been made to the accounts receivable from related parties, due to sales turnover of materials, equipment,and services.
Sales and services have a short-term maturity. d) Compensation to key management executives and administrators
The company is managed by a Board composed of 9 members, who remain for a period of 3 years and may be reappointed.
For these purposes, the company has defined key executives as the ones who define macro policies and guidelines for the company and that directly affect business results, including frontline Executives, General Managers, and Directors. e) Directors Committee
In accordance with Article 50-bis of Law No. 18,046, Enjoy S.A. has a committee of 3 members who have the faculties referred to in that Article. f) Salaries and other benefits
Board members and other key executives of Enjoy S.A. have earned the salaries described below, as the Directors wages, listed in the following exercises:
12-31-2018 12-31-2017 Item ThCh$ ThCh$ Wages 1,048,598 1,527,079 Board fees 239,704 453,115
44
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 12 - INVENTORIES
At 31 December 2018 and 31 December 2017, this item consists of the following:
12-31-2018 12-31-2017 Item ThCH$ ThCH$ Perishables 549,215 751,474 Non-perishables 237,255 279,444 Beverages 863,217 925,599 Gaming articles 583,346 497,757 Gift shop articles 78,965 119,317 Consumables and supplies 1,298,652 1,476,160 Advertisement material 134,219 135,496 Other inventories 217,486 354,875 Provision for obsolescence (246,291) (363,820) Total 3,716,064 4,176,302
12-31-2018 12-31-2017 ThCH$ ThCH$ Costs of inventory recognized as expenses during the (19,953,188) (21,708,155) year
The company periodically assesses the net realizable value of its inventories.
Assets included in inventories are valued at the lowest value between their acquisition costs and net realizable value.
The company has no inventories pledged as collateral to the closing date of each reported year.
The company has no inventory on consignment at the close of each reported year.
Inventories of the company have a turnover under a year.
The amount of inventory write-offs as of December 31, 2018 and 2017 are (ThCh$ 194,969) and ThCh$ 44,696, reversal and impairment of inventories, respectively. These write-offs are recognized in the Statement of Income by Function in the item Cost of sales.
The company is monitoring monthly if there is evidence of impairment of inventories and recording such against results when there is evidence.
45
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 13 - CURRENT TAX RECEIVABLE AND PAYABLE a) Current tax assets
Breakdown of current tax assets net to 31 December 2018 and 2017 is as follows:
12-31-2018 12-31-2017 ThCh$ ThCh$ Monthly provisional payments 1,913,721 1,052,145 Provisional payment for profits absorbed (i) 6,966,484 3,608,000 Other renfundable taxes (ii) 5,820,919 2,602,476 Total 14,701,124 7,262,621
(i) Certain Chilean companies that requested taxes to be recovered for provisional payment of absorbed profits are in the process of being reviewed by the Chilean Internal Revenue Service, which is in the process of validating the first category tax credits and the tax losses that gave rise to them. (ii) Includes training credit, donations and other taxes to be recovered from Enjoy S.A. and its Subsidiaries. b) Current tax liability
Breakdown of current tax liabilities nets, to 31 December 2018 and 2017 is as follows:
12-31-2018 12-31-2017 ThCh$ ThCh$ Income taxes payable 1,706,025 2,066,954 Single tax liability (35%) 102,268 770,988 Total 1,808,293 2,837,942
NOTE 14 - OTHER NON-CURRENT FINANCIAL ASSETS
The breakdown of other non-current financial assets to 31 December 2018 and 2017 is as follows:
12-31-2018 12-31-2017 Institution Instruments ThCh$ ThCh$ Almendral S.A. (i) Shares 2,759 3,465 Pucobre S.A. (i) Shares 10,342 7,258 Total 13,101 10,723
(i) These instruments are valued at the end of each year reporting at market value if there is any market for them.
46
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 15 - INTEREST IN SUBSIDIARIES a) Summary of financial information of significant subsidiaries
The summary of financial information of the subsidiaries included in consolidation to 31 December 2018 is as follows:
Current Non-current Current Non-current Income (loss) Country of Functional Revenue Expenses Company Percentage Assets assets Liabilities liabilities acquisition currency ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Enjoy Gestión Ltda. Chile CLP 99.98% 171,530,284 186,052,911 282,075,820 80,180,643 197,272,909 (200,904,954) (3,632,045) Inversiones Enjoy S.p.A. Chile CLP 100.00% 74,225,785 238,931,571 302,508,773 34,046,100 80,552,049 (115,674,094) (35,122,045) Inversiones Inmobiliarias Enjoy S.p.A. Chile CLP 100.00% 65,930,921 129,541,810 22,423,269 89,325,297 21,428,407 (16,017,842) 5,410,565 Total 311,686,990 554,526,292 607,007,862 203,552,040 299,253,365 (332,596,890) (33,343,525)
The summary of financial information of the subsidiaries included in consolidation to 31 December 2017 is as follows:
Current Non-current Current Non-current Income (loss) Country of Functional Revenue Expenses Company Percentage Assets assets Liabilities liabilities acquisition currency ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Enjoy Gestión Ltda. Chile CLP 99.98% 232,306,263 3,310,728 306,224,159 - 196,936,097 (197,007,934) (71,837) Inversiones Enjoy S.p.A. Chile CLP 100.00% 61,745,408 213,543,440 259,489,701 32,729,702 89,322,215 (83,774,693) 5,547,522 Inversiones Inmobiliarias Enjoy S.p.A. Chile CLP 100.00% 39,679,681 152,329,836 16,851,828 93,624,666 24,501,270 (16,545,545) 7,955,725 Total 333,731,352 369,184,004 582,565,688 126,354,368 310,759,582 (297,328,172) 13,431,410
NOTE 16 - INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD AND JOINT VENTURES a) Summarized relevant information for investments in associates
Information at 31 December 2018:
Country of Functional Percentage of Current Assets Non-current Current Non-current Revenue Expenses Income / Loss Company acquisition currency interest assets Liabilities liabilities (net) ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Cela S.A. Argentina ARS 53.00% 3,808,426 17,924,126 4,097,974 6,218,464 18,443,170 (17,468,859) 974,311 Total 3,808,426 17,924,126 4,097,974 6,218,464 18,443,170 (17,468,859) 974,311
Information at 31 December 2017:
Country of Functional Percentage of Current Assets Non-current Current Non-current Revenue Expenses Income / Loss Company acquisition currency interest assets Liabilities liabilities (net) ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Cela S.A. Argentina ARS 53.00% 8,444,321 8,005,766 5,741,417 3,434,755 22,900,662 (20,860,532) 2,040,130 Casino Grad d.d.(i) Croacia HRK 46.54% 138,737 - 399 2,301,926 - (29,710) (29,710) Total 8,583,058 8,005,766 5,741,816 5,736,681 22,900,662 (20,890,242) 2,010,420
(i) On December 31, 2018, the investment in the Croatian company Casino Grad has started its settlement and closing process. For this reason, an impairment of the value of this investment has been applied.
47
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) Investments in associates and jointly controlled companies
Accounting movements for the year ended December 31, 2018 and December 31, 2017 are as follows:
The detail as of December 31, 2018, is as follows:
Share of profit Translation Other Country of Functional Percentaje of Balance at Balance at Main Activity (loss) differences increases Company acquisition currency interest 01-01-2018 of associates (decreases) 12-31-2018 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Casino Grad d.d.(i) Casino de Juegos Croacia Croacia HRK 46.54% (1,007,084) - (34,151) 1,041,235 - Cela S.A. (investment) (ii) Casino de Juegos Mendoza Argentina ARS 53.00% 3,466,983 503,664 125,964 2,063,170 6,159,781 Cela S.A. (goodwill) Casino de Juegos Mendoza Argentina ARS 53.00% 1,411,540 - (626,688) - 784,852 Total 3,871,439 503,664 (534,875) 3,104,405 6,944,633
(i) As of December 31, 2018, the amounts included in Other increases (decreases) correspond to the impairment of the value of the investment. (ii) As of December 31, 2018, the amounts included in Other increases (decreases) include the adjustment of the application of IAS 29 (see note No. 39).
The detail as of December 31, 2017, is as follows:
Share of profit Translation Other Country of Functional Percentaje of Balance at Balance at Main Activity (loss) differences increases Company acquisition currency interest 01-01-2017 of associates (decreases) 12-31-2017 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Casino de Colchagua S.A. (investment) Casino de Juegos Santa Cruz Chile CLP 40.00% 2,148,846 336,622 - (2,485,468) - Casino de Colchagua S.A. (goodwill) Casino de Juegos Santa Cruz Chile CLP 30.00% 131,615 - - (131,615) - Casino Grad d.d. Casino de Juegos Croacia Croacia HRK 46.54% (933,579) (13,827) (59,678) - (1,007,084) Cela S.A. (investment) Casino de Juegos Mendoza Argentina ARS 53.00% 4,668,982 1,060,609 (1,434,733) (827,875) 3,466,983 Cela S.A. (goodwill) Casino de Juegos Mendoza Argentina ARS 53.00% 1,802,474 - (390,934) - 1,411,540 Total 7,818,338 1,383,404 (1,885,345) (3,444,958) 3,871,439
(*) As of December 31, 2017, the amounts included in Other increases (decreases) correspond to the reclassification of the investment and goodwill of the associate Casino de Colchagua S.A. to the item Assets available for sale of the Classified Statement of Financial Position, (see note No. 36).
48
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 17 - SHARES IN JOINT VENTURES
The shares Enjoy S.A. holds in joint ventures correspond to the investment Cela S.A., which is an investment that is accounted for using the equity method. Enjoy holds an indirect stake through the subsidiary Inversiones Enjoy S.p.A of 53% in Cela S.A. whose ownership and control is shared with the Camsen group of Argentina.
CELA S.A.
On 27 March 2008, Enjoy International Ltda., named Inversiones Enjoy S.p.A, direct subsidiary of Enjoy S.A., signed a framework agreement to acquire a 50% share in the companies Cela S.A. and K -Bin S.A.
On 29 December 2008, Enjoy International Ltda., Inversiones Enjoy S.p.A. transferred the shareholding of Cela S.A. and K-Bin SA to its Chilean subsidiary Inversiones Andes Entretencion Ltda.
The investment undertaken by Inversiones Andes Entretención Ltda. will be the result of a negotiation established in the aforementioned framework agreement, initially estimated at approximately US$ 32,000,000. To date, US$ 31,604,636 have been paid under this agreement, completing the pledged contributions.
Inversiones Andes Entretención Limitada, an indirect subsidiary of Enjoy S.A., increased its share from 50% to 53%. It should be noted that the described operation did not imply a change in control of that company because the statute provides two shares classes (A for the Argentinean group and B for Enjoy S.A.), and requires most actions to be enjoined by each class to control the company. Holding 6% of Class A shares by Enjoy does not imply control of class A.
According to the above, there are no contributions or outstanding accounts relating to the Framework Agreement.
Neither are there assets and liabilities that must be separately disclosed as a result of the joint venture agreement.
As of December 31, 2018 and 2017, the Argentine company Cela S.A. has distributed dividends.
49
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 18 - INTANGIBLE ASSETS OTHER THAN GOODWILL a) Composition
The breakdown of this item as of 31 December 2018 is as follows:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ Casino gaming operating permits (1) 114,947,606 (56,464,273) 58,483,333 Advisory agreement Casino Rinconada (2) 13,041,720 (7,884,237) 5,157,483 Other intangibles necessary to get operating permit(3) 16,246,450 (5,584,404) 10,662,046 Software 10,679,934 (8,941,862) 1,738,072 Permit related to water rights 291,736 - 291,736 Others 82,900 (29,934) 52,966 Total 155,290,346 (78,904,710) 76,385,636
As of 31 December 2017:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ Casino gaming operating permits (1) 107,988,700 (50,460,769) 57,527,931 Advisory agreement Casino Rinconada (2) 13,041,720 (6,974,093) 6,067,627 Other intangibles necessary to get operating permit(3) 11,182,515 (4,747,460) 6,435,055 Software 9,361,876 (7,563,052) 1,798,824 Permit related to water rights 291,736 - 291,736 Others 82,900 (2,303) 80,597 Total 141,949,447 (69,747,677) 72,201,770
(1) See note 18, letter c).
(2) As part of the acquisition and takeover of Salguero Hotels Chile S.A. (now Casino Rinconada S.A.), the subsidiary of Enjoy, Enjoy Consultora S.A., acquired a consultancy contract which gives rights to provide consultancy on the operation of the Casino during the term of the operating permit. Enjoy Consultora S.A. paid US$ 24,780,482 (ThCh$ 13,041,720) for the acquisition of this contract. This contract pays Enjoy Consultora S.A, a monthly amount equivalent to 2 % of net gaming revenue and 10% of EBITDA generated by the operating company. Note that the revenue and cost of sales are eliminated, as applicable, in the process of consolidation of the Consolidated Financial Statements of Enjoy S.A. and subsidiaries.
(3) This item includes expenditures related to costs necessary to obtain the operating permit, such as improvements in Ruinas de Huanchaca in the city of Antofagasta, road improvements, and roadwork for the community in the communes where the operation permit is set. These disbursements are made only once, either at the time of receiving the municipal grant or renewal thereof and/or when the operating permit for casino games under Law No. 19,995 is obtained. (modified by law N° 20.856). As of December 31, 2018, it also includes interest expenses and insurance premiums associated with performance bonds for new gambling casino operating permits by the indirect Subsidiary Companies Casino de la Bahía, Casino del Lago, Casino del Mar and Casino de Puerto Varas, located in the cities of Coquimbo, Pucón, Viña del Mar and Puerto Varas, respectively. These performance bonds are included in the requirements to apply for these permits to operate gambling casinos.
50
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
The breakdown of other intangibles necessary to obtain the operating permit for each of the periods under review is as follows:
At 31 December 2018:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ Disbursements necessary to obtain operating permits: Land and road infrastructure Antofagasta 2,892,721 (1,868,693) 1,024,028 Ruins Museum Of Huanchaca 2,062,791 (1,338,358) 724,433 Works and premises of Viña del Mar restaurant 457,150 (457,150) - Land and road infrastructure Coquimbo 144,046 (144,046) - Road infrastructure Rinconada Los Andes 5,625,807 (1,776,157) 3,849,650 Disbursements for new operating permits (*) 5,063,935 - 5,063,935 16,246,450 (5,584,404) 10,662,046
(*) Includes the interest accrued and/or paid for the Performance bonds required for compliance with the economic and technical offer of the new licenses awarded for the casinos in Coquimbo, Viña del Mar, Pucón and Puerto Varas. Furthermore, it considers the insurance premium paid that some performance bonds include as a requirement for their issuance.
As of 31 of December, 2017:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ Disbursements necessary to obtain operating permits: Land and road infrastructure Antofagasta 2,892,721 (1,682,579) 1,210,142 Ruins Museum Of Huanchaca 2,062,791 (1,191,016) 871,775 Works and premises of Viña del Mar restaurant 457,150 (457,150) - Land and road infrastructure Coquimbo 144,046 (144,046) - Road infrastructure Rinconada Los Andes 5,625,807 (1,272,669) 4,353,138 Total 11,182,515 (4,747,460) 6,435,055 b) Detail of movements
Movement of intangible assets at 31 December 2018 are as follows:
Operating permit Consultancy Other intangibles Software, Net Water rights, gaming casino, net Agreement necessary to get easement and Others Total Item Rinconada Casino operating permit (i) mining protests
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Opening balance at 1 January, 2018 57,527,931 6,067,627 6,435,055 1,798,824 291,736 80,597 72,201,770 Additions - - 5,063,935 668,195 - - 5,732,130 Other increases (decreases) due to variations in Foreign currency 5,432,524 - - 129,398 - - 5,561,922 Amortization expenses (4,477,122) (910,144) (836,944) (861,857) - (27,631) (7,113,698) Transfers (to) from non-currents assets - - - 5,859 - - 5,859 Other increases (decreases) - - - (2,347) - - (2,347) Total as of December 31, 2018 58,483,333 5,157,483 10,662,046 1,738,072 291,736 52,966 76,385,636
(i) In the column Other intangibles necessary to obtain the operating permit, are included expenses associated with the issuance of performance bonds for new operating permits for gambling casinos by the indirect Subsidiaries; Casino de la Bahía, Casino del Lago, Casino del Mar and Casino de Puerto Varas, located in the cities of Coquimbo, Pucón, Viña del Mar and Puerto Varas, respectively. These performance bonds are included in the requirements to apply for these permits to operate gambling casinos. Movement of intangible assets at 31 December 2017 are as follows:
51
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Operating permit Consultancy Other intangibles Software, Net Water rights, gaming casino, net Agreement necessary to get easement and Others Total Item Rinconada Casino operating permit (ii) mining protests
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Opening balance at 1 January, 2017 66,335,058 6,977,771 2,463,683 2,810,661 291,736 - 78,878,909 Additions - - - 95,566 - 82,900 178,466 Other increases (decreases) due to variations in Foreign currency (3,923,035) - - (132,903) - - (4,055,938) Amortization expenses (4,884,092) (910,144) (383,916) (1,019,369) - (2,303) (7,199,824) Transfers (to) from non-currents assets - - 4,357,941 52,156 - 4,410,097 Other increases (decreases) - - (2,653) (7,287) - - (9,940) Total as of December 31, 2017 57,527,931 6,067,627 6,435,055 1,798,824 291,736 80,597 72,201,770
(ii) The column Other intangibles required to obtain the operating license includes the implementation of the donation on November 13, 2017 by the subsidiary Casino Rinconada S.A. to the Chilean Department of Public Works (MOP for its Spanish acronym), of the road junction that connects the route Santiago-Colina-Los Andes to the casino located in Rinconada district. Said work was included in the respective concession contract of the casino located in said district.
The software licenses are obtained through non-renewable contracts for which the Company has determined that they have a useful life between 3 and 5 years. They are amortized on a straight-line basis over their estimated useful lives; the amortization of each year is recognized in the Statement of Income by Function, under the item Cost of sales. In accordance with IAS 36, assets that are recoverable are tested for impairment whenever there is an indication that the asset may be impaired. It even specifies that the recoverable amount of an intangible asset with an indefinite useful life should be measured annually regardless of whether there is any indication that its value might have been impaired. The main intangible assets of the Company and its Subsidiaries are of finite useful life, such as, for example, permits to operate gambling casinos. In the case of the only intangible asset with indefinite useful life, such as water rights and easements, therefore, the reason the Company uses to classify these assets as having indefinite useful life is that they are considered to maintain their value over time and therefore cannot be amortized. Assets with definite and indefinite useful lives are tested for impairment on an annual basis.
The charge to income (loss) for amortization of intangible assets as at December 31, 2018 and 2017 is of ThCh$ 7,113,698 and ThCh$ 7,199,824, respectively.
As of December 31, 2018 and December 31, 2017, there are no relevant intangible assets granted as collateral.
As of December 31, 2018 and December 31, 2017, there are no significant commitments for the acquisition of intangible assets. There are no fully amortized relevant intangible assets in use at December 31, 2018 and 2017.
52
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) Casino operation permits c.1) Municipal License and other Foreign Licenses
This item includes the following concept associated with the municipal concession of gambling casinos and others, both in Chile and abroad:
As of 31 of December, 2018:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ License Pucón 1,700,000 (1,700,000) - License Coquimbo 4,422,000 (4,422,000) - License Uruguay 11,811,090 (2,755,689) 9,055,401 Total 17,933,090 (8,877,689) 9,055,401
As of 31 of December, 2017:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ License Pucón 1,700,000 (1,700,000) - License Coquimbo 4,422,000 (4,422,000) - License Uruguay 10,450,750 (2,001,592) 8,449,158 Total 16,572,750 (8,123,592) 8,449,158
The licenses apply to single payments made to the Municipality of Coquimbo and Pucon for the casino operating license and are amortized on a straight-line basis over the term of the license. The amortization for each period is recognized in the income statement, in costs of sales. In the case of the license of Uruguay, this payment is the amount of the additional fee paid to the Uruguayan Government for the renewal of the license agreement, effective from 1 January 2016 of the gaming casino Conrad, located in Punta del Este. c.2) Casino Operating License acquired in a business combination
As of 31 of December, 2018:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ Operaciones Integrales Coquimbo Ltda. (i) 1,396,332 (1,396,332) - Enjoy Gestión Ltda. (i) 3,102,223 (3,102,223) - Slots S.A. (i) 8,783,487 (8,783,487) - Campos del Norte S.A. (ii) 4,212,749 (4,212,749) - Casino Rinconada S.A. (iii) 30,910,429 (18,750,544) 12,159,885 Baluma S.A. (iv) 48,609,296 (11,341,249) 37,268,047 Total 97,014,516 (47,586,584) 49,427,932
53
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
As of 31 of December, 2017:
Gross Asset Accumulated Net Asset Item Amortization ThCh$ ThCh$ ThCh$ Operaciones Integrales Coquimbo Ltda. (i) 1,396,332 (1,396,332) - Enjoy Gestión Ltda. (i) 3,102,223 (3,102,223) - Slots S.A. (i) 8,783,487 (8,783,487) - Campos del Norte S.A. (ii) 4,212,749 (4,212,749) - Casino Rinconada S.A. (iii) 30,910,429 (16,604,681) 14,305,748 Baluma S.A. (iv) 43,010,730 (8,237,705) 34,773,025 Total 91,415,950 (42,337,177) 49,078,773
(i) Corresponds to the fair value assigned to the value of the concessions determined as a result of the share exchange operation carried out in 2006 for the investments acquired. As a result of this operation, Enjoy S.A. became the direct and indirect owner of 90% of Slots S.A., of 99.98% of Enjoy Chile Ltda. (at current Enjoy Gestión Ltda.), of 89.4% of Inversiones del Norte S.A. (at current Operaciones Integrales Coquimbo Ltda.)
(ii) Corresponds to the fair value assigned to the license value of casino games located in the city of Coquimbo determined from the acquisition of 37.5% stake in the company Campos del Norte S.A., direct and indirect subsidiary of Enjoy S.A., dated 19 August 2008.
(iii) Corresponds to the fair value assigned to the value of the casino operating permit located in the commune of Rinconada de los Andes determined from the acquisition of 70% stake of the company Salguero Hotels Chile S.A., now Casino Rinconada S.A., indirect subsidiary of Enjoy S.A., dated 26 March 2010.
(iv) Corresponds to the fair value assigned to the value of the operating permit for the casino located in Punta del Este, determined as a result of the acquisition of 45% shares and takeover of the company Baluma S.A. indirect subsidiary of Enjoy S.A. dated on 31 May 2013.
54
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 19 - GOODWILL
As of December 31, 2018 and December 31, 2017, this item is composed as follows: a) Composition
Original 12-31-2018 12-31-2017 Investor Issuer / UGE Currency ThCh$ ThCh$ Inversiones del Norte Ltda. (hoy Operaciones Integrales Coquimbo Campos del Norte Ltda.) S.A. CLP 2,787,743 2,787,743 Inversiones y Enjoy Gestión Ltda. Servicios Guadalquivir S.A. CLP 522,984 522,984 Total 3,310,727 3,310,727 b) Transaction
Changes in goodwill are as follows:
As of 31 December 2018:
Campos del Inversiones y Total Norte S.A. Servicios Guadalquivir S.A. ThCh$ ThCh$ ThCh$ Initial balance at 1 January 2018 2,787,743 522,984 3,310,727 Other increases (decreases) - - - Total 2,787,743 522,984 3,310,727
As of 31 December 2017:
Campos del Inversiones y Total Norte S.A. Servicios Guadalquivir S.A. ThCh$ ThCh$ ThCh$ Initial balance 1 January 2017 2,787,743 522,984 3,310,727 Other increases (decreases) - - - Total al 31 de diciembre de 2017 2,787,743 522,984 3,310,727
The investment surplus allocated to Cash Generated Units (CGUs) is tested for impairment annually, or more frequently if there are indicators that any of the CGUs may be impaired. The recoverable value of each CGU is determined as the higher between its usage value or the fair value, less costs of sales. In order to determine the fair value, the Company has used cash flow projections for the Gambling Casino of Coquimbo, based on the assumptions and projections reviewed by Senior Management for the same period. The goodwill acquired through business combinations has been analyzed for purposes of determining possible impairment based on their respective cash-generating units (CGU) described in Note 2g). The Company performed the annual impairment test as of December 31, 2018 and 2017.
The recoverable amount has been determined on the basis of projected cash flows depending on the duration of each gambling casino license, which have been approved by the Company's Management and are periodically updated based on real income growth. The discount rate applied corresponds to the WACC rate of 9.95% for Chile, 9.78% for Uruguay and 15.46% for Argentina, which are adjusted for each projected year in order to reflect the effects of the value of money over time.
55
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) Key assumptions used in the calculations:
Setting of the impairment tests was performed considering the following assumptions as sensitive:
• Projected Revenue • Discount rates • Market assumptions • Residual value
Projected Revenue The projection made by the company regarding future income growth corresponds to growth rates that are consistent with the historical background of each business unit.
Discount rate The management used the WACC rate to discount the future cash flows of the company a rate that represents the market value of the specific business and industry risk, taking into account the value of money over time and individual asset risks under analysis.
Market assumptions Certain market assumptions have been taken into account for the projection of future cash flows, such as projected inflation, business growth, industry growth, and of the country.
Residual Value The residual value is calculated considering a probability of renewal of municipal licenses of 50%. Some assumptions such as value of the real estate asset, cash flow perpetuity of the casino and others were used.
Because of this analysis, the management has concluded that no impairment of these intangibles has been identified, as the recoverable value of the goodwill is higher than the book value recorded in the financial statements at 31 December 2018 and 2017.
56
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 20 - PROPERTY, PLANT AND EQUIPMENT a) Composition
The detail for each of the periods under review is as follows:
At 31 December 2018:
Gross Asset Accumulated Net Asset Depreciation ThCh$ ThCh$ ThCh$ Land 98,521,023 - 98,521,023 Construction in progress 8,394,138 - 8,394,138 Buildings 306,988,192 (98,423,027) 208,565,165 Machinery and Equipment 34,045,832 (28,984,187) 5,061,645 Slot Machines 69,089,748 (49,541,879) 19,547,869 Transportation Vehicles 477,396 (293,185) 184,211 Other property, plant and equipment 28,286,290 (24,883,112) 3,403,178 Total 545,802,619 (202,125,390) 343,677,229
At 31 December 2017:
Gross Asset Accumulated Net Asset Depreciation ThCh$ ThCh$ ThCh$ Land 89,340,391 - 89,340,391 Construction in progress 3,749,654 - 3,749,654 Buildings 287,619,222 (85,066,614) 202,552,608 Machinery and Equipment 30,849,858 (25,532,430) 5,317,428 Slot Machines 54,560,737 (46,308,755) 8,251,982 Transportation Vehicles 440,017 (313,573) 126,444 Other property, plant and equipment 26,193,997 (22,199,189) 3,994,808 Total 492,753,876 (179,420,561) 313,333,315
As required by IAS 36 and the analyses performed by the Company at December 31, 2018 and 2017, Enjoy S.A. and Subsidiaries have no evidence of impairment of Property, plant and equipment.
Next is presented, by comprehensive project, the detail of Property, plant and equipment.
At 31 December 2018:
Net fixed asset
Item Antofagasta Coquimbo Rinconada Viña Pucón Chiloe Uruguay Corporativo Puerto Varas Total
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Land 4,704,711 3,401,428 1,251,881 - 8,729,537 1,764,484 78,668,982 - - 98,521,023 Construction in progress 24,529 370,641 989,550 433,889 555,515 6,949 5,751,850 60,283 200,932 8,394,138 Buildings 22,981,206 27,195,633 39,146,461 149,440 8,560,374 13,491,565 95,879,763 1,160,723 - 208,565,165 Machinery and Equipment 706,884 763,081 1,035,196 339,604 274,853 404,546 1,165,563 371,918 - 5,061,645 Slot Machines 2,409,429 3,760,221 3,436,101 5,551,592 1,937,977 420,911 2,031,638 - - 19,547,869 Transportation Vehicles - 2,609 201 - - 4,106 1,197 184,310 - - 184,211 Other property, plant and equipment 337,581 483,837 530,333 267,610 286,275 304,291 1,077,332 115,919 - 3,403,178 Total 31,164,340 35,977,450 46,389,723 6,742,135 20,340,425 16,393,943 184,759,438 1,708,843 200,932 343,677,229
57
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
At 31 December 2017:
Net fixed asset
Item Antofagasta Coquimbo Rinconada Viña Pucón Chiloe Uruguay Colombia Corporativo Total
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Land 4,704,711 3,401,428 1,251,881 - 8,609,590 1,764,485 69,608,296 - - 89,340,391 Construction in progress - 75,538 - - - 15,000 3,659,116 - - 3,749,654 Buildings 23,736,554 28,159,484 40,588,887 125,332 9,073,320 13,984,018 85,819,275 - 1,065,738 202,552,608 Machinery and Equipment 523,774 674,781 983,228 348,960 396,700 525,636 1,507,850 124,634 231,865 5,317,428 Slot Machines 1,046,759 543,029 2,039,857 943,250 712,804 578,814 1,753,135 634,334 - 8,251,982 Transportation Vehicles - 4,566 1,560 - 243 2,752 117,323 - - 126,444 Other property, plant and equipment 256,666 461,184 463,149 229,340 333,800 343,409 1,225,975 509,530 171,755 3,994,808 Total 30,268,464 33,320,010 45,328,562 1,646,882 19,126,457 17,214,114 163,690,970 1,268,498 1,469,358 313,333,315 b) Detail of movements
Detail of movements of PPE is as follows for the year ended 31 December 2018:
Other Machinery property, plant Construction Buildings Slot Tranportation Land and and equipment Total in progress Machines Vehicles Equipment
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Opening balance at 1 January 2018 89,340,391 3,749,654 202,552,608 5,317,428 8,251,982 126,444 3,994,808 313,333,315 Additions 0 6,383,596 572,686 2,100,384 14,684,790 166,812 1,754,885 25,663,153 Sales - - - - - (86,354) - (86,354) Withdrawals - - - (245) - - (1,391) (1,636) Tranfers to (from) non-current assets - (2,215,407) 2,145,979 214,069 (1,056) - (149,444) (5,859) Depreciation expense - - (7,876,923) (2,438,017) (2,974,969) (37,962) (1,845,731) (15,173,602) Other increase (decrease) due to variations in Foreign currency (i) 9,060,685 476,295 11,170,815 196,272 221,456 15,271 159,581 21,300,375 Other increases (decreases) 119,947 - - (328,246) (634,334) - (509,530) (1,352,163) Closing balance at 31 December 2018 98,521,023 8,394,138 208,565,165 5,061,645 19,547,869 184,211 3,403,178 343,677,229
Detail of movements of PPE is as follows for the year ended 31 December 2017:
Other Construction Machinery and Transportatio property, Land Buildings Slot Machines Total in progress Equipment n Vehicles plant and equipment ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Opening balance at 1 January 2017 95,519,832 3,047,554 220,940,198 7,412,664 8,759,040 179,776 5,228,419 341,087,483 Additions 42,171 1,361,599 1,359,678 1,712,405 3,807,492 1,411 1,193,065 9,477,821 Withdrawals (42,171) - - (13,578) (19,157) - (3,371) (78,277) Transfers to (from) non-current assets (103,428) (435,444) (3,891,103) (643,077) 643,470 - 19,485 (4,410,097) Depreciation expense - - (7,976,100) (2,946,861) (4,346,243) (42,046) (2,240,569) (17,551,819) Other increase (decrease) due to variations in Foreign currency (i) (6,195,959) (224,055) (7,880,065) (204,125) (159,778) (12,697) (183,752) (14,860,431) Other increases (decreases) 119,946 - - - (432,842) - (18,469) (331,365) Closing balance at 31 December 2017 89,340,391 3,749,654 202,552,608 5,317,428 8,251,982 126,444 3,994,808 313,333,315
(i) The origin of the amount in Other increases (decreases) due to variation in foreign currency corresponds to the adjustment for the conversion of assets of property, plant and equipment of the foreign subsidiary Enjoy Punta del Este, which has the United States dollar (USD) as its functional currency, and the foreign subsidiary Enjoy Caribe Sucursal Colombia, which has the Colombian peso (COL) as its functional currency. This effect is mainly due to converting the figures reported by those subsidiaries from their functional currencies to the Chilean peso. This effect is recorded in Equity in Other reserves (See Note 27).
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) Financial leasing
The real estate companies and operating subsidiaries of Enjoy S.A., have leases with option to acquire (last installment) land, buildings, and slot machines with certain financial institutions. Details of property, plant and equipment under financial leasing for accounting periods is as follows:
12-31-2018 12-31-2017
ThCh$ ThCh$ Land, net 6,409,677 6,409,677 Buildings, net 21,543,195 22,400,674 Slot Machines, net - 16,386 Total 27,952,872 28,826,737
The breakdown of property, plant, and equipment under financial leasing for each of the infrastructures is as follows:
Antofagasta Infrastructure:
12-31-2018 12-31-2017 Company that has the financial ThCh$ ThCh$ obligation of leasing Land, net 2,420,699 2,420,699 Inm. Proyecto Integral Antofagasta S.A. Antofagasta Buildings, net 21,543,195 22,400,674 Inm. Proyecto Integral Antofagasta S.A. Infrastructure Total 23,963,894 24,821,373
Viña del Mar Infrastructure:
12-31-2018 12-31-2017 Company that has the financial ThCh$ ThCh$ obligation of leasing
Viña del Mar Slot Machines, net - 16,386 Slots S.A. Infrastructure Total - 16,386
Pucón Infrastructure:
12-31-2018 12-31-2017 Company that has the financial ThCh$ ThCh$ obligation of leasing
Pucón Land, net 3,988,978 3,988,978 Enjoy S.A. Infrastructure Total 3,988,978 3,988,978
The present value of and other information about the future payments for financial leasing are as follows:
At 31 December 2018:
Gross value Interest Present value
ThCh$ ThCh$ ThCh$ From 0 to 1 year 5,105,708 (656,552) 4,449,156 From 1 to 5 years 20,024,543 (1,510,032) 18,514,511 Over 5 years 2,185,668 (222,330) 1,963,338 Total 27,315,919 (2,388,914) 24,927,005
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
At 31 December 2017:
Gross value Interest Present value ThCh$ ThCh$ ThCh$ From 0 to 1 year 5,322,631 (1,345,302) 3,977,329 from 1 to 5 years 21,279,340 (3,484,759) 17,794,581 Over 5 years 7,037,954 (457,726) 6,580,228 Total 33,639,925 (5,287,787) 28,352,138
No payments have been made for contingent fees during accounting periods.
The restrictions imposed by financial leasing agreements are set out in Note 31.3 Contingencies and engagements, point ii). d) Operating leases
Among the most significant operating leases are mainly the leases of slot machines corresponding to the casinos of Antofagasta, Coquimbo, Viña del Mar, Rinconada, Pucón, Chiloé and Uruguay.
There are no restrictions imposed by operating lease agreements.
The detail of operating lease payments is as follows:
Mainly related to software leases for slot machines and leases of land and property.
The breakdown of future payments under operating leases is as follows:
12-31-2018 12-31-2017 ThCh$ ThCh$ From 0 to 1 year 1,181,070 4,795,881 From 1 to 5 years 2,069,342 11,563,171 Over 5 years 445,748 9,941,946 Total 3,696,160 26,300,998
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 e) Construction in progress
The breakdown of the construction in progress is as follows:
Item 12-31-2018 12-31-2017 ThCh$ ThCh$ Master Plan Project Enjoy Punta del Este 3,017,668 2,632,041 Swimming Pool - Parking Lot Conrad Project 2,734,181 1,027,075 Bar Scenario - Terraces Rinconada Project 989,550 - Municipal Works Projects 1,253,595 - Others 399,144 90,538 Total 8,394,138 3,749,654 f) Others
Enjoy S.A. and Subsidiaries do not own any property, plant or equipment that is out of service or significant assets in use, valued at Ch$ 1.
The fixed assets of the company have no significant differences between the book value and market value. In addition, the land and property of the company were revalued at market value only once, upon the adoption of IFRS at the transition date (2008). Similarly, as a result of the acquisition of the companies Casino Rinconada S.A. (2010) and Conrad Punta del Este (2013), the real estate of those companies were revalued at market value when applying the IFRS 3R “Business combinations”.
As of December 31, 2018 and 2017 there exist no capitalized financing costs.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 21 - DEFERRED TAXES AND INCOME TAXES
21.1 Deferred taxes
Deferred Taxes Assets and Liabilities
Deferred taxes correspond to the tax amount on profits that Enjoy S.A. and Subsidiaries estimates to pay (liabilities) or estimates to recover (assets) in future periods, relating to temporary differences between the tax or taxation base and the carrying amount of certain assets and liabilities.
The main asset for deferred tax corresponds to tax losses of subsidiaries for future recovery. The main liabilities for deferred tax payable in future periods corresponds to the temporary differences arising from property, plant, and equipment acquired in business combinations.
Deferred tax assets and liabilities recognized at 31 December 2018 and 2017 include the following:
Assets Liabilities Items 12-31-2018 12-31-2017 12-31-2018 12-31-2017 ThCh$ ThCh$ ThCh$ ThCh$ Impairment for bad debts 2,658,637 2,409,806 - - Unearned income 653,309 149,406 - - Staff vacation 348,307 341,196 - - Leasing Creditors 6,767,898 7,643,895 - - Tax loss carryforwards 38,807,811 32,676,455 - - Provisions 1,808,365 2,049,876 - - Property, plant and equipment - - 14,729,636 12,318,818 Property, plant and equipment from business combination - - 17,713,991 15,547,391 Property, plant and equipment in leasing - - 7,547,275 7,783,219 Intangibles - - 12,420,145 11,407,335 Other assets 52,030 - - - Bank obligations and others - - 2,073,839 2,249,791 Reclassification (6,480,469) (5,336,210) (6,480,469) (5,336,210) Total 44,615,888 39,934,424 48,004,417 43,970,344
Deferred tax es have not been recognized for the temporary differences between the tax and financial value generated by investments in related companies. Therefore, no deferred tax is also recognized for the translation adjustments and ajustments of associates recored directly in equity, as disclosed in the comprehensive income statement.
The recovery of the balances of deferred tax assets requires obtaining sufficient tax income in the future. Enjoy S.A. and Subsidiaries estimate that future earnings projections will cover the recovery of these assets. The rate applied for the calculation of temporary differences is 27% for Chile, 35% for Argentina and 25% for Uruguay.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
21.2. Income Taxes
Benefit (expenses) for income and deferred tax to 31 December 2018 and 2017 is as follows:
Accumulated
12-31-2018 12-31-2017 Current Tax ThCh$ ThCh$ Current tax expense (2,886,935) (4,691,339) Single tax expense (35%) - (155,704) Total current tax (2,886,935) (4,847,043)
12-31-2018 12-31-2017 Deferred tax ThCh$ ThCh$ Deferred expense (income) for taxes on creation and reversal of temporary differences (1,023,983) 921,763 Benefits from tax losses 6,131,356 7,494,801 Total deferred tax 5,107,373 8,416,564
Income / (expense) due to income tax 2,220,438 3,569,521
Accumulated 12-31-2018 12-31-2017 Current tax expense ThCh$ ThCh$ Foreign current tax (1,202,492) (1,383,969) National current tax (1,684,443) (3,463,075) Total current tax (2,886,935) (4,847,044)
Deferred Foreign tax 294,728 1,975,617 National deferred tax 4,812,645 6,440,948 Total deferred tax 5,107,373 8,416,565
Income / (expense) due to income tax 2,220,438 3,569,521
21.3 Effective Rate Settlement
The reconciliation of income tax expense using the statutory rate to the effective rate at 31 December 2018 and 2017 is as follows:
Accumulated
12-31-2018 12-31-2017
ThCh$ ThCh$ Income (expense) due to tax, using legal rate 6,955,122 (134,720) Tax-effected basis on rates of other jurisdictions (963,388) (1,356,200) Tax effect of expenses, not deductible from taxes (5,049,319) 4,156,598 Other increases (decreases) on legal tax 1,278,023 903,843 Total adjustments to the tax expense using legal rate (4,734,684) 3,704,241 Tax related income (expense) using effective rate 2,220,438 3,569,521
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Reconciliation of the legal tax rate with the effective tax rate is as follows:
12-31-2018 12-31-2017 % % Legal tax rate -27.0% -25.5% Effect of legal tax rate of other jurisdictions 3.7% -256.7% Tax effect of expenses, not deductible from taxes 19.6% 786.8% Other increases (decreases) on legal tax rate -4.9% 171.1% Total adjustment to legal tax rate 18.4% 701.1% Effective legal tax rate -8.6% 675.6%
The tax rate used for the reconciliations of 2018 and 2017 (as of December 31, 2017 this amounted to 25.5% in Chile) corresponds to the corporate tax rate (27% in Chile, 25% in Uruguay and 35% in Argentina) that the entities have to pay over their taxable income according to current tax legislation in each of the countries in which they operate.
Tax losses
The Company maintains deferred assets from tax losses from its Casino and Hotel businesses, both in Chile as abroad. Such losses are found in countries where they do not have a maturity date and their reversal is estimated as projected future tax revenues increase.
On September 29, 2014, Law No. 20.780 was published in the Official Gazette, introducing various changes in the tax system in force in Chile (Tax Reform Law). The Tax Reform Law considered a gradual increase in the rate of first category tax for business years 2014, 2015, 2016, 2017 and 2018 and onwards, increasing the rate of 20% to 21%, 22.5%, 24%, 25.5% and 27%, respectively. On February 8, 2016, Law No. 20.899 was published in the Official Gazette, introducing changes in the current tax system and modifying in some aspects Law No. 20.780.
64
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 22 - OTHER CURRENT AND NON-CURRENT FINANCIAL LIABILITIES a) Composition
At 31 December 2018 and 2017, the company presents other current and non-current financial liabilities according to the following breakdown:
12-31-2018 12-31-2017 Current Non-Current Current Non-Current ThCh$ ThCh$ ThCh$ ThCh$ Loans that accrued interest 26,154,896 - 24,005,711 2,170,389 Other financial institutions 10,440,631 20,837,977 - - Waranty papers 506,490 - - - Obligations of financial leasing 4,449,156 20,477,849 3,977,329 24,374,809 Commercial paper 19,498,542 18,031,811 18,969,988 - Public bonds 2,606,217 213,420,893 19,289,559 252,542,971 Total 63,655,932 272,768,530 66,242,587 279,088,169
On June 17, 2010, Enjoy S.A. obtained the registration of 2 lines of bonds, one for 10 years and the other for 30 years, for an amount of up to UF 3,000,000 each, registered in the Securities Registry of the Superintendence of Securities and Insurance of Chile (at current the Commission for the Financial Market), under No. 637 and 638, respectively. In February and April of this year, the total prepayment of the last remaining series of these lines was made, Series C and E respectively for a total of UF 3,000,000 approximately.
On July 30, 2014, the Series F bonds issued by Enjoy for a fixed amount of UF 1,658,500 and maturing on June 14, 2021, were registered in the securities registry of the Superintendence of Securities and Insurance of Chile (at current Commission for the Financial Market) under No. 784. On the same day, the Company made its total placement, and the obligation to pay the placement price of the bond was offset by the acquisition of 12 promissory notes subscribed by Inmobiliaria Rinconada S.A. with Asesorías y Valores Euroamérica in June 2013. In December of this year, the total prepayment of the outstanding Series F bonds was made, for a total of approximately UF 583,062
On 14 October 2014, the subsidiary Inmobiliaria Integral Project Antofagasta S.A. entered into a real estate financial leasing contract with Banco de Chile and Banco de Crédito e Inversiones. The subsidiary terminated the leasing contract with Banco de Chile and Banco de Crédito e Inversiones, by early exercise of the option to purchase provided for in the contract for 680,498 Indexed Units. After this, the company sold the property to such banks at a price of 1,328,000 Indexed Units. Together with these contracts, it signed a new leasing contract for UF 1,328,000, maturing in November 2023 and an associated rate of TAB UF of 90 days, plus an applicable margin of 2.5%. This funding will be repaid in 108 equal installments from November 2014.
On October 17, 2014, a financing agreement was signed through a syndicated loan signed with Banco Bilbao Vizcaya Argentaria, Chile; Banco Santander-Chile; Banco del Estado de Chile; Scotiabank Chile and Tanner Servicios Financieros S.A., in the amount of ThCh$ 44,200,000 million, payable in 13 successive quarterly installments as from October 2015. The interest rate contracted was TAB 90 plus a spread ranging between 2.5% and 3.5% according to the company's financial indicators. This credit was paid in advance on May 30, 2017.
On May 16, 2017, the Company issued and placed in the international market, under Rule 144A and Regulation S of the Securities and Exchange Commission and the Securities Act of 1933 (Securities Act of 1993) of the United States of America, long-term guaranteed bonds for US$ 300 million dollars, due in May of the year 2022, at an initial interest rate of 10.5% per annum. The funds obtained from the aforementioned bond issue were
65
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 used to: (i) finance the value paid of US$ 196.8 million for the purchase of 55% of the shares of the subsidiary Baluma S.A .; (ii) finance the value of Indexed Unit 837,282.89 for the exercise of the purchase option of series B shares issued by Inversiones Inmobiliarias Enjoy S.p.A., owned by Fondo de Inversión Privado BP Acciones Preferentes; (iii) prepay a local syndicated loan of ThCh$ 20,573,972, contracted with domestic banks (agent bank is BBVA Chile); and (iv) the balance to refinance other liabilities, lines of credit and negotiable instruments. On February 26, 2018, this bond was partially redeemed for an amount of USD 105 million of its unpaid balance, with a prepayment cost of 10.5% of the unpaid balance.
On November 17, 2017, the Company placed 2 series of negotiable instruments for a total of ThCh$ 20,000,000, series 7B and 8B, with an annual rate of 7.2% and 7.8%, respectively. The first maturity was for ThCh$ 5,000,000 on April 27, 2018, and the next maturity was October 31, 2018.
On March 26, 2018, the Company obtained a bank loan with Banco BTG Pactual Chile and BTG Pactual Deuda Privada Fondo de Inversión for UF 928,000, in equal parts at an interest rate of UF+4.6% per annum. The loan will be repaid in 3 equal installments of UF 309,333, maturing on September 26, 2019, March 26 and September 26, 2020.
On March 28, 2018, the Company obtained a bank loan with Banco Internacional for ThCh$ 7,000,000 at an annual rate of 5.99%. The credit has a monthly amortization with maturity on February 28, 2020.
On April 13, 2018, the Company registered the series of bills of exchange 4C for ThCh$ 20,000,000 with an annual rate of 7.92% and a maturity date of May 8, 2020. On June 18, 2018, the Company placed 2 series of negotiable instruments for ThCh$ 10,000,000 each, the 18A and 5C with an annual rate of 6.12%, maturing on June 5 and May 29, 2020, respectively.
On July 3, 2018, the Company refinanced its existing debt with Banco BTG Pactual Chile, BTG Pactual Deuda Privada Fondo de Inversión and the debt with Banco Internacional, where the promissory notes were assigned and a new syndicated loan was signed in which the debt was absorbed in its entirety by BTG Deuda Privada Fondo de Inversión and Banco Santander, the latter acting as Agent Bank. This loan of approximately USD 50 million will be repaid in 3 equal installments, maturing on September 26, 2019, March 26, 2020 and September 26, 2020.
On July 17, 2018, the companies Casino de la Bahía S.A., Casino del Mar S.A., Casino del Lago S.A. and Casino de Puerto Varas S.A., which were awarded the gambling casino operating permits for the districts of Coquimbo, Viña del Mar, Pucón and Puerto Varas, respectively, took Performance Bonds Slips on behalf of the Superintendence of Gambling Casinos for a total amount of Indexed Unit 4,845,330, in order to guarantee the technical and economic offer presented. The performance bonds have a term of two years, earn an annual interest rate of UF + 2.25%, payable quarterly as of October 15, 2018.
On November 21, 2018, Enjoy S.A. placed in the local market, a corporate bond in the amount of UF 3,000,000, at an annual coupon rate of 3.9% (placement rate 3.99%). The placement corresponds to all Series I Bonds issued with a charge to the 10 years term Bonds Line registered in the Securities Registry of the Financial Market Commission under No. 915 dated October 30, 2018.
The Series I bonds mature on October 1, 2028, will bear interest of 3.9% per annum on the outstanding principal expressed in Indexed Unit and its payment will be in a single coupon at maturity.
b) Capitalized borrowing costs: As of December 31, 2018, ThCh$ 1,117,167 has been capitalized for the interest generated by the performance bonds, forming part of the cost of the intangible asset for the right obtained by the licenses of the casinos located in the districts of Coquimbo, Viña del Mar, Pucón and Puerto Varas.
66
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) Maturity profile and credit conditions at each accounting close
As of December 31, 2018:
Country Tax payer ID of Description of Up to three From three to From one to From three to Total Non- Timing of Name of Creditor Total Current Over five years Total Debt Total Nominal Interest rate Creditor Entity Creditor Currency months twelve months three years five years Current payment of Entity principal ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Effective nominal Bank loans: Banco Corpbanca 97,023,000-9 Chile CLP 1,635 - 1,635 - - - - 1,635 - 6.72% 6.72% At maturity Banco BCI 97,006,000-6 Chile CLP 3,044,650 - 3,044,650 - - - - 3,044,650 3,044,650 5.64% 5.64% At maturity Banco BBVA 97,004,000-5 Chile CLP 5,022,951 - 5,022,951 - - - - 5,022,951 5,022,951 5.90% 5.90% At maturity Banco Santander 97,036,000-K Chile CLP 6,813,703 - 6,813,703 - - - - 6,813,703 6,813,703 5.49% 5.49% At maturity Banco Santander 97,036,000-K Uruguay USD 1,493,827 - 1,493,827 - - - - 1,493,827 1,493,827 4.75% 4.75% At maturity Banco Consorcio 99,500,410-0 Chile CLP 3,989,732 - 3,989,732 - - - - 3,989,732 3,989,732 5.76% 5.76% At maturity Banco ITAU 76,745,030-K Uruguay USD 2,784,398 - 2,784,398 - - - - 2,784,398 2,784,398 5.25% 5.25% At maturity Banco Estado 97,030,000-7 Chile CLP 4,000 3,000,000 3,004,000 - - - 3,004,000 3,004,000 4.80% 4.80% At maturity Total 23,154,896 3,000,000 26,154,896 - - - - 26,154,896 26,153,261
Other financial institutions: BTG Fondo de Inversión 96,966,250-7 Chile CLF 20,161 10,420,470 10,440,631 20,837,977 - - 20,837,977 31,278,608 31,577,335 5.62% 4.60% Quarterly Total 20,161 10,420,470 10,440,631 20,837,977 - - 20,837,977 31,278,608 31,577,335
Waranty papers (i): Banco Security 97,053,000-2 Chile CLF 78,329 - 78,329 - - - - 78,329 78,329 1.13% 1.13% Quarterly Banco Internacional 97,011,000-3 Chile CLF 126,148 - 126,148 - - - - 126,148 126,148 1.69% 1.69% Quarterly Banco BTG 96,966,250-7 Chile CLF 302,013 - 302,013 - - - - 302,013 302,013 2.25% 2.25% Quarterly Total 506,490 - 506,490 - - - - 506,490 506,490
Financial leasing: Banco de Chile 97,004,000-5 Chile CLF 527,559 1,546,580 2,074,139 4,276,097 4,313,866 - 8,589,963 10,664,102 10,733,742 2.64% 2.64% Monthly Banco BCI 97,006,000-6 Chile CLF 527,559 1,546,580 2,074,139 4,276,097 4,313,866 - 8,589,963 10,664,102 10,733,742 2.64% 2.64% Monthly Banco Security 97,053,000-2 Chile CLF 75,983 224,895 300,878 637,673 696,912 1,963,338 3,297,923 3,598,801 3,598,801 4.45% 4.45% Monthly Total 1,131,101 3,318,055 4,449,156 9,189,867 9,324,644 1,963,338 20,477,849 24,927,005 25,066,285
Commercial paper: Chilean publicly-traded commercial paper: CLP - 19,498,542 19,498,542 18,031,811 - - 18,031,811 37,530,353 40,000,000 7.02% 7.02% At maturity Total - 19,498,542 19,498,542 18,031,811 - - 18,031,811 37,530,353 40,000,000
Obligations with the public, Bond: Serie I Chile CLF - 798,567 798,567 - - 81,790,591 81,790,591 82,589,158 82,697,370 3.97% 3.90% At maturity Serie 144 A USA USD - 1,807,650 1,807,650 - 131,630,302 - 131,630,302 133,437,952 135,480,150 12.11% 10.50% At maturity Total - 2,606,217 2,606,217 - 131,630,302 81,790,591 213,420,893 216,027,110 218,177,520
Total 24,812,648 38,843,284 63,655,932 48,059,655 140,954,946 83,753,929 272,768,530 336,424,462 341,480,891
(i) Corresponds to the interest accrued on the performance bonds disclosed in note 31.4.
67
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
As of December 31, 2017:
Country Tax payer ID of Description of Up to three From three to From one to From three to Total Non- Timing of Name of Creditor Total Current Over five years Total Debt Total Nominal Interest rate Creditor Entity Creditor Currency months twelve months three years five years Current payment of Entity principal ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Effective nominal Bank loans: Banco de Chile 97,004,000-5 Chile CLP 1,099 - 1,099 - - - - 1,099 1,099 7.80% 7.80% At maturity Banco Corpbanca 97,023,000-9 Chile CLP 1,065 - 1,065 - - - - 1,065 1,065 7.80% 7.80% At maturity Banco BCI 97,006,000-6 Chile CLP 1,752 - 1,752 - - - - 1,752 1,752 7.56% 7.56% At maturity Banco BCI 97,006,000-6 Chile CLP 2,005,548 - 2,005,548 - - - - 2,005,548 2,005,548 6.24% 6.24% Monthly Banco Security 97,053,000-2 Chile CLP 378,861 375,000 753,861 - - - - 753,861 753,861 7.13% 7.13% Quarterly Banco Security 97,053,000-2 Chile CLP 1,518,120 - 1,518,120 - - - - 1,518,120 1,518,120 6.96% 6.96% At maturity Banco Santander 97,036,000-K Chile CLP 9,891,471 - 9,891,471 - - - - 9,891,471 9,891,471 6.43% 6.43% At maturity Banco Internacional 97,011,000-3 Chile CLP 508,942 1,559,324 2,068,266 1,276,214 - - 1,276,214 3,344,480 3,344,480 7.50% 7.50% Monthly Banco Internacional 97,011,000-3 Chile CLP 375,332 846,210 1,221,542 894,175 - - 894,175 2,115,717 2,115,717 7.20% 7.20% Monthly Banco Consorcio 99,500,410-0 Chile CLP 4,094,163 - 4,094,163 - - - - 4,094,163 4,094,163 6.36% 6.36% At maturity Banco ITAU 76,745,030-K Uruguay USD - 2,448,824 2,448,824 - - - - 2,448,824 2,448,824 4.50% 4.50% At maturity Total 18,776,353 5,229,358 24,005,711 2,170,389 - - 2,170,389 26,176,100 26,176,100 Financial leasing: Banco de Chile 97,004,000-5 Chile CLF 486,471 1,362,138 1,848,609 3,914,628 4,362,136 2,162,645 10,439,409 12,288,018 12,370,687 5.56% 5.56% Monthly Banco BCI 97,006,000-6 Chile CLF 486,471 1,362,138 1,848,609 3,914,628 4,362,136 2,162,645 10,439,409 12,288,018 12,370,687 5.56% 5.56% Monthly Banco Security 97,053,000-2 Chile CLF 70,976 209,135 280,111 592,982 648,071 2,254,938 3,495,991 3,776,102 3,776,102 4.45% 4.45% Monthly Total 1,043,918 2,933,411 3,977,329 8,422,238 9,372,343 6,580,228 24,374,809 28,352,138 28,517,476
Commercial paper: Chilean publicly-traded commercial paper: CLP - 18,969,988 18,969,988 - - - - 18,969,988 20,000,000 7.65% 7.65% At maturity Total - 18,969,988 18,969,988 - - - - 18,969,988 20,000,000
Obligations with the public, Bond: Serie C (i) Chile CLF 64,903 7,559,121 7,624,024 15,118,243 15,118,243 11,338,682 41,575,168 49,199,192 49,767,974 4.72% 4.75% Biyearly Serie E (ii) Chile CLF 29,071 3,774,775 3,803,846 7,549,550 7,549,550 5,662,163 20,761,263 24,565,109 24,883,987 4.30% 4.25% Biyearly Serie F (iv) Chile CLF 1,401,760 4,039,351 5,441,111 10,771,602 2,692,900 - 13,464,502 18,905,613 19,886,343 6.80% 6.25% Quarterly Serie 144 A (iii) USA USD - 2,420,578 2,420,578 - 176,742,038 - 176,742,038 179,162,616 184,425,000 11.93% 10.50% At maturity Total 1,495,734 17,793,825 19,289,559 33,439,395 202,102,731 17,000,845 252,542,971 271,832,530 278,963,304
Total 21,316,005 44,926,582 66,242,587 44,032,022 211,475,074 23,581,073 279,088,169 345,330,756 353,656,880
(i) On February 14, 2018, the Company made the total prepayment of the national corporate C series bond (BENJO-C), which had an outstanding balance of UF 1,857,142.80. The payment was made at 110% of its par value.
(ii) On April 17, 2018, the Company made the total prepayment of the national corporate bond series E (BENJO-E), which presented an outstanding balance of UF 928,571.43. The payment was made at 110% of its par value.
(iii) On February 26, 2018, the partial redemption of the international bond was made for USD 105,000,000 of its unpaid balance, with a prepayment cost of 10.5% on the outstanding balance paid.
(iv) On December 10, 2018, the Company made the total prepayment of the national corporate bond series F (BENJO-F), which presented an unpaid balance of UF 583,062, with a prepayment cost of 0.5% of this unpaid balance. 68
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 23 - FINANCIAL INSTRUMENTS
As of December 31, 2018 there are no derivative financial instruments.
Classification of financial assets and liabilities by nature and category
The detail of the financial assets by nature and category, as of December 31, 2018, is the following:
Financial assets at Financial assets fair value through measured at Total profit or loss amortized cost
ThCh$ ThCh$ ThCh$ Cash and cash equivalents 27,032,350 30,512,867 57,545,217 Trade debtors and other accounts receivable, current - 43,929,623 43,929,623 Accounts receivable from related parties, current - 636,418 636,418 Total current 27,032,350 75,078,908 102,111,258 Other financial assets, non-current 13,101 - 13,101 Trade debtors and other accounts receivable, non-current - 1,105,969 1,105,969 Total non-current 13,101 1,105,969 1,119,070 Total 27,045,451 76,184,877 103,230,328
The detail of the financial assets by nature and category, as of December 31, 2017, is the following:
Financial assets at Financial assets fair value through measured at Total profit or loss amortized cost
ThCh$ ThCh$ ThCh$ Cash and cash equivalents 1,100,230 1,845,996 2,946,226 Trade debtors and other accounts receivable, current - 39,486,657 39,486,657 Accounts receivable from related parties, current - 2,047,207 2,047,207 Total current 1,100,230 43,379,860 44,480,090 Other financial assets, non-current 10,723 - 10,723 Trade debtors and other accounts receivable, non-current - 5,467 5,467 Total non-current 10,723 5,467 16,190 Total 1,110,953 43,385,327 44,496,280
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
The detail of the financial liabilities by nature and category, as of December 31, 2018, is the following:
12-31-2018 Financial liabilities measured at Total amortized cost ThCh$ ThCh$ Other current financial liabilities 63,655,932 63,655,932 Trade payables and other payables 47,506,469 47,506,469 Accounts payable to related parties, current 1,127,863 1,127,863 Total current 112,290,264 112,290,264 Other financial liailities, non-current 272,768,530 272,768,530 Total non-current 272,768,530 272,768,530 Total 385,058,794 385,058,794
The detail of the financial liabilities by nature and category, as of December 31, 2017, is the following:
12-31-2017
Financial liabilities measured at Total amortized cost
ThCh$ ThCh$ Other current financial liabilities 66,242,587 66,242,587 Trade payables and other payables 33,479,046 33,479,046 Accounts payable to related parties, current 3,564,590 3,564,590 Total current 103,286,223 103,286,223 Other financial liailities, non-current 279,088,169 279,088,169 Total non-current 279,088,169 382,374,392 Total 382,374,392 485,660,615
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Because the carrying amount of financial assets is a fair approximation of their fair value, no additional disclosures are required in accordance with IFRS 7. With respect to financial liabilities, a comparison at December 31, 2018 between the carrying amount and the fair value of financial liabilities, other than those whose carrying amount is a reasonable approximation to fair value, is presented below:
Accounting Comparison of carrying value vs. fair value Carrying Fair Value treatment for its as of December 31, 2018 amount ThCh$ ThCh$ valuation
Financial liabilities: Commercial paper: Amortized cost 37,530,353 38,560,535 Obligations with the public, national Bond Amortized cost 82,589,158 87,513,492 Obligations with the public, international Amortized cost 133,437,952 153,294,345
Fair value measurement
In consideration of the hierarchy of inputs used in valuation techniques, assets and liabilities measured at fair value can be classified at the following levels:
Level 1: Quoted price (not adjusted) in an active market for identical assets and liabilities. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices), and, Level 3: Inputs for the asset or liability that are not based on observable market data. (not observable inputs)
When measuring fair value, the Company takes into account the characteristics of the asset or liability. To determine fair value, the Company uses valuation techniques that are appropriate to the circumstances and for which there are sufficient data to perform the measurement, maximizing the use of input data, observable relevant data and minimizing the use of unobservable input data.
Fair value hierarchies
The following table presents the financial assets and liabilities that are measured at fair value at December 31, 2018 and 2017:
Financial instruments Level 1 Level 2 Level 3 measured at fair value ThCH$ ThCH$ ThCH$ Assets: Mutual funds 7,002,340 - - Agreements 20,030,010 - - Total 27,032,350 - -
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Financial instruments Level 1 Level 2 Level 3 measured at fair value ThCh$ ThCh$ ThCh$ Liabilities: Other current financial - 63,655,932 - liabilities Other non-current financial - 272,768,530 - liabilities Total - 336,424,462 -
Financial instruments measured at fair value qualify at level 3.
The Group has no financial assets or liabilities measured at fair value that are categorized as Level 3.
NOTE 24 - TRADE AND OTHER PAYABLES
At 31 December 2018 and 2017, the breakdown of this item is the following:
12-31-2018 12-31-2017 Items ThCh$ ThCh$ Debts due to pruchases or services received 27,973,218 12,023,348 Accounts payable related to gaming prizes 3,076,741 3,212,895 Withholdings to employees and pension obligations 8,052,132 6,412,257 Other accounts payable 16,456,510 18,242,803 Total 55,558,601 39,891,303
Obligations for purchases and services received, relate mainly to acquisitions to domestic and foreign suppliers, These obligations do not bear interest and are usually paid 30 days from the acquisition and/or provision of services.
NOTE 25 - CURRENT AND NON-CURRENT PROVISIONS FOR EMPLOYEE BENEFITS
At 31 December 2018 and 2017, this item is broken down as follows: a) Current
12-31-2018 12-31-2017 ThCh$ ThCh$ Management bonus for executives - 799,929 Total - 799,929
This provision corresponds to performance bonus associated with the remuneration scheme of the executive team based on compliance with a predefined set of indicators and objectives, It is paid in March of each year.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) Non-Current
At 31 December 2018 and 2017, this item is broken down as follows:
12-31-2018 12-31-2017 ThCh$ ThCh$ Share-based payments 192,723 - Total 192,723 -
The Company has implemented a compensation plan for a limited group of executives granting them a right to receive a cash payment if they achieve certain objectives in Enjoy’s equity valuation (see Note 2). The fair value of the liability is determined in accordance with IFRS 2 "Share-based Payment" for cash-settled share- based payment transactions. The charge to the Statements of income by Function is recorded in the item “Cost of sales” in the Company where the executive provided the related services.
The principal assumptions used for the determination of fair value are the following:
• Volatility: 18.7% per year • Price of the underlying: $ 56.98 • Risk free rate: 4.1% • Time to maturity: 5 years • Valuation model: Binomial trees.
NOTE 26 - OTHER CURRENT AND NON-CURRENT FINANCIAL LIABILITIES
As of 31 December 2018 and 2017, this item is broken down as follows:
Current Non- Current 12-31-2018 12-31-2017 12-31-2018 12-31-2017 ThCh$ ThCh$ ThCh$ ThCh$ Income collected in advance (i) 10,029,170 8,406,296 1,096,205 - Deferred income loyalty program 819,511 820,682 - - Other non-financial liabilities 20,250 61,171 - - Total 10,868,931 9,288,149 1,096,205 -
(i) It includes deposits made by customers of Enjoy Conrad Punta del Este.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 27 - EQUITY
Changes in equity are as follows: a) SUBSCRIBED AND PAID IN CAPITAL
The Company's subscribed and paid-in capital as of December 31, 2018 amounts to ThCh$ 231,644,842 divided into 4,694,959,928 nominative shares with no par value, of the same series and grants the same rights to the Company's shareholders.
On September 20, 2016, an Extraordinary Shareholders' Meeting of Enjoy S.A. Was held in which it was agreed to increase the capital stock in Ch$ 119,444,841,662 divided into 2,357,459,928 ordinary, registered, no-par value shares of a single series for Ch$ 164,996,746,102 divided into 3,008,201,420 ordinary, registered, no- par value shares of a single series. The 650,741,492 new payment shares are issued without being subscribed or paid.
On April 12, 2017, the Extraordinary Shareholders' Meeting of the Company was held, in which the following agreements were reached, among others: i) The issuance of two series of bonds convertible into shares for up to a total amount equivalent in pesos to 3,300,000 Indexed Unit was approved, both at fixed amounts; and ii) Increase the Company's capital by Ch$ 78,938,749,260 through the issuance of 1,315,645,821 new payment shares, in order to support the convertibility of the Convertible Bonds. The option to convert bonds into shares will be available to Series C and E bondholders from the date of publication of the Financial Statements for the year ended December 31, 2018 through September 30, 2019. In the event that backup shares are not subscribed for by holders of Convertible Bonds exercising the option, they will be offered to shareholders and third parties at a minimum price of Ch$60 per share, payable in cash.
On August 16, 2017, the Extraordinary Shareholders' Meeting of the Company was held, in which the following resolutions were adopted: i) Increase the capital stock by Ch$ 106,969,068,000, through the issuance of 2,377,090,400 new nominative, ordinary shares of a single series with no par value; ii) Approve the modification of the conditions of the issue of 650,741 492 shares, issued on the occasion of the capital increase agreed at the Extraordinary Shareholders' Meeting held on September 20, 2016; iii) Modify, supplement, ratify, substitute and correct, in whole or in part, the resolutions of the Extraordinary Shareholders' Meeting of the Company held on April 12, 2017, regarding the terms, conditions and characteristics of issues of convertible bonds and their supporting shares, in the sense of modifying the amount of the issue, number of bonds and par value of each bond of the Convertible Bonds, among other resolutions, and agree that the purpose of the supporting shares is only to be used for the exercise of convertibility by the holders of Convertible Bonds.
On November 29, 2017, the Company’s Board of Directors, empowered for this purpose by the Extraordinary Shareholders' Meetings held on September 20, 2016 ("September Meeting") and August 16, 2017 ("August Meeting"), agreed to place the 650,741,492 shares that were issued against the capital increase agreed upon at the September Meeting, as well as to place 1,686,758,508 shares issued against the capital increase agreed upon at the August Meeting. Altogether a total of 2,337,500,000 shares will be placed. In accordance with Article 25 of the Law on Corporations and Article 24 and the following articles of its regulations, the shares will be offered preferably to the Company's shareholders (hereinafter, the "Preferred Option"), pro rata to the shares of the Company that are registered under its name at midnight of the fifth business day prior to the start date of the preferential subscription period (hereinafter, the "Preferred Option Period"). The Preferential Option and the beginning of the Preferred Option Period will be informed through publications in the electronic newspaper La Tercera on November 30, 2017 and December 7, 2017.
On January 9, 2018, at the Enjoy S.A.'s Board of Directors meeting held yesterday, Enjoy S.A. took note of the end of the preferential option period that the Company had begun on December 7, 2017. Thus, of the 2,337,500,000 shares that were placed, 829,730,951 shares were subscribed. In addition, with respect to the remaining 1,507,769,049 shares, i.e., those that remained unsubscribed by shareholders during the preferred
74
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 option period, the Board of Directors agreed that they be offered to Entretenciones Consolidadas S.p.A., an entity controlled by and owned by an investment fund called Advent Latin America Private Equity Fund VI Limited Partnership, managed by Advent International Corporation (Delaware, USA) at a price of Ch$ 48 per share. Entretenciones Consolidadas S.p.A. has accepted the subscription offer of 1,507,769,049 shares of Enjoy S.A. at Ch$48 per share, and consequently, has signed today the corresponding share subscription agreement. On January 10, 2018 Entretenciones Consolidadas S.p.A. paid the subscription price of 1,241,446,250 shares of Enjoy S.A. equivalent to Ch$ 59,589,420,000. The price balance corresponding to the 266,322,799 shares subscribed was paid on January 23, 2018. a.1) Reconciliation of shares
The following is a reconciliation of the number of outstanding shares at the beginning and end of the accounting periods presented:
at 31 December 2018 at 31 December 2017 Shares Suscribed and Suscribed and Issued Issued paid paid Opening balance 6,700,937,641 2,370,768,285 3,008,201,420 2,357,459,928 Increase in capital 12.04.2017 - - 1,315,645,821 - Increase in capital 16.08.2017 - - 2,377,090,400 - Subscribed and placement of shares 29.11.2017 - - - 13,308,357 Subscribed and placement of shares 09.01.2018 - 2,324,191,643 - - Closing balance 6,700,937,641 4,694,959,928 6,700,937,641 2,370,768,285
As of December 31, 2018, there are 2,005,977,713 shares pending placement, of which 1,315,645,821 are only shares to be used for the exercise of convertibility by holders of C and E bonds, which no longer exist because they are prepaid.
Capital Management Enjoy S.A. keeps an adequate capital level, so that it can access the financial banking and securities market, according to the needs or short and long-term investment requirements, in order to maximize the company’s value and financial strength. This optimizes adequate returns to Company shareholders.
Expenses for the issuance and placement of shares As of December 31, 2018 and 2017, the balance under this item corresponds to disbursements directly related to the issuance and placement of shares. The disbursed expenses associated with the opening on the stock exchange are recorded as part of equity under the caption overprice on sale of shares. The expenses of the last capital increase are recorded in shareholders' equity under other reserves due to the fact that there was no overpricing in the sale of shares in this last placement, as stated in Circular No. 1,736 of the Superintendence of Securities and Insurance of Chile (now the Financial Market Commission), dated January 13, 2005. The detail of these disbursements associated with the capital increase as of January 2018, August 2014, November 2012, November 2010 and the opening on the stock exchange on July 8, 2009, is as follows:
Jan-18 Sep-14 Nov-12 Nov-10 Jul-09 Items ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Commissions for placement and Consultancy 2,094,598 199,276 1,215,528 85,118 417,263 Subscription and registry rights - - - 7,374 4,618 Printing expenses - - - 2,435 37,053 Total 2,094,598 199,276 1,215,528 94,927 458,934
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) Other reserves
At 31 December 2018 and 2017, the item Other reserves included the following:
12-31-2018 12-31-2017 Items ThCh$ ThCh$ Foreign exchange gain/loss (b.1) 6,915,752 (4,661,051) Equity contribution (i) (9,153,906) (9,153,906) Other reserves (b.2) (25,834,385) (23,739,787) Total (28,072,539) (37,554,744)
(i) Includes ThCh$ 16,772,364 as a result of the assignment of rights received from members of the Sociedad Antonio Martínez y Cía., Indicated in Note 1, a Company under common control through its partners.
Other reserves include the adjustment for translation differences, other reserves and equity contributions. The latter ones, generated by the proportional valuation of the investments in subsidiary companies, because these operations are generated between companies under common control. b.1) Cumulative translation adjustment:
At 31 December 2018 and 2017, the item Translation Adjustment includes the following:
12-31-2018 12-31-2017 ThCh$ ThCh$ Opening balance (4,661,051) 3,895,045 Conversion adjustment of the period 11,576,803 (8,556,096) Total 6,915,752 (4,661,051)
Corresponds to the equity effects produced by variations in the exchange rate of foreign currency on the investments held directly and indirectly, through Inversiones Enjoy S.p.A. and Inversiones Andes Entretención Ltda., which has investments in Argentine pesos in the Argentine companies Cela S.A. (Joint Control Company), Yojne S.A., the investment in Kunas in the Croatian company Casino Grad d.d. (only as of December 31, 2017), the investment in U.S. dollars in the Uruguayan company Baluma S.A. and the investment in Colombian pesos in Sociedad Enjoy Caribe S.p.A., Colombia branch (only as of December 31, 2017). b.2) Other reserves (without equity contribution)
As of 31 December 2018 and 2017, the Other reserves item includes the following:
12-31-2018 12-31-2017 ThCh$ ThCh$
Opening balance (23,739,787) (20,894,386) Derivatives - 775,172 Expenses for the issuance and placement of shares (2,094,598) - Ajustment from change of interest in subsidiary (i) - (3,620,573) Total (25,834,385) (23,739,787)
(i) Arising from the change in the ownership percentage in the acquisition of the non-controlling interest of the subsidiaries Inversiones Inmobiliarias Enjoy S.p.A. (36.8%) and Baluma S.A. (55%).
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) NON-CONTROLLING INTERESTS
At December 31, 2018 and 2017 the detail of non-controlling interests is as follows:
Non-Controlling Effect on Equity Effect on Income Company interest 12-31-2018 12-31-2017 12-31-2018 12-31-2017 % ThCh$ ThCh$ ThCh$ ThCh$ Inmobiliaria Proyecto Integral Antofagasta S.A. 25.00% 3,869,267 4,674,050 695,217 537,360 Operaciones El Escorial S.A. 0.25% 20,100 18,595 2,755 7,586 Inversiones Vista Norte S.A. 25.00% 1,569,761 2,160,570 159,191 716,094 Casino Rinconada S.A. 30.00% 2,948,944 3,300,333 (351,389) (23,858) Operaciones Integrales Chacabuco S.A. 30.00% (5,192,746) (4,678,854) (513,893) (581,948) Inversiones y Servicios Guadalquivir S.A. 30.00% 711,127 667,104 44,024 37,551 Inmobiliaria Rinconada S.A. 30.00% 4,377,539 3,794,446 583,093 856,750 Inversiones Inmobiliarias Enjoy S.p.A. (2) 36.80% - - - 561,694 Baluma S.A. (1) 45.00% - - - 2,762,992 Total 8,303,992 9,936,244 618,998 4,874,221
1) Because Baluma Holdings S.A. had a PUT option on 55% of the shares of Baluma S.A. owned by it in favor of Inversiones Enjoy S.p.A., and IFRS 10, paragraph 22, defines non-controlling interest (INC) as part of equity, and IAS 32, paragraph 23, establishes that a contract containing an obligation for the entity to purchase its own equity instruments, in exchange for cash or another financial instrument, gave rise to a financial liability that was recognized for the present value of the amount to be repaid. Therefore, the aforementioned obligation was reflected in accounts payable to related companies as of December 31, 2016. In May 2017, the remaining 55% of the shares of Baluma S.A. were acquired.
2) On May 16, 2017, Enjoy S.A. acquired the remaining 36.8% interest in the direct subsidiary Inversiones Inmobiliarias Enjoy S.p.A. The value at which the call option on the Series B shares issued by Inversiones Inmobiliarias Enjoy S.p.A. was exercised was 837,282.89 Indexed Unit.
d) DIVIDENDS
As of December 31, 2018 and 2017, the Company had not distributed any dividends due to losses for the year and accumulated losses. e) RETAINED EARNINGS (ACCUMULATED LOSSES)
As of December 31, 2018 and 2017, the detail is as follows:
12-31-2018 12-31-2017 ThCh$ ThCh$ Opening balance (23,352,019) (22,129,512) Profit (Loss) for the period (25,020,549) (776,385) Ajustment IFRS 9 (See note No. 6ii) (328,062) - Ajustment IAS 29 (See note No. 39) 2,377,696 - Reversal of funds bases from previous year - (446,122) Closing balance (46,322,934) (23,352,019)
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 28 - COMPOSITION OF RELEVANT RESULTS a) Revenue
Breakdown of revenue at 31 December 2018 and 2017 is as follows:
Accumulated 12-31-2018 12-31-2017
ThCh$ ThCh$ Slot machine revenue 142,148,438 141,282,649 Gaming tables revenue 68,115,482 71,751,710 Bingo revenue 282,353 299,545 Sub-total gaming revenue 210,546,273 213,333,904 Food & Beverages revenue 30,192,064 33,401,995 Hotel revenue 22,295,313 22,832,203 Show revenue 1,544,866 1,829,942 Other ordinary revenue 10,426,716 12,278,914 Total 275,005,232 283,676,958
a.1) Income from activities
The detail of ordinary revenues at December 31, 2018 and 2017, according to the classification established by IFRS 15 "Revenues from contracts with customers", is as follows:
As of December 31, 2018:
Food & Others Gaming Hotel Show Beverages ordinary Total Recognition revenue revenue revenue revenue revenue ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ At a point in time 210,546,273 30,192,064 - - - 240,738,337 Through time - - 22,295,313 1,544,866 10,426,716 34,266,895 Total 210,546,273 30,192,064 22,295,313 1,544,866 10,426,716 275,005,232
As of December 31, 2017:
Food & Others Gaming Hotel Show Beverages ordinary Total Recognition revenue revenue revenue revenue revenue ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ At a point in time 213,333,904 33,401,995 - - - 246,735,899 Through time - - 22,832,203 1,829,942 12,278,914 36,941,059 Total 213,333,904 33,401,995 22,832,203 1,829,942 12,278,914 283,676,958
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) Costs Of Sales
The breakdown of costs of to 31 December 2018 and 2017 is as follows:
Accumulated 12-31-2018 12-31-2017
ThCh$ ThCh$ Costs of hotel operations, food & beverage and others (*) (95,499,838) (97,482,131) Staff expenses (74,508,562) (76,519,499) Expenses for basic services (13,962,596) (17,627,314) Maintenance expenses (6,145,804) (5,739,007) General expenses (1,418,086) (1,455,872) Depreciation (15,173,602) (17,551,819) Amortization (10,243,776) (7,199,824) Total (216,952,264) (223,575,466)
(*) Includes gaming tax according to Act 19,995 (modified by law 20.856), and municipal participation of the licensed casinos from the corresponding municipalities. c) Finance Costs
Breakdown of finance costs at 31 December 2018 and 2017 is as follows:
Accumulated 12-31-2018 12-31-2017 ThCh$ ThCh$ Interests on bank loans (4,136,247) (4,411,181) Financial leasing (955,619) (1,455,495) Interests for obligations to the public (22,851,620) (19,310,223) Other financial expenses (*) (17,188,275) (7,807,772) Total (45,131,761) (32,984,671)
(*) Includes, among others, expenses disbursed for prepaid commissions of the national bond series C, E and international bonds of a non-recurring nature. d) Profit/(loss) from readjustment units
The detail of Income (loss) per indexation units as of December 31, 2018 and 2017 is as follows:
Accumulated 12-31-2018 12-31-2017 ThCh$ ThCh$ Bonds readjustable in CLF (*) (977,954) (2,870,142) Leasing, readjustable in CLF (*) (751,589) (504,666) Bank loans in CLF (*) (882,316) - Other readjustable in CLF (*) 653,408 203,602 Total (1,958,451) (3,171,206)
(*) CLF (Indexed Unit).
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 e) Other gains (losses)
Breakdown of other gains (losses) at 31 December 2018 and 2017 is as follows:
Accumulated 12-31-2018 12-31-2017 ThCh$ ThCh$ Impairment of assets as held for sale (1,053,001) - Withholding of remittances of foreign (197,191) (233,437) Expenses for non-recurrent advisory (1,459,267) (1,771,721) Contribution of equity in Uruguay (869,603) (928,634) Others 342,556 (177,740) Total (3,236,506) (3,111,532) NOTE 29 - TRANSLATION DIFFERENCES
Exchange differences for the years ended at 31 December 2018 and 2017, due to stocks of assets and liabilities in foreign currencies other than the functional currency that were credited (charged) to the income statement is as follows:
Accumulated
12-31-2018 12-31-2017 ThCh$ ThCh$ Liabilities in US dollars (USD) (2,164,492) 7,339,108 Total (2,164,492) 7,339,108
As of December 31, 2018, it includes mainly the effect of the exchange difference of the Bond denominated in U.S. dollars, portion that was not matched with a net investment abroad (see Note No. 22).
NOTE 30 - EARNINGS PER SHARE
Basic earnings (loss) per share are calculated as the quotient of profit or loss attributable to shareholders by the weighted average of the number of ordinary shares outstanding during the period. The calculation of gain (loss) per share for the reporting years is presented below:
12-31-2018 12-31-2017 ThCh$ ThCh$ Earning (loss) attributable to equity instrument holders in net equity of parent company (25,020,549) (776,385) Weighted average of ordinary outstanding shares 4,643,878,793 2,370,768,285 Basic earnings per share (in pesos) (5.388) (0.327)
The company has not conducted any operation of potential diluted effect, which involves diluted earnings per share.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 31 - CONTINGENCIES AND ENGAGEMENTS
31.1 LAWSUITS
Enjoy S.A.
(i) Uribe Triviño with Enjoy S.A.
Civil Case (N° C-142-2013 Regular Trial) followed before the J.L. Castro Civil Court.
On 16 January 2013, Mrs. Norma Uribe Trivino claimed Ch$ 60,000,000 for damages caused by an alleged construction carried out in her property by the defendant, without her consent. On 8 March 2013, the responded raises a motion to vacate hearing. On 14 March, the respondent vacates the notification of pleading. On 11 February 2014, the case was filed since there were no useful actions on behalf of the applicant. Then, on April 15, 2014, a request for reopening was filed. On February 5, 2019, a request for reopening was made and the incident of abandonment of the proceedings in the case began. Subsequently, the files were reopened on February 19, and a supplemental case file was opened. On March 8, 2019, the applicant was served per substitute service of that incident. At current the parties are awaiting resolution of the abandonment of the procedure. In the opinion of our lawyers, there are well-founded legal arguments that the position of the Company is in accordance with law.
(ii) Nancy Espinoza Muñoz with Enjoy S.A.
Case followed before the First Court of Letters of Coquimbo. On March 23, 2018, the plaintiff attended the launch of the Beauty Parlor Matiz del Milagro (on the terrace of Enjoy Coquimbo), on the way to the parlor, she fell on the stairs. The plaintiff indicates that there was moral damage, consequential damage and loss of profit as a result of the accident, for which she requested payment of Ch$ 108,087,988. The lawsuit was filed on March 29, 2018. On June 26, 2018, the Court called for a reconciliation hearing after notifying the parties. On November 13, 2018, the reconciliation hearing was held, without coming to an agreement. The case is currently in its evidentiary stage and the evidence was received on March 13, 2019. According to our lawyers, it is likely that the plaintiff's request will be granted, but for a much lower amount than the one claimed.
Indirect Subsidiary Operaciones El Escorial S.A.
Alejandro Cisterna Salvo with Operaciones El Escorial S.A.
Case followed before the Civil Court of Antofagasta, on compensation for damages. Customer is retained by security for having stolen a chip belonging to a third party inside the casino gambling room until the arrival of Carabineros [Chilean police force]. The customer claims that the behavior of security personnel corresponds to a fraudulent act. The plaintiff considers that his moral damage for having being retained amounts to Ch$ 100,000,000. The lawsuit is filed on September 11, 2017. On May 31, 2018, a witness hearing is held without the appearance of the defendant. On July 9, the Court summoned the parties to pronounce sentence. The sentence was pronounced on September 28, 2018, rejecting the claim in all its parts. On December 31, 2018, the plaintiffs filed for a review in cassation with appeal in subsidy in respect of the sentence; this appeal was declared admissible on January 4, 2019, and since February 18, 2019, it is on the table and awaiting pleadings. In the opinion of our attorneys, the result of the trial should be the dismissal of the lawsuit.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Indirect subsidiary Casino Rinconada S.A.
Salazar, Carolina del Carmen with Casino Rinconada S.A.
Case filed at the First Civil Court of Los Andes. The plaintiff claims that she developed a long and acute dependence on gambling, calculating consequential and moral damages in the amount of Ch$ 107,280,000. On October 30, 2018, the case entered the court. On November 11, 2018, after notification, the subsidiary responded by filing a motion to dismiss. On January 3, 2019, a decision for sentence was issued, in order to elucidate the formal nature of the lawsuit. On January 7, 2019, the motion to dismiss that gave rise to the incident was rejected. Casino Rinconada S.A. appealed this resolution, and is awaiting the pleadings. The trial, however, continued and a reconciliation hearing was held on March 5, 2019, not reaching an agreement and consequently the judicial process continues in progress. In the opinion of our lawyers, there are well-founded legal arguments that the Company's position is in accordance with law and if convicted, it would be for a much lower amount.
Indirect Subsidiary Masterline S.A.
(i) Vargas and Others with Masterline S.A.
Case filed at the Labor Court of Valparaíso. The lawsuit, which involves six people who worked as waiters, is based on the existence of numerous fixed-term contracts for a single day. In addition, there would exist several benefits claimed by the plaintiffs as "full week", social security debts and others, all in the amount of Ch$ 139,347,936. In addition, a series of sayings are added in relation to the existing work environment and charges regarding the physical and psychological integrity of employees when involved in this work dynamic. On August 2, 2018, the case entered the Labor Court of Valparaiso. On August 20, 2018 the case was notified to the subsidiary. On September 12, 2018, the response to the complaint was filed. On September 26, 2018, the preparatory hearing was held, and the trial hearing was set for January 8, 2018, and subsequently rescheduled for April 23, 2019. According to our attorneys, the outcome of the lawsuit will depend solely on the court's interpretation of the conversion of discontinued fixed-term contracts.
(ii) Orellana and others with Masterline S.A.
The lawsuit, which involves six people who worked as waiters, is based on the existence of numerous fixed- term contracts for a single day. In addition, there would exist several benefits claimed by the plaintiffs as "full week", social security debts and others, all in the amount of Ch$ 63,771,150. On July 28, 2018, the case entered the court. The preparatory hearing was held on October 3, 2018. The next hearing is scheduled for April 16, 2019. According to our attorneys, the outcome of the lawsuit will depend solely on the court's interpretation of the conversion of discontinued fixed-term contracts.
Indirect Subsidiary Campos del Norte S.A.
(i) “Erler Mario and Campos del Norte S.A.”
The case was brought before the 3rd Coquimbo Court of First Instance regarding compensation for damages. A minor was involved in a fight and got hurt by others involved in this fight; the damages assessed by the plaintiff amount to Ch$ 318,369,318. There was breach of duty of guarantor by the casino, because the event was held in the premises of the club of the casino. On September 21, 2017 the claim was processed. On October 3, the casino is notified of the claim filed. On October 25, 2017, the case enters the evidencing period. On January 8, 2018, the court summoned the parties to hear the sentence. On June 27, 2018, Campos del Norte S.A. was sentenced to pay Ch$ 16,998,918 for consequential damages and Ch$ 160,000,000 for moral damages. On July 13, 2018, a review for cassation was filed and an appeal in subsidy against the previously
82
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 individualized sentence. On September 7, 2018, the case was transferred to the Court's reporting clerk after the documentary perception hearing and the September 5 acquittal hearing. From October to 24 December 2018, a number of supporting evidence was certified to the cause related to the case from the first instance. This case is currently in the certifying stage. In the opinion of our lawyers, there are well-founded legal arguments that the Company's position is in accordance with the law and if effectively condemned, it would be for a much lower amount.
(ii) Videla Hidalgo, Emiliano con Campos del Norte S.A.
Case filed at the 3rd Local Police Court of Coquimbo. A client claims that he fell and hit his head because of a puddle of water present in the Casino facilities. The damages requested amount to Ch$ 40,000,000 (Forty million Chilean pesos). In the opinion of our lawyers, there are well-founded legal arguments that the Company's position is in accordance with law and if convicted, it would be for a much lower amount.
Indirect subsidiary Kuden S.A.
(i) Empresa Comercial y Servicios Jorge Montecinos Jara EIRL and Kuden S.A.
The agreement with the security company that provided services to Hotel Villarrica Park Lake was terminated after Enjoy took control of the hotel's operations. The plaintiff alleges that the decision to terminate its service agreement is contrary to the agreement for the provision of services in force with the previous management, as the minimum period of 24 months stipulated in the agreement has not been reached. By virtue of the foregoing, the plaintiff claims to have been severely damaged up to Ch$ 41,295,398. The lawsuit was filed on May 15, 2017. The request was received on January 15, 2018. On March 19, 2018, the plaintiff filed dilatory objections, which were accepted by the Court on April 6, 2018. On May 9, 2018, Kuden S.A. replied asking for the rejection in all its parts with legal costs. On September 20, 2018, the claim was admitted for the evidencing stage. On March 4, 2019, all parties were notified of the resolution, and the evidencing stage started. In the opinion of our lawyers, there are well-founded legal arguments that the Company's position is in accordance with law and if convicted, it would be for a much lower amount.
(ii) Campos Pamela con Kuden S.A.
Former collaborator sues the company after being fired for due to needs of the Company. The claim was admitted on June 29, 2018. On July 31, 2018, six more claims were added to the case, increasing the amount sued to Ch $43,776,837 (forty-three million seven hundred and seventy-six thousand eight hundred and thirty- seven). The preparatory hearing was held on August 14, 2018. The trial hearing took place on October 4, 2018. Finally, a ruling was issued on October 8, rejecting the lawsuit against the subsidiary in all its parts. On October 19, 2018, the joint litigation filed an appeal for annulment against the sentence of first instance. The appeal was declared admissible on November 6, 2018. The Court of Appeals ruled on March 11, 2019, rejecting the petition for Guardianship, but accepting in the replacement sentence, the demands for unjustified dismissal, and the subsidiary was condemned to pay Ch$ 8,872,003.
Indirect subsidiary Rantrur S.A.
Luis Fernando González with Rantrur S.A.
Case followed before the Local Police Court of Castro, filed on April 21, 2017 and regarding the Consumer Law, case number 7-2017. The customer claims that the machine indicated a prize higher than the allowed by the technical limits. When he was informed that it was a defect of the machine, he considered it was an insufficient explanation. On October 19, 2017 a hearing is held. On March 23, 2018, the appeal filed by the opposing party regarding the rejection of the appointment of an audiovisual expert for the analysis of the
83
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 evidence entered the Court. On July 12, 2018, the pleadings were held. On July 13 the appeal is deemed inadmissible. On July 19, the case returns to the Court of origin. The case is currently awaiting sentence. The opinion of our lawyers is as follows, in view of the background, the prognosis of the case is favorable, since the Superintendence of Gambling Casinos, an organ specialized in the matter, has already issued a pronouncement regarding this controversy, being favorable to Enjoy.
Indirect Subsidiary Baluma S.A.
Lawsuit filed in Uruguay:
Silvina Luna with Baluma S.A.
On April 8, 2017, the plaintiff filed a labor claim against Baluma S.A., claiming payment of the items: Compensation for abusive dismissal, compensation for non-material damage, differences in credited disbursements, bonus, vacation and unfulfilled leaves, vacation salary, annual executive bonus, weekly breaks, overtime and incidents, damages for improper use of image, undue withholding payment of FONASA (Chilean State Health Fund), mandatory damages and legal fine for USD 4,544,512.69. Baluma S.A. replied the claim by rejecting and controverting each of the points. On June 7, 2017, the subject of the proceeding and the evidencing was provisionally set. On May 29, 2018, the final arguments were presented. On June 15, 2018, the lawsuit was partially accepted, and Baluma was ordered to pay the plaintiff the sum of USD 3,098,514 for overtime, weekly rest worked and others. On July 16, 2018, both the plaintiff as Baluma S.A. filed an appeal against the above-mentioned sentence. On September 5, 2018, a second instance sentence was issued, confirming the first instance ruling, condemning the subsidiary to pay an undetermined amount but close to a little more than 50% (fifty percent) of the first instance amount. On November 28, 2018, Baluma S.A. filed an appeal in cassation in order to revoke the Second Instance sentences. On December 3, 2018, the plaintiff filed an appeal in cassation in order to confirm the decision in the first instance and thus obtain the amount previously decreed. Taking into account the background and jurisprudential parameters involved in the matter, our lawyers understand that if there is an unfavorable sentence, the amount derived from this sentence should be lower than the amount claimed. Baluma S.A. filed an application for suspension of execution of the sentence. The possibility that the Second Instance Sentence is revoked in the terms of the plaintiff, that is, returning to the first instance sentence, is low. There is also a low probability that the subsidiary will obtain a favorable cassation decision, since the appeal must first be admitted. Taking into consideration all of the foregoing and taking into account the precedents and jurisprudential parameters in the matter and in the subject, our external advisors recommended that we make a provision for amounts substantially lower than those claimed.
Subsidiary Enjoy Gestión Ltda.
Case before the Civil Court of Santiago.
Bizalia Inversiones y Asesorías Limitada issued a series of materially false invoices against Enjoy Gestión for a total amount of Ch$ 1,510,080,846, which were assigned to Seymour Marketing S.p.A, a company created especially to collect such invoices. Preparatory management for recovery was presented on June 4, 2018. On July 13, 2018, a nullity incident was filed in relation to the receivership of the notification and searches. During the months of July, August and September, the incident took place, with a sentence date of October 30, 2018, and everything done since July 5, 2018 was declared null and void. On November 5, 2018, Enjoy filed an incident of material and ideological falsehood regarding the invoices presented by Bizalia Inversiones y Asesorías Limitada. From that day until now, this incident is under development. On March 22, 2019, the court issued orders for judgment, stating that it will be resolved promptly. The fact that the incident of nullity of everything done has been accepted increases the probability of obtaining a favorable resolution in the rest of the procedure.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
31.2 TAX CONTINGENCIES
Indirect subsidiary Inmobiliaria Proyecto Integral Antofagasta S.A.
(i) Inmobiliaria Proyecto Integral Antofagasta con Chilean Internal Revenue Service XV D.R Santiago East: Case before the Third Tax and Customs Court of the Metropolitan Region. Claim against Settlement No. 101- 13 dated June 26, 2015. The Chilean IRS through the claimed tax assessment rejected the deduction that Inmobiliaria Proyecto Integral Antofagasta made to the first category taxable income for tax year 2012 on account of "loss from prior years" for (Ch$ 9,749,025,053). Total amount of settlement claimed: Ch$ 470,955,299. Claim filed on October 26, 2015. On March 3, 2016 the Court has evacuated the transfer. At present, it is for the Court to receive the case on trial. In the opinion of our external attorneys to date, there is no risk of actual loss to the Company. The Company has not recognized a liability for these uncertain tax claims because it believes that the transaction giving rise to both differences has not been properly interpreted by the Internal Revenue Service and that the entity has all the necessary records to support the amounts reported.
(ii) Inmobiliaria Proyecto Integral Antofagasta S.A. with Chilean Internal Revenue Service East Case before the Third Tax and Customs Court of the Metropolitan Region. Settlement No. 193 was issued by the Regional Director XV Metropolitan Directorate Santiago East, for a value of Ch$ 299,322,076. This case is based on the non-accreditation of the deduction to the Taxable Liquid Income for an amount of Ch$ 8,588,170,668 corresponding to a forward loss, commercial year 2012, as such entry is being questioned and still under discussion in lawsuits role 10.313-11 and 10.314-11 before the Regional Board of Directors as Tax Judge. Complaint filed on March 4, 2015. On October 16, 2018, the Court received the case for trial. On October 25, the evidencing state started, with various proceedings on behalf of the Internal Revenue Service and the subsidiary, the last proceedings is dated November 14, 2018 corresponding to the evidence provided by Inmobiliaria Proyecto Integral Antofagasta. It corresponds to the court to set a date for the pronouncement of the sentence. In the opinion of our external lawyers, to date there is no risk of actual loss to the company. The Company has not recognized a liability for these uncertain tax claims because it believes that the transaction giving rise to both differences has not been properly interpreted by the Internal Revenue Service and that the entity has all the necessary records to support the amounts declared.
(iii) Inmobiliaria Proyecto Integral Antofagasta S.A with Chilean Internal Revenue Service Nullity and Tax Claim against Settlements No. 601 and No. 602, both dated July 28, 2017. The settlements are based on a set of administrative actions previously issued by the SII, which apart from being challenged through the courts are a direct consequence of 3 acts that were issued by the AT 2010 and were invalidated by virtue of a RAF. Complaint filed on November 10, 2017. Total amount of claimed settlement: Ch$ 2.710.152.385. On December 1, 2017, the claim was filed and transferred to the SII. On December 17, 2017, the SII evacuates the transfer, and on January 3, 2018, the Court deems it evacuated, with the latter receiving the case on trial. In the opinion of our external lawyers to date there is no risk of actual loss to the company.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Enjoy S.A.
(i) Enjoy S.A. with Chilean Internal Revenue Service, XV D.R.M East Santiago Case filed at the Third Tax and Customs Court of the Metropolitan Region. The Chilean IRS by means of resolution notified on March 30, 2011, rejected the refund for Ch$ 436,382,368 requested on the income tax return for tax year 2010. This was due to the fact that there were inconsistencies in the income tax return filed and the supporting information on the tax loss filed by this taxpayer was not accompanied. The tax loss absorbed tax profits for which the refund of the provisional payment of absorbed earnings was requested in accordance with Article 31 No. 3 of the Income Tax Law. Entered claim dated August 21, 2014. On November 4, 2016, the Tax and Customs Court rejected the filed claim and consequently rejected the corresponding refund. On November 25, 2016, an appeal was filed. The appeal was accepted and processed in the weekly list of cases. On May 25, 2017, the appealable judgment was confirmed. An appeal of annulment was filed on June 12, 2017. On June 19, 2017 it was granted. On August 02, 2017 it entered the Supreme Court. In the opinion of our external attorneys to date there is no risk of actual loss to the Company. The Company has not recognized a liability for this uncertain tax claim, as it considers that it has all the necessary evidence to support the tax loss claimed and which has been made available to the tax authorities.
(ii) Enjoy S.A with Chilean Internal Revenue Service East Case filed at the Third Tax and Customs Court of the Metropolitan Region. Enjoy S.A, by means of the annual tax return for tax year 2014, requested the refund of the provisional payment for absorbed earnings for Ch$ 449,095,369. As a result of this, the Chilean IRS started an inspection, through which it requests different documents. Finally, in accordance with the analysis of his information the Chilean IRS concluded that the expenditure corresponding to the disbursement made by Enjoy S.A. on behalf of bondholders of series A, C, D and E do not meet the requirements of necessity and obligation, since these expenses are not inevitable, but rather the payment was made at the will of the issuer with the purpose of changing the bond issuance contracts at their convenience. The Chilean IRS also challenged the fact that these expenses are not related to income for the 2013 business year. Therefore, such disbursement should be taxed according to the Chilean IRS with the control rule of sub-paragraph 1 of Article 21 in relation to Article 33 No. 1 of the Income Tax Law. As a result the Chilean IRS decided to: Change the filed 2014 tax loss from Ch$ 2,284,082,398 to Ch$ 2,235,754,382; Change the records of calculation of the net taxable income and, consequently, the tax result recorded in the taxpayer’s taxable profits ledger of the year 2014 and following years; Change the first category sole tax of Article 21of Income Tax Law as a base filed by the taxpayer, corresponding to 2014; and authorize only part of the request for refund of provisional payments for absorbed earnings. Entrance of claim on August 24, 2015. On October 9, 2015, the Internal Revenue Service replied by answering the claim and accompanying it with documents. On November 10 of the same year, the court considered the claim to have been answered. On March 8, 2019, the Court received the case for the evidentiary stage, notifying this on March 22, 2019. A subsidiary appeal was filed against the evidentiary stage. In the evidentiary stage. In the opinion of our external attorneys to date, there is no risk of actual loss to the Company.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
31.3 ENGAGEMENTS
Engaged Guarantee to Third Parties
The obligations undertaken by Enjoy S.A and its subsidiaries are described below. These must meet certain financial ratios (covenants) for the term of the several loan agreements entered into with financial institutions and the local market. At the date of these statements of financial position, the company complies with the obligations set forth in its financing contracts. The Company when calculating the covenants of: "Net consolidated financial obligations" and "Net consolidated financial obligations, adjusted " includes in the latter the balance of Due to related companies.
Covenant Summary
The summary of the covenants required by the respective contracts is as follows:
Net Consolidated Net Consolidated Interest hedge Level of Financial Net Consolidated Net Consolidated Level of Financial Financial Net Consolidated Financial (financial expenses Indebtedness Financial Financial Assets free of Indebtedness for Covenant Obligations/ Financial Debt/ Debt/EBITDA annualized / (Combined Liquidity Index Obligations / Obligations / Total guarantee Subsidiary Baluma S.A. EBITDA adjusted Total Equity Adjusted EBITDA adjusted Subsidiaries Total Equity Equity (US dollars) annualized Annualized annualized) Antofagasta)
Limit Limit Limit Limit Limit Limit Limit Limit Limit less 12-31-2018 less 12-31-2018 less 12-31-2018 less 12-31-2018 less 12-31-2018 higher 12-31-2018 higher 12-31-2018 higher 12-31-2018 higher 12-31-2018 Maximum 12-31-2018 than: than: than: than: than: than: than: than: than: International bond (*) 4.5 4.31 2.0 2.25 10,000,000 6,157,758 Syndicated Loan (BTG Fondo de Inversión and Banco 4.5 4.31 2.0 1.47 Santander) Commercial paper 5.25 1.48 6.5 4.33 1.5 2.87 (line No. 113) Commercial paper (lines No. 109 and 5.25 1.47 6.5 4.31 1.5 2.87 No. 116) Leasing for Subsidiary IPI 1.2 2 0.5 0.62 Antofagasta S.A. Waranty papers 2.00 1.47 4.5 4.31
(*) Covenant for incurrence, does not imply acceleration of the debt. 87
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Enjoy S.A. a) Issuance and placing of bonds in the local market
The contracts that account for the placement of bonds mentioned in Note 22 state that Enjoy must fulfill the following obligations:
Financial Debt Level
1) The issuer shall maintain, at the respective measurement date, in their quarterly consolidated IFRS financial statements, an indebtedness ratio measured as net consolidated financial obligations divided by equity, not greater than (i) 5.25 times from the measurement to be made on March 31, 2017, that is, the end of the first quarter of 2017and until the measurement to be made on September 30, 2018, that is, at the end of the third quarter of 2018, both inclusive; and (ii) twice from the measurement to be made on December 31, 2018, that is, at the end of the fourth quarter of 2018 and thereafter. As of December 31, 2018, this level reached 1.47 times.
2) Additionally, the issuer shall maintain, at the respective measurement date, in their quarterly consolidated IFRS financial statements, an indebtedness ratio measured as net consolidated financial obligations divided by EBITDA: (i) not greater than 6.5 times from the measurement to be made on March 31, 2017, that is, the end of the first quarter of 2017 and until the measurement to be made on September 30, 2018, that is, at the end of the third quarter of 2018, both inclusive; and, (ii) not greater than four times from December 31, 2018, that is, at the end of the fourth quarter of 2018 and thereafter. For the purposes of this ratio, it will be understood that the last twelve months of the EBITDA of new acquisitions will be included in the definition of EBITDA. As of December 31, 2018, this indicator was 4.31 times.
Prohibition to issue commercial guarantees:
The Issuer is required to maintain assets free of any liens, security interests, charges, restrictions or any kind of privileges and to perform the measurement of this index on the dates of the quarterly consolidated financial statements under IFRS. These assets must be equivalent to at least a: /i/ one time the outstanding amount of the total consolidated, unsecured quarterly financial debt estimated, as of December thirty one of the year two thousand ten and until the end of third quarter of the year two thousand eleven, inclusive, /ii/ one point fifteen the total amount of total consolidated financial debt without guarantees, from the fourth quarter of the year two thousand eleven, that is, from the measurement performed to thirty one December two thousand eleven and until the end of the third quarter of the year two thousand and twelve inclusive, / iii/ one point three the total amount of the total unsecured, consolidated financial debt, from the fourth quarter of year two thousand twelve, that is, from the measurement made at thirty one December 31 two thousand and twelve and until the end of the third quarter of the year two thousand and thirteen, inclusive, and /iv/ one point five the total amount of all consolidated unsecured financial obligations, from the fourth quarter of the year two thousand and thirteen onwards, i.e. after the measurement made at thirty one December two thousand and thirteen. Treasury credits for withholding and surcharge taxes will not be considered as liens, charges, restrictions or privileges for this purpose; trade preferences established by law, and all other charges which the Issuer has not consented to and that are being properly challenged by the Issuer. The Issuer shall deliver to the Representative, if so requested, the record for verifying the indicator that this clause refers to at 31 December 2018, the ratio of assets free of securities, outstanding the amount of total unsecured, consolidated financial debt reaches two point eighty-seven times.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Guarantees
The issuance of Series F bonds includes the following actual guarantees:
1. Mortgage collateral on the following real estate: a) Lot A of the property title that is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred sixty-six turn page number one thousand seven hundred fifty-one of the Property Registry of the Real Estate Custodian of Los Andes of 2012. The appraisal number of the property is twenty-five dash one hundred and fifty-seven of the district of Rinconada. b) Lot B One The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and sixty-seven turn page number one thousand seven hundred and fifty-two of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is twenty-five dash one hundred and fifty-seven of the district of Rinconada. c) Lot B Two The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred sixty-eight turn page number one thousand seven hundred fifty-three of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is twenty- five dash two hundred sixteen of the district of Rinconada. d) Lot Thirty-eight, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred sixty-nine turn page number one thousand seven hundred fifty-four of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is twenty-five dash two hundred fifty-four of the district of Rinconada. e) Lot Thirty-nine, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy number one thousand seven hundred and fifty-five of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is twenty- five dash two hundred and fifty-five of the district of Rinconada. f) Lot Forty, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy turn page number one thousand seven hundred and fifty-six of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is twenty-five dash two hundred and fifty-six of the district of Rinconada. g) Lot Forty-one The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy-one number one thousand seven hundred and fifty-seven of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is twenty-five dash two hundred and fifty-seven of the district of Rinconada. h) Lot Forty-two, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy-one turn page number one thousand seven hundred and fifty- eight of the Registry of Property of the appraisal number of the property is twenty-five dash two hundred and fifty-eight of the district of Rinconada. i) Lot A Two, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred seventy-two number one thousand seven hundred fifty-nine of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is the twenty-five dash one hundred sixty-five of the Commune of Rinconada. j) Lot A Three, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy-two turn page number one thousand seven hundred and sixty of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is the twenty-five dash one hundred and sixty-six of the Commune of Rinconada.
89
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 k) Lot A Five, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy-three number one thousand seven hundred and sixty-one of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is the twenty-five dash one hundred and seventy-five of the Commune of Rinconada. l) Lot A Six, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy-three turn page number one thousand seven hundred and sixty-two of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is the twenty-five dash one hundred and seventy-six of the Commune of Rinconada. m) Lot A Eight, The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand two hundred and seventy-four number one thousand seven hundred and sixty-three of the Property Registry of the Real Estate Custodian of Los Andes in 2012. The appraisal number of the property is the twenty-five dash one hundred and eighty-nine of the Commune of Rinconada. n) Mortgage on plot 13 and site 22 of the El Castillo Plotting Project, located in the district of Calle Larga, Province of Los Andes. The property title is registered under the name of Inversiones y Servicios Guadalquivir S.A. at numbered page six hundred sixty-seven number one thousand thirty-five of the Property Registry of the Real Estate Custodian of Los Andes in 2007. ñ) Mortgage on Lot B2-A7 resulting from the subdivision of the rest of a larger estate called Fundo La Cuesta. The property title is registered under the name of Inmobiliaria Rinconada S.A. at numbered page one thousand six hundred and forty-four turn page two thousand two hundred and eighty-first of the Property Registry of the Real Estate Custodian of Los Andes in 2012.
2. Pledge Guarantee for the following personal property: a) Pledge without displacement on movable assets deployed in the Casino Rinconada, owned by Casino Rinconada S.A. and, b) Pledge on movable assets deployed in the Hotel, Spa, Restaurant, and Convention Center Rinconada, owned by Operaciones Integrales Chacabuco S.A.
3. Bond and joint debt in which Inmobiliaria Rinconada S.A. constitutes as guarantor and joint debtor of the obligations contracted by Enjoy S.A.
The bonds of this issuance make us of the tax regime set in Section 104 of the Law on Income Tax, included in Decree Law N° 824.
"By means of a public deed dated April 24, 2014, granted at Mr. Eduardo Díez Morello’s notary’s office in Santiago, a dematerialized bond issue agreement was entered into for a fixed amount by Enjoy S.A. and Banco Santander-Chile in its capacity as representative of the bondholders. In order to guarantee the full, effective and timely compliance with all the obligations contracted by Enjoy S.A. on behalf of the bondholders under the issuance contract, Casino Rinconada S.A. created chattel mortgage without conveyance on certain fixed assets, including slot machines (the "pledged assets"). The pledged assets were registered in the Register of Pledges kept by the Chilean Registrar's Office. In order to replace some of the pledged assets, Casino Rinconada S.A. and the representative of the bondholders, through public deeds dated August 17, 2016, December 28, 2016 and August 28, 2017, granted at Mr. Eduardo Diez Morello’s notary’s office in Santiago, raised certain pledges and created new pledges to replace them on new fixed assets consisting of slot machines. These new pledged assets were registered in the Register of Pledges kept by the Chilean Registrar's Office."
This bond was prepaid on December 10, 2018 and is in the process of the easements of the aforementioned guarantees.
90
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) Issuance and placement bonds in the international market
1) Limitation in the taking of additional debt
No additional debt may be taken, if because of said debt and after the use of funds, the Financial Expense Coverage Ratio is less than 2 times and the Net Debt to EBITDA ratio of the Company does not exceed 4.5 times. The above restriction considers a series of exceptions, including refinancing, and new financing for up to the largest amount between US$ 50 million and 3.75% of net consolidated assets, among other exceptions.
2) License loss event:
If the company loses the license to operate the casino located in Coquimbo and/or Pucón, it must partially repurchase the bonds for the value of the appraisal of those properties through the sale of those properties or with resources from a capital increase.
3) Others:
Additionally, the notes consider a series of common covenants for this type of instruments, including: limitation on restricted payments, limitation on the sale of Assets, limitation on Sale and Leaseback transactions, limitation on the designation of unrestricted subsidiaries, limitation on the payment of dividends over the statutory amount, other payments that affect the restricted subsidiaries, limitations on the granting of guarantees, limitations on mergers, consolidation and sale of assets, limitations on transactions with related parties, and clauses on change of control, among other.
The issuance of the international bond includes the following guarantees:
Mortgage Guarantee and prohibition to encumber and dispose of the following real estate assets: a) Mortgage on cabins and property, located in the variant of Camino Internacional No. 655 and No. 663, Población Villa Las Araucarias, of the Municipality of Pucón, Province of Cautín, IX Region. The title of ownership is registered under the name of Inmobiliaria Kuden S.A. in page 1817, No. 1263 of the Pucón Real Estate Property Registry of the year 2000. b) Mortgage on properties located in Site N° One of Block N° 23 Pedro de Valdivia Street N° 4331, Pucón. The title of ownership is registered under the name of Inmobiliaria Kuden S.A. in page 2434, N° 1721 of the Real Estate Property Registry of Pucón of the year 2007. c) Mortgage on real estate lots A-B-C, located in Balneario de Peñuelas, municipality of Coquimbo. The title of ownership is registered under the name of Inmobiliaria Proyecto Integral Coquimbo S.A. in page 483 N° 283 in the Real Estate Property Registry of Coquimbo of the year 2007. d) Mortgage on Lot One A in the municipality of Pucón, Department of Villarrica, Ninth Region. The title of ownership is registered in the name of Inmobiliaria Kuden S.A., on page 776 No. 1528 of the Real Estate Property Registry of Pucón of the year 2011. e) Mortgage on property denominated lot b located in the Municipality of Pucón, Department of Villarrica, Ninth Region. The title of ownership is registered in the name of Inmobiliaria Kuden S.A., pages 2564, 1639 of the Real Estate Property Registry of Pucón of the year 2008. In addition, the issuance of the international bond is guaranteed by a pledge on 100% of the shares of Inmobiliaria Proyecto Integral Coquimbo S.p.A., Inmobiliaria Kuden S.p.A., Enjoy Consultora S.A.; series B shares of Baluma S.A. and a trust agreement on series A shares of Baluma S.A. Finally, the issuance of the international bond considers the following companies as guarantors of the issuer: Enjoy Gestión Ltda., Inversiones Enjoy S.p.A., Inversiones Inmobiliarias Enjoy Spa., Enjoy Consultora S.A., Inversiones Andes Entretención Limitada, Inmobiliaria Proyecto Integral Coquimbo Spa., Inmobiliaria Kuden S.p.A., Campos del Norte S.A., Enjoy Caribe S.p.A., Inmobiliaria Proyecto Integral Castro S.p.A., Slots S.A., Masterline S.A., Kuden S.A., Operaciones Turísticas S.A., Operaciones Integrales Isla Grande S.A., Rantrur S.A., Casino de Iquique S.A., Casino de la Bahía S.A., Casino del Mar S.A., Casino del Lago S.A., Casino de Puerto Varas S.A., Yojne S.A. and Baluma S.A.
91
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 c) Syndicated Loan (BGT Fondo de Inversión y Banco Santander)
As a result of the credit agreement entered into on March 26, 2018, Enjoy S.A. shall maintain at the respective measurement date, in its Financial Statements under quarterly Consolidated IFRS, the following; (i) An indebtedness ratio measured as Consolidated Net Financial Obligations divided by adjusted annualized EBITDA, not to exceed: 4.5 times. As of December 31, 2018, this level amounts to 4.31 times. (ii) A debt ratio measured as Consolidated Net Financial Obligations divided by Total Equity, not to exceed twice. As of December 31, 2018, this level reaches 1.47 times. As described in the aforementioned contract "Consolidated Net Financial Debt" means the positive difference, if any, between (a) the sum of the balances corresponding to the items in the Financial Statements under the item "Loans accruing interest", "Creditors from financial leasing", "Bonds payable, negotiable instruments", "Bonds payable, Bonds", and, in general, any other item contained in the Financial Statements that refers to money payment obligations derived from Financial Debt; and (b) the sum of the balances corresponding to the items of the Financial Statements under the item "Cash and cash equivalents". d) Lines of negotiable instruments The lines of negotiable instruments No. 109 and No. 116 contemplate financial restrictions (covenant) which are the same as those established by the Syndicate indicated in letter c) of the Company with BTG Fondo de Inversión. Line No. 113 is calculated with the indicator "Consolidated Net Financial Debt.” e) Performance bonds The performance bonds contracts between Banco Internacional, Banco Security, Banco BTG Pactual Chile, and Casino de la Bahía S.A., Casino del Mar S.A., Casino del Lago S.A. and Casino de Puerto Varas S.A., establish that Enjoy S.A. is constituted, in favor of the creditors, as guarantor and joint and several guarantor to guarantee the payment obligations of the contracts. In addition, the following financial relationships must be maintained throughout their term: a) Net Consolidated Financial Debt to Adjusted Ebitda less than or equal to 4.5 times, and ii) Net Consolidated Financial Debt to Equity less than or equal to 2 times, which complies as of December 31, 2018, due to the fact that it presents 4.31 times and 1.47 times, respectively. ii) Inmobiliaria Proyecto Integral Antofagasta S.A. (IPIA) The lease purchase contract signed with Banco de Chile and BCI on October 14, 2014 and its amendments stipulate the following obligations, which are measured annually, with the year-end financial statements
Level of financial debt
1. At a combined level, the Companies shall maintain a debt service hedge greater than or equal to 1.2 times. Debt service will be understood to be the EBITDA to total annual rent that the lessee must pay pursuant to clause four of the above contract ratio, plus the companies’ financial expenses. EBITDA will be understood to be the operating income less operating costs less administrative costs plus depreciation for the year plus amortizations plus asset impairment losses. The indicator will be measured on the thirty first of March each year, with balance sheets at December thirty first of the prior year, as of two thousand and fourteen. At December 31, 2018, this indicator was two times.
2. At combined level, the companies shall maintain a liquidity of zero point five times or more, with liquidity being understood to be the current asset to current liability ratio, deducting in both cases the accounts receivable from and payable to related companies. The indicator will be measured on the thirty first of March each year, with balance sheets at December thirty first of the prior year, as of two thousand and fourteen. At December 31, 2018, this indicator was zero point sixty-two times.
92
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Common obligations 1. In the entire period this contract is in force, Inversiones Vista Norte S.A. irrevocably promises the lessors that it will maintain its ownership interest in Operaciones El Escorial S.A., which currently stands at ninety nine percent of the shares.
2. In the entire period this contract is in force, Enjoy S.A. irrevocably promises the lessors that it will maintain a direct or indirect interest of not less than fifty-one percent of each one’s shares in the companies Inmobiliaria Proyecto Integral S.A. and Inversiones Vista Norte S.A. Likewise, Enjoy S.A. promises to maintain its control, management and administration of Inmobiliaria Proyecto Integral S.A. and Inversiones Vista Norte S.A.
31.4 GUARANTEES
Indirect Guarantees
Outstanding balances at the Debtor Committed assets Maturity closing date Creditor of the guarantee Type of guarantee Account Name Relationship Type 12-31-2018 12-31-2017 Date value ThCh$ ThCh$ ThCh$ BCI / Banco de Chile Inmobiliaria Proyecto Integral Antofagasta S.A. Indirect subsidiary Pledge Payment of installment - 21,328,204 24,576,036 04-08-2024 Municipality of Antofagasta Inmobiliaria Proyecto Integral Antofagasta S.A. Indirect subsidiary Waranty papers Urbanization - 165,395 160,777 01-06-2019 Municipality of Pucón Kuden S.A. Indirect subsidiary Waranty papers Municipal concession in Pucón - 689,145 669,904 01-07-2019 Municipality of Pucón Operaciones Turísticas S.A. Indirect subsidiary Waranty papers Concession ski-center - - 1,996 04-28-2018 National Director of the Sea and Merchant Navy Campos del Norte S.A. Indirect subsidiary Waranty papers Sea concession in Coquimbo - 4,269 4,269 10-31-2019 Holders of Series F Bonds Enjoy S.A. Parent Pledge Inmobiliaria Rinconada S.A. - - 18,905,613 06-14-2021 Holders of International Bond Inversiones Enjoy S.p.A. Direct subsidiary Trust Share of company Baluma S.A. - Series A 225,041,571 - - 05-17-2022 Holders of International Bond Enjoy Consultora S.A. Indirect subsidiary Pledge Share of company Baluma S.A. - Series B 270,374 - - 05-17-2022 Building Casino y Hotel Coquimbo, Building Casino y Gran Hotel Pucón, cottages of Holders of International Bond Enjoy S.A. Mortgage Parent employees 36,509,852 133,437,952 179,162,616 10-17-2018 Banco de Seguros del Estado Baluma S.A. Indirect subsidiary Bank guarantor Guarantees compliance between Baluma S.A. y B.S.E. - 694,770 614,750 02-01-2019 Municipality of Viña del Mar Antonio Martínez y Cía. Indirect subsidiary Waranty papers Municipal concession Viña del Mar - 2,594,549 2,615,883 06-30-2019 Municipality of Coquimbo Campos del Norte S.A. Indirect subsidiary Waranty papers Municipal concession in Coquimbo - 29,561 28,736 03-30-2019 Banco Santander Op. Integrales Isla Grande S.A. Indirect subsidiary Waranty papers Sublease contract Hotel Patagónico Pto. Varas - 234,309 227,767 12-11-2018 Superintendence of Gambling Casinos Casino De Puerto Varas S.A. Indirect subsidiary Waranty papers Guarantee economic offer bid Casino de Puerto Varas - - 166,450 10-20-2018 Superintendence of Gambling Casinos Casino De Puerto Varas S.A. Indirect subsidiary Waranty papers Guarantee economic offer bid Casino de Puerto Varas - - 604,744 10-20-2018 To guarantee faithful compliance of the established in Article 47DS 1722 of 2016 of the Superintendence of Gambling Casinos Casino De Puerto Varas S.A. Indirect subsidiary Waranty papers Treasury Department. - 609,863 - 12-31-2020 Superintendence of Gambling Casinos Casino De Puerto Varas S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino De Puerto Varas S.A. - 12,528,734 - 07-31-2020 Superintendence of Gambling Casinos Casino De La Bahía S.A. Indirect subsidiary Waranty papers Guarantee economic offer bid Casino de Coquimbo - - 255,731 10-25-2018 Superintendence of Gambling Casinos Casino De La Bahía S.A. Indirect subsidiary Waranty papers Guarantee economic offer bid Casino de Coquimbo - - 497,187 10-25-2018 To guarantee faithful compliance of the established in Article 47DS 1722 of 2016 of the Superintendence of Gambling Casinos Casino De La Bahía S.A. Indirect subsidiary Waranty papers Treasury Department. - 501,550 - 12-31-2020 Superintendence of Gambling Casinos Casino De La Bahía S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino de la Bahía S.A. - 19,888,234 - 07-31-2020 Superintendence of Gambling Casinos Casino De La Bahía S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino de la Bahía S.A. - 15,988,158 - 07-31-2020 Superintendence of Gambling Casinos Casino De La Bahía S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino de la Bahía S.A. - 3,942,474 - 07-31-2020 Superintendence of Gambling Casinos Casino Del Lago S.A. Indirect subsidiary Waranty papers Gurantee economic offer bid Casino de Pucón - - 92,919 11-14-2018 Superintendence of Gambling Casinos Casino Del Lago S.A. Indirect subsidiary Waranty papers Gurantee economic offer bid Casino de Pucón - - 746,776 11-14-2018 To guarantee faithful compliance of the established in Article 47DS 1722 of 2016 of the Superintendence of Gambling Casinos Casino Del Lago S.A. Indirect subsidiary Waranty papers Treasury Department. - 752,880 - 12-31-2020 Superintendence of Gambling Casinos Casino Del Lago S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino Del Lago S.A. - 10,006,382 - 07-31-2020 To guarantee faithful compliance of the established in Article 47DS 1722 of 2016 of the Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers Treasury Department. - 248,092 - 12-31-2020 To guarantee faithful compliance of the established in Article 47DS 1722 of 2016 of the Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers Treasury Department. - 367,292 - 12-31-2020 Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino Del Mar S.A. - 19,557,928 - 07-31-2020 Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino Del Mar S.A. - 19,774,400 - 07-31-2020 Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino Del Mar S.A. - 25,994,540 - 07-31-2020 Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers To guarantee the economic bid of Casino Del Mar S.A. - 3,404,819 - 07-31-2020 Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers Guarantee economic offer bid Casino de Viña del Mar - - 609,945 11-10-2018 Superintendence of Gambling Casinos Casino Del Mar S.A. Indirect subsidiary Waranty papers Guarantee economic offer bid Casino de Viña del Mar - - 940,230 11-10-2018
The Waranty Papers are not registered as obligations in Enjoy S.A. and Subsidiaries. However, in the case of breach of the respective contracts, this will imply to recognizing the obligation in the Financial Statements.
93
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 32 - ADJUSTED EBITDA, ADJUSTED ANNUALIZED EBITDA AND FINANCIAL DEBT
Adjusted EBITDA = (Earnings before interest, taxes, depreciation, amortization and impairment of assets)
EBITDA is a financial indicator meaning “Earnings before Interest, Taxes, Depreciation and Amortization.” The Adjusted EBITDA is calculated based on the statement of income, representing the company’s operating income before deducting interest, amortization, depreciation and income taxes. This indicator is used as a measure of profitability and also for purposes of valuing companies, among others.
The methodology used by Enjoy S.A. and its subsidiaries to determine the adjusted EBITDA is as follows:
Income from ordinary activities (+) Costs of sales (-) Administration expenses (-) Depreciation and amortization (i) (+) Impairment (reversal) of assets (ii) (+) Total Adjusted EBITDA (=)
(i) Depreciation of fixed assets and amortization of licenses, are recorded under the item Cost of sales in the income statement by function. (ii) Impairment (reversal) of assets is recorded in the account management fees for the income statement by function. a) Adjusted EBITDA (*)
Enjoy S.A. and its subsidiaries, have calculated the adjusted EBITDA indicator reported for the following exercises:
Accumulated
01-01-2018 01-01-2017 Items 12-31-2018 12-31-2017 ThCh$ ThCh$ Income from ordinary activities 275,005,232 283,676,958 Costs of sales (216,952,264) (223,575,466) Administration expenses (28,256,971) (27,752,879) Depreciation 15,173,602 17,551,819 Amortization 10,243,776 7,199,824 Impairment (reversal) of stocks (194,969) 44,696 Impairment (reversal) of Current Receivable 3,450,326 4,973,480 Total Adjusted EBITDA 58,468,732 62,118,432 EBITDA before income 21.3% 21.9%
(*) Definition according to the contracts for lines of issuance and placement of bonds in the local market.
94
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) NET CONSOLIDATED FINANCIAL OBLIGATIONS
Enjoy S.A. and its subsidiaries have calculated the following Net Consolidated Financial Debt and Net Consolidated Financial As of at 31 December 2018 and 2017:
Items 12-31-2018 12-31-2017 ThCh$ ThCh$ Other current financial liabilities (+) 63,655,932 66,242,587 Other non-current financial liabilities (+) 272,768,530 279,088,169 Accounts payable to current related parties (+) 1,127,863 3,564,590 Accounts payable to non-current related parties (+) - - Dividends receivable (-) - - Cash and cash equivalents (-) 84,409,844 30,344,365 Net Consolidated Financial Obligations 253,142,481 318,550,981 Adjusted annualized EBITDA 58,468,732 62,118,432 Covenant DFN/EBITDA Ajusted Annualized 4.33 5.13 c) DEFINITIONS d.1) Indebtedness measured as net consolidated financial debt divided by equity:
Form of calculation:
Net consolidated financial Obligations Equity
Account balance included:
Other current financial liabilities + Other non-current financial liabilities + Accounts payable to related parties, current + Accounts payable to related parties, non-current – Cash and cash equivalents - Accounts receivable from related parties, current(*)______Equity d.2) Indebtedness measured as net consolidated financial debt divided by adjusted annualized EBITDA.
Form of calculation:
Net consolidated financial debt EBITDA Adjusted annualized
Account balance included:
Interest accruing loans + Waranty papers + Other financial institutions + Creditors for financial leasing + Obligations with the public, + Commercial paper + Obligations with the public, Bonds (-) Cash and cash equivalents _ EBITDA Adjusted annualized
95
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 d.3) Unsecured consolidated financial liabilities
Form of calculation:
Assets free of guarantee_____ Non-guaranteed financial debt
Book accounts included:
Total Assets (-) Property, plant and equipment provided in guarantee Other current financial liabilities + Other non-current financial liabilities Non-guaranteed
The amount of unencumbered assets and unsecured consolidated obligations as of December 31, 2018 was ThCh$ 510,601,203 and ThCh$ 178,059,505, respectively. d) NET CONSOLIDATED FINANCIAL DEBT
Enjoy S.A. and Subsidiaries has calculated the following indicator of Net Consolidated Financial Debt as of December 31, 2018:
(*) Items 12-31-2018 ThCh$ Interest accruing loans (+) 26,154,896 Other financial institutions (+) 31,278,608 Waranty papers (+) 506,490 Creditors for financial leasing (+) 24,927,005 Commercial paper (+) 37,530,353 Obligations with the public, Bonds (+) 216,027,110 Cash and cash equivalent (-) 84,409,844 Net Consolidated Financial Debt 252,014,618 Adjusted annualized EBITDA 58,468,732 Covenant DFN/EBITDA Ajusted Annualized 4.31
(*) Indicator calculated in accordance with the requirements of the syndicated loan agreement signed by Enjoy S.A. with the BTG Pactual Chile Investment Fund and Banco Santander, on the lines of negotiable instruments and the Bond I (see note N° 22).
96
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 f) INTEREST HEDGE (*)
Form of calculation:
Adjusted annualized EBITDA_ Annualized financial expense
Enjoy S.A. and Subsidiaries, has calculated the following Interest indicator:
(a) (b) (a) x (b) Type of debt Weighted Financial cost Financial debt effective debt 12 months ThCh$ % ThCh$ Bank loans: 26,154,896 5.48% 1,433,458 Other financial institutions: 31,278,608 5.62% 1,757,754 Financial Leasing: 24,927,005 2.90% 723,211 Commercial paper: 37,530,353 7.02% 2,634,631 Obligations with the public, Bond: 216,148,784 9.00% 19,447,062 Financial debt (2) 336,039,646 25,996,116
EBITDA adjusted 12 months (1) 58,462,732
Covenant interest hedge (1) /2 (times). 2.25
(*) Unlike the covenant of the debt in Chile (maintenance covenant), the international bond is of incurrence, which means that in the event of default, restrictions are generated mainly to incur new debt.
NOTE 33 - GUARANTEES RECEIVED FROM THIRD PARTIES
As of 31 December 2018 and 2017, Enjoy S.A. and its subsidiaries have no indemnities from third parties to report.
NOTE 34 - GUARANTEES RECEIVED
On 31 December 2011, by public deed executed before the Public Notary of Santiago, Eduardo Diez Morello, a debtor of subsidiary Enjoy Gestión Ltda., constituted a first mortgage in favor of Enjoy Management Limited, for a rural field of a surface of 253 hectares, 40 areas, located in Alcalde de Llau Llao, Castro district of the province of Chiloe, in Los Lagos Region. The mortgage was created to ensure payment of a debt currently held by the grantor to Enjoy Gestión Ltda., amounting to 10,182.18 UF. On September 22, 2017, by public deed recorded in the Temuco Notary Office of Mr. Carlos Alarcón Ramírez, the aforementioned debtor, signed an acknowledgment of debt and mandate in favor of Enjoy Gestión Ltda., so that the latter can carry out the sale of the individualized property and with this pay the aforementioned debt.
97
Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 35 - ASSETS AND LIABILITIES BY CURRENCY
The assets in foreign and local currency for each of the periods under review are:
Functional Assets Currency 12-31-2018 12-31-2017 currency ThCh$ ThCh$
Current assets Cash and cash equivalents Chilean pesos CLP 72,936,115 15,525,259 Cash and cash equivalents Dollar USD 10,389,922 14,459,951 Cash and cash equivalents Argentinean Pesos ARS 1,077,549 293,617 Cash and cash equivalents Euro EUR 6,258 17,361 Cash and cash equivalents Colombian Pesos COL - 48,177 Other current non-financial assets Chilean pesos CLP 1,580,349 2,416,491 Other current non-financial assets Kunas HRK 3,579 6,357 Other current non-financial assets Dollar USD 136,110 167,423 Trade debtors and other receivables, current Chilean pesos CLP 21,581,284 18,343,881 Trade debtors and other receivables, current Dollar USD 22,348,339 21,142,776 Accounts receivable from related parties, current Argentinean Pesos ARS 636,418 1,249,058 Accounts receivable from related parties, current Kunas HRK - 798,149 Inventories Chilean pesos CLP 2,580,243 2,817,122 Inventories Dollar USD 1,135,821 1,310,966 Inventories Colombian Pesos COL - 48,214 Current tax assets Chilean pesos CLP 10,089,704 5,946,876 Current tax assets Dollar USD 4,525,380 1,204,509 Current tax assets Argentinean Pesos ARS 86,040 111,236 Current assets other than assets or groups of assets for disposal classified as held for sale or as held for distribution to owners. 149,113,111 85,907,423 Non-current assets or groups of assets for disposal classified as held for sale or as Chilean pesos CLP 3,005,119 3,315,916 held for distribution to owners and discontinued operations Non-current assets or groups of assets for disposal. 3,005,119 3,315,916
Total current assets 152,118,230 89,223,339
Non-current assets Other non-current financial assets Chilean pesos CLP 13,101 10,723 Other non-financial non-current assets Chilean pesos CLP 234,516 295,490 Trade debtors and other receivables, non-current Chilean pesos CLP 1,105,969 5,467 Investments accounted for using the equity method Argentinean Pesos ARS 6,944,633 4,878,523 Investments accounted for using the equity method Kunas HRK - (1,007,084) Intangible assets other than goodwill Chilean pesos CLP 29,112,711 27,675,020 Intangible assets other than goodwill Colombian Pesos COL - 37,070 Intangible assets other than goodwill Dollar USD 47,272,925 44,489,680 Goodwill Chilean pesos CLP 3,310,727 3,310,727 Property, plant and equipment Chilean pesos CLP 158,962,196 148,425,655 Property, plant and equipment Colombian Pesos COL - 1,268,498 Property, plant and equipment Dollar USD 184,715,033 163,639,162 Rights-of-use Chilean pesos CLP 12,261,464 - Deferred tax assets Chilean pesos CLP 44,614,549 39,918,922 Deferred tax assets Argentinean Pesos ARS 1,339 15,502 Total non-current assets 488,549,163 432,963,355 Total assets 640,667,393 522,186,694
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
The liabilities in foreign and local currency for each of the periods under review are:
At 31 December 2018:
12-31-2018 Currency Functional Current Non-current Total current Total non-current Liabilities currency Up to 90 days 90 days to 1 year 1 to 3 years 3 to 5 years more than 5 years ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Other financial liabilities Chilean pesos CLP 18,876,671 22,498,542 41,375,213 18,031,811 - - 18,031,811 Other financial liabilities Indexed Unit CLF 1,657,752 14,537,092 16,194,844 30,027,844 9,324,644 83,753,929 123,106,417 Other financial liabilities Dollar USD 4,278,225 1,807,650 6,085,875 - 131,630,302 131,630,302 Lease liabilities, current Chilean pesos CLP 1,355,857 1,684,503 3,040,360 1,886,312 2,934,356 4,678,864 9,499,532 Trade payable and other payable Chilean pesos CLP 38,146,196 - 38,146,196 - - - - Trade payable and other payable Dollar USD 17,173,091 187,354 17,360,445 - - - Trade payable and other payable Argentinean Pesos ARS 51,324 - 51,324 - - - - Trade payable and other payable Kunas HRK 636 - 636 - - - - Accounts payable to related parties Argentinean Pesos ARS - 1,127,863 1,127,863 - - - - Current tax liabilities Chilean pesos CLP - 1,448,060 1,448,060 - - - - Current tax liabilities Argentinean Pesos ARS - 360,233 360,233 - - - - Current provisions for employee benefits Chilean pesos CLP - - - - - 192,723 192,723 Deferred tax liabilities Chilean pesos CLP - - - - - 3,775,888 3,775,888 Deferred tax liabilities Dollar USD - - - - - 44,228,529 44,228,529 Other non-financial liabilities Chilean pesos CLP 2,855,235 - 2,855,235 1,096,205 - - 1,096,205 Other non-financial liabilities Kunas HRK 198 - 198 - - - - Other non-financial liabilities Dollar USD 8,013,498 - 8,013,498 - - - - Total Current liabilities other than liabilities included in groups of assets for 92,408,683 43,651,297 136,059,980 51,042,172 143,889,302 136,629,933 331,561,407 disposal classified as held for sale Liabilities included in groups of liabilities for disposal classified as held for sale and Chilean pesos CLP - 2,026,744 2,026,744 - - - - discontinued operations
Total liabilities 92,408,683 45,678,041 138,086,724 51,042,172 143,889,302 136,629,933 331,561,407
At 31 December 2017:
12-31-2017 Currency Functional Current Non-current Total current Total non-current Liabilities currency Up to 90 days 90 days to 1 year 1 to 3 years 3 to 5 years more than 5 years ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Other financial liabilities Chilean pesos CLP 18,776,353 21,750,522 40,526,875 2,170,389 - - 2,170,389 Other financial liabilities Indexed Unit CLF 2,539,652 20,727,236 23,266,888 41,861,633 - 23,581,073 65,442,706 Other financial liabilities Dollar USD - 2,448,824 2,448,824 - 211,475,074 - 211,475,074 Trade payable and other payable Chilean pesos CLP 24,382,600 - 24,382,600 - - - - Trade payable and other payable Dollar USD 15,372,862 74,793 15,447,655 - - - - Trade payable and other payable Argentinean Pesos ARS 17,403 - 17,403 - - - - Trade payable and other payable Colombian Pesos COL 43,197 - 43,197 - - - Trade payable and other payable Kunas HRK 448 - 448 - - - - Accounts payable to related parties Chilean pesos CLP - 1,002,175 1,002,175 - - - - Accounts payable to related parties Argentinean Pesos ARS - 1,617,526 1,617,526 - - - - Accounts payable to related parties Dollar USD - 944,889 944,889 - - - - Current tax liabilities Chilean pesos CLP - 2,631,344 2,631,344 - - - - Current tax liabilities Argentinean Pesos ARS - 206,598 206,598 - - - - Deferred tax liabilities Chilean pesos CLP - - - - - 5,317,408 5,317,408 Deferred tax liabilities Dollar USD - - - - - 38,652,936 38,652,936 Current provisions for employee benefits Chilean pesos CLP - 541,689 541,689 - - - - Current provisions for employee benefits Dollar USD - 258,240 258,240 - - - - Other non-financial liabilities Chilean pesos CLP 2,032,971 - 2,032,971 - - - - Other non-financial liabilities Kunas HRK 174 - 174 - - - - Other non-financial liabilities Dollar USD 7,255,004 - 7,255,004 - - - - Total Current liabilities other than liabilities included in groups of assets for 70,420,664 52,203,836 122,624,500 44,032,022 211,475,074 67,551,417 323,058,513 disposal classified as held for sale Liabilities included in groups of assets for disposal classified as held for sale Chilean pesos CLP - 1,924,656 1,924,656 - - - -
Total liabilities 70,420,664 54,128,492 124,549,156 44,032,022 211,475,074 67,551,417 323,058,513
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 36 - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Assets and liabilities of the group of assets for disposal held for sale
In May 2017, the Board of Directors of Enjoy S.A. committed to a plan to sell the 40% minority interest held by the direct Subsidiary Enjoy Gestión Ltda. in the affiliate Casino de Colchagua S.A. At December 31, 2018 and 2017, the group of Assets for disposal held for sale is presented at cost or fair value less cost of sales as required by IFRS 5 "Fair Value Measurement" and consists of the following assets and liabilities:
12-31-2018 12-31-2017 Items ThCh$ ThCh$ Investment in Casino de Colchagua S.A. 2,309,684 2,478,069 Goodwill in Casino de Colchagua S.A. - 131,615 Account receivable from Casino de Colchagua S.A. 663,547 706,232 less: Account payable to Casino de Colchagua S.A. (2,018,354) (1,924,656) Total 954,877 1,391,260
The delay in the sale of this minority interest is caused by events or circumstances beyond the control of the entity, mainly as a change in the sales price and payment methods. The foregoing is in line with the current circumstances of the gambling casino industry in Chile. However, Enjoy Gestión Ltda. remains committed to its plan to sell the asset. Finally, no accumulated income or expense has been recognized in other comprehensive income in relation to the group of assets to be disposed of.
Discontinued Operations
On February 19, 2016, Enjoy Caribe S.p.A. - Branch Colombia, an indirect subsidiary of Enjoy S.A., obtained a license to operate a gambling casino on the Island of San Andrés in Colombia, whose license lasted for 5 years until 2021. On June 11, 2018, the operations of this Gambling Casino were terminated. As of December 31, 2018, having complied with the requirements established in IFRS 5, "Discontinued Operations", the values of the Branch were deconsolidated in the Statement of Income by Function and Cash Flows:
Assets and liabilities
Discontinued operations ThCh$ Cash and cash equivalents 18,051 Trade debtors and other receivables 357 Current tax assets 13,480 less: Trade payable and other payable, current (6,150) Current tax liabilities (2,240) Total 23,498
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
Statement of cash flows
12-31-2018 Cash flow statements ThCh$
Cash flows provided by (used in) operating activities Types of collections from operating activities Collections from sales of assets and service renderings 261,888 Types of payments Payment to suppliers for the supply of goods and services (830,601) Payments to and on behalf of employees (150,611) Other payments for operating activities (76,854) Net cash flows provided by (used in) the operation (796,178) Income taxes paid (disbursed), classified as operating activities (14,460) Net cash flows provided by (used in) the operating activities (810,638) Net cash flows provided by (used in) investing activities - Net cash flows provided by (used in) the investing activities Net cash flows provided by (used in) financing activities - Payments for other participations in equity 780,512 Amounts from borrowings, classified as financing activities - Net cash flows provided by (used in) the financing activities 780,512 Increase (decrease) in cash and cash equivalent, before the exchange rate effect (30,126) Effects of the variation in the exchange rate over cash and cash equivalent - Effects of the variation in the exchange rate over cash and cash equivalent Net increase (decrease) of cash and cash equivalent (30,126) Cash and cash equivalent at the beginning of the year 48,177 Cash and cash equivalent at the end of the year 18,051
Income and expenses
All revenues and expenses corresponding to the business of Enjoy Caribe S.p.A. - As of December 31, 2018 are presented under the heading Gains (losses) from discontinued operations in the Statement of Income by function:
12-31-2018 Statements of Income ThCh$ Revenue 261,786 Cost of sales (447,306) Gross margin (185,520) Administrative expenses (61,215) Other gains (losses) (643,780) Profit (loss) from operating activities (890,515) Finance costs (9,200) Foreign exchange 39,676 Profit (loss) before tax (860,039) Income tax (expense) continuing operations (2,240) Profit (loss) (862,279)
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 37 - OTHER EXPENSES
Breakdown of the other expenses at 31 December of 2018 and 2017 is as follows:
Accumulated
12-31-2018 12-31-2017 ThCh$ ThCh$ Compensations and other staff expenses 4,081,780 1,526,054 Total 4,081,780 1,526,054
The above amounts relate to costs associated with the restructuring plan implemented by the administration of Enjoy S.A. and subsidiaries, which were recorded in accordance with IAS 37.
NOTE 38 - RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS
The Company has early adopted, as of January 1, 2018, IFRS 16 "Leases", opting to measure the asset equal to the lease liability, and determined the incremental borrowing rate based on the lease term and the nature of the right-of-use assets. The right-of-use assets recognized at the initial date of application consider amortization expenses over the shorter of the lease term or the useful life of the asset. At December 31, 2018, the liquidity risk associated with these maturities is matched by the Company's operating cash flows. Enjoy S.A. and Subsidiaries has no restrictions associated with leases. The Company has certain lease contracts, which contain renewal options and for which it is reasonably certain that the option will be exercised (indefinitely or for an indicated period). The lease term used to measure the liability and asset corresponds to such period unless the useful life of the related asset is shorter, in which case the useful life of the asset is considered to be the term of the contract. There are no agreements included in the lease contracts to be met by the Company over the term of the contracts. Enjoy S.A. and Subsidiaries does not have any other cash flow to which it is exposed with respect to the leasing liabilities previously reported. a) Right-of-use assets
As of December 31, 2018, the movement in the item Right-of-use associated with assets subject to IFRS 16 by asset class is as follows:
Lease Lease contracts contracts of Total of properties slot machines ThCh$ ThCh$ ThCh$ Balances as of January 1, 2018 1,379,993 13,535,143 14,915,136 Additions 119,429 356,977 476,406 Amortization for the year (716,756) (2,413,322) (3,130,078) Balances as of December 31, 2018 782,666 11,478,798 12,261,464
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017 b) Lease liabilities
As of December 31, 2018, the current and non-current lease liabilities are as follows:
Non- Current Total Non- Total Current more than 5 1 to 3 years 3 to 5 years Current Total years ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Contracts of slot machines 732,124 - - - - 732,124 Contracts of properties 2,308,236 1,886,312 2,934,356 4,678,864 9,499,532 11,807,768 Total 3,040,360 1,886,312 2,934,356 4,678,864 9,499,532 12,539,892
As of December 31, 2018, the liquidity risk associated with these maturities is matched with the operating cash flows of Enjoy S.A. and Subsidiaries. The Company has no restrictions associated with leases. Enjoy S.A. and Subsidiaries has certain lease contracts, which contain renewal options and for which it is reasonably certain that the option will be exercised (indefinitely or for a specified period). The lease term used to measure the liability and asset corresponds to such period unless the useful life of the related asset shorter, in which case the useful life of the asset is considered to be the term of the contract. There are no agreements included in the lease contracts to be met by the Company over the term of the contracts. Enjoy S.A. and Subsidiaries has no other cash flows to which it is exposed with respect to the leasing liabilities previously reported.
NOTE 39 - HYPERINFLATION IN ARGENTINA
As of July 2018, Argentina's economy is considered as hyperinflationary according to the criteria established in IAS 29 "Financial Reporting in Hyperinflationary Economies". This determination was made on the basis of a series of qualitative and quantitative criteria, among which stands out the presence of an accumulated inflation rate of more than 100% for 3 years. In accordance with IAS 29, the Financial Statement of the joint venture Cela S.A. in which Enjoy S.A. participates in Argentina has been restated retrospectively by applying a general price index to historical cost in order to reflect changes in the purchasing power of the Argentine peso as of the closing date of these financial statements. Non-monetary assets and liabilities were restated as of December 2009. It is important to note that Enjoy S.A. and Subsidiaries transitioned to IFRS on January 1, 2009, applying the attributed cost exception for the assets of property, plant and equipment. For purposes of recognition under the equity method in these Consolidated Financial Statements, Enjoy S.A. has used the restated financial statement of Cela S.A. translated at the closing exchange rate ($ARG/CLP) as of December 31, 2018. Furthermore, considering that the functional and presentation currency of Enjoy S.A. does not correspond to that of a hyperinflationary economy, in accordance with the guidelines established in IAS 29, the restatement of comparative periods is not required in the Group's Consolidated Financial Statements. These Consolidated Financial Statements reflect an increase in equity of ThCh$ 2,377,696 corresponding to the cumulative effect of the adjustment for inflation of the net non-monetary assets of the Argentine company Cela S.A. as of December 31, 2017. Additionally, since the previous date, a loss of ThCh$ 455,473 was recognized in the results of the period generated by the inflation adjustment and translation at the closing exchange rate as of December 31, 2018.
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Enjoy S.A. and Subsidiaries Notes To The Consolidated Financial Statements At December 31, 2018 and 2017
NOTE 40 - SUBSEQUENT EVENTS
1.- On January 14, 2019, the Commission for the Financial Market (CFM) was informed that the Board of Directors of Enjoy S.A. accepted the resignation of Mr. Gerardo Cood Schoepke as General Manager and Mr. Eliseo Gracia Martinez (who served as Corporate Operations Manager) was appointed to replace him, who assumed said position until the search for and appointment of a new General Manager is finalized.
2.- On February 20, 2019, the Superintendence of Gambling Casinos (SGC) authorized the corporate changes of Casino de Juegos del Pacífico S.A. and Casino Gran Los Ángeles S.A. (of the Latin Gaming group), which will be materialized through the sale of both companies to Enjoy Gestión Ltda. and Enjoy S.A., which will have a 99% and 1% participation, respectively.
3.- As of the date of issuance of these Financial Statements, there are no other subsequent events that could significantly affect the financial situation of Enjoy S.A. and Subsidiaries.
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