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50TH ANNIVERSARY ISSUE

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					                      50TH ANNIVERSARY ISSUE




LOG CABIN LUXURY
At The Woodlands Point
BUILD A MOUNTAIN
LODGE TO DREAM IN
At The Hillside
The Woodridge Park
MERGING A COSMOPOLITAN
LIFESTYLE WITH MOUNTAIN
RESORT LIVING

Spotlight on Independent Director
GREGORIO U. KILAYKO
about the cover
As SM celebrates its 50th Anniversary, we honor the man who
started it all, Mr. Henry Sy, Sr.—a man who dared to dream big, even
as a child who migrated from Jinjiang, China. He made his dreams
become a reality in the Philippines where he spent most of his life
growing up, facing many challenges, building a family and building SM,
from a small shoe business known then as Shoemart. Mr. Sy continues
to dream. He shares his vision with his family and together, they build
more properties other than the 30 malls, 71 retail stores and numerous
bank branches that their companies have built thus far. Their vision
takes Highlands Prime to new heights as it creates communities in the
mountain resort of Tagaytay Highlands and Tagaytay Midlands, thus,
setting the standard for the ultimate in leisure and lifestyle destinations.
table of contents
02   MESSAGE TO STOCKHOLDERS


04
     The Chairman’s Message

     PRESIDENT’S REPORT
                                                 02
     Performance Report of 2007

06   TRENDS AND EXPECTATIONS
     Antonio A. Henson

07   HISTORY OF THE HIGHLANDS


08
     A Look at How HPI Began

     LOG CABIN LUXURY
                                                           20
     The Woodlands Point at Tagaytay Highlands

11   ARCHITECT’S NOTES:
     The Woodlands Point Gets
                                                      15
     Top Designer Arch. Bong Recio

12   BUILD A MOUNