The-Spa-Lodge-At-Tagaytay-Highlands-Inc..Pdf

GENERAL INFORMATION

ITEM 1. DATE, TIME AND PLACE OF MEETING OF SECURITY HOLDERS

DATE: 03 August 2019

TIME: 11:00 a.m.

PLACE: Spring Garden, Highlands China Palace Tagaytay Highlands Complex, Brgy. Calabuso, Tagaytay City

Mailing address: Tagaytay Highlands Complex, Brgy. Calabuso, Tagaytay City

Approximate date on which the Information Statement is to be sent or given to security holders: 15 July 2019

ITEM 2. DISSENTER’S RIGHT OF APPRAISAL

The matters to be voted upon in the Annual Members’ Meeting on 03 August 2019 are not among the instances enumerated in Sections 42 and 81, Title X of the Corporation Code whereby the right of appraisal, defined to be the right of any stockholder to dissent and demand payment of the fair value of his shares, may be exercised. The instances where the right of appraisal may be exercised are as follows:

1. In case any amendment to the Articles of Incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those outstanding shares of any class, or of extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code;

3. In case TSL decides to invest its funds in another corporation or business outside of its primary purpose; and

4. In case of merger or consolidation.

ITEM 3. INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON

a. No person who has been a director or officer or a nominee for election as director of TSL or associate of such persons, has a substantial interest, direct or indirect, in the matter to be acted upon.

b. No director of TSL has informed the Club in writing that he intends to oppose the action to be taken by TSL.

CONTROL AND COMPENSATION INFORMATION

ITEM 4. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

a. TSL has 434 outstanding membership certificates as of 04 July 2019, Each membership certificate shall be entitled to one (1) vote with respect to the matter to be voted upon.

b. The record date for determining members entitled to notice of and to vote in during the annual member’s meeting is set on 4 July 2019.

c. Security Ownership of Certain Record and Beneficial Owners

Security Ownership of Certain Record and Beneficial Owners

The following table shows the record and beneficial owners owning more than 5% of the outstanding capital stock of TSL as of 30 June 2019.

AMOUNT AND NATURE NAME AND ADDRESS OF PERCENT OF TITLE OF CLASS OF RECORD/BENEFICIAL CITIZENSHIP RECORD/BENEFICIAL OWNER CLASS OWNERSHIP

Proprietary Belle Corporation * 202 membership Filipino 46.54% membership 5th Floor Tower A, Two E-com certificates certificate Center, Palm Coast Avenue, Mall of Asia Complex CBP-1A, Pasay City 1300

* Belle Corporation is a publicly-listed corporation. Its Board of Directors is composed of Messrs. Emilio S. De Quiros, Jr., Willy N. Ocier, Elizabeth Anne C. Uychaco, Manuel A. Gana, Jose T. Sio, Virginia A. Yap, Arthur L. Amansec, Aurora Cruz Ignacio, Jacinto C. Ng Jr., Gregorio U. Kilayko, Cesar E. A. Virata, and Amando M. Tetangco, Jr. Belle Corporation, having 46.26% shareholdings, is an associate of the Club.

All the members of the Board of Directors of Belle Corporation are Filipino citizens.

The top 20 stockholders of Belle Corporation as of 30 June 2019 are as follows:

Outstanding & Issued Stockholders Type / Class Shares 1 Belleshares Holdings, Inc. Common 2,604,740,622 2 PCD Nominee Corporation (Filipino) Common 2,504,738,686 3 PCD Nominee Corporation (Non-Filipino) Common 2,032,206,932 4. Sysmart Corporation Common 1,629,353,802 5 Sybase Equity Investment Corporation. Common 531,320,577 6 Social Security System Common 370,469,139 7 Eastern Securities Development Corp. Common 171,730,866 8 Ng, Jacinto C. Jr. Common 135,860,666

4 - Jacinto C. Ng, Jr or Anita C. Ng Common 18,293,333 Premium Leisure Corporation (form. Sinophil 99,987,719 9 Corp) Common 10 Ng, Jacinto L. Sr. Common 88,835,833 11 Parallax Resources Inc. Common 86,308,131 12 SLW Development Corporation Common 66,082,333 13 F. Yap Securities, Inc. Common 31,803,732 14 Willy N. Ocier Common 15,090,342 15 Pacita K. Yap / Phillip K. Yap Common 7,000,000 16 Lim Siew Kim Common 6,200,000 17 James Go. Common 4,816,999 18 Estate of Leo Joseph Blanchet Common 4,128,579 19 William T. Gabaldon Common 4,000,000 20 TDG Retirement Fund Common 2,536,800

SECURITY OWNERSHIP OF MANAGEMENT

The following is a tabular presentation of the membership certificates beneficially owned by all directors and executive officers of TSL as of 30 June 2019:

TITLE OF CLASS NAME OF BENEFICIAL OWNER AMOUNT AND NATURE OF OWNERSHIP PERCENT OF CLASS

Hans T. Sy 1 membership certificate 0.23% Proprietary Share No. 11 Harvard Road, Beneficial Forbes Park, Makati City

Jerry C. Tiu 1 membership certificate 0.23% Proprietary Share 5 Urdaneta St., Urdaneta Beneficial Village, Makati City

Ruben C. Tan 1 membership certificate Proprietary Share #769 Harvard St. Wack Beneficial 0.23% wack Village Mandaluyong City

Joseph T. Chua 1 membership certificate Macroasia Corporation, Beneficial Proprietary Share 0.23% 12/F Allied Bank Center, 6765 Ayala Avenue, Makati City Aggregate Security Ownership of Directors and 5 membership certificates 1.15% Officers

VOTING TRUST HOLDERS OF 5% OR MORE

There is no party that holds any voting trust or any similar agreement for 5% or more of TSL voting

5 securities. CHANGES IN CONTROL

TSL is not aware of any arrangement that may result in a change in control of the Club.

ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS

a. Directors, Executive Officers, Promoters and Control Persons

The following are the incumbent Directors and Key Officers of TSL elected during the last meeting of the shareholders held on 26 May 2018:

NATIO- TERM OF NAME POSITION AGE NALITY OFFICE Willy N. Ocier Filipino Chairman 62 1992 to present Hans T. Sy Filipino Director 63 1992 to present Jerry C. Tiu Filipino President 62 1999 to present Joseph T. Chua Filipino Independent Director 62 1999 to present Ruben C. Tan Filipino Independent Director 2018 to 63 Present A. Bayani K. Tan Filipino Corporate Secretary 63 1992 to present Manuel A. Gana Filipino Vice President / Treasurer 61 2000 to present Ma. Clara T. Kramer Filipino General Manager 57 2010 to present

Upon recommendation of the Club’s Nomination Committee composed of Mr. Willy N. Ocier (Chairman), Jerry C. Tiu, and Joseph T. Chua, as required by the Club’s Manual of Corporate Governance, the following persons are nominated for election to the positions above-stated for the year 2019-2020, to hold office as such for one year or until their successors shall have been duly elected and qualified.

The independent directors, Mr. Joseph T. Chua and Mr. Ruben C. Tan, were nominated by Mr. Willy N. Ocier and Jerry C. Tiu, respectively. Except as fellow stockholders of the Corporation, the nominees for independent director are not related to the persons nominating them.

Presented below are brief write-ups on the nominees’ business experience for at least the past five (5) years:

Willy N. Ocier Chairman

Mr. Ocier is the Chairman of the Board of TSL. He is also the Chairman of the Board of Tagaytay Midlands Golf Club, Inc. (“TMGCI”), and The Country Club at Tagaytay Highlands, Inc. (“TCCATHI”) from year 1996 up to present. He is the Vice-Chairman of Tagaytay Highlands International Golf Club, Inc. (THIGCI) from 1992 up to present, Co Vice Chairman Belle Corporation, and concurrently the Chairman and President of Pacific Online Systems Corporation; Chairman of the Board and a Director of APC Group, Inc., Premium Leisure Corp., and Premium Leisure and Amusement, Inc., Leisure and Resorts World Corporation, Vantage Equities, Philequity Management, Inc., Philequity Funds, Philippine Global Communications, Inc. and Toyota Corporation

6 Batangas. He was formerly President and Chief Operating Officer of Eastern Securities Development Corporation. He graduated from Ateneo de Manila University with a Bachelor of Arts degree in Economics.

Jerry C. Tiu President

Mr. Tiu, Filipino, is the President and Director of TSL since 2001. He is the President and Director as well of TCCATHI, THIGCI, TMGCI, and Tagaytay Highlands Community Condominium Association, Inc., Tagaytay Midlands Community Homeowner’s Association Inc and Greenlands Community Homeowner’s Association Inc. Moreover, he is the Vice President and a Board of Trustee of The Highlands Prime Community Condominium Owner’s Association, Inc. The HPI’s Horizon Community Condominium Owner’s Association, Inc. and The Hillside at Tagaytay Highlands Community Homeowner’s Association, Inc from 2014 to present. He holds a Bachelor of Science degree in Commerce (Major in Marketing) from the University of British Columbia.

Hans T. Sy Director

Mr. Sy, Filipino, is currently a Director of TSL. He is also a Director of TMGCI and TCCATHI and the Chairman of THIGCI. Currently, he is the Chairman of the Board of China Banking Corporation and has served as such since May 5, 2011. He first served as member of China Banking Corporation's Board of Directors on May 21, 1986, and was elected Vice Chairman in 1989. Aside from China Banking Corporation, Mr. Sy also serves in the Boards of other companies listed in the Philippine Stock Exchange (PSE): in SM Prime Holdings, Inc. as Director and Chairman of the Executive Committee and in SM Investments Corporation as Adviser to the Board. He also has positions in other companies under the SM Group. Mr. Sy is a Mechanical Engineering graduate of the De La Salle University.

Ruben C. Tan Independent Director

Mr. Tan, Filipino, is currently an independent Director of TSL, TMGCI and TCCATHI. He is also the President of Glendale Mining and Development Corporation, Citimex, Inc., Cedarside Industries Inc. and Barrington Carpets Inc. From 2012 to present, he is the Director of Blue Ridge Mineral Corp. and Eagle Crest Mining and Development Corp. He holds a Bachelor of Science in Mechanical Engineering from De La Salle University.

Joseph T. Chua Independent Director

7 He holds an MBA degree in International Finance from the University of Southern California. He is also a member of several Organizations such as Management Association of the Philippines, Philippine Chamber of Commerce and Industry, German Philippine Chamber of Commerce and Rubber Association of the Philippines.

Manuel A. Gana Vice-President and Treasurer

Mr. Gana, Filipino is the Vice President and Tresurer of the Club as well as THIGCI, TMGCI and TCCATHI. Mr. Gana is also the Executive Vice President and Chief Financial Officer of Belle Corporation (Belle). He joined Belle in 1997 as Vice President for Corporate Development and Special Projects, during which time he was also assigned as the Vice President-Finance and Chief Financial Officer for MagiNet Corporation, which was then as subsidiary of Premium Leisure Corporation, a subsidiary of Belle. He is also a Director of Woodland Development Corporation. Previously, he was the President of Sinophil, and Director of Investment Banking at Nesbitt Burns Securities Inc. in New York. He also previously worked from Bank of Montreal and Merrill Lynch Capital Markets (both in New York), and for Procter & Gamble Philippine Manufacturing Corporation. Mr. Gana holds a Master of Business Administration degree from the Wharton School of University of Pennsylvania, and degrees in Accounting and Economics from De La Salles University. He is a Certified Public Accountant.

A. Bayani K. Tan Corporate Secretary

Mr. A. Bayani K. Tan, Filipino, is the Corporate Secretary of the Corporation (since December 1999). He is also a Director, Corporate Secretary or both of the following reporting and/or listed companies: Belle Corporation (since May 1994, Publicly Listed), Coal Asia Holdings, Inc. (since July 2012, Publicly-Listed), Discovery World Corporation (since March 2013 as Director, since July 2003 as Corporate Secretary, Publicly-Listed), First Abacus Financial Holdings Corp. (since May 1994, Publicly Listed), I-Remit, Inc. (since May 2007, Publicly-Listed), Pacific Online Systems Corporation (since May 2007, Publicly- Listed), Philequity Dividend Yield Fund, Inc. (since January 2013), Philequity Dollar Income Fund, Inc. (since March 1999), Philequity Fund, Inc. (since June 1997), Philequity Peso Bond Fund, Inc. (since June 2000), Philequity PSE Index Fund, Inc. (since February 1999), Premium Leisure Corporation (since December 1993, Publicly-Listed), TKC Metals Corporation (since February 2007, Publicly-Listed), THIGCI (since November 1993), TMGCI (since June 1997), TCCATHI (since August 1995) and Vantage Equities, Inc. (since January 1993, Publicly-Listed). Mr. Tan is also a Director and the Corporate Secretary of Sterling Bank of Asia Inc. (since December 2006). He is the Managing Partner of the law offices of Tan Venturanza Valdez (since it was established in 1988), Managing Director/President of Chamrock Development Corporation (since May 1988). Director of Destiny LendFund, Inc. (since December 2005), Pascual Laboratories, Inc. (since March 2014), and Pure Energy Holdings Corporation (since October 2016), President of Catarman Chamber Elementary Scholld Foundation, Inc. (since August 2012), managing Trustee of SCTan Foundation, Inc. (since 1986), Trustee of Rebisco Foundation, Inc. (since April 2013) and Trustee and Corporate Secretary of St. Scholastica’s Hospital, Inc. (since February 2011).

Mr. Tan holds a Master of Laws degree from New York University (Class of 1988) and earned his Bachelor of Laws degree from the University of the Philippines (Class of 1980)

8 where he was a member of the Order of the Purple Feather (U.P. College of Law Honor Society) and ranked ninth in his class. Mr. Tan passed the bar examination in 1981 where he placed sixth. He has a Bachelor of Arts major in Political Science degree from the San Beda College (Class of 1976) from where he graduated Class Valedictorian and was awarded the medal for Academic Excellence.

Key Officers

Ma. Clara T. Kramer

Ms. Kramer, Filipino is the General Manager of TSL. She is also the concurrent General Manager of TMGCI, THIGCI and TCCATHI. She was a consistent Dean’s Lister in Assumption College (San Lorenzo Village, Makati City) where she earned her Bachelor’s degree. She started her career in hotel industry back in December of 1983 when she joined the sales department of Manila Hotel as Sales Executive. In July 1990, she was hired by L’Fisher Hitel as Front Office Manager and later as PR & Promotions Manager until she got promoted in June 2001 and was tasked to manage the Sales and Marketing Department. As member of the management team, she actively took part in the formulation of major policies and procedures of the Hotel. Ms. Kramer is also involved in various civic and social activities as member and resource speaker focusing on family, marriage and parenting.

b. Material Pending Legal Proceedings

As of 30 June 2019, there is no material pending legal proceeding which TSL is a party to. c. Significant Employees

TSL has no significant employee as of 30 June 2019. d. Family Relationships

None of the directors or officers of TSL are related to each other up to the fourth civil degree of consanguinity or affinity. e. Involvement in Certain Legal Proceedings

The Club is not aware of any of the following events wherein any of its directors, nominees for election as director, executive officers, underwriter or control person were involved during the past five (5) years:

(a) Any bankruptcy petition filed by or against any business of which any of TSL's directors or officers was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time;

(b) Any conviction by final judgment, in a criminal proceeding, domestic or foreign.

9 vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement of any of the above persons in any type of business, securities, commodities or banking activities; and,

(d) Any finding by a domestic or foreign court of competent jurisdiction (in civil action), the SEC or comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self regulatory organization, that any of the above persons has violated a securities or commodities law, and the judgment has not been reversed, suspended, or vacated. f. Certain Relationships and Related Transactions

TSL has not been involved in any transaction during the last two (2) years in which any of its directors, executive officers, nominees or security holders has direct or indirect material interest. g. Disagreement with Director

None of the directors have resigned or declined to stand for re-election to the Board of Directors since the date of the last annual meeting of security holders because of a disagreement with TSL on any matter relating to TSL’s operations, policies or practices.

ITEM 6. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The Directors do not receive any compensation from the Club.

SUMMARY COMPENSATION TABLE Annual Compensation (a) (b) (c) (d) (e) Salary / Name and Principal Position Year Professional Bonus Others Service Fees

NOT APPLICABLE

TSL has no other arrangements, including consulting contracts, pursuant to which any director of the Club was compensated, or is to be compensated, directly or indirectly, during the Clubs’s last completed fiscal year, and the ensuing year.

ITEM 7. INDEPENDENT PUBLIC ACCOUNTANTS

SyCip Gorres Velayo & Co. (“SGV”), the Club’s external auditors for 2017-2018, will be recommended for re-appointment as such for the current year. Representatives of SGV are expected to be present at the Annual Stockholders’ Meeting to respond to appropriate questions and will be given the opportunity to make a statement if they so desire.

Over the past five (5) years, there was no event where SGV and the Club had any disagreement with regard to any matter relating to accounting principles or practices,

10 disclosure of financial statements or auditing scope or procedure.

In Compliance with the SEC Memorandum Circular No. 8 Series of 2003, Ms.Julie Christine Ong-Mateo was assigned in 2017 as SGV’s engagement partner for the Club to replace Mr. Sherwin V. Yason assignment ended after the 2015-2016 audit engagement.

The Club paid SGV ₱167,000 and ₱151,900 for external audit services for 2018 and 2017.

For each of the last two (2) fiscal years, SGV did not render services for tax accounting, planning, compliance, advice, or any other professional services for which it billed the Club the corresponding professional fees.

The Audit Committee, composed of Mr. Ruben C. Tan as Chairman, and Mr. Willy N. Ocier, Jr. and Hans T. Sy as Members, recommends to the Board of Directors the appointment of the external auditors. The Board of Directors and the stockholders approve the Audit Committee’s recommendation. The Executive Committee approves the audit fees as recommended by the Audit Committee.

OTHER MATTERS

ITEM 15. ACTION WITH RESPECT TO REPORTS

TSL will seek the approval by the members of the Minutes of the previous Members’ Meeting during which the following were taken up: (1) Call to Order, (2) Certification of Notice and Quorum, (3) Approval of the Minutes of the Last Members’ Meeting, (4) Approval of Audited Financial Statements and Annual Report for 2016, (5) Ratification and Approval of the acts of the Board of Directors (6) Election of Directors, (7) Appointment of SyCip, Gorres, Velayo & Co. as External Auditors, and (8) Adjournment.

The items covered with respect to the ratification of the acts of the Board of Directors and officers for the past year up to the date of the meeting are those items entered into in the ordinary course of business, with those of significance having been covered by appropriate disclosures such as:

1. Appointments of officers; 2. Membership in the relevant committees; 3. Budget for Capital Expenditures/Renovation and other Projects; 4. Opening of Bank Accounts; 5. Employee Benefits and Incentives; and 6. Approval of Membership Applications.

Management reports will be submitted for approval by the members at the meeting. Approval of the reports will constitute approval and ratification of the acts of management for the past year.

ITEM 19. VOTING PROCEDURES

Each member shall be entitled to one vote, in person or thru proxy for each share with voting right. All elections and all questions, except as otherwise provided by law, shall be decided by the plurality vote of the members present in person or by proxy, a quorum (majority of the issued and outstanding capital stock having powers) being present.

In the election of directors, the five (5) nominees with the greatest number of votes will be elected directors. If the number of nominees for election as directors does not exceed the number of directors to be elected, the Secretary of the Meeting shall be instructed to cast all votes represented at the Meeting equally in favor of all such nominees. However, if the number of nominees for election as directors exceeds the number of directors to be elected, voting shall be done by ballot, and counting of votes shall be done by two (2) election inspectors appointed by the Chairman of the Meeting.

For motion on other corporate matters that will be submitted for approval and for such other matters as may properly come before the Meeting, a vote of the majority of the shares present or represented by proxy at the meeting is necessary for their approval. Voting will be done by secret balloting and the votes for or against the matter submitted shall be tallied by the Secretary. TSL shall adopt the rules and procedures for balloting to insure the proper and orderly conduct of elections.

Items 8. 9, 10, 11, 12, 13, 14, 16, 17, and 18 are not responded to in this report, the Club having no intention to take any action with respect to the information required therein.

THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. BUSINESS AND GENERAL INFORMATION

THE BUSINESS

TSL was incorporated in 2001 as an exclusive lodge membership operating on a non-profit basis. Membership at TSL is proprietary. This means that TSL Members have full equity membership certificate in the ownership of the assets of TSL, which include the land, the 25 one-bedroom suites, and the fixtures and equipment. Membership in TSL cannot be assigned nor be leased out; however, it may be transferred after the standard holding period requirement of two years from the date that TSL is declared fully operational.

Constructed using authentic North American cedar logs, TSL is designed to provide the feel and comfort of a traditional log cabin. Since it is located on one of the highest points of Tagaytay Highlands, it has a breathtaking view of Mount Makiling, Laguna Lake, and Taal Volcano and the Highlands Golf Course.

TSL is situated in Tagaytay City which is about 60 kilometers south of Metro Manila.

Members are enjoying the following upgraded benefits:  24 room nights per year of free accommodation, 12 of which are weekend or holiday nights and 12 weekday nights;  Convertibility of unused weekday nights to weekend nights ( subject to room availability ) with only a minimal conversion fee;  Privilege to use more room nights after the free 24 nights, subject to the corresponding room charge;  “Junior Membership” eligibility;  Accommodation of guest at the Lodge; and  Special discounts on certain spa services and facilities.

The privileges and benefits of TSL Membership are subject to the procedures, rules and regulations set forth by Management for this purpose.

TSL revenue contributions are generated from collection of Membership Dues (35.10%), Room Sales (31.66%), Food & Beverages (18.36%), Service fee/Spa Commission (7.09%), and Other income (7.49%).

BANKRUPTCY RECEIVERSHIP OR SIMILAR PROCEEDINGS TSL has not been involved in any bankruptcy, receivership or similar proceedings for the past (3) years.

MATERIAL RECLASSIFICATION, MERGER, CONSOLIDATION OR PURCHASE OR SALE OF A SIGNIFICANT AMOUNT OF ASSETS (NOT ORDINARY)

TSL has not engaged in any material reclassification, merger, consolidation or purchase or sale of significant amount of assets (not ordinary) for the past (3) years.

COMPETITION

There is no formal or organized secondary market for the purchase and sale of TSL membership certificates in the Philippines. As such, holders of membership certificates of TSL who wish to sell or dispose of their membership certificates may not readily find a counter party for the

14 transaction at the desired asking price. However, there is currently a growing number of lodge memberships are being established in various parts of the country. This may affect appreciation in the value of investment in TSL.

Investments in leisure-oriented developments such as TSL facilities are influenced by economic and political conditions in the country. Any adverse economic and political developments in the country may affect the demand for such leisure facilities, and this may result in anticipated appreciation in the prices of TSL membership certificates.

Although there are other companies engaged in the same line of business, TSL competes in terms of services and facilities. TSL is highly competitive because of its time sharing lodge accommodation and the panoramic view of Taal Lake, Mt. Makiling, and Laguna de Bay. TSL also offers several body treatment massages such as Aromatherapy, Swedish, Holistic, Sports, Prenatal, Child Massage, Shiatsu or Combination massage, complimented with essential oils such as, Sweet Almond Oil, Lavender, Ilang-ilang Oil.

SOURCES AND AVAILABILITY OF RAW MATERIALS

The principal suppliers include Eastworld Sales Philippines, Reem-Cool Airconditioning and Refrigeration, Sanitary Care Products, Huge Manufacturing Inc., FW Spavenue, Delos Reyes Trading, RGL33 Fruits and Vegetables, Ace Hardware, Star Appliance, and Silang Gasul. There are no existing major supply contracts entered into by the Club.

TRANSACTIONS WITH AND/ OR DEPENDENCE ON RELATED PARTIES

In the ordinary course of business, TSL has transactions with affiliates mainly consisting of noninterest bearing advances for the acquisition/transfer of property and equipment, and reimbursement of certain expenses.

COMPLIANCE WITH ENVIRONMENTAL LAWS

TSL, being an affiliate of the Tagaytay Highlands Clubs, has complied with pertinent environmental laws and regulations and wherein the Clubs has received the Environmental Certificate Clearance issued by the Department of Energy and Natural Resources.

GOVERNMENT REGULATIONS

TSL has complied with licensing and regulatory requirements necessary for its development and operations.

EMPLOYEES

The TSL is run by a team of regular and casual employees as follows: Regular Employees(based on head count as of 30 June 2019) Officer 3 Supervisor 2 Rank & File 21 Total 26

All regular rank and file employees are not subject to the Collective Bargaining Agreement.

15 MAJOR BUSINESS RISKS

TSL has been sustaining its operational requirements through the collection of monthly dues from each member and the operation of Lodge rooms. It has no foreign currency exposures or obligations that will have a material impact on its short-term or long-term liquidity due to the depreciation of the peso. Despite the current economic slowdown, however, TSL membership has not been adversely affected. There are no foreseeable any negative effect on members’ patronage in view of the present economic condition. Likewise, TSL’s wide array of sports and recreational facilities and club events has attracted members to it. TSL does not foresee any negative effect on members’ patronage in view of the present economic condition.

DIRECTORS AND EXECUTIVE OFFICERS

Please refer to discussion on Directors and Executive Officers.

MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER RELATED MEMBER MATTERS

Market Information

TSL has 434 membership certificates as of 30 June 2019, of which 202 or 46.54% is owned by Belle Corporation. The remaining membership certificates are owned by other members. There are 232 holders of the Club’s membership certificates.

Top 20 members are as follows:

No. of membership Name of member % certificates

Belle Corporation 202 46.54 Fortune International Trading Corp. 2 0.46 Hortaleza, Rosalinda 2 0.46 JLV Holdings, Inc. 2 0.46 Lahoz, Bernardo 2 0.46 Lim, Jose Antonio Ong 2 0.46 Ocampo, Antonio V. 2 0.46 Tangco, Paciano L. 2 0.46 RDJ Development Corporation 2 0.46 Others 216 49.77 Total 434 100.00%

Market Value of Securities

Below are the high and low bid prices for the past two (2) years based on GG & A Club Shares records:

Period High Low

Quarter ended June 2016 600,000 600,000 Quarter ended September 2016 600,000 500,000

16 Quarter ended December 2016 600,000 500,000 Quarter ended March 2017 650,000 500,000 Quarter ended June 2017 650,000 500,000 Quarter ended September 2017 550,000 500,000 Quarter ended December 2017 600,000 530,000

(Forward) HIGH LOW

Quarter ended March 2018 800,000 600,000 Quarter ended June 2018 800,000 650,000 Quarter ended September 2018 750,000 750,000 Quarter ended December 2018 550,000 550,000 Quarter ended March 2019 550,000 550,000 Quarter ended June 2019 600,000 600,000

TSL’s securities are not traded in any of the stock exchanges.

Dividends TSL does not declare dividends to its shareholders. In accordance with the TSL’s Articles of Incorporation and By-Laws, no profit shall inure to the exclusive benefit of any of its shareholders, hence, no dividends shall be declared in their favor. Shareholders shall be entitled only to a pro-rata share of the asset of the company at the time of the dissolution or liquidation of the company.

Recent Sales of Unregistered Securities All TSL’s securities are registered under the Securities Regulation Code. There were no sale of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities for the past (3) years.

17 MANAGEMENT'S DISCUSSION AND ANALYSIS

TSL derived its revenues from the membership dues, food and beverage sales and income from lodge rooms.

Financial Highlights (In Million Pesos) Jun 30 Jun 30 Dec 31 Dec 31 Dec 31 2019 2018 2018 2017 2016 Balance Sheet Total Assets 47.54 47.36 46.85 44.46 52.05 Total Liabilities 13.22 10.19 9.19 7.93 12.09 Total Members Equity 34.32 37.18 37.66 36.53 39.96

Jun 30 Jun 30 Dec 31 Dec 31 Dec 31 2019 2018 2018 2017 2016 Income Statement Total Revenues 10.57 13.23 26.30 21.44 20.59 Total Cost and Operating Expenses 9.64 8.63 18.41 17.10 14.45 Depreciation and Amortization 4.17 3.90 7.87 7.75 7.49

Net Income/(Loss) (3.34) 0.65 (0.76) (3.41) (1.35)

RESULTS OF OPERATIONS

Six-month period ending June 30, 2019 compared to June 30, 2018

Revenue For the six months ended June 30, 2019, TSL generated total revenue of P=10.57 million, lower by P= 2.66 million or 20.09% as compared to total revenue of P=13.23 million for the six month period ended June 30, 2018. This was mainly attributed to the decrease in room revenue by P=1.81 million or 44.51% from P=4.07 million for the six month ended June 30, 2018 to P=2.26 million in six month ended June 30, 2019. Food, beverage and sundry also showed a decrease of P=0.58 million or 20.34% from P=2.87 million in 2018 period to P=2.29 million in 2019 period. Other income also showed a decrease of P=0.43 million or 34.68% from P=1.25 million to =0.81P million in 2018 and 2019 respectively.

Cost of services and Operating expenses During the six-month period ended June 30, 2019, cost of services and operating expenses amounting to P= 9.64 million showed an increase of P=1.01 million or 11.71% compared to P=8.63 million in 2018. These was mainly attributed to the salaries, wages and employee benefits by P= 0.38 million or 15.01%, repairs and maintenance by P=0.16 million or 30.30%, and miscellaneous expense by P=1.31 million or 125.25%.

Net Income/Loss The Spa & Lodge posted a net loss amounting to P=3.34 million for the six months period ended June 30, 2019 which showed decrease of P=4.00 million as compared to the net income of P=0.65 million for the six months ended June 30, 2018. This was due to the closure of 15 rooms currently undergoing renovation.

18 December 31, 2018 compared to December 31, 2017

Revenue During the year, cost of services of P=26.3 million showed an increase of P=4.86 million or 22.69% compared to P=21.44 million in 2017. This was attributed to the increase in depreciation by P=0.12 million or 1.61% from P=7.74 million in 2017 to P=7.87 million in 2018.Supplies also increased by P=.15 million or 20.03% from P=.73 million in 2017 to P=.87 million in 2018.

Moreover, outside services increased by P=.07 million or 1395.77%. On the other hand, salaries, wages and benefits decreased by P=.05 million or 0.81%. Retirement benefit cost increased by P= 0.03 million or 11.24% due to provision during the period. Repairs and maintenance decreased by P=0.47 million or 35.35%. Food, beverages and sundries increased by P=0.07 million or 2.96% from P=2.25 million to P=2.32 million in 2017 and 2018, respectively. This was attributed to the increase in Food, beverages and sundries Revenue.

Cost of services and Operating expenses Operating expenses increased by P=1.40 million or 8.18% from P=17.10 million in 2017 to P=18.41 million in 2018, due to increase in miscellaneous expense from P=0.10 million in 2017 to P=0.63 million in 2018. Also, taxes and licenses increased by P=0.02 million or 16.73% from P=0.14 million in 2017 to P=0.16 million in 2018. Fuel and oil increased by P=0.10 million or 132.86% due to higher fuel and oil rates during the period. In addition, processing fees increased by P=0.04 million or 33.95%. Meanwhile, insurance decreased by P=0.10 million or 22.94% from P=0.44 million in 2017 to P=0.34 million in 2018. Supplies also showed a decreased of 13.0% or P=0.02 million due to lower supply expense incurred during the period.

Net Income The Company posted a net income amounting to P=0.76 million which showed an improvement of P=4.17 million for the twelve-month period ended December 31, 2018 as compared to net loss of P=3.41 million in the twelve-month period ended December 31, 2017.

December 31, 2017 compared to December 31, 2016

Revenue TSL’s performance in 2017 compared to 2016 showed an increase in total revenue of P=0.85 million or 4.11% from P=20.58 million in 2016 to P=21.43 million in 2017. The Company’s business operations mainly consist of Room Revenue, Spa Revenue & Food and Beverage Revenue. Room Revenue decreased by P=0.17 million or 3.23% from ₱5.16 million in 2016 to P=4.99 million in 2017 due to decreased in registered room accommodation for the year. Meanwhile, the Food, beverage and sundries revenue of P4.26 million for the year ended December 31, 2017 were increased by P=0.63 million or 17.28% compared to ₱3.64 million for the year ended December 31, 2016 due to increase in members patronage and delivery services to the home owners. Meanwhile, Spa Revenue decreased by P=0.13 million or 7.32% from ₱1.79 million in 2016 to ₱1.66 million in 2017 due to temporary close of salon operations starting August 2016. On the other hand, the membership transfer and assignment fee increased by P=0.13 million or 46.88% from ₱0.29 to ₱0.42 million in 2016 and 2017 respectively due to increase by transfer of shares for the year.

19 benefits, repairs and maintenance and depreciation expense for the year. The increase in Operating expenses of P=0.20 million or 6.35% from P=3.10 million in 2016 to P=3.30 million in 2017 due to increase in insurance, supplies, transportation and travel, and entertainment, amusement and recreation expenses.

Net Loss The Club posted a total net loss of ₱3.41 million in 2017 compared to P=1.35 million in 2016.

FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION

Six-month period ending June 30, 2019 compared to June 30, 2018

Assets The Spa & Lodge has total assets of P=47.54 million as of June 30, 2019 compared to P=46.90 million as of December 31, 2018. The Company has current asset of P=1.25 for each peso of current liabilities as of June 30, 2019 compared to P=2.64 as of December 31, 2018 as a result of reduction in receivables and increase in accounts payable and accrued expenses.

Cash and cash equivalents Cash and cash equivalents showed an increase of P=3.39 million or 54.06% from P=6.28 million as of December 31, 2018 to P=9.67 million as of June 30, 2019. This was due to net cash provided by operating activities amounting to P=7.96 million. This was reduced by the addition to property and equipment amounting to P=4.57 million.

Receivables Receivables decreased by P=4.96 million or 34.84% from P=14.24 million as of December 31, 2018 to P=9.28 million as of June 30, 2019 due to payment from members and related parties during the period.

Inventories Inventories also showed an increase of P=0.16 million or 31.06% from P=0.51 million as of December 31, 2018 to P=0.66million as of June 30, 2019 due to increase in supplies.

Other current assets Other current assets increased by P=1.64 million or 83.01% from P=1.98 million as of December 31, 2018 to P=3.63 million as of June 30, 2019 which represents the remaining unamortized portion of insurance and deposit to contractors.

Property and equipment Property and equipment of P=24.31 million as of June 30, 2019 showed an increase of P=0.40 million as compared to P=23.90 million as of December 31, 2018 due to improvement in building, facilities and equipment of P=4.55 million. This was offset by the depreciation expense during the period amounting to P=4.15 million.

Liabilities Total liabilities increased by P=3.98 million or 4.3.05% from P=9.24 million as of December 31, 2018 to P=13.22 million as of June 30, 2019. These were mainly due to annual dues paid collected in advance and provision for pension liability during the period.

Equity Member’s equity showed a decrease of P=3.34 million or 8.88% from P=37.66 million as of December 31, 2018 to P=34.32 million as of June 30, 2019 due mainly to the net loss recognized for the six months ended June 30, 2019.

December 31, 2018 compared to December 31, 2017

Assets The Spa and Lodge has total assets of P=46.85 million as of December 31, 2018 compared to P=44.46 million as of December 31, 2017. The Company has current ratio of P=1.70 for each peso of current liabilities as of December 31, 2018 compared to P=2.01 as of December 31, 2017.

Cash and Cash equivalents Cash and cash equivalents increased by P=3.94 million or 168.74%, from =2.34P million in 2017 to P= 6.28 million as of December 31, 2018 due to net cash provided by operating activities of P=5.43 million and net to cash used in addition of property and equipment of P=1.49 million during the year.

Receivables Receivables increased by P=3.94 million or 38.26% from P=10.30 million to P=14.24 million as of December 31, 2017 and 2018, respectively due to collection in receivables from related parties amounting to P=3.68 million during the year.

Other current assets Other current assets posted an increase of P=0.66 million or 52.35% from P=1.26 million as of December 31, 2017 to P=1.92 million as of December 31, 2018 due to increase in creditable withholding tax of P=0.68 million during the period and increase in deposit to contractors of P=0.02 million.

Noncurrent assets Property and equipment of P=23.90 million in December 31, 2018 was lower by P=6.38 million or 21.08% compared to P=30.29 million as of December 31, 2017, due to depreciation charges during the year.

Liabilities Total liabilities increased by P=1.26 million or 15.83% from P=7.93 million as of December 31, 2017 compared to P=9.19 million as of December 31, 2018, mainly due to increase in payables during the year of 2018.

Equity The Company’s shareholders’ equity as of December 31, 2018 of P=37.66 million was higher by P= 1.13 million or 3.10% compared to P=36.53 million as of December 31, 2017 due to income incurred during the year of 2018.

December 31, 2017 compared to December 31, 2016

Assets The Spa and Lodge has total assets of P=44.46 million as of December 31, 2017 as compared to P=

21 52.05 million as of December 31, 2016. The Club has current ratio of P=2.01 for each peso of current liabilities for the year ended December 31, 2017 as compared to P=1.27 million as of December 31, 2016.

Receivables Receivables decreased by P=1.68 million or 14.01% from P=11.97 million as of December 31, 2016 to P=10.30 million as of December 31, 2017 due to collection in receivables from related parties amounting to P=1.34 million during the year.

Other Current Assets Other current assets posted an increase of P=0.21 million or 19.93% from P=1.05 million as of December 31, 2016 to P=1.26 million as of December 31, 2017 due to increase in creditable withholding tax of P=0.55 million during the period and decrease in input value-added tax of P= 0.36 million.

Noncurrent assets Property and Equipment of P=30.29 million in December 31, 2017 was lower by P=7.16 million or 19.12% compared to P=37.45 million as of December 31, 2016, due to depreciation charges during the year.

Liabilities Total Liabilities decreased by P=4.41 million or 34.37% from P=12.09 million as of December 31, 2016 compared to P=7.93 million as of December 31, 2017, mainly due to payments made during the year of 2017.

EQUITY The Company’s shareholders’ equity as of December 31, 2017 of P=36.53 was lower by P=3.43 million or 8.60% compared to P=39.96 million as of December 31, 2016 due to total comprehensive loss during the year of 2017.

Below are the comparative key performance indicators of TSL: PERFORMANCE JUN 30, 2019 DEC 31, 2018 DEC 31, 2017 FORMULA FOR CALCULATION INDICATORS (UNAUDITED) (AUDITED) (AUDITED) Current ratio Current assets over current 1.85 : 1.00 2.65 : 1.00 2.01 : 1.00 liabilities

Debt to equity Total debt over total 0.37 : 1.00 0.23 : 1.00 0.19 : 1.00 ratio members’ equity

Asset to equity Total assets over total equity 1.39 : 1.00 1.25 : 1.00 1.25 : 1.00 ratio

Fixed assets Sales over net fixed assets 0.44 times 0.10 times 0.71 times turnover

Profitability Net income over total 0.05 : 1.00 (0.32) : 1.00 0.05 : 1.00 ratio revenue

EBITDA * per Excess of Expenses Over ₱2,153 ₱2,001 (₱9,980) share Revenue before Interest, Tax,

22 Depreciation and Amortization over weighted average number of shares * Excess of Expenses Over Revenue before Interest, Tax, Depreciation and Amortization (EBITDA) As of the second quarter ended June 30, 2019, except for what has been stated above, there were no material events or uncertainties known to management that had a material impact on past performance, or that would have a material impact on future operations in respect of the following:

i. Known trends, demands, commitments, events or uncertainties that would have a material impact on the Club;

ii. Events that will trigger direct or contingent financial obligation that is material to the Club, including any default or acceleration of an obligation;

iii. Material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Club with unconsolidated entities or other persons created during the reporting period;

iv. Material commitments for capital expenditures that are reasonably expected to have a material impact on the Club’s short term or long-term liquidity;

v. Known trends, events or uncertainties that have had or that are reasonably expected to have a material favorable or unfavorable impact on net sales/ revenues/ income from continuing operations;

vi. Significant elements of income or loss that did not arise from the Club’s continuing operations;

vii. Seasonal aspects that had a material impact on the Club’s results of operations; and

viii. Material changes in the financial statements of the Club as of June 30, 2019, except as reported in the MD&A.

DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING & FINANCIAL DISCLOSURE

There have been no changes in and any disagreements with accountants on any accounting financial disclosures.

MERGERS, CONSOLIDATIONS AND SIMILAR MATTERS

There is no action to be taken with respect to any transaction involving the following:

(1) the merger or consolidation of the registration into or with any other person or of any other person into or with the registrant;

(2) the acquisition by the registrant or any of its security holders of securities of another person;

(3) the acquisition by the registrant of any others going business or of the assets thereof;

23 (4) the sale or other transfer of all or any substantial part of the assets of the registrant; or

(5) the liquidation or dissolution of the registrant,

ACQUISITIONS OR DISPOSITIONS OF PROPERTY

There is no action to be taken with respect to the acquisition or disposition of any property.

RESTATEMENT OF ACCOUNTS

There is no action to be taken with respect to the restatement of any asset, capital, or surplus account of TSL.

24 DISCUSSION ON CORPORATE GOVERNANCE

TSL remains focused on insuring the adoption of systems and practices of good corporate governance in enhancing value for its shareholders.

In compliance with the initiative of the Securities and Exchange Commission (“SEC”), TSL submitted its Corporate Governance Manual (the “Manual”) to the SEC. This manual institutionalizes the principles of good corporate governance in the entire Company. TSL believes that corporate governance, the framework of rules, systems and processes governing the performance of the Board of Directors and Management of their respective duties and responsibilities, and from which the organization’s values and ethics emerge, is of utmost importance to the Club’s shareholders and other stakeholders, which include, among others, clients, employees, suppliers, financiers, government and community in which it operates. The Club undertakes every effort possible to create awareness throughout the entire organization.

TSL has been monitoring compliance with SEC Memorandum Circular No.2, Series of 2002, as well as other relevant SEC circular and rules on good corporate governance. TSL also appointed members of various Board level committees. These committees consist of the Membership Committee, the Nomination committee (for selection and evaluation of qualifications of directors and officers), the Compensation Committee (tasked to consider an appropriate remuneration system), and the Audit Committee (tasked to review financial and accounting matters). A Compliance Officer was also appointed. Members of various committees are elected annually and to serve for a term of one (1) year.

As proof of compliance with leading practices and principles of Good Governance TSL has formally adopted a manual on Corporate Governance and regularly submits to SEC its Corporate Governance Self–Rating Form.

The Board establishes the major goals, policies and objectives of TSL, as well as the means to monitor and evaluate the performance of Management. The Board also ensures that adequate internal control mechanisms are implemented and properly complied in all levels.

TSL is not aware of any non-compliance with its Manual on Corporate Governance, by any of its officers or employees.

25 UNDERTAKING TO PROVIDE COPIES OF THE ANNUAL REPORT

UPON WRITTEN REQUEST OF ANY MEMBER OF RECORD ENTITLED TO NOTICE OF AND VOTE, THE COMPANY SHALL FURNISH SUCH MEMBER A COPY OF THE COMPANY’S ANNUAL REPORT (SEC FORM 17-A) WITHOUT CHARGE. ANY SUCH WRITTEN REQUEST SHALL BE ADDRESSED TO:

THE CORPORATE SECRETARY THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC.. BRGY. CALABUSO, TAGAYTAY CITY PHILIPPINES

f:\data\clients\592\corp\asm\2018\2018 tsl definitive 20-is final.doc 592-2-28 ABKT\ACR\MAS

26 The Spa and Lodge at Tagaytay Highlands, Inc. (A Nonprofit Corporation)

Financial Statements December 31, 2018 and 2017 and Years Ended December 31, 2018, 2017 and 2016 and

Independent Auditor’s Report

THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. (A Nonprofit Corporation) STATEMENTS OF CHANGES IN MEMBERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016

Remeasurement Gain (Loss) on Defined Proprietary Benefit Pension Certificates Deficit Plan Net Members’ (Notes 11 and 19) (Note 19) (Note 16) Equity Balances at December 31, 2015 P=124,974,678 (P=83,106,901) P=– P=41,867,777 Net loss for the year – (1,351,252) – (1,351,252) Other comprehensive loss – – (554,749) (554,749) Total comprehensive loss for the year – (1,351,252) (554,749) (1,906,001) Balances at December 31, 2016 124,974,678 (84,458,153) (554,749) 39,961,776 Net loss for the year – (3,414,287) – (3,414,287) Other comprehensive loss – – (20,985) (20,985) Total comprehensive loss for the year – (3,414,287) (20,985) (3,435,272) Balances at December 31, 2017 124,974,678 (87,872,440) (575,734) 36,526,504 Net income for the year – 758,604 – 758,604 Other comprehensive income – – 373,914 373,914 Total comprehensive income for the year – 758,604 373,914 1,132,518 Balances at December 31, 2018 P=124,974,678 (P=87,113,836) (P=201,820) P=37,659,022

See accompanying Notes to Financial Statements. THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. (A Nonprofit Corporation) STATEMENTS OF CASH FLOWS

Years Ended December 31 2018 2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax P=868,390 (P=3,411,224) (P=1,304,593) Adjustments for: Depreciation (Notes 9 and 12) 7,867,068 7,742,405 7,441,135 Retirement benefits cost (Notes 12 and 16) 255,288 229,495 74,474 Interest income (Note 5) (17,395) (11,084) (13,326) Loss on retirement of property and equipment (Note 9) 2,021 – – Income before working capital changes 8,975,372 4,549,592 6,197,690 Decrease (increase) in: Receivables (3,939,224) 1,677,329 (6,529,111) Inventories (230,697) (26,840) 4,731 Other current assets (661,328) (209,939) 651,736 Increase (decrease) in accounts payable and other current liabilities 1,606,348 (4,405,545) 1,281,126 Cash generated from operations 5,750,471 1,584,597 1,606,172 Contributions to plan assets (Note 16) (232,107) – – Income tax paid (109,786) (3,063) (46,659) Interest received 17,395 11,084 13,326 Net cash provided by operating activities 5,425,973 1,592,618 1,572,839

CASH FLOW FROM AN INVESTING ACTIVITY Additions to property and equipment (Note 9) (1,485,672) (580,836) (1,961,413)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,940,301 1,011,782 (388,574)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,335,072 1,323,290 1,711,864

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 5) P=6,275,373 P=2,335,072 P=1,323,290

See accompanying Notes to Financial Statements. THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. (A Nonprofit Corporation) NOTES TO FINANCIAL STATEMENTS

1. Corporate Information and Authorization for the Issuance of Financial Statements

Corporate Information The Spa and Lodge at Tagaytay Highlands, Inc. (the Company) was incorporated and registered in the Philippine Securities and Exchange Commission (SEC) on December 2, 1999. The Company was established to acquire, own, maintain and operate vacation houses, suites or rooms in condominium form or otherwise, for use of its members and to promote other activities among its members on a nonprofit basis.

The registered office address of the Company is Tagaytay Highlands Complex, Barangay Calabuso, Tagaytay City 4120, Cavite.

Belle Corporation (Belle), a publicly-listed company in the Philippines, owns 46.31% of the Company’s proprietary certificates as at December 31, 2018 and 2017.

Authorization for the Issuance of Financial Statements The financial statements were approved and authorized for issuance by the Board of Directors (BOD) on April 11, 2019.

2. Basis of Preparation, Statement of Compliance and Changes in Accounting Policies

Basis of Preparation The financial statements of the Company have been prepared on a historical cost basis and are presented in Philippine peso, which is the Company’s functional and presentation currency. All values are rounded to the nearest peso, except when otherwise indicated.

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

The PFRS for Small and Medium Entities (PFRS for SMEs) has been approved for adoption by the Philippine Financial Reporting Standards Council (FRSC) on October 13, 2009 and by the SEC on December 3, 2009. The PFRS for SMEs is effective for annual periods beginning on or after January 1, 2010, and is required to be used by entities that meet the definition of an SME, which include among others, an entity with total assets of between P=3,000,000 and P=350,000,000 or total liabilities of between =3,000,000P and P=250,000,000.

The Company, as an SME, availed the exemption of adopting PFRS for SMEs and opted to prepare its financial statements in compliance with full PFRS as the Company meets the exemption criteria being a holder of secondary license issued by SEC. - 2 -

Changes in Accounting Policies and Disclosures The accounting policies adopted are consistent with those of the previous financial year, except that the Company has adopted the following amendments to accounting standards starting January 1, 2018. Adoption of these pronouncements did not have a significant impact on the Company’s financial position or performance unless otherwise indicated.

§ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based Payment Transactions

§ Amendments to PFRS 4, Applying PFRS 9 Financial Instruments, with PFRS 4, Insurance Contracts

§ PFRS 9, Financial Instruments

PFRS 9 replaces Philippine Accounting Standards (PAS) 39, Financial Instruments: Recognition and Measurement for annual reporting periods beginning on or after January 1, 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement, impairment, and hedge accounting.

The Company applied PFRS 9 using the modified retrospective approach, with an initial application date of January 1, 2018. The Company has not restated the comparative information, which continues to be reported under PAS 39.

The nature and effect of the adoption of PFRS 9 is described below:

a) Classification and Measurement

Under PFRS 9, debt instruments are subsequently measured at fair value through profit or loss (FVPL), amortized cost, or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Company’s business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding.

The assessment of the Company’s business model was made as of the date of the initial application, January 1, 2018. The assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.

The classification and measurement requirements of PFRS 9 did not have a significant impact on the financial statements.

The Company’s cash and cash equivalents and receivables classified as Loans and receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are now classified and measured as Debt instruments at amortized cost beginning January 1, 2018.

There are no changes in classification and measurement for the Company’s financial liabilities. - 3 -

The impact of adopting PFRS 9 as at January 1, 2018 is as follows:

PAS 39 PFRS 9 measurement measurement category category Loans and receivables Amortized cost Cash and cash equivalents* P=2,329,985 P=2,329,985 Receivables 10,295,910 10,295,910 P=12,625,895 P=12,625,895 *Excluding cash on hand amounting to P=5,087.

b) Impairment

The adoption of PFRS 9 has fundamentally changed the Company’s accounting for impairment losses for financial assets by replacing PAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. PFRS 9 requires the Company to recognize an allowance for ECLs for all debt instruments not held at FVPL and contract assets. The adoption of ECL approach did not have any significant impact on the Company’s provision for impairment on its financial assets.

§ PFRS 15, Revenue from Contracts with Customers PFRS 15 supersedes PAS 11, Construction Contracts, PAS 18, Revenue, and related interpretations. It applies, with limited exceptions, to all revenue arising from contracts with its customers. PFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles set in PFRS 15 provide a more structured approach to measuring and recognizing revenue. PFRS 15 requires the exercise of judgment when applying each step of the model to contracts with customers, taking into consideration all of the relevant facts and circumstances. The standard also specifies the accounting for incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures. The Company applied PFRS 15 using the modified retrospective approach, with an initial application as at January 1, 2018. The adoption of PFRS 15 did not have a material impact on the Company’s statements of financial position, statements of comprehensive income and statements of cash flows since the Company’s primary performance obligation to its customers is the sale of food and beverage and sundries wherein revenue is recognized at a point in time when control of the asset is transferred to the customer, generally at point of sale and sales of services wherein the Company satisfies it performance obligation by transferring of the promised services to customers on an agreed contract price.

§ Amendments to PAS 28, Investments in Associates and Joint Ventures, Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle) § Amendments to PAS 40, Investment Property, Transfers of Investment Property - 4 -

§ Philippine Interpretation International Financial Reporting Interpretations Committee (IFRIC) 22, Foreign Currency Transactions and Advance Consideration

Future Changes in Accounting Policies The following are the new standards, amendments, interpretation and improvements to PFRSs that were issued but are not yet effective as at December 31, 2018. Unless otherwise indicated, the Company does not expect the future adoption of the said new standards, amendments, interpretation and improvements to have a significant impact on the financial statements. The Company intends to adopt the applicable standards, amendments, interpretations, and improvements when these become effective.

Effective beginning on or after January 1, 2019

§ Amendments to PFRS 9, Prepayment Features with Negative Compensation Under PFRS 9, a debt instrument can be measured at amortized cost or at FVOCI, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to PFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The amendments should be applied retrospectively and are effective from January 1, 2019, with earlier application permitted.

The amendments are not applicable since the Company does not have debt instruments with negative compensation prepayment features.

§ PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under PAS 17. Lessors will continue to classify all leases using the same classification principle as in PAS 17 and distinguish between two types of leases: operating and finance leases.

PFRS 16 also requires lessees and lessors to make more extensive disclosures than under PAS 17.

Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.

The standard is not applicable as the Company does not have leasing agreements. - 5 -

§ Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement The amendments to PAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to determine the:

• Current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and

• Net interest for the remainder of the period after the plan amendment, curtailment or settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset).

The amendments also clarify that an entity first determines any past service cost, or a gain or loss on settlement, without considering the effect of the asset ceiling. This amount is recognized in profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or settlement. Any change in that effect, excluding amounts included in the net interest, is recognized in other comprehensive income.

The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after January 1, 2019, with early application permitted.

The Company is currently assessing the impact of adopting the amendments to PAS 19.

§ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments clarify that an entity applies PFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the ECL model in PFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying PFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying PAS 28, Investments in Associates and Joint Ventures.

The amendments should be applied retrospectively and are effective from January 1, 2019, with early application permitted.

These amendments are not applicable since the Company does not have any investments in associates and joint ventures.

§ Philippine Interpretation IFRIC 23, Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of PAS 12, Income Taxes, and does not apply to taxes or levies outside the scope of PAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. - 6 -

The interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately • The assumptions an entity makes about the examination of tax treatments by taxation authorities • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates • How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.

The Company is currently assessing the impact of adopting this interpretation.

Annual Improvements to PFRSs (2015 - 2017 cycle) The Annual Improvements to PFRSs (2015 - 2017 cycle) are effective for annual periods beginning on or after January 1, 2019.

§ Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements, Previously Held Interest in a Joint Operation

The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.

A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in PFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured.

An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2019 and to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early application permitted.

The standard is not applicable since the Company does not enter into business combination transactions.

§ Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments Classified as Equity

The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early application is permitted.

The amendments are not applicable since the Company does not declare dividends to its members. - 7 -

§ Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization

The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early application permitted.

The standard is not applicable since the Company does not enter into transactions involving the acquisition, construction, or production of qualifying assets.

Effective beginning on or after January 1, 2020

§ Amendments to PFRS 3, Definition of a Business

The amendments to PFRS 3 clarify the minimum requirements to be a business, remove the assessment of a market participant’s ability to replace missing elements, and narrow the definition of outputs. The amendments also add guidance to assess whether an acquired process is substantive and add illustrative examples. An optional fair value concentration test is introduced which permits a simplified assessment of whether an acquired set of activities and assets is not a business.

An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1, 2020, with earlier application permitted.

The amendments have no impact to the Company since the Company does enter into business combinations transactions.

§ Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, Definition of Material

The amendments refine the definition of material in PAS 1 and align the definitions used across PFRSs and other pronouncements. They are intended to improve the understanding of the existing requirements rather than to significantly impact an entity’s materiality judgements.

An entity applies those amendments prospectively for annual reporting periods beginning on or after January 1, 2020, with earlier application permitted. The Company is currently assessing the impact of adopting the amendments to PAS 1.

Effective beginning on or after January 1, 2021

§ PFRS 17, Insurance Contracts

PFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, PFRS 17 will replace PFRS 4, Insurance Contracts. This new standard on insurance contracts applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. - 8 -

The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are largely based on grandfathering previous local accounting policies, PFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.

PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, with comparative figures required. Early application is permitted.

The amendments are not applicable to the Company since it has no activities that are predominantly connected with insurance or insurance contracts. Deferred effectivity

§ Amendments to PFRS 10, Consolidated Financial Statements and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves a business as defined in PFRS 3, Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council deferred the original effective date of January 1, 2016 of the said amendments until the International Accounting Standards Board completes its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.

3. Summary of Significant Accounting and Financial Reporting Policies

The significant accounting policies that have been used in the presentation of the financial statements are summarized below. These policies have been consistently applied to all years presented, unless otherwise stated.

Current versus Noncurrent Classification The Company presents assets and liabilities in the statement of financial position based on current or noncurrent classification.

An asset is current when it is:

§ Expected to be realized or intended to be sold or consumed in normal operating cycle; § Held primarily for the purpose of trading; § Expected to be realized within 12 months after the reporting period; or § Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

All other assets are classified as noncurrent. - 9 -

A liability is current when it is:

§ Expected to be settled in normal operating cycle; § Held primarily for the purpose of trading; § Expected to be settled within 12 months after the reporting period; or § There is no unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

All other liabilities are classified as noncurrent.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively. Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash in bank earns interest at the prevailing bank deposit rates. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less from date of acquisition and are subject to an insignificant risk of change in value.

Financial Instruments -Beginning January 1, 2018

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

Financial Assets

Initial Recognition and Measurement Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, FVOCI, and FVPL.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under PFRS 15.

In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs to give rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at instrument level.

The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset. - 10 -

Subsequent Measurement For purposes of subsequent measurement, financial assets are classified in four categories:

§ financial assets at amortized cost (debt instruments) § financial assets at FVOCI with recycling of cumulative gains and losses (debt instruments) § financial assets designated at FVOCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) § financial assets at FVPL

Financial Assets at Amortized Cost (Debt Instruments) The Company measures financial assets at amortized cost if both of the following conditions are met:

§ The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and § The contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.

Financial assets at amortized cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

The Company’s financial assets at amortized cost include cash in banks, short-term deposits and receivables as at December 31, 2018.

Financial Assets at FVPL Financial assets at FVPL include financial assets held for trading, financial assets designated upon initial recognition at FVPL and financial assets mandatorily required to be measured at fair value.

Financial assets are classified as held for trading if these are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not SPPI are classified and measured at FVPL, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at FVOCI, debt instruments may be designated at FVPL on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at FVPL are measured at fair value. Changes in fair values are recognized in profit or loss.

As at December 31, 2018, the Company does not have financial assets measured at FVPL.

Financial Assets at FVOCI (Debt Instruments) The Company measures debt instruments at FVOCI if both of the following conditions are met:

§ the financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and § the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.

For debt instruments at FVOCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognized in the statement of comprehensive income and computed in the same manner as for financial assets measured at amortized cost. The remaining fair value changes are - 11 - recognized in other comprehensive income. Upon derecognition, the cumulative fair value change recognized in other comprehensive income is recycled to profit or loss.

As at December 31, 2018, the Company does not have debt instruments measured at FVOCI.

Financial Assets Designated at FVOCI (Equity Instruments) Upon initial recognition, the Company can elect to irrevocable classify its equity investments as equity instruments designated at FVOCI when these meet the definition of equity under PAS 32, Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Equity instruments designated at FVOCI are not subject to impairment assessment.

As at December 31, 2018, the Company does not have equity instruments designated at FVOCI.

Impairment of Financial Assets The Company recognizes an allowance for ECLs for all debt instruments not held at FVPL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognized in two stages. For credit exposures with no significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures with significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables, the Company applies a simplified approach in calculating ECLs. The Company does not track changes in credit risk, instead, recognizes a loss allowance based on lifetime ECLs at each reporting date. The Company uses specific identification approach in determining the Loss Given Default (LGD) (recoverable amount/outstanding balance).

The Company considers a financial asset in default generally when contractual payments are past due. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company.

Financial Liabilities

Initial Recognition and Measurement Financial liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables (excluding statutory payables and membership dues collected in advance). - 12 -

Subsequent Measurement The measurement of financial liabilities depends on their classification, as described below: a. Financial Liabilities at FVPL Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by PFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the statement of comprehensive income.

Financial liabilities designated upon initial recognition at FVPL are designated at the initial date of recognition, and only if the criteria in PFRS 9 are satisfied. The Company has not designated any financial liability as at FVPL as at December 31, 2018. b. Loans and Borrowings After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in the statement of comprehensive income.

This category includes the trade and other payables (excluding statutory payables and membership dues collected in advance).

Financial Instruments - Prior to January 1, 2018

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

Date of Recognition The Company recognizes a financial asset or a financial liability in the statement of financial position when it becomes a party to the contractual provisions of the instrument. In the case of regular purchase or sale of financial assets, recognition or derecognition, as applicable, is done using settlement date accounting. Regular way purchases that require delivery or assets within the time frame established by regulation or convention in the market place are recognized on the trade date.

Initial Recognition of Financial Instruments Financial instruments are recognized initially at fair value, which is the fair value of the consideration given (in case of an asset) or received (in case of a liability). The fair value of the consideration given or received is determined by reference to the transaction price or other market prices. The initial measurement of financial instruments, except for financial instruments at FVPL, includes transaction cost. If the fair value differs from the transaction price, the Company will account for the financial instrument as presented in the next page: - 13 - a) if that fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation technique that uses only data from observable markets, the Company shall recognize the difference between the fair value at initial recognition and the transaction price as a gain or loss. b) in all other cases, adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, the Company shall recognize that deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.

The Company has no financial assets and liabilities carried at FVPL, held-to-maturity and available- for-sale investments as at December 31, 2018 and 2017.

The classification depends on the purpose for which the instruments were acquired or liabilities were incurred and whether they are quoted in an active market. Management determines the classification of its instruments at initial recognition and, where allowed and appropriate, reevaluates such classification at each financial reporting date.

The Company’s financial instruments pertain only to loans and receivables and other financial liabilities as at December 31, 2017.

Subsequent Measurement Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently carried at amortized cost using the EIR, less any allowance for impairment, if any. Gains and losses are recognized in the statement of comprehensive income when the loans and receivables are derecognized or impaired, as well as through the amortization process. Loans and receivables are included in current assets if maturity is within 12 months from the reporting date. Otherwise, these are classified as noncurrent assets.

As at December 31, 2017, the Company’s loans and receivables include cash in banks, short-term deposits and receivables.

Impairment of Financial Assets The Company assesses at the end of each reporting period whether a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired, if and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated. Objective evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For financial assets carried at amortized cost, the Company first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. - 14 -

The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in the statement of comprehensive income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to finance costs in the statement of comprehensive income.

Accounting Policies Applicable to Both Periods Presented

Other Financial Liabilities This category pertains to financial liabilities that are neither held for trading nor designated as at FVPL upon the inception of the liability. These include liabilities of the Country Club arising from its operations.

Other financial liabilities are initially recorded at fair value, less directly attributable transaction costs. Other financial liabilities are included in current liabilities if maturity is within 12 months from the reporting date. Otherwise, these are classified as noncurrent liabilities.

As at December 31, 2017, the Company’s other financial liabilities include accounts payable and other current liabilities, excluding statutory payables and membership dues collected in advance.

Derecognition of Financial Assets and Financial Liabilities A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company’s statement of financial position) when:

§ the right to receive cash flows from the asset has expired; or § the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or, (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of its continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. - 15 -

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of comprehensive income.

Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. The Company assesses that it has a currently enforceable right to offset if the right is not contingent on a future event, and is legally enforceable in the normal course of business, event of default, and event of insolvency or bankruptcy of the Company and all of the counterparties.

Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

§ In the principal market for the asset or liability, or § In the absence of a principal market, in the most advantageous market for the asset of liability.

The principal or the most advantageous market must be accessible to the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

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

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

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Company determines the policies and procedures for both recurring and non-recurring fair value measurements. For the purpose of fair value disclosures, the Company has determined classes of assets - 16 - and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy.

“Day 1” Difference Where the transaction price in a non-active market is different from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Company recognizes the difference between the transaction price and fair value (a “Day 1” difference) in the statement of comprehensive income unless it qualifies for recognition as some other type of asset. In cases where unobservable data is used, the difference between the transaction price and model value is only recognized in the statement of comprehensive income when the inputs become observable or when the instrument is derecognized. For each transaction, the Company determines the appropriate method of recognizing the “Day 1” difference amount.

Inventories Inventories include food, beverage and supplies. Inventories are carried at lower of cost or net realizable value (NRV). The Company’s current practice of reporting its ending inventory is based on the moving average method for storeroom items, while weighted average method for direct issuance to outlets. NRV for food and beverage is the estimated selling price in the ordinary course of business, less estimated costs of marketing and distribution. NRV for supplies is the current replacement cost. In determining the NRV, the Company considers any adjustments necessary for obsolescence.

Creditable Withholding Tax (CWT) CWT, which is presented as part of “Other current assets” pertains to the withholding tax which is prescribed on certain income payments and is creditable against the income tax due of the Company for the taxable quarter/year in which the particular income was earned.

Prepaid Expenses Prepaid expenses, which are presented as part of “Other current assets” are carried at cost, less amortized portion. These include prepayments of insurance for the Company’s properties, health insurance of directors and officers, advance payments for the monthly golf course maintenance and other prepayments.

Property and Equipment Property and equipment, except for land, are measured at cost, including transaction costs, less accumulated depreciation and any accumulated impairment in value. Land is measured at cost, including transaction costs less any accumulated impairment in value. Such cost includes the cost of replacing part of the property and equipment when that cost is incurred, if the recognition criteria are met.

The initial cost of property and equipment consists of its purchase price, including import duties, taxes and any directly attributable costs in bringing the asset to its working condition and location for its intended use. Expenditures incurred after the item has been put into operations, such as repairs, maintenance and overhaul costs, are normally recognized as expense in the period such costs are incurred. In situations where it can be clearly demonstrated that the expenditures have improved the condition of the asset beyond the originally assessed standard of performance, the expenditures are capitalized as additional cost of property and equipment. - 17 -

Depreciation of property equipment commences once the property and equipment are available for use and is computed using the straight-line method over the following estimated useful lives of the assets:

Number of years Buildings and improvements 20 Office furniture, fixtures and equipment 5

Construction in progress represents structures under construction and is stated at cost less any impairment in value. This includes the cost of construction and other direct costs. Cost also includes interest on borrowed funds incurred during the construction period. Construction in progress is not depreciated until such time that the relevant assets are completed and are ready for use.

The residual values, useful lives and method of depreciation of the assets are reviewed and adjusted, if appropriate, at each financial year-end.

Fully depreciated assets are retained in the accounts until they are no longer in use and no further depreciation is credited or charged to current operation.

When each major inspection is performed, the cost is recognized in the carrying amount of property and equipment as a replacement, if the recognition criteria are met.

Property and equipment is derecognized when either it has been disposed of or when it is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of property and equipment are recognized in the statement of comprehensive income in the year of retirement or disposal.

Impairment of Property and Equipment The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. If any such indication exists, and if the carrying value exceeds the estimated recoverable amount, the assets or cash generating units (CGUs) are written down to their recoverable amounts. The recoverable amount is the greater of fair value less costs to sell (FVLCTS) or value in use (VIU). The FVLCTS is the amount obtainable from the sale of an asset in an arm’s-length transaction less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. Impairment losses are recognized in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of comprehensive income. After such a reversal, the depreciation charges are adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. - 18 -

Members’ Equity Proprietary certificates are measured at par value for all shares issued. Incremental costs directly attributable to the issuance of new shares are recognized as a deduction from proceeds, net of any tax effects.

Deficit represents cumulative excess of expenses over revenues.

Revenue Recognition Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The Company has generally concluded that it is the principal in all of its revenue arrangements.

Accounting Policies Starting January 1, 2018

Sale of Food, Beverage and Sundries Revenue from sale of food, beverage and sundries is recognized when the transfer of control has been passed to the buyer at the time when the performance obligation has been satisfied. The performance obligation is generally satisfied when the customer purchases the goods. Payment of the transaction price is due immediately at the point when the customer purchases the goods. Sales returns and discounts are deducted from gross sales to arrive at net sales as presented under “Food, beverage and sundries” in the statement of comprehensive income.

Spa Services, Room Sales and Others Revenue from spa service, room sales and others are recognized upon satisfaction of performance obligation transferring of the promised services to the customers.

Accounting Policies Prior to January 1, 2018

Revenue and income are recognized to the extent that it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of the revenue can be reliably measured. Revenue and income are measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding value-added tax (VAT).

The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. It is acting as a principal when it has the primary responsibility for providing the goods or services. The Company also acts as a principal when it has the discretion in establishing the prices and bears inventory and credit risk. The Company has concluded that it is acting as a principal in all of its revenue arrangements.

Spa Services, Room Sales and Others Revenue is recognized when services are rendered.

Food, Beverage and Sundries Revenue is recognized upon delivery and billing to customers. - 19 -

Accounting Policies Applicable to Both Periods Presented

Membership Dues Membership dues are recognized in the applicable membership period. Advance collection of membership dues are recognized in the “Membership dues collected in advance” presented under “Accounts payable and other current liabilities” account in the statement of financial position.

Membership Transfer and Assignment Fees Revenue is recognized upon transfer of member shares.

Interest Income Interest income from bank deposits is recognized as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

Other Income Revenue is recognized when there is an incremental economic benefit, other than the usual business operations, that will flow to the Company and the amount of the revenue can be measured reliably.

Costs and Expenses Costs and expenses are decreases in economic benefits during the accounting period in the form of outflows or decrease of assets or incurrence of liabilities that result in decrease in equity, other than those relating to distributions to equity participants. Costs and expenses are recognized in the statement of comprehensive income on the basis of systematic and rational allocation procedures when economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or indirectly determined or immediately when expenditure produces no future economic benefits or when, and to the extent that, future economic benefits do not qualify, cease to qualify, for recognition in the statement of financial position as an asset.

Other Comprehensive Income (OCI) OCI comprises items of income and expenses that are not recognized in profit or loss for the year in accordance with PFRS. As at December 31, 2018 and 2017, the Company’s OCI pertains to actuarial gain and losses arising from valuation of pension liability.

Pension Benefits The Company has a defined benefit pension plan administered by a trustee, covering its regular and permanent employees. The cost of providing benefits under the defined benefit plan is actuarially determined using the projected unit credit method. This method reflects service rendered by employees to the date of valuation and incorporates assumptions concerning employees’ projected salaries.

The net defined benefit liability or asset is the aggregate of the present value of the defined benefit obligation at the end of the reporting period reduced by the fair value of plan assets, adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

Defined benefit costs comprise the following:

• Service cost • Net interest on the net defined benefit liability or asset • Remeasurements of net defined benefit liability or asset - 20 -

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to the net defined benefit liability or asset. Net interest on the net defined benefit liability or asset is recognized as expense or income in profit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately in OCI in the period in which they arise. Remeasurements are not reclassified to profit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Company, nor can they be paid directly to the Company. Fair value of plan assets is based on market price information. When no market price is available, the fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the related obligations). If the fair value of the plan assets is higher than the present value of the defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The Company’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognized as a separate asset at fair value when and only when reimbursement is virtually certain.

Taxes Current Income Tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.

Deferred Tax Deferred tax is provided, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, including asset revaluations. Deferred tax assets are recognized for all deductible temporary differences, carryforward benefits of unused tax credits from the excess of minimum corporate income tax (MCIT) over the regular corporate income tax, and unused net operating loss carryover (NOLCO), to the extent that it is probable that sufficient future taxable income will be available against which the deductible temporary differences and carryforward benefits of unused tax credits from excess MCIT and unused NOLCO can be utilized.

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that sufficient future taxable profits will be available against which the deductible temporary difference can be utilized. - 21 -

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

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

Income tax relating to items recognized directly in equity is recognized in the statement of changes in members’ equity and not in the statement of comprehensive income.

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

VAT Revenues, expenses and assets are recognized net of the amount of VAT, if applicable.

When VAT from sales of goods and/or services (output VAT) exceeds VAT passed on from purchases of goods or services (input VAT), the excess is recognized as payable in the statement of financial position. When VAT passed on from purchases of goods or services (input VAT) exceeds VAT from sales of goods and/or services (output VAT), the excess is recognized as an asset in the statement of financial position to the extent of the recoverable amount.

Net Income (Loss) Per Share Net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares issued and outstanding during the year.

Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, if it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as interest expense. Where the Company expects a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the receipt of the reimbursement is virtually certain.

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

Events After the End of the Reporting Period Post year-end events that provide additional information on the Company’s financial position at the reporting period (adjusting events), if any, are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to financial statements when material. - 22 -

4. Significant Accounting Estimates and Assumptions

The preparation of the Company’s financial statements requires management to make judgments and estimates that affect certain reported amounts and disclosures. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying value of the asset or liability affected in the future.

Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the financial reporting date, that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities within the next financial period are as follows:

Provision for ECLs (PFRS 9) For receivable from members, the Company uses specific identification approach in determining balance of receivables from each members to be potentially uncollectible, when it meets the following criteria: (a) the member is more than 120 days past due on its contractual payments, i.e. principal and/or interest including penalties; and (b) the current market value of the shares of each member is below its outstanding receivables. The current market value of the shares act as collateral in case of non-payment of members, as the Company has the current right to rescind the shares and sell it in an auction. The Company determine the loss given default (recoverable amount/outstanding receivables) in computing the provision for ECL.

For receivable from related parties, the Company uses judgment, based on the best available facts and circumstances, including but not limited to, assessment of the related parties’ operating activities (active or dormant), business viability and overall capacity to pay, in providing for ECL. The provision for ECL are re-evaluated and adjusted as additional information is received. For cash and cash equivalents, the Company applies the low credit risk simplification. The probability of default and loss given defaults are publicly available and are considered to be low credit risk investments. It is the Company’s policy to measure ECLs on such instruments on a 12-month basis.

Following the adoption of PFRS 9, the Company did not recognize additional allowance. The carrying value of receivables amounted to =14,235,134P as at December 31, 2018 (see Notes 6, 15 and 19).

Determination of Impairment of Receivables (PAS 39) The Company reviews its receivables at each financial reporting date to assess whether a provision for impairment should be recorded in the statement of comprehensive income. Allowance for impairment of receivables is maintained at a level considered adequate to provide for potentially uncollectible receivables. The level of this allowance is evaluated by the management on the basis of factors that affect that collectability of the accounts. These factors include, but not limited to, the age and status of receivable, the length of relationship with the members and related parties, the member’s payment behavior and other known market factors. The Company reviews the allowance on a continuous basis. Accounts that are specifically identified to be potentially uncollectible are provided with adequate allowance through charges to income in the form of provision for impairment of receivables. Accounts are written off when management believes that the receivables cannot be collected or realized after exhausting all efforts and courses of action. The amount and timing of recorded provision for impairment of receivables for any period would differ if the Company made different judgments or utilized different estimates. An increase in the Company’s allowance for impairment of receivables would increase the recorded operating expenses and decrease its current assets.

No provision for impairment of receivables was recognized in 2017 and 2016. The carrying value of receivables, net of allowance for impairment of receivables, amounted to P=10,295,910 as at December 31, 2017 (see Notes 6, 15 and 19). - 23 -

Determination of NRV of Inventories The Company writes down the carrying value of inventories whenever NRV of inventories becomes lower than cost due to damage, physical deterioration, obsolescence, changes in prices level or other causes. The carrying value of inventories is reviewed at each reporting date. Inventory items identified to be obsolete and unusable are also written off and charged as expense in the statement of comprehensive income.

There was no allowance for inventory write-down in 2018, 2017 and 2016. The carrying values of inventories amounted to =507,101P and P=276,404 as at December 31, 2018 and 2017, respectively (see Note 7). Estimation of Useful Lives of Property and Equipment The useful life of each Company’s property and equipment is estimated based on the period over which the property and equipment are expected to be available for use. Such estimation is based on the collective assessment of industry practice, internal technical evaluation and experience with similar assets. The estimated useful lives of property and equipment are reviewed periodically and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the property and equipment. It is possible, however, that future financial performance could be materially affected by changes and timing of recorded expenses brought about by changes in the factors mentioned above. A reduction in the estimated useful life of any property and equipment would increase the recorded depreciation expense and decrease property and equipment.

There were no changes in the estimated useful lives of property and equipment as at December 31, 2018 and 2017. Determination of Impairment of Property and Equipment The Company assesses whether there are any indicators of impairment for all nonfinancial assets at each financial reporting date. Property and equipment are reviewed for impairment when there are indicators that the carrying value may not be recoverable. Determining the VIU of these nonfinancial assets, which requires the determination of future cash flows expected to be generated from the continued use and ultimate disposition of such assets, requires the Company to make estimates and assumptions that can materially affect the financial statements. Future events could cause the Company to conclude that such nonfinancial assets are impaired.

While it is believed that the assumptions used in the estimation of fair values reflected in the financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse impact on the financial performance. Based on the evaluation made by management, no indication of impairment was noted on the Company’s property and equipment in 2018, 2017 and 2016. The carrying values of property and equipment as at December 31, 2018 and 2017 amounted to P=23,904,889 and P=30,288,306, respectively (see Note 9). Determination and Computation of Pension Cost The present value of the defined benefit liability depends on a number of factors including assumptions of discount rate and rate of salary increase, among others. Due to the complexities involved in the valuation and its long-term nature, a defined benefit liability is highly sensitive to changes in these key assumptions and current market condition. - 24 -

Pension liability amounted to P=528,970 and P=879,703 as at December 31, 2018 and 2017, respectively (see Note 16). The Company recognized net retirement benefits cost in profit or loss amounting to P=255,288, P=229,495 and P=74,474 in 2018, 2017 and 2016, respectively (see Notes 12 and 16). Recognition of Deferred Tax Assets The carrying amount of deferred tax assets is reviewed at each reporting period. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. The forecasted availability of taxable profit is based on past and future expectations on revenue and expenses. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Deferred tax assets amounting to P=2,159,587 and P=2,645,809 as at December 31, 2018 and 2017, respectively, were not recognized in the financial statements because management believes that future taxable profit will not be available against which the deferred tax assets can be utilized (see Note 17).

5. Cash and Cash Equivalents 2018 2017 Cash on hand and in banks P=5,734,854 P=1,800,766 Short-term deposits 540,519 534,306 P=6,275,373 P=2,335,072

Interest income on cash in banks and short-term deposits amounted to P=17,395, P=11,084 and P=13,326 in 2018, 2017 and 2016, respectively.

6. Receivables 2018 2017 Trade: Related parties (Note 15) P=12,171,754 P=8,492,858 Members(1) 1,138,915 1,567,289 Credit card(2) 528,406 488,916 Other receivables(3) 1,111,348 462,136 14,950,423 11,011,199 Less allowance for doubtful accounts 715,289 715,289 P=14,235,134 P=10,295,910 (1) With allowance for doubtful accounts amounting to P=93,934 as at December 31, 2018 and 2017. (2) With allowance for doubtful accounts amounting to =312,287P as at December 31, 2018 and 2017. (3) With allowance for doubtful accounts amounting to =309,068P as at December 31, 2018 and 2017.

Receivables from related parties consist of charges for the use of the Company’s facilities. These receivables are noninterest-bearing and are due and demandable.

Members’ accounts are normally on a 30 to 60 days’ term. Unsettled members’ accounts for 60 days are considered past due. The Company has the option to put members’ proprietary into auction shares in case of nonpayment of members’ accounts. - 25 -

Receivable from credit card pertains to receivable from BDO Unibank, Inc. arising from the use of the Company’s members of credit card in payment of their dues. These are noninterest-bearing and are normally settled within the following month.

Other receivables pertains to advances made to employees which are normally settled or liquidated within one month from availment date and are liquidated.

7. Inventories

2018 2017 At cost: Supplies P=364,471 P=153,471 Food and beverage 142,630 122,933 P=507,101 P=276,404

The cost of inventories charged to “Food, beverage and sundry costs” under “Costs of services” account in the statements of comprehensive income amounted to P=2,318,593, P=2,251,968 and =1,837,661P in 2018, 2017 and 2016, respectively (see Note 12).

8. Other Current Assets

2018 2017 CWT P=1,745,869 P=1,068,196 Prepaid expenses 156,929 166,246 Others 21,802 28,830 P=1,924,600 P=1,263,272

CWT are taxes withheld from collections of the Company and are deductible from the income tax due of the Company for the future taxable quarters.

Prepaid expenses pertain to the unamortized portion of insurance for the Company’s properties, health insurance of directors and officers, prepayments for the monthly golf course maintenance and other prepayments. These are expected to be utilized and consumed within one year.

Others consist of the initial set-up made for the Cash Card System services availed with BDO Unibank, Inc. and the deposit to contractors resulting from payments for design fee and project cost for interior renovation which are not yet fully completed.

9. Property and Equipment

Office Furniture, Buildings and Fixtures and Construction Land Improvements Equipment In Progress Total Cost At December 31, 2016 P=5,870,000 P=111,803,949 P=31,676,121 P=92,730 P=149,442,800 Additions – – 580,836 – 580,836 At December 31, 2017 5,870,000 111,803,949 32,256,957 92,730 150,023,636 Additions – – 1,485,672 – 1,485,672

(Forward) - 26 -

Office Furniture, Buildings and Fixtures and Construction Land Improvements Equipment In Progress Total Retirement P=– P=– (P=21,486) P=– (P=21,486) Reclassification – – 57,596 (57,596) – At December 31, 2018 P=5,870,000 P=111,803,949 P=33,778,739 P=35,134 P=151,487,822

Accumulated Depreciation At December 31, 2016 P=– P=83,748,287 P=28,244,638 P=– P=111,992,925 Depreciation (Note 12) – 6,579,050 1,163,355 – 7,742,405 At December 31, 2017 – 90,327,337 29,407,993 – 119,735,330 Depreciation (Note 12) – 6,612,838 1,254,230 – 7,867,068 Retirement – – (19,465) – (19,465) At December 31, 2018 P=– P=96,940,175 P=30,642,758 P=– P=127,582,933

Net Book Value At December 31, 2018 P=5,870,000 P=14,863,774 P=3,135,981 P=35,134 P=23,904,889 At December 31, 2017 5,870,000 21,476,612 2,848,964 92,730 30,288,306

The cost of fully depreciated property and equipment which are still being used amounted to P=28,280,641 and P=28,212,794 as at December 31, 2018 and 2017, respectively.

In 2018, the Company retired some of its furniture and fixture with a total cost and accumulated depreciation of P=21,486 and P=19,465, respectively. Loss on retirement of property and equipment amounting to P=2,021 was included under “Others” in the Company’s “Operating expenses” account.

10. Accounts Payable and Other Current Liabilities

2018 2017 Trade P=710,303 P=885,157 Related parties (Note 15) 147,088 893,259 Statutory payables 2,143,829 1,496,789 Payable to concessionaire 2,781,531 1,244,031 Membership dues collected in advance 1,233,545 389,552 Accrued expenses: Outside services 560,201 753,704 Utilities 417,554 124,577 Professional fees 137,445 207,900 Breakage and losses 75,734 – Others 206,786 236,882 Payable to employees 245,089 172,311 Retention payable – 177,493 Provision for contingencies – 471,102 P=8,659,105 P=7,052,757

Trade payables are noninterest-bearing and are normally on a 15 to 30 days’ term.

Payable to related parties consist of reimbursements for certain operating expenses of the Company, net of room charges and costs of spa services rendered to Belle-sponsored clients. These payables are due and demandable. - 27 -

Payable to concessionaire a pertains to the net payables to Asmara, Inc. resulting from the services it rendered to members and guests. These payables are normally settled within a year upon receipt of the statement of account.

Statutory payables pertain to net output VAT, net deferred output VAT, various withholding taxes, and other government taxes. These are normally settled within 30 days.

Accrued expenses are noninterest-bearing with a term of 30 to 180 days.

Membership dues collected in advance pertain to membership dues that are already collected but are not yet earned as at reporting date. This is expected to be recognized as revenue within the next financial year.

Retention payable is the amount retained by the Company from contractors as insurance for the completion of various projects, which will be released upon completion of the related construction contract.

Payable to employees consists of service charges collected from members for the services rendered by the Company’s employees. These payables are due and demandable and are distributed to the Company’s regular employees.

Provision for contingencies was recognized for estimated claims and losses. The information usually required by PAS 37, “Provisions, Contingent Liabilities and Contingent Assets” is not disclosed as it may prejudice the Company’s position in the ongoing claims and litigations.

11. Members’ Equity

Track Record of Registration of Securities The following summarizes the information on the Company’s registration of securities under the Securities Regulation Code:

Authorized Number of Date of SEC Approval Shares Shares Issued Issue/Offer Price December 2, 1999 434 434 P=750,000 to P=1,000,000

The Company is organized as a non-stock entity, and on a nonprofit basis, for the sole and exclusive benefit of its members. The Company have 434 members classified into 5 Voting Members and 429 Non-Voting Members. Each type of member is issued a Proprietary Membership Certificate which is transferable in accordance with the provision of the Articles of Incorporation and the By-Laws. Unless otherwise so stated in the face of the Certificate, Proprietary Membership Certificates pertain to Non-Voting Members.

Voting Members are the incorporators of the Company who are designees/nominees of the developer, Belle. In order to ensure compliance with the overall concept of the Tagaytay Highlands Complex (the “Complex”) of which the Company is a part of, as well as to ensure uniformity in policy among the various components of said Complex, Voting Members have the exclusive right to vote and be voted for as Directors of the Company and have the exclusive right to attend all general or special members’ meetings. Aside from the other rights and privileges of other members, they have the right to the corresponding equity participation in the properties and assets of the Company upon its dissolution. Voting Members may assign or transfer their membership only to designees/nominees of Belle unless waived by the latter in writing. - 28 -

Non-Voting Membership is available to natural and juridical persons who are shareholders and/or members of Tagaytay Highlands International Golf Club, Inc. (THIGCI), The Country Club at Tagaytay Highlands, Inc. (TCCTHI) or Tagaytay Midlands Golf Club, Inc. (TMGCI) and any other club development of Belle as may be determined by the Company’s BOD, upon purchase of Proprietary Membership certificates of the Company and admission as such members by the BOD.

Non-Voting Members do not have the right to vote or be voted for as Directors of the Company. They are, however, entitled to the rights described herein, including the right to the corresponding equity participation in the properties of the Company in the event of dissolution or liquidation. In case the owner of Proprietary Membership Certificates is a juridical entity, such rights may be enjoyed by its duly designated representative but only upon approval of such designation by the BOD of the Company.

Holders of Proprietary Membership Certificates admitted as members of the Company are entitled to such rights and are subject to restrictive conditions as follows: a. Each member is entitled to 24 one-room night use of the Company’s vacation suites per year, consisting of 12 weekend/holiday nights and 12 weekday nights. Weekend/holiday nights as used herein refer to Fridays, Saturday, Sundays and legal or special non-working holidays under Philippines laws. Although the Proprietary Membership Certificate may be assigned or transferred under the restrictions specified hereunder, such room night entitlement is not assignable or transferable and its use is subject to the reservation procedures and other rules and regulations as may be prescribed by the BOD. b. No profit inures to the exclusive benefit of any of the members of the Company, hence, no dividends is declared in their favor. Members are entitled only to a pro-rata share of the assets of the Company at the time of the dissolution or liquidation of the Company. c. Holders of Proprietary Membership Certificates through secondary and subsequent transfers or assignments are subject to the payment of annual dues and other dues and assessments in such amounts and subject to such rules and conditions as may be prescribed in the By-Laws or by the BOD to meet the expenses for the general operations of the Company, and the maintenance and improvement of its premises and facilities. The designated representative of a holder of a Proprietary Membership Certificate who is a juridical entity is billed for such dues. In case of non- payment by such representative, the holder of the Proprietary Membership Certificates is ultimately liable for the payment of such dues. Such dues, together with all other obligations of such members to the Company, constitute a first lien on the Proprietary Membership Certificates, second only to any lien in favor of the national or local government, and in the event of delinquency, such Certificate may be ordered sold by the BOD in the manner provided in the By-Laws to satisfy said dues or other obligations of the members. No transfer of Proprietary Membership Certificate(s) is recorded in the Membership Book of the Company, unless all unpaid obligations of the selling member, assignor or predecessor-in-interest have been fully paid. In previous years, each member was assessed an amount of P=3,000 per month or a total of P=36,000 per year. Starting in 2019, the membership dues will increase to P=3,200 per month or a total of P=38,400 per year. d. Holders of Proprietary Membership Certificates should not sell, transfer, convey, or otherwise dispose of their Proprietary Membership Certificates (i) for a period of 2 years commencing from and after the date the relevant Reservation Agreement for such Proprietary Membership Certificate(s) is accepted by Belle, or (ii) for the period that the Company’s vacation suites are under construction until the date of opening and actual operations of the Company’s vacation suites, whichever comes later. - 29 - e. Any member or owner of a membership certificate other than the developer, Belle, selling or disposing of his/its membership certificate in the Company, pay a transfer fee in such amount as may be determined by the BOD from time to time. Said transfer fee is levied and collected at the time of transfer in the Company’s Membership Book. Any transfer of membership, except transfer by hereditary succession, made in violation of these conditions renders it null and void, hence, not recorded in the books of the Company. f. Membership in the Company may be registered only in the name of a single person, firm, entity, association or corporation. Juridical entities may designate only one individual representative for each Proprietary Membership Certificate owned by them. g. In case any member violate the provisions of the Articles of Incorporation or the By-Laws or the rules and regulations of the Company, or the resolutions duly promulgated by the BOD, or commit any other act or conduct which the BOD may deem injurious to the interest or hostile to the objects of the Company, such member may be expelled by the BOD in the manner provided in the By- Laws upon proper notice and hearing. A member who is so expelled then cease to be such and lose the benefits of membership except the right to demand payment for his/its membership certificate in accordance with the By-Laws of the Company. The expelled member surrenders his membership certificate forthwith to the Secretary of the Company for cancellation. Refusal of such member to do so after the lapse of 30 days from notice by the Company authorizes the Corporate Secretary to cancel such certificate in the books of the Company. h. No issuance or transfer of membership certificates of the Company which would reduce the ownership of Philippine citizens or nationals in the Company to less than the minimum percentage required by any applicable provisions of the Constitution, law, or regulation to be owned by Philippine citizens or nationals, is made or effected by, or recorded in the books of the Company. i. Membership certificates of the Company may be encumbered by the holder thereof. In the event of either a foreclosure or execution sale, the Company is entitled to a right, but not the obligation to redeem the certificate by tendering to the lien holder the amount necessary to discharge the obligation which gave cause to the foreclosure or execution. For this purpose the right of redemption may be exercised by the Company within a period of ninety days or such longer period as may be allowed by law from and after written notice of foreclosure or execution is received by the Company. In cases of foreclosure or execution sale, no transfer of the membership certificate(s) sold there under is made or effected by, or recorded in the books of the Company, where the winning bidder/transferee of such membership certificate(s) is not qualified to become a Member under Section 7 paragraph 3 of the Articles of Incorporation. j. Holders of Proprietary Membership Certificates are not entitled to any preemptive right to purchase additional membership certificates which the Company may now or in the future issue. k. Membership certificates shall be in such form as the BOD approves, but all such certificates contain an appropriate reference to the foregoing limitations and restrictions, and these may be issued or transferred in the books of the Company only in accordance with the terms and provisions of such limitations and restrictions. - 30 -

12. Costs of Services

2018 2017 2016 Depreciation (Note 9) P=7,867,068 P=7,742,405 P=7,441,135 Salaries, wages and employee benefits 6,254,427 6,305,395 3,040,487 Communications, light and water 2,694,375 2,612,972 2,321,775 Food, beverage and sundry costs (Note 7) 2,318,593 2,251,968 1,837,661 Supplies 872,602 726,993 721,892 Repairs and maintenance 853,341 1,319,846 723,831 Professional fees 400,079 349,058 385,176 Retirement benefits cost (Note 16) 255,288 229,495 74,474 Outside services (Note 20) 72,784 4,866 2,241,419 P=21,588,557 P=21,542,998 P=18,787,850

13. Operating Expenses

2018 2017 2016 Outside services P=1,519,541 P=1,509,317 P=1,384,299 Insurance 338,833 439,719 319,789 Dues and subscription 274,821 274,821 279,044 Communications, light and water 201,713 216,685 217,862 Fuel and oil 178,995 76,868 65,028 Taxes and licenses 163,478 140,042 127,155 Supplies 161,985 186,230 143,743 Processing fees 155,922 116,402 176,649 Entertainment, amusement and recreation 91,462 106,262 75,751 Transportation and travel 66,375 66,331 52,586 Bank charges 54,932 46,775 39,314 Decorations – 21,429 38,797 Commission expense – – 2,414 Others 628,130 97,130 178,736 P=3,836,187 P=3,298,011 P=3,101,167

14. Room Charges and Others

2018 2017 2016 Extra room charges P=1,325,636 P=913,313 P=812,393 Service charge revenue 1,005,830 785,884 453,976 Reversal of long-outstanding liabilities – – 49,958 P=2,331,466 P=1,699,197 P=1,316,327 - 31 -

15. Related Party Disclosures

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

There have been no guarantees provided or received for any related party receivables or payables. Settlement of the outstanding balances occur in cash.

The following table provides the summary of outstanding balances with related parties as at December 31:

Classification Terms Conditions 2018 2017 Shareholder Belle Payables Due and demandable, Unsecured (Note 10) noninterest-bearing (P=147,088) (P=893,259)

Related party with common set of directors THIGCI Receivables Due and demandable, Unsecured, no (Note 6) noninterest-bearing impairment 4,269,984 2,767,583 TCCTHI Receivables Due and demandable, Unsecured, no (Note 6) noninterest-bearing impairment 1,632,600 3,908,375

TMGCI Receivables Due and demandable, Unsecured, no (Note 6) noninterest-bearing impairment 6,269,170 1,816,900 Receivables (Note 6) P=12,171,754 P=8,492,858 Payables (Note 10) (147,088) (893,259)

The following table provides the summary of transactions entered with related parties in 2018, 2017 and 2016:

Transactions 2018 2017 2016 Stockholder Belle Lodge sales P=– P=12,708 P=12,708 Reimbursement of expenses 1,315,400 905,967 1,056,024 Related party with common set of directors

THIGCI Lodge sales 6,816,970 6,823,246 1,546,221 Reimbursement of expensse 1,197,218 3,699,308 2,706,158 Management fee 385,740 356,355 337,408 TCCTHI Lodge sales 11,451,613 11,299,604 10,183,371 Reimbursement of expense 5,130,640 7,391,229 3,185,568

TMGCI Lodge sales 3,211,053 3,839,375 4,688,421 Reimbursement of expense 417,374 2,022,476 1,815,631

Belle Transactions with Belle consists of room charges and costs of spa services rendered to Belle-sponsored clients which are subsequently charged to latter’s account. The Company also has transactions with Belle for the reimbursement of electricity, water and repairs and maintenance expenses. - 32 -

THIGCI The Company entered into a contract with THIGCI appointing the latter to organize, manage and operate the Company effective September 1, 2008. The contract shall be effective for a period of one year subject to renewal for the same period. In 2016, the management fee was computed on the basis of (a) 2.5% of the gross operating revenues; and (b) 2.5% of net income from operations. On January 1, 2017, the contract was renewed with a two-year term upon agreement of both parties. In 2017 and 2018, the basis for the computation of management fee was changed to 2.5% of the gross operating revenues.

The Company also has an outstanding receivable from THIGCI, also majority-owned by Belle, for billings related to use by THIGCI’s members of the Company’s facilities. The Company also has an outstanding liability to THIGCI for reimbursement of operating expenses.

TCCTHI and TMGCI The transactions pertains mainly to lodge sales availed by TCCTHI and TMCGI members from the Company. The Company also has an outstanding liability to TCCTHI and TMCGI for reimbursement of operating expenses.

Compensation of Key Management Personnel The compensation and benefits paid to the key management personnel of the Company is being shouldered by THIGCI.

16. Pension Liability

The Company is a participant to the Tagaytay Highlands Multiemployer Retirement Plan which is non- contributory and of the final salary defined benefit type. The plan provides a retirement benefit equal to one hundred percent (100%) of plan salary for every year credited service or in accordance with the collective bargaining agreement. Benefits are paid in a lump sum upon retirement or separation in accordance with the terms of the plan.

In accordance with the provisions of the Bureau of Internal Revenue (BIR) Revenue Regulations No. 1-68, it is required that a formal retirement plan be trusteed; that there must be no discrimination in benefits; that forfeitures shall be retained in the retirement fund and be used as soon as possible to reduce the future contributions; and that no part of the corpus or income of the retirement fund shall be used for, or diverted to, any purpose other than for the exclusive benefit of the plan members. The latest actuarial valuation of the plan Company’s retirement plan is as at December 31, 2018.

The following tables summarize the components of retirement benefits cost recognized in the statements of comprehensive income and the funded status and amounts recognized in the statements of financial position.

2018 2017 Current service cost P=210,299 P=197,530 Net interest expense 44,989 31,965 Retirement benefits cost - net (Note 12) P=255,288 P=229,945 - 33 -

Changes in net pension liability as at December 31 are as follows:

2018 2017 Pension liability, beginning P=879,703 P=629,223 Current service cost 210,299 197,530 Net interest expense 44,989 31,965 255,288 229,495 Actuarial changes arising from: Changes in financial assumptions (283,984) 91,112 Experience adjustments (93,765) (70,127) Return on plan assets 3,835 – (373,914) 20,985 Contributions to plan assets (232,107) – P=528,970 P=879,703

Changes in the present value of the pension liability as at December 31 are as follows: 2018 2017 Beginning balance P=879,703 P=629,223 Current service cost 210,299 197,530 Interest expense 50,759 31,965 Remeasurement in other comprehensive income: Actuarial gain - changes in financial assumptions (283,984) (70,127) Actuarial (gain) loss - experience adjustments (93,765) 91,112 P=763,012 P=879,703

Changes in the fair value of plan assets as at December 31 are as follow: 2018 2017 Beginning balance P=– P=– Contribution to the retirement fund 232,107 – Interest income 5,770 – Return on plan assets (excluding amount included in net interest) (3,835) – P=234,042 P=–

Reconciliation of net pension liability as at December 31 are as follow: 2018 2017 Fair value of plan assets P=234,042 P=– Less present value of pension liability 763,012 879,703 (P=528,970) (=P879,703)

The retirement benefits cost and present value of the pension liability are determined using actuarial valuations. The actuarial valuation includes making various assumptions. The principal assumptions used in determining the pension liability as at December 31 are shown below: 2018 2017 Discount rate 8.61% 5.77% Salary increase rate 4.00% 4.00% Mortality rate 2001 CSO Table 2001 CSO Table Disability rate 1952 Disability Study 1952 Disability Study - 34 -

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in the Philippines. The weighted average duration of the defined benefit obligation is 10.6 years and 11 years as at December 31, 2018 and 201, respectively.

The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the defined benefit pension plan as at December 31, assuming all other assumptions were held constant. Impact on Pension Liability Increase (Decrease) 2018 2017 Discount rate +1% (P=74,704) (=P89,676) -1% 86,376 104,115 Salary rate increase +1% 81,599 95,689 -1% (71,977) (84,394) The Company’s plan assets mainly consist of cash and cash equivalents. The carrying values of the Company’s plan assets approximates its fair values since these are short-term in nature. As at December 31, 2018 the fair value of plan assets amounted to P=234,042 (nil as at December 31, 2017).

Shown below is the maturity analysis of the undiscounted benefit payments as at December 31, 2018:

Year Amount Less than one year P=14,705 More than one year to five years 124,279 More than five years to ten years 1,030,741 Actual return on plan assets amounted to P=1,935 in 2018 (nil in 2017). The Company expects to contribute P=300,000 in the defined benefit plan in 2019 .

17. Income Taxes

a. The components of the provision for current income tax are as follows: 2018 2017 2016 MCIT P=106,307 P=846 P=43,994 Final tax on interest income 3,479 2,217 2,665 P=109,786 P=3,063 P=46,659

b. Deferred tax assets on the following temporary differences and carryforward benefits of NOLCO and MCIT were not recognized since management believes that it is not probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilized as at December 31:

2018 2017 NOLCO P=3,984,888 P=6,667,221 Membership dues collected in advance (Note 10) 1,233,545 389,552 Accrued retirement liability (Note 16) 761,077 879,703 Allowance for impairment of receivables (Note 6) 715,289 715,289 MCIT 151,147 50,279 - 35 -

Unrecognized deferred tax assets amounted to P=2,159,587 and P=2,645,809 as at December 31, 2018 and 2017, respectively. b. As at December 31, 2018, the carry forward benefits of MCIT and NOLCO that can be claimed as tax credit against RCIT and deduction against taxable income, respectively, are as follows:

NOLCO

Period Expiry Beginning Balance Still Incurred Year Balance Additions Expired Applications Available 12/2015 2018 P=2,682,333 P=– (=P1,203,159) (=P1,479,174) P=– 12/2016 2019 779,196 – – – 779,196 12/2017 2020 3,205,692 – – – 3,205,692 P=6,667,221 P=– (=P1,203,159) (=P1,479,174) P=3,984,888

MCIT

Beginning Balance Still Period Incurred Expiry Year Balance Additions Expired Available 12/2015 2018 P=5,439 P=– (=P5,439) P=– 12/2016 2019 43,994 – – 43,994 12/2017 2020 846 – 846 12/2018 2021 – 106,307 P=– 106,307 P=50,279 P=106,307 (=P5,439) P=151,147 c. The reconciliation between the benefit from income tax computed at the statutory income tax rate to the provision for income tax as shown on the statements of comprehensive income follows:

2018 2017 2016 Income (benefit from)income tax at statutory income tax rate of 30% P=260,517 (=P1,023,367) (=P391,378) Income tax effects of: Changes in unrecognized deferred tax assets (374,048) (2,574,555) (1,681,838) Expired NOLCO 360,948 3,587,093 2,081,903 Nontaxable income (141,331) – – Interest income subjected to final tax (5,218) (3,325) (3,998) Final tax on interest income 3,479 2,217 2,665 Expired MCIT 5,439 – 2,631 Nondeductible expenses – 15,000 36,674 P=109,786 P=3,063 P=46,659 - 36 -

18. Net Income (Loss) Per Share

The Company’s net income (loss) per share is computed as follows: 2018 2017 2016 Net income (loss) P=758,604 (=P3,414,287) (=P1,351,252) Divided by weighted average number of shares 434 434 434 Net income (loss) per share P=1,748 (=P7,867) (=P3,113)

19. Financial Risk Management Objectives and Policies

The Company’s principal financial assets comprise of cash and cash equivalents. The main purpose of this financial asset is to finance the Company’s operations. The Company has various other financial assets and financial liabilities such as receivables and accounts payable and other current liabilities, which arise directly from its operations. The main risks arising from the Company’s financial assets and financial liabilities are liquidity risk and credit risk. The Company’s BOD and management reviews and agrees on policies for managing each of these risks as summarized below. Liquidity Risk Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company monitors its risk to a shortage of funds through monitoring of financial assets and projected cash flows from operations. The Company’s objectives to manage its liquidity profile are: a) to ensure that adequate funding is available at all times; b) to meet commitments as they arise without incurring unnecessary costs; and c) to be able to access funding when needed at the least possible cost. The analysis of financial assets into maturity groupings is based on the remaining period from the financial reporting date to the contractual maturity date or if earlier, the expected date on which the assets will be realized.

For financial liabilities, the maturity grouping is based on the remaining period from the financial reporting date to the contractual maturity date. When a counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Company can be required to pay.

The table below summarizes the maturity profile of the Company’s financial liabilities as at December 31, 2018 and 2017 based on contractual undiscounted payments. The table also analyzes the maturity profile of the Company’s financial assets to provide a complete view of the Company’s contractual commitments and liquidity.

December 31, 2018 Due and Demandable Within 1 Year Total Financial Assets At amortized cost: Cash and cash equivalents P=6,275,373 P=– P=6,275,373 Receivables: Related parties 12,171,754 – 12,171,754 Members – 1,044,981 1,044,981

(Forward) - 37 -

December 31, 2018 Due and Demandable Within 1 Year Total Credit card P=– P=216,119 P=216,119 Other receivables 766,598 35,682 802,280 P=19,213,725 P=1,296,782 P=20,510,507 Financial Liabilities Other financial liabilities: Trade payables P=– P=710,303 P=710,303 Related parties 147,088 – 147,088 Payable to concessionaire – 2,781,531 2,781,531 Accrued expenses – 1,397,720 1,397,720 Payable to employees 245,089 – 245,089 P=392,177 P=4,889,554 P=5,281,731

December 31, 2017 Due and Demandable Within 1 Year Total Financial Assets Loans and receivables: Cash and cash equivalents P=2,335,072 P=– P=2,335,072 Receivables: Related parties 8,492,858 – 8,492,858 Members – 1,473,355 1,473,355 Credit card – 176,629 176,629 Other receivables 117,386 35,682 153,068 P=10,945,316 P=1,685,666 P=12,630,982 Financial Liabilities Other financial liabilities: Trade payables P=– P=885,157 P=885,157 Related parties 893,259 – 893,259 Payable to concessionaire – 1,244,031 1,244,031 Accrued expenses – 1,323,063 1,323,063 Retention payable – 177,493 177,493 Payable to employees 172,311 – 172,311 P=1,065,570 P=3,629,744 P=4,695,314

Credit Risk. Credit risk is most likely limited to the risk arising from the inability of a debtor or member to make payments when due. The Company trades only with recognized, creditworthy third parties. It is the Company’s practice that all members are subject to credit verification procedures. The Company’s exposure to credit risk is related primarily to the collection of members’ monthly dues and receivables from related parties. The Company’s policy is to monitor the receivable balances on an ongoing basis, which causes the exposure to bad debts to be insignificant. The Company has also the option to put into auction members’ proprietary shares in case of non-payment of members account. As at December 31, 2018 and 2017, credit risk is significantly concentrated on the Company’s receivable from related parties or 86% of total receivables, net of allowance for impairment (see Note 6). - 38 -

The table below shows the maximum exposure to credit risk for the Company’s financial assets, as at December 31, 2018 and 2017, without taking account of any collateral and other credit enhancements:

Gross Maximum Exposure(1) Net Maximum Exposure(2) 2018 2017 2018 2017 Cash and cash equivalents* P=6,257,673 P=2,329,985 P=5,257,673 P=1,329,985 Receivables Trade: Related parties 12,171,754 8,492,858 12,171,754 8,492,858 Members 1,044,981 1,473,355 – – Credit card 216,119 176,629 216,119 176,629 Other receivables 802,280 153,068 802,280 153,068 P=20,492,807 P=12,625,895 P=18,447,826 P=10,152,540 (1) Gross financial assets before taking into account any collateral held or other credit enhancements or offsetting arrangements or insurance in case of bank deposits. (2) Gross financial assets after taking into account any collateral held or other credit enhancements or offsetting arrangements or insurance in case of bank deposits. *Excluding cash on hand amounting to =17,700P and =5,087P as at December 31, 2018 and December 31, 2017, respectively.

The table below shows the aging analysis of the Company’s financial assets as at December 31:

December 31, 2018 Past Due Over Provision for Total Current 1–30 Days 31–60 Days 60 Days ECL net of ECL Cash and cash equivalents* P=6,257,673 P= – P= – P= – P= – P=6,257,673 Receivables: Related parties – 1,079,278 1,847,389 9,245,087 – 12,171,754 Members – 51,447 86,873 906,661 93,934 1,138,915 Credit card – 216,119 –– 312,287 528,406 Other receivables – 25,028 – 777,252 309,068 1,111,348 P=6,257,673 P=1,371,872 P=1,934,262 P=10,929,000 P=715,289 P=21,208,096 *Excluding cash on hand amounting to P=17,700.

December 31, 2017 Neither Past Due but not Impaired Past Due Over nor Impaired 1–30 Days 31–60 Days 60 Days Impaired Total Cash and cash equivalents* P=2,329,985 P=– P=– P=– P=– P=2,329,985 Receivables: Related parties – 2,143,751 1,538,814 4,810,293 – 8,492,858 Members – 85,836 66,650 1,320,869 93,934 1,567,289 Credit card – 48,734 – 127,895 312,287 488,916 Other receivables – – – 153,068 309,068 462,136 P=2,329,985 P=2,278,321 P=1,605,464 P=6,412,125 P=715,289 P=13,341,184 *Excluding cash on hand amounting to P=5,087. Credit Quality of Financial Assets – Applicable as at December 31, 2018 The financial assets of the Company are grouped according to stage whose description is explained as follows:

Stage 1 - Those that are considered current and up to 60 days past due and based on change in rating delinquencies and payment history, do not demonstrate significant increase in credit risk.

Stage 2 - Those that, based on change in rating, delinquencies and payment history, demonstrate significant increase in credit risk, and/or are considered more than 60 days past due but does not demonstrate objective evidence of impairment as of reporting date. - 39 -

Stage 3 - Those that are considered in default or demonstrate objective evidence of impairment as of reporting date.

The table below shows determination of ECL stage of the Company’s financial assets:

December 31, 2018 Stage 1 Stage 2 Stage 3 12-month ECL Lifetime ECL Lifetime ECL Total Financial assets at amortized cost: Cash and cash equivalents* P=6,257,673 P=– P=– P=6,257,673 Receivables: Members 138,320 906,661 93,934 1,138,915 Credit card 216,119 – 312,287 528,406 Other receivables 25,028 777,252 309,068 1,111,348 P=6,637,140 P=1,683,913 P=715,289 P=9,036,342 *Excluding cash on hand amounting to P=17,700.

Credit Quality of Financial Assets - Applicable as at December 31, 2017 The credit quality of financial assets is managed by the Company using high grade and standard grade as internal credit ratings.

High Grade Pertains to counterparty who is not expected by the Company to default in settling its obligations, thus credit risk exposure is minimal. This normally includes large prime financial institutions, companies, government agencies and individual buyers. Credit quality was determined based on the credit standing of the counterparty.

Standard Grade Other financial assets not belonging to high grade financial assets are included in this category. The table below shows the credit quality of the Company’s financial assets that are neither past due nor impaired as at December 31, 2017 based on historical experience with the corresponding third parties:

2017 High Grade Standard Grade Total Cash and cash equivalents* P=2,329,985 P=– P=2,329,985 Receivables: Members – 1,567,289 1,567,289 Credit card – 488,916 488,916 Other receivables – 462,136 462,136 P=2,329,985 P=2,518,341 P=4,848,326 *Excluding cash on hand amounting to =5,087.P

Capital Management The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize member value.

The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions. To maintain or adjust the capital structure, the Company may increase monthly membership dues. There were no changes made in the objectives, policies or processes in 2018 and 2017. - 40 -

The Company considers the following capital as at December 31:

2018 2017 Proprietary certificates P=124,974,678 P=124,974,678 Deficit (87,113,836) (87,872,440) P=37,860,842 P=37,102,238

The Company monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as current liabilities divided by total equity. The debt-to-equity ratio as at December 31, 2018 and 2017 is as follows:

2018 2017 Total current liability (a) P=8,659,105 P=7,052,727 Net members’ equity (b) 37,659,022 36,526,504 Debt-to-equity ratio (a/b) 0.23:1 0.19:1

Fair Value of Financial Assets and Liabilities The carrying values of cash and cash equivalents, receivables, accounts payable and other current liabilities approximate their fair values due to the short-term nature and maturities of the transactions.

Fair Value Hierarchy As at December 31, 2018 and 2017, the Company has no financial assets and liabilities carried at fair value that which is based on the three levels of fair value hierarchy.

20. Agreements

Contract and Janitorial Services The Company entered into a Service Agreement (SA) with contractors to provide manpower for various manpower for various projects, hotels and related services required by the Company.

On April 1, 2015, the Company entered into a SA with Pipols Synergy Management Services, Inc. (PSMI) with a one year effective term starting April 1, 2015 and considered automatically renewed every year under the same terms and conditions unless otherwise agreed upon by the Company and PSMI. The agreement was terminated on November 30, 2017.

On December 1, 2017, the Company entered into a SA with Kares International Commodities and Manpower Services Corporation (KICMSC), effective for one year starting December 1, 2017 and considered automatically renewed every year under the same terms and conditions unless otherwise agreed upon by the Company and KICMSC.

Outside services accounted under cost of services account in the statement of comprehensive income incurred by the Company amounted to P=72,784, P=4,866 and P=2,241,419 in 2018, 2017 and 2016, respectively (see Note 12).

Security Services A Memorandum of Agreement with Saint Anthony Security and Investigation Agency (SASIA) for general professional security services was entered on August 1, 2017 and will end on July 31, 2020. The agreement may be renewed as may be mutually agreed upon by the parties. - 41 -

Moreover, the Company entered into a Memorandum of Agreement with Eagle Corinthians Security Services (ECSS) wherein ECSS will provide general professional security services to the Company. The agreement is for 3 years to commence on August 1, 2014. It was renewed for another 3 years in August 2017.

Security services recognized by the Company amounted to P=879,556, =919,450P and =807,437P in 2018, 2017 and 2016, respectively.

Pest Management The Company has contracted with Bio-Tech Environmental Services Philippines, Inc. (Bio-Tech) in August 2015. Bio-Tech shall perform pest control services including fly baiting, surface spraying, larvaciding, etc. The agreement is for two years which commenced on August 1, 2016 to July 31, 2018, signed by the Company and Bio-tech. The contract was renewed for another year starting August 1, 2018.

Pest control expense incurred by the Company amounted to P=129,880 in 2018, and P=105,175 in 2017 and 2016.

Laundry Services On January 1, 2016, the Company entered into an agreement with Mountain Top Laundry (Mountain Top) for laundry services. The agreement shall be effective for one year starting January 1, 2016 and will expire on December 31, 2016 and can be renewed for another year subject to re-negotiation of the terms and conditions. The agreement was renewed on January 1, 2017 and January 1, 2018, effective for one year starting from the date of the renewal. Mountain Top shall bill the Company on a bi-monthly basis and the corresponding payment shall be due and collected fifteen days after the billing.

Laundry expenses incurred by the Company amounted to P=555,276, =537,753P and P=302,434 in 2018, 2017 and 2016, respectively.

Repairs and Maintenance Services The Company has contracted with Creative Proverbs Enterprises for facilities and building maintenance such as painting/repainting works, masonry, flooring works such as tiling and carpeting, maintain of equipment rooms and other related functions. The agreement was for two years which started on November 16, 2016 until November 15, 2018. The Company shall pay the contractor an amount of P=21,756 inclusive of VAT within 30 days after the receipt of the invoice or billing statement. In April 2018, an addendum was made on the agreement wherein the administrative cost was reduced from 15% to 10% effective on November 16, 2017 to November 15, 2018.

Repairs and maintenance services incurred by the Company amounted to P=503,118, P=499,759, and P=355,306 in 2018, 2017 and 2016, respectively.

21. Supplementary Information Required Under Revenue Regulations (RR) 15-2010

The Bureau of Internal Revenue has issued RR 15-2010 which requires certain tax information to be disclosed in the notes to financial statements. The Company presented the required supplementary tax information as a separate schedule attached to its annual income tax return. THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. Index to the Financial Statements and Supplementary Schedules December 31, 2018

Schedule I: Supplementary schedule of all effective standards and interpretations as at December 31, 2018

Schedule II: Financial Soundness Indicator

Schedule III: Supplementary schedules required by Annex 68 - E THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. SUPPLEMENTARY INFORMATION REQUIRED UNDER REVENUE REGULATIONS NO. 15-2010 FOR THE YEAR ENDED DECEMBER 31, 2018

In compliance with the requirements set forth by Revenue Regulations No. 15-2010 hereunder are the information on taxes, duties and license fees paid or accrued during the taxable year. a. Value-added Tax

The Company is a VAT-registered entity with output tax declaration of =3,783,540P for the year based on the sales of services amounting to P=31,529,501.

The Company’s sales of services is based on actual collection during the year, hence, may not be the same with the amount recorded in the statements of comprehensive income.

Details of the Company’s input VAT are as follows:

Beginning of the year P=– Domestic purchases of goods other than Capital Goods: 264,659 Domestic purchase of services 2,410,160 2,674,819 Application against output VAT (2,674,819) Balance at December 31, 2018 P=– b. The amount of withholding taxes declared during the year are as follows:

Expanded withholding tax P=46,326 Withholding taxes on compensation and benefits 12,301

Withholding taxes payable on compensation and benefits and expanded withholding taxes payable as at December 31, 2018 amounted to nil and P=3,662, respectively, and are presented under the “Accounts payable and other current liabilities” account in the 2018 statement of financial position. c. Details of taxes and licenses are as follow:

Business permits P=122,969 Documentary stamp tax on insurance 29,663 Others 10,846 P=163,478 d. Deficiency Taxes and Litigations

As at December 31, 2018, there are no outstanding tax cases and litigation nor deficiency tax assessments against the Company. e. Tax Cases

The Company is not involved in tax cases under preliminary investigation, litigation and prosecution in courts or bodies outside the Bureau of Internal Revenue as at December 31, 2018. THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. (A Nonprofit Corporation) SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS AS AT DECEMBER 31, 2018

PHILIPPINE FINANCIAL REPORTING STANDARDS Not Not AND INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018 Philippine Financial Reporting Standards PFRS 1 First-time Adoption of Philippine Financial π Reporting Standards PFRS 2 Share-based Payment π Amendments to PFRS 2, Classification and π Measurement of Share-based Payment Transactions PFRS 3 Business Combinations π PFRS 4 Insurance Contracts π Amendments to PFRS 4, Applying PFRS 9 π Financial Instruments with PFRS 4 Insurance Contracts PFRS 5 Non-current Assets Held for Sale and π Discontinued Operations PFRS 6 Exploration for and Evaluation of Mineral π Resources PFRS 7 Financial Instruments: Disclosures π PFRS 8 Operating Segments π PFRS 9 Financial Instruments π PFRS 10 Consolidated Financial Statements π PFRS 11 Joint Arrangements π PFRS 12 Disclosure of Interests in Other Entities π PFRS 13 Fair Value Measurement π PFRS 14 Regulatory Deferral Accounts π PFRS 15 Revenue from Contracts with Customers π Philippine Accounting Standards PAS 1 Presentation of Financial Statements π PAS 2 Inventories π PAS 7 Statement of Cash Flows π PAS 8 Accounting Policies, Changes in Accounting π Estimates and Errors PAS 10 Events after the Reporting Period π - 2 -

PHILIPPINE FINANCIAL REPORTING STANDARDS Not Not AND INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018 PAS 12 Income Taxes π PAS 16 Property, Plant and Equipment π PAS 17 Leases π PAS 19 Employee Benefits π PAS 20 Accounting for Government Grants and π Disclosure of Government Assistance PAS 21 The Effects of Changes in Foreign Exchange π Rates PAS 23 Borrowing Costs π PAS 24 Related Party Disclosures π PAS 26 Accounting and Reporting by Retirement π Benefit Plans PAS 27 Separate Financial Statements π PAS 28 Investments in Associates and Joint π Ventures Amendments to PAS 28, Measuring an π Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle) PAS 29 Financial Reporting in Hyperinflationary π Economies PAS 32 Financial Instruments: Presentation π PAS 33 Earnings per Share π PAS 34 Interim Financial Reporting π PAS 36 Impairment of Assets π PAS 37 Provisions, Contingent Liabilities and π Contingent Assets PAS 38 Intangible Assets π PAS 39 Financial Instruments: Recognition and π Measurement PAS 40 Investment Property π Amendments to PAS 40, Transfers of π Investment Property PAS 41 Agriculture π

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PHILIPPINE FINANCIAL REPORTING STANDARDS Not Not AND INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018 Philippine Interpretations Philippine Changes in Existing Decommissioning, π Interpretation Restoration and Similar Liabilities IFRIC-1 Philippine Members’ Shares in Co-operative Entities π Interpretation and Similar Instruments IFRIC-2 Philippine Determining whether an Arrangement π Interpretation contains a Lease IFRIC-4 Philippine Rights to Interests arising from π Interpretation Decommissioning, Restoration and IFRIC-5 Environmental Rehabilitation Funds Philippine Liabilities arising from Participating in a π Interpretation Specific Market—Waste Electrical and IFRIC-6 Electronic Equipment Philippine Applying the Restatement Approach under π Interpretation PAS 29 Financial Reporting in IFRIC-7 Hyperinflationary Economies Philippine Interim Financial Reporting and Impairment π Interpretation IFRIC-10 Philippine Service Concession Arrangements π Interpretation IFRIC-12 Philippine PAS 19—The Limit on a Defined Benefit π Interpretation Asset, Minimum Funding Requirements and IFRIC-14 their Interaction Philippine Hedges of a Net Investment in a Foreign π Interpretation Operation IFRIC-16 Philippine Distributions of Non-cash Assets to Owners π Interpretation IFRIC-17 Philippine Extinguishing Financial Liabilities with π Interpretation Equity Instruments IFRIC-19 Philippine Stripping Costs in the Production Phase of a π Interpretation Surface Mine IFRIC-20 - 4 -

PHILIPPINE FINANCIAL REPORTING STANDARDS Not Not AND INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018 Philippine Levies π Interpretation IFRIC-21 Philippine Foreign Currency Transactions and Advance π Interpretation Consideration IFRIC-22 Philippine Introduction of the Euro π Interpretation SIC-7 Philippine Government Assistance—No Specific π Interpretation Relation to Operating Activities SIC-10 Philippine Operating Leases—Incentives π Interpretation SIC-15 Philippine Income Taxes—Changes in the Tax Status π Interpretation of an Entity or its Shareholders SIC-25 Philippine Evaluating the Substance of Transactions π Interpretation Involving the Legal Form of a Lease SIC-27 Philippine Service Concession Arrangements: π Interpretation Disclosures SIC-29 Philippine Intangible Assets—Web Site Costs π Interpretation SIC-32

A 1 9 9 9 - 1 8 3 2 3 S.E.C. Registration Number

T H E S P A A N D L O D G E A T

T A G A Y T A Y H I G H L A N D S , I N C .

(Company‟s Full Name)

T A G A Y T A Y H I G H L A N D S C O M P L E X , B A R A N G A Y C A L A B U S O , T A G A Y T A Y

C I T Y , 4 1 2 0 C A V I T E (Business Address: No. Street City / Town / Province)

Mr. A. Bayani K. Tan 632-0905 Contact Person Company Telephone Number

1 2 - 3 1 A M E N D E D 1 7 - A 0 8 - 0 3 Month Day FORM TYPE Month Day Calendar Year Annual Meeting

Secondary License Type, If Applicable

Dept. Requiring this Doc. Amended Articles Number/Section

Total No. of Stockholders Domestic Foreign Total Amount of Borrowings

______To be accomplished by SEC Personnel concerned

File Number LCU

Document I.D. Cashier

STAMPS

Remarks = pls. use black ink for scanning purposes

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SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A, AS AMENDED

ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF CORPORATION CODE OF THE PHILIPPINES

1. For the Twelve months ended 31 December 2018

2. SEC Identification Number: A199918323 3. BIR Tax Identification Number: 210-642-098-000

THE SPA & LODGE AT TAGAYTAY 4. Exact name of issuer as specified in its charter HIGHLANDS, INC.

Cavite, Philippines 5. Province, Country or other jurisdiction of incorporation 6. (SEC Use Only) or organization Industry Classification Code:

Tagaytay Highlands Complex, Barangay Calabuso, Tagaytay City, Philippines 4120 7. Address of principal office Postal Code

8 Registrant‟s telephone number, including area code: (046) 483-0838

NOT APPLICABLE 9. Former name, former address, and former fiscal year, if changed since last report

10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA (information on number of shares and amount of debt is applicable only to corporate registrants):

Number of Shares of Common Stock Outstanding Title of Each Class and Amount of Debt Outstanding Proprietary Shares 434

11. Are any or all of Registrant‟s securities listed on a Stock Exchange? [ ] Yes [ X ] No

12. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); [ ] Yes [ X ] No

(b) has been subject to such filing requirements for the past 90 days. [ ] Yes [ X ] No

13. Aggregate market value of voting stock held by non-affiliates: ₱ 139,800,00.00

APPLICABLE ONLY TO ISSUERS INVOLVED IN INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 of the SRC subsequent to the distribution of securities under a plan confirmed by a court or the SEC. NOT APPLICABLE

-2- The Spa & Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

Background and Business Development

The Spa & Lodge at Tagaytay Highlands, Inc. (TSL) was incorporated in 2001 as an exclusive lodge membership operating on a non-profit basis. Membership at TSL is proprietary. This means that TSL members have full equity share in the ownership of the assets of TSL, which include the land, the 24 one-bedroom suites, and the fixtures and equipment. Membership in TSL cannot be assigned nor be leased out. However, it may be transferred after the standard holding period requirement of two years from the date that TSL is declared fully operational.

Constructed using authentic North American cedar logs, TSL are designed to provide the feel and comfort of a traditional log cabin. Since it is located on one of the highest points of Tagaytay Highlands, it has a breathtaking view of Mount Makiling, Laguna Lake, and Taal Volcano and the Highlands Golf Course.

TSL is situated in Tagaytay City which is about 60 kilometers south of Metro Manila.

Lodge Members are enjoying the following upgraded benefits:

 24 room nights per year of free accommodation, 12 of which are weekend or holiday nights and 12 weekday nights;  Convertibility of unused weekday nights to weekend nights (subject to room availability) with only a minimal conversion fee;  Privilege to use more room nights after the free 24 nights, subject to the corresponding room charge;  “Junior Membership” eligibility;  Accommodation of guest at the Lodge; and  Special discounts on certain spa services and facilities.

The privileges and benefits of TSL Membership are subject to the procedures, rules and regulations set forth by Management for this purpose.

TSL revenue contributions are generated from collection of Membership Dues (31.90%), Room Sales (29.66%), Food & Beverages (20.57%), Service fee/Spa Commission (6.32%), and Other income (11.55%).

Bankruptcy, Receivership or Similar Proceedings

TSL does not been involved in any bankruptcy, receivership or similar proceedings for the past (3) years.

Material Reclassification, Merger, Consolidation or Purchase or Sale of a Significant Amount of Assets (Not Ordinary)

TSL does not engaged in any material reclassification, merger, consolidation or purchase or sale of significant amount of assets (not ordinary) for the past (3) years.

-3- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

Competition

There is no formal or organized secondary market for the purchase and sale of TSL shares in the Philippines. As such, holders of shares of TSL who wish to sell or dispose of their shares may not readily find a counter party for the transaction at the desired asking price. However, there is currently a few growing number of lodge membership shares being established in various parts of the country. This may affect appreciation in the value of investment in TSL.

Although there are other companies engaged in the same line of business, TSL competes in terms of services and facilities. TSL is highly competitive because of its timesharing lodge accommodation and the panoramic view of Taal Lake, Mt. Makiling, and Laguna de Bay. TSL also offers several body treatment massages such as Aromatherapy, Swedish, Shiatsu or Combination massage, complimented with essential oils such as Lavender, Ylang-ylang, and Almond Oil.

Sources and availability of raw materials

The TSL principal suppliers include Eastworld Sales Philippines, Reem-Cool Airconditioning and Refrigeration, Delos Reyes Trading, RGL33 Fruits and Vegetables, Ace Hardware,Star Appliance, and Silang Gasul. There are no existing major supply contracts entered into by the Company.

Transactions with and/ or dependence on related parties

In the ordinary course of business, TSL has transactions with affiliates mainly consisting of non-interest bearing advances for the acquisition/ transfer of property and equipment, supplies and reimbursement of certain expenses.

Government Regulations

TSL has complied with licensing and regulatory requirements necessary for its development and operations.

Compliance with Environmental Laws

TSL being one of the affiliates of the Tagaytay Highlands Clubs has complied with pertinent environmental laws and regulations and wherein the Clubs has received the Environmental Certificate Clearance issued by the Department of Energy and Natural Resources.

Employees

The Spa & Lodge is run by a team of regular and casual employees as follows:

-4- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

Regular Employees* Officer 2 Supervisor 3 Rank & File 19 Total 24

All regular rank and file employees are not subject to the Collective Bargaining Agreement.

(* based on head count as of Dec 31, 2018)

Major Business Risks

TSL has been sustaining its operational requirements through the collection of monthly dues from each member and the operation of Lodge rooms. It has no foreign currency exposures or obligations that will have a material impact on its short-term or long-term liquidity due to the depreciation of the peso. Despite the current economic condition, however, TSL membership has not been adversely affected. There are no foreseeable any negative effect on members‟ patronage in view of the present economic condition.

Item 2. Properties

TSL is located Tagaytay Highlands, Complex, barangay Calabuso, Tagaytay City 4120, Cavite. Its principal properties include the whole building structure with 25-lodge accommodations, 14- individual massage rooms, and a Salon. The building structure is situated on a 1-hectare land about 60 kilometers south of Metro Manila. These properties are well maintained and go through regular repairs and maintenance program throughout the year.

TSL has complete ownership and that there is no other party who owns the property. In addition, the property is free from all liens, encumbrances and mortgages. There are no limitations as to the ownership brought about by the terms and conditions of any encumbrances.

Item 3. Legal Proceedings

As of December 2018, there is no material pending legal proceeding which TSL is a party to.

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

Also during the year, there were no matters submitted to a vote of the shareholders.

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer's Common Equity and Related Stockholder Matters

Proprietary Shares

TSL has 434 membership certificates as at December 31, 2018, of which 202 or 46.54% is owned by Belle Corporation with the remaining being owned by other members. There are 232 holders of the Company‟s membership certificates.

-5- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

The top 20 members are as follows:

No. of membership Name of member % certificates

Belle Corporation 202 46.54% Fortune International Trading Corp. 2 0.46% Hortaleza, Rosalinda A. 2 0.46% JLV Holdings 2 0.46% 2 0.46% (forward) Lahoz, Bernardo Lim, Jose Antonio Ong 2 0.46% Ocampo, Antonio V. 2 0.46% Soesanto, Henry R. 2 0.46% Tangco, Ponciano L. 2 0.46% RDJ Development Corp. 2 0.46% Others 214 49.31% Total 434 100.00%

Market Value of Security

Below are the high and low bid prices for the past two (2) years based on GG&A Club shares records:

HIGH LOW

Quarter ended March 2016 600,000 550,000 Quarter ended June 2016 600,000 550,000 Quarter ended September 2016 600,000 550,000 Quarter ended December 2016 600,000 550,000 Quarter ended March 2017 650,000 500,000 Quarter ended June 2017 650,000 500,000 Quarter ended September 2017 650,000 550,000 Quarter ended December 2017 600,000 550,000 Quarter ended March 2018 800,000 600,000 Quarter ended June 2018 800,000 650,000 Quarter ended September 2018 750,000 750,000 Quarter ended December 2018 550,000 550,000

TSL‟s securities are not traded in any of the stock exchanges.

Dividends

Please note that TSL is a non-profit corporation and as such, does not declare dividends to its shareholders. In accordance with the TSL‟s Articles of Incorporation and By-Laws, no profit shall inure to the exclusive benefit of any of its shareholders, hence, no dividends shall be declared in their favor. Shareholders shall be entitled only to a pro-rata share of the asset of the company at the time of the dissolution or liquidation of the company.

-6- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

Recent Sales of Unregistered Securities

All TSL‟s securities are registered under the Securities Regulation Code. There were no sale of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities for the past (3) years.

Item 6. Management's Discussion and Analysis

Results of Operations

December 2018 compared to December 2017

Revenue TSL generated a total revenue of P=26.30 million in 2018, higher by P=4.86 million or 22.69% compared to 2017 revenue of P=21.43 million mainly due to increase in room sales of P=2.81 million or 56.30% from P=4.99 million in 2017 to P=7.80 million in 2018. The food, beverages and sundries revenue also increased by P=1.14 million or 26.81% from P=4.26 million in 2017 to P=5.41 million in 2018. In addition, other income showed an increase of P=0.91 million or 42.56% from P= 2.13 million in 2017 to P=3.04 million in 2018 due to increase in other room charges, transfer fee and service charge revenue during the period.

Cost of services and Operating expenses During the year, cost of services of P=21.59 million showed an increase of P=.05 million or 0.21% compared to P=21.54 million in 2017. This was attributed to the increase in depreciation by P=0.12 million or 1.61% from P=7.74 million in 2017 to P=7.87 million in 2018.Supplies also increased by P= .15 million or 20.03% from P=.73 million in 2017 to P=.87 million in 2018.

Likewise, operating expenses increased by P=0.54 million or 16.32% from P=3.30 million in 2017 to P=3.84 million in 2018, due to increase in miscellaneous expense from P=0.10 million in 2017 to P= 0.63 million in 2018. Also, taxes and licenses increased by P=0.02 million or 16.73% from P=0.14 million in 2017 to P=0.16 million in 2018. Fuel and oil increased by P=0.10 million or 132.86% due to higher fuel and oil rates during the period. In addition, processing fees increased by P=0.04 million or 33.95%. Meanwhile, insurance decreased by P=0.10 million or 22.94% from P=0.44 million in 2017 to P=0.34 million in 2018. Supplies also showed a decreased of 13.0% or P=0.02 million due to lower supply expense incurred during the period.

Net Income The Company posted a net income amounting to P=0.76 million which showed an improvement of P=4.17 million for the twelve-month period ended December 31, 2018 as compared to net loss of P= 3.41 million in the twelve-month period ended December 31, 2017.

-7- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

December 2017 compared to December 2016

Revenue TSL‟s performance in 2017 compared to 2016 showed an increase in total revenue of P=0.85 million or 4.11% from P=20.58 million in 2016 to P=21.43 million in 2017. The Company‟s business operations mainly consist of Room Revenue, Spa Revenue & Food and Beverage Revenue. Room Revenue decreased by P=0.17 million or 3.23% from ₱5.16 million in 2016 to P= 4.99 million in 2017 due to decreased in registered room accommodation for the year. Meanwhile, the Food, beverage and sundries revenue of P4.26 million for the year ended December 31, 2017 were increased by P=0.63 million or 17.28% compared to ₱3.64 million for the year ended December 31, 2016 due to increase in members patronage and delivery services to the home owners. Meanwhile, Spa Revenue decreased by P=0.13 million or 7.32% from ₱1.79 million in 2016 to ₱1.66 million in 2017 due to temporary close of salon operations starting August 2016. On the other hand, the membership transfer and assignment fee increased by P=0.13 million or 46.88% from ₱0.29 to ₱0.42 million in 2016 and 2017 respectively due to increase by transfer of shares for the year.

Cost of services and Operating expenses During the year, cost of services increased by P=2.76 million or 14.66% from P=18.79 million in 2016 to P=21.54 million in 2017 due to increase in expenses relating to salaries, wages and employee benefits, repairs and maintenance and depreciation expense for the year. The increase in Operating expenses of P=0.20 million or 6.35% from P=3.10 million in 2016 to P=3.30 million in 2017 due to increase in insurance, supplies, transportation and travel, and entertainment, amusement and recreation expenses.

Net Loss The Club posted a total net loss of ₱3.41 million in 2017 compared to P=1.35 million in 2016.

Financial Condition and Changes in Financial Condition

December 2018 compared to December 2017

Assets The Spa and Lodge has total assets of P=46.85 million as of December 31, 2018 compared to P=44.46 million as of December 31, 2017. The Company has current ratio of P=2.65 for each peso of current liabilities as of December 31, 2018 compared to P=2.01 as of December 31, 2017.

Cash and Cash equivalents Cash and cash equivalents increased by P=3.94 million or 168.74%, from P=2.34 million in 2017 to P=6.28 million as of December 31, 2018 due to net cash provided by operating activities of P=5.43 million and net to cash used in addition of property and equipment of P=1.49 million during the year.

-8- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended) withholding tax of P=0.68 million during the period and increase in deposit to contractors of P=0.02 million.

Noncurrent assets

Property and equipment of P=23.90 million in December 31, 2018 was lower by P=6.38 million or 21.08% compared to P=30.29 million as of December 31, 2017, due to depreciation charges during the year.

Equity The Company‟s shareholders‟ equity as of December 31, 2018 of P=37.66 million was higher by P= 1.13 million or 3.10% compared to P=36.53 million as of December 31, 2017 due to income incurred during the year of 2018.

December 31, 2017 compared to December 31, 2016

Assets The Spa and Lodge has total assets of P=44.46 million as of December 31, 2017 as compared to P=52.05 million as of December 31, 2016. The Club has current ratio of P=2.01 for each peso of current liabilities for the year ended December 31, 2017 as compared to P=1.27 million as of December 31, 2016.

Cash and Cash equivalents Cash and cash equivalents slightly increased by P=1.01 million or 76.46%, from P=1.32 million in 2016 to P=2.34 million as of December 31, 2017 due to net cash provided by operating activities of P=1.59 million and net cash used in addition of property and equipment of P=0.58 million during the year.

-9- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

EQUITY The Company‟s shareholders‟ equity as of December 31, 2017 of P=36.53 was lower by P=3.43 million or 8.60% compared to P=39.96 million as of December 31, 2016 due to total comprehensive loss during the year of 2017.

Below are the comparative key performance indicators of The Spa & Lodge:

Performance Dec 31, 2018 Dec 31, 2017 Formula for Calculation Indicators (Audited) (Audited)

Current ratio Current assets over 2.65 : 1.00 2.01 : 1.00 current liabilities

Debt to equity ratio Total debt over total 0.23 : 1.00 0.19 : 1.00 members‟ equity Debt ratio Total debt over total 0.20 : 1.00 0.18 : 1.00 assets

Fixed assets turnover Sales over net fixed 1.10 times 0.71 times assets

EBITDA * per share Excess of Revenue Over ₱2,001 (₱9,980) Expenses before Interest, Tax, Depreciation and Amortization over weighted average number of shares

* Excess of Revenue Over Expenses before Interest, Tax, Depreciation and Amortization (EBITDA)

During the year ended December 31, 2018, except for what has been stated above, there were no material events or uncertainties known to management that had a material impact on past performance, or that would have a material impact on future operations in respect of the following:

i. Known trends, demands, commitments, events or uncertainties that would have a material impact on the Company. ii. Events that will trigger direct or contingent financial obligation that is material to the Company, including any default or acceleration of an obligation; iii. Material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the company with unconsolidated entities or other persons created during the reporting period; iv. Material commitments for capital expenditures that are reasonably expected to have a material impact on the Company‟s short term or long-term liquidity; v. Known trends, events or uncertainties that have had or that are reasonably expected to have a material favorable or unfavorable impact on net sales/ revenues/ income from continuing operations;

-10- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

vi. Significant elements of income or loss that did not arise from the Company‟s continuing operations; vii. Seasonal aspects that had a material impact on the Company‟s results of operations; and viii. Material changes in the financial statements of the Company from the year ended December 31, 2016, except as reported in the MD&A.

Item 7. Financial Statements

The audited balance sheets as of December 31, 2018 and 2017, and the related statements of revenues and expenses and cash flows for each period ended are attached herewith as part of this Form 17-A. Also accompanying the financial statements is a statement of management‟s responsibility over them.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

No principal accountant or independent accountant of TSL has resigned, was dismissed or has ceased to perform services during the fiscal year covered by this report.

There was no disagreement with the accountants on any matter of accounting principles or practices, financial statement disclosures, or auditing scope procedure.

Independent Public Accountants, External Audit Fees and Services

SyCip Gorres Velayo & Co. (“SGV”), the Club‟s external auditors for 2017-2018, will be recommended for re-appointment as such for the current year. Representatives of SGV are expected to be present at the Annual Stockholders‟ Meeting to respond to appropriate questions and will be given the opportunity to make a statement if they so desire.

Over the past five (5) years, there was no event where SGV and the Club had any disagreement with regard to any matter relating to accounting principles or practices, disclosure of financial statements or auditing scope or procedure.

In Compliance with the SEC Memorandum Circular No. 8 Series of 2003, Ms.Julie Christine Ong-Mateo was assigned in 2017 as SGV‟s engagement partner for the Club to replace Mr. Sherwin V. Yason assignment ended after the 2015-2016 audit engagement.

The Club paid SGV ₱167,000 and ₱151,900 for external audit services for 2018 and 2017.

The Audit Committee, composed of Mr. Ruben C. Tan as Chairman, and Mr. Willy N. Ocier, Jr. and Hans T. Sy as Members, recommends to the Board of Directors the appointment of the external auditors. The Board of Directors and the stockholders approve the Audit Committee‟s recommendation. The Executive Committee approves the audit fees as recommended by the Audit Committee.

-11- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Issuer

The following are the incumbent Directors and Executive Officers of the Company:

A brief write-up on the incumbent directors and principal officers are as follows:

Willy N. Ocier Chairman

Jerry C. Tiu President

Mr. Tiu, Filipino, is the President and Director of TSL since 2001. He is also an Independent Director of Philippine Global Communications, Inc. since 2009. He is the President and Director as well of TCCATHI, THIGCI, TMGCI, and Tagaytay Highlands Community Condominium Association, Inc., Tagaytay Midlands Community Homeowner‟s Association Inc and Greenlands Community Homeowner‟s Association Inc. Moreover, he is the Vice President and a Board of Trustee of The Highlands Prime Community Condominium Owner‟s Association, Inc. The HPI‟s Horizon Community Condominium Owner‟s Association, Inc. and The Hillside at Tagaytay Highlands Community Homeowner‟s Association, Inc from 2014 to present. He holds a Bachelor of Science degree in Commerce (Major in Marketing) from the University of British Columbia.

-12- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

Hans T. Sy Director

Ruben C. Tan Independent Director

Joseph T. Chua Independent Director

Mr. Chua, Filipino, is an independent Director of the TSL as well as THIGCI, TMGCI and TCCATHI. He is the Chairman of the Board for JF Rubber Phils from 1993 to present. He is the President and COO of Macroasia Corporation from December 2015 to present. He is also the Director of PAL Holdings Inc. from October 2014 to January 2018. He served as EVP-Chief Operating Officer from June 2014 to September 2017 of Eton Properties Philippines, Inc. He is the Director of Philippine National Bank from May 2014 to May 2015 and PNB General Insurers Co. Inc from August 2014 to February 2018. Mr. Chua has a Bachelor‟s degree in Economics and Business management from De La Salle University. He holds an MBA degree in International Finance from the University of Southern California. He is also a member of several Organizations such as Management Association of the Philippines, Philippine Chamber of Commerce and Industry, German Philippine Chamber of Commerce and Rubber Association of the Philippines.

A. Bayani K. Tan Corporate Secretary

-13- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended) of Tan Venturanza Valdez (since it was established in 1988), Managing Director/President of Chamrock Development Corporation (since May 1988). Director of Destiny LendFund, Inc. (since December 2005), Pascual Laboratories, Inc. (since March 2014), and Pure Energy Holdings Corporation (since October 2016), President of Catarman Chamber Elementary Scholld Foundation, Inc. (since August 2012), managing Trustee of SCTan Foundation, Inc. (since 1986), Trustee of Rebisco Foundation, Inc. (since April 2013) and Trustee and Corporate Secretary of St. Scholastica‟s Hospital, Inc. (since February 2011).

Mr. Tan holds a Master of Laws degree from New York University (Class of 1988) and earned his Bachelor of Laws degree from the University of the Philippines (Class of 1980) where he was a member of the Order of the Purple Feather (U.P. College of Law Honor Society) and ranked ninth in his class. Mr. Tan passed the bar examination in 1981 where he placed sixth. He has a Bachelor of Arts major in Political Science degree from the San Beda College (Class of 1976) from where he graduated Class Valedictorian and was awarded the medal for Academic Excellence.

Manuel A. Gana Vice-President and Treasurer

Mr. Gana, Filipino is the Vice President and Treasurer of the Club as well as THIGCI, TMGCI and TCCATHI. Mr. Gana is also the Executive Vice President and Chief Financial Officer of Belle Corporation (Belle). He joined Belle in 1997 as Vice President for Corporate Development and Special Projects, during which time he was also assigned as the Vice President-Finance and Chief Financial Officer for MagiNet Corporation, which was then as subsidiary of Premium Leisure Corporation, a subsidiary of Belle. He is also a Director of Woodland Development Corporation. Previously, he was the President of Sinophil, and Director of Investment Banking at Nesbitt Burns Securities Inc. in New York. He also previously worked from Bank of Montreal and Merrill Lynch Capital Markets (both in New York), and for Procter & Gamble Philippine Manufacturing Corporation. Mr. Gana holds a Master of Business Administration degree from the Wharton School of University of Pennsylvania, and degrees in Accounting and Economics from De La Salle University. He is a Certified Public Accountant.

Principal Officers

Ma. Clara T. Kramer General Manager

Ms. Kramer, Filipino is the General Manager of TSL. She is also the concurrent General Manager of TMGCI, THIGCI and TCCATHI. She was a consistent Dean‟s Lister in Assumption College (San Lorenzo Village, Makati City) where she earned her Bachelor‟s degree. She started her career in hotel industry back in December of 1983 when she joined the sales department of Manila Hotel as Sales Executive. In July 1990, she was hired by L‟Fisher Hitel as Front Office Manager and later as PR & Promotions Manager until she got promoted in June 2001 and was tasked to manage the Sales and Marketing Department. As member of the management team, she actively took part in the formulation of major policies and procedures of the Hotel. Ms. Kramer is also involved in various civic and social activities as member and resource speaker focusing on family, marriage and parenting.

Significant Employee

TSL has no significant employee as of December 31, 2018.

-14- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

Family Relationships

None of the directors or officers of TSL are related to each other up to the fourth civil degree either by consanguinity or affinity.

Involvement in Certain Legal Proceedings

Except as provided below, TSL is not aware of any of the following events wherein any of its directors, nominees for election and director, executive officers, underwriter or control person where involved during the past five (5) years:

(a) Any bankruptcy petition files by or against any business of which any of the Golf Club‟s directors or officers was a general partner or executive officer either at the time of the bankruptcy of within two (2) years prior to that time; (b) Any order, judgment, or decree, not subsequently reverse, suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement or any of the above persons in any type of business, commodities or banking activities; and, (c) Any finding by a domestic or foreign court of competent jurisdiction (in civil action), the SEC of comparable foreign body, or a domestic or foreign exchange or electronic marketplace or self-regulatory organization, that any of the above persons has violated a securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Item 10. Executive Compensation

Except for the President who is receiving only professional service fees, the Directors and Executive Officers do not receive any compensation from TSL.

Annual Compensation

Named Group:

Other Annual Year Salary Bonus Compensation

Not applicable

Compensation of Directors Directors, as such, do not receive any compensation.

Item 11. Security Ownership of Certain Beneficial Owners and Management

(1) Security Ownership of Certain Record and Beneficial Owners

The following table shows the record and beneficial owners owning more than 5% of the outstanding capital stock of The Spa & Lodge as of December 31, 2018:

AMOUNT AND NATURE OF TITLE OF NAME AND ADDRESS OF PERCENT OF RECORD/BENEFICIAL CLASS RECORD/BENEFICIAL OWNER CLASS OWNERSHIP

Proprietary Belle Corporation*

-15- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

membership 5/F Tower A 202 membership 46.54% certificate Two Ecom Centre certificates Palm Coast Avenue Mall of Asia Complex Pasay City

*Belle Corporation is a publicly-listed corporation. Its Board of Directors is composed of Messrs. Emilio S. De Quiros, Jr., Willy N. Ocier, Elizabeth Anne C. Uychaco, Manuel A. Gana, Jose T. Sio, Virginia A. Yap, Arthur L. Amansec, Aurora Cruz Ignacio, Jacinto C. Ng Jr., Gregorio U. Kilayko, Cesar E. A. Virata, and Amando M. Tetangco, Jr. Belle Corporation, having 46.26% shareholdings, is an associate of the Club.

The top 20 stockholders of Belle Corporation (as of 31 December 2018) are as follows:

TYPE / STOCKHOLDERS NUMBER OF STOCKS CLASS 1 Belleshares Holdings, Inc. Common 2,604,740,622 2 PCD Nominee Corporation Non-Filipino Common 2,549,349,317 3 PCD Nominee Corporation Filipino Common 2,074,101,699 4 Sysmart Corporation Common 1,629,353,802 5 Sybase Equity Investment Corp. Common 531,320,577 6 Social Securities System Common 370,469,140 7 Eastern Securities Development Corp Common 171,730,866 8 Ng, Jacinto C. Jr. Common 154,153,999 9 Premium Leisure Corporation (formerly Sinophil Common 99,987,719 Corp) 10 Ng, Jacinto L. Sr. Common 88,835,833 11 Parallax Resources Inc Common 86,308,131 12 SLW Development Corporation Common 66,082,333 13 Willy N. Ocier Common 48,541,702 14 F. Yap Securities, Inc. Common 21,803,732 15 Pacita K. Yap/Philip K. Yao Common 7,000,000 16 Lim Siew Kim Common 6,200,000 17 James Go Common 4,816,999 18 Estate of Leo Joseph Blanchet Common 4,128,579 19 William T. Gabaldon Common 4,000,000 20 Washington Z. Sycip (+) Common 3,008,334

(2) Security Ownership of Management

The following is a tabular presentation of the shares beneficially owned by all directors and executive officers of The Spa & Lodge as of December 31, 2018:

AMOUNT AND NATURE CITIZEN- PERCENT OF TITLE OF CLASS NAME OF BENEFICIAL OWNER OF OWNERSHIP SHIP CLASS

1 membership 0.23% certificate Willy N. Ocier Filipino Proprietary Share Beneficial 32 Wilson St., San Juan, Metro Manila

Hans T. Sy 1 membership 0.23% certificate Filipino Proprietary Share No. 11 Harvard Road, Forbes Park, Makati City Beneficial

-16- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended)

AMOUNT AND NATURE CITIZEN- PERCENT OF TITLE OF CLASS NAME OF BENEFICIAL OWNER OF OWNERSHIP SHIP CLASS

Jerry C. Tiu 1 membership 0.23% certificate Filipino Proprietary Share 5 Urdaneta St., Urdaneta Village, Makati City Beneficial

Ruben C. Tan 1 membership 0.23% Proprietary Share certificate Filipino #769 Harvard St. Wack wack Village Mandaluyong City Beneficial

Joseph T. Chua 1 membership 0.23% Proprietary Share certificate Filipino Macroasia Corporation, 12/F Allied Bank Center, 6765 Beneficial Ayala Avenue, Makati City Aggregate Security Ownership of Directors and Officers 5 membership 1.15% certificates

(3) Voting Trust Holders of 5% or more

There is no party that holds any voting trust or any similar agreement for 5% or more of The Spa & Lodge voting securities.

(4) Changes in Control

The Spa & Lodge is not aware of any arrangement that may result in a change in control of the Company.

Item 12. Certain Relationships and Related Transactions

The Spa & Lodge is not a party to any transaction in which any director or officer, or any security holder, or any member of the immediate family of the foregoing, had or is to have a direct or indirect material interest.

In the ordinary course of business, The Spa & Lodge has transactions with affiliates which consist mainly of non-interest bearing advances for the acquisition/transfer of property and equipment, acquisition of the affiliate‟s proprietary shares and reimbursement of certain expenses.

PART IV- CORPORATE GOVERNANCE

Item 13. Corporate Governance

TSL remains focused on insuring the adoption of systems and practices of good corporate governance in enhancing value for its shareholders.

In compliance with the initiative of the Securities and Exchange Commission (“SEC‟), TSL submitted its Corporate Governance Manual (the “Manual”) to the SEC. This manual institutionalize the principles of good corporate governance in the entire Company. TSL believes that corporate governance, the framework of rules, systems and processes governing the performance of the Board of Directors and Management of their respective duties and responsibilities, and from which the organization‟s values and ethics emerge, is of utmost importance to the Club‟s shareholders and other stakeholders, which include, among others,

-17- The Spa and Lodge at Tagaytay Highlands, Inc. 2018 Annual Report (SEC Form 17-A, As Amended) clients, employees, suppliers, financiers, government and community in which operates. The Club undertakes every effort possible to create awareness throughout the entire organization.

TSL has been monitoring compliance with the relevant SEC circular and rules on good corporate governance. TSL filed with the SEC its Revised Manual on Corporate Governance in 2014, pursuant to SEC Memorandum circular No. 9, series of 2014. TSL also appointed members of various Board level committees. These committees consist of the Membership Committee, the Nomination committee (for selection and evolution of qualifications of directors and officers), the Compensation Committee (tasked to consider an appropriate remuneration system), and the Audit Committee (tasked to review financial and accounting matters). A Compliance Officers was also appointed. Members of various committees are elected annually and to service for a term of one (1) year.

The Board establishes the major goals, policies and objectives of TSL, as well as the means to monitor and evaluate the performance of Management. The Board also ensures that adequate internal control mechanism is implemented and properly complied in all levels.

TSL is not aware of any non-compliance with its Manual on Corporate Governance, by any of its officers or employees.

PART V - EXHIBITS AND SCHEDULES

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

(a) Exhibits

Financial Statements (meeting the requirements of RSA Rule 48-1) Exhibit “D” Schedule of Indebtedness to Affiliates and Related Parties Exhibit “E” Schedule of Property and Equipment Exhibit “F” Schedule of Accumulated Depreciation Exhibit “K” Proprietary Certificates

(b) Reports on SEC Form 17-C

Date of Report Information

Notice of Annual Stockholders Meeting 12 April 2018

31 May 2018 Results of Annual Stockholders Meeting and the Organizational Meeting on the Board of Directors

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THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. (A Nonprofit Corporation)

INDEX TO THE FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

FORM 17-A, Item 7

Page No. Financial Statements

Statement of Management‟s Responsibility for Financial Statements Report of Independent Public Accountants Statement of Financial Position as at December 31, 2018 and 2017 Statements of Comprehensive Income For the years ended December 31, 2018 and 2017 Statements of Changes in Members‟ Equity For the years ended December 31, 2018 and 2017 Statements of Cash Flows For the years ended December 31, 2018 and 2017 Notes to Financial Statements

Supplementary Schedules Required by Annex 68-E

A. Financial Assets Attached

B. Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal Stockholders (Other than Related Parties) NA

C. Amounts Receivable from Related Parties which are Eliminated during the Consolidation of Financial Statements NA

D. Intangible Assets and Other Assets NA

E. Long-term Debt NA

F. Indebtedness to Related Parties (Long-term Loans from Related NA Companies)

G. Guarantees of Securities of Other Issuers NA

H. Capital Stock Attached

Additional Components

I.) List of Philippine Financial Reporting Standards effective as at Attached December 31, 2018

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THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. SUPPLEMENTARY SCHEDULES REQUIRED BY ANNEX 68-E DECEMBER 31, 2018

Schedule A. Financial Assets Amount Shown in the Statement Income Name of Issuing Entity and Association of Each of Financial Received and Issue Position Accrued Cash and cash equivalents Cash on hand P=17,700 P=– Cash in banks: Union Bank – Savings Account 3,391,860 – MBTC - Savings Account 850,302 – BDO – Savings Account 1,453,452 MBTC - Current Account 10,000 – Chinabank – Current Account 10,540 Chinabank – Savings Account 1,000 5,734,854 – Short-term deposits- Union Bank 540,519 17,395 P=6,275,373 P=17,395

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Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal Stockholders (Other than Related Parties) As at December 31, 2018 Deductions Name and Balance as at Amount Amount Balance as at Designation January 1, 2018 Additions Collected Written Off Current Non-Current December 31, 2018

Not applicable: The Company has no receivable from directors, officers, employees, related parties and principal stockholders.

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Schedule C - Amounts Receivable from and Payable to Related Parties which are Eliminated during the Consolidation of Financial Statements As at December 31, 2018

Due from subsidiaries

Deductions Balance as at Amount Amount Balance as at Name and Designation January 1, 2018 Additions Collected Written Off Current Non-Current December 31, 2018

Not Applicable: The Company has no long-term debt as at December 31, 2018.

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Schedule D - Intangible Assets - Other Assets As at December 31, 2018

Other changes: Beginning Additions at Charged to cost additions Description balance cost and expenses (disposals) Ending balance

Not Applicable: The Company has no intangible assets at December 31, 2018.

Schedule E - Long Term Debt As at December 31, 2018

Amount Amount shown under caption Amount shown under Title of Issue and Type of Authorized “Current portion of long term caption “Long term debt” in Obligation by Indenture debt” in related balance sheet related balance sheet

Not Applicable: The Company has no long-term debt as at December 31, 2018.

Schedule F - Indebtedness to Related Parties As at December 31, 2018 Balance, Balance, Name January 1, 2018 December 31, 2018

Not Applicable: The Company has no long-term indebtedness to a related party as at December 31, 2018.

Schedule G - Guarantees of Securities of Other Issuers As at December 31, 2018

Name of Issuing Entity of Title of Issue of Total Amount Amount Owned by Securities Guaranteed by Each Class of Guaranteed Person for which the Company for which Securities and the Statement is Nature of this statement is filed Guaranteed Outstanding Filed Guarantee

Not Applicable: The Company has no guarantees of securities of other issuers as at December 31, 2018.

-25-

Schedule H - Capital Stock December 31, 2018

Number of Shares Held By

Number of Shares Number of Shares Reserved for Number of Shares Issued and Options, Warrants, Conversions, Directors, Officers Title of Issue Authorized Outstanding and Other Rights Related parties and Employees Others

Common 434 434 − 202 − 232

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THE SPA AND LODGE AT TAGAYTAY HIGHLANDS, INC. SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS EFFECTIVE AS AT DECEMBER 31, 2018

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018 Framework for the Preparation and Presentation of Financial

Statements  Conceptual Framework Phase A: Objectives and qualitative characteristics PFRSs Practice Statement Management Commentary 

Philippine Financial Reporting Standards - PFRS 1 First time Adoption of Philippine Financial  (Revised) Reporting Standards Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity  or Associate

Amendments to PFRS 1: Additional Exemptions for  First-time Adopters Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time  Adopters

Amendments to PFRS 1: Severe Hyperinflation  and Removal of Fixed Date for First-time Adopters Amendments to PFRS 1: Government Loans  Amendments to PFRS 1: Borrowing Costs 

Amendment to PFRS 1: Meaning of Effective  PFRSs PFRS 2 Share-based Payment 

Amendments to PFRS 2: Vesting Conditions and  Cancellations - Amendments to PFRS 2: Group Cash settled  Share-based Payment Transactions

Amendment to PFRS 2: Definition of Vesting  Condition Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based  Payment Transactions* PFRS 3 Business Combinations 

- 2 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018

(Revised) Amendment to PFRS 3: Accounting for Contingent  Consideration in a Business Combination

Amendment to PFRS 3: Scope Exceptions for Joint  Arrangements PFRS 4 Insurance Contracts 

Amendments to PAS 39 and PFRS 4: Financial  Guarantee Contracts

Amendments to PFRS 4, Applying PFRS 9 with  PFRS 4* - PFRS 5 Non current Assets Held for Sale and Discontinued  Operations

Amendments to PFRS 5: Changes in Methods of  Disposals

PFRS 6 Exploration for and Evaluation of Mineral  Resources PFRS 7 Financial Instruments: Disclosures 

Amendments to PAS 39 and PFRS 7:  Reclassification of Financial Assets Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date  and Transition

Amendments to PFRS 7: Improving Disclosures  about Financial Instruments - Amendments to PFRS 7: Disclosures Transfers of  Financial Assets - Amendments to PFRS 7: Disclosures Offsetting  Financial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Date  of PFRS 9 and Transition Disclosures - Amendments to PFRS 7: Disclosures Servicing  Contracts Amendments to PFRS 7: Applicability of the Amendments to PFRS 7 to Condensed Interim  Financial Statements PFRS 8 Operating Segments  Amendments to PFRS 8: Aggregation of Operating  Segments and Reconciliation of the Total of the Reportable Segments‟ Assets to the Entity‟s Assets

- 3 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018 PFRS 9 Financial Instruments* 

Amendments to PFRS 9: Prepayment Features  with Negative Compensation* Consolidated Financial Statements  PFRS 10 Amendments to PFRS 10, PFRS 12 and PAS 27:  Investment Entities Amendments to PFRS 10 and PAS 28: Sale or Contribution of Assets Between an Investor and its  Associate or Joint Venture*

Amendments to PFRS 10, PFRS 12 and PAS 28:  Applying the Consolidation Exception PFRS 11 Joint Arrangements 

Amendments to PFRS 11: Accounting for  Acquisitions of Interests in Joint Operations PFRS 12 Disclosure of Interests in Other Entities 

Amendments to PFRS 10, PFRS 12 and PAS 27:  Investment Entities

Amendments to PFRS 10, PFRS 12 and PAS 28:  Applying the Consolidation Exception

Amendment to PFRS 12, Clarification of the Scope  of the Standard PFRS 13 Fair Value Measurement  - Amendment to PFRS 13: Short term Receivables  and Payables  Amendment to PFRS 13: Portfolio Exception PFRS 14 Regulatory Deferral Accounts  PFRS 15 Revenue from Contracts with Customers*  PFRS 16 Leases*  Philippine Accounting Standards PAS 1 Presentation of Financial Statements  (Revised) Amendment to PAS 1: Capital Disclosures  Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on  Liquidation

Amendments to PAS 1: Presentation of Items of  Other Comprehensive Income

- 4 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018

Amendments to PAS 1: Clarification of the  Requirements for Comparative Information Amendments to PAS 1: Disclosure Initiative   PAS 2 Inventories PAS 7 Statement of Cash Flows  - Amendments to PAS 7: Statement of Cash Flows  Disclosure Initiatives

PAS 8 Accounting Policies, Changes in Accounting  Estimates and Errors PAS 10 Events after the Reporting Period  PAS 11 Construction Contracts  PAS 12 Income Taxes  - Amendment to PAS 12 Deferred Tax: Recovery of  Underlying Assets - Amendments to PAS 12 Recognition of Deferred  Tax Assets for Unrealized Losses PAS 16 Property, Plant and Equipment 

Amendments to PAS 16: Classification of Servicing  Equipment Amendments to PAS 16 and PAS 38: Property, - - Plant and Equipment Revaluation Method  Proportionate Restatement of Accumulated Depreciation Amendment to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and  Amortization Amendment to PAS 16 and PAS 41: Bearer Plants   PAS 17 Leases  PAS 18 Revenue PAS 19 Employee Benefits 

Amendments to PAS 19: Actuarial Gains and  Losses, Group Plans and Disclosures PAS 19 Employee Benefits 

(Amended) Amendments to PAS 19: Defined Benefit Plans:  Employee Contribution

Amendments to PAS 19: Regional Market Issue  Regarding Discount Rate

- 5 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018

PAS 20 Accounting for Government Grants and Disclosure  of Government Assistance  PAS 21 The Effects of Changes in Foreign Exchange Rates  Amendment: Net Investment in a Foreign Operation

PAS 23 Borrowing Costs  (Revised) PAS 24 Related Party Disclosures  (Revised) Amendments to PAS 24: Key Management  Personnel

PAS 26 Accounting and Reporting by Retirement Benefit  Plans PAS 27 Consolidated and Separate Financial Statements  PAS 27 Separate Financial Statements  (Amended) Amendments to PFRS 10, PFRS 12 and PAS 27: 

Investment Entities Amendments to PAS 27: Equity Method in  Separate Financial Statements PAS 28 Investments in Associates  PAS 28 Investments in Associates and Joint Ventures  (Amended) Amendments to PFRS 10 and PAS 28: Sale or Contribution of Assets Between an Investor and its  Associate or Joint Venture*

Amendments to PFRS 10 and PAS 28: Applying  the Consolidation Exception - Amendments to PAS 28: Long term Interest in  Associates and Joint Ventures*

Amendments to PAS 28, Measuring an Associate  or Joint Venture at Fair Value* PAS 29 Financial Reporting in Hyperinflationary Economies  PAS 31 Interests in Joint Ventures  PAS 32 Financial Instruments: Presentation 

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on  Liquidation

Amendment to PAS 32: Classification of Rights  Issues

- 6 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018

Amendments to PAS 32: Offsetting Financial  Assets and Financial Liabilities

Amendments to PAS 32: Tax Effect of Distribution  to Holders of Equity Instruments  PAS 33 Earnings per Share PAS 34 Interim Financial Reporting  Amendments to PAS 34: Interim Financial Reporting and Segment Information for Total  Assets and Liabilities

Amendments to PAS 34: Disclosure of Information  „Elsewhere in the Interim Financial Report‟ PAS 36 Impairment of Assets 

Amendments to PAS 36: Recoverable Amount  Disclosures for Non-Financial Assets

PAS 37 Provisions, Contingent Liabilities and Contingent  Assets PAS 38 Intangible Assets  Amendments to PAS 16 and PAS 38: Revaluation Method - Proportionate Restatement of  Accumulated Depreciation / Amortization Amendment to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and  Amortization

PAS 39 Financial Instruments: Recognition and  Measurement

Amendments to PAS 39: Transition and Initial  Recognition of Financial Assets and Financial Liabilities

Amendments to PAS 39: Cash Flow Hedge  Accounting of Forecast Intragroup Transactions Amendments to PAS 39: The Fair Value Option 

Amendments to PAS 39 and PFRS 4: Financial  Guarantee Contracts

Amendments to PAS 39 and PFRS 7:  Reclassification of Financial Assets Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date  and Transition

- 7 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018

Amendments to Philippine Interpretation  IFRIC 9 and PAS 39: Embedded Derivatives Amendment to PAS 39: Eligible Hedged Items 

Amendments to PAS 39: Novation of Derivatives  and Continuation of Hedge Accounting PAS 40 Investment Property  Amendments to PAS 40: Clarifying the Interrelationship between PFRS 3 and PAS 40  when Classifying Property as Investment Property or Owner-Occupied Property

Amendments to PAS 40, Transfers of Investment  Property* PAS 41 Agriculture  Amendment to PAS 16 and PAS 41: Bearer Plants  Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration  and Similar Liabilities - IFRIC 2 Members‟ Share in Co operative Entities and  Similar Instruments

IFRIC 4 Determining Whether an Arrangement Contains a  Lease IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation  Funds

IFRIC 6 Liabilities arising from Participating in a Specific  Market - Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29  Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of PFRS 2  IFRIC 9 Reassessment of Embedded Derivatives 

Amendments to Philippine Interpretation  IFRIC 9 and PAS 39: Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment  IFRIC 11 PFRS 2 - Group and Treasury Share Transactions  IFRIC 12 Service Concession Arrangements  IFRIC 13 Customer Loyalty Programmes 

- 8 -

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Adopted Applicable Effective as at December 31, 2018 The Limit on a Defined Benefit Asset, Minimum IFRIC 14  Funding Requirements and their Interaction Amendments to Philippine Interpretations

IFRIC 14, Prepayments of a Minimum Funding  Requirement IFRIC 15 Agreements for the Construction of Real Estate*  IFRIC 16 Hedges of a Net Investment in a Foreign Operation  IFRIC 17 Distributions of Non-cash Assets to Owners  IFRIC 18 Transfers of Assets from Customers 

IFRIC 19 Extinguishing Financial Liabilities with Equity  Instruments

IFRIC 20 Stripping Costs in the Production Phase of a  Surface Mine  IFRIC 21 Levies Foreign Currency Transactions and Advance IFRIC 22  Consideration* IFRIC 23 Uncertainty over Income Tax Treatments* Not Early Adopted SIC-7 Introduction of the Euro  - - SIC 10 Government Assistance No Specific Relation to  Operating Activities SIC-12 Consolidation - Special Purpose Entities  Amendment to SIC 12: Scope of SIC 12  - - - SIC 13 Jointly Controlled Entities Non Monetary  Contributions by Venturers -  SIC 15 Operating Leases – Incentives - - SIC 25 Income Taxes Changes in the Tax Status of an  Entity or its Shareholders - SIC 27 Evaluating the Substance of Transactions Involving  the Legal Form of a Lease SIC-29 Service Concession Arrangements: Disclosures  - - SIC 31 Revenue Barter Transactions Involving  Advertising Services SIC-32 Intangible Assets - Web Site Costs  *These standards and interpretations which will be effective subsequent to December 31, 2018.

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Note: Standards and interpretations tagged as “Not Applicable” are those standards and interpretations which were adopted but the entity has no significant covered transaction as at and for the year ended December 31, 2018.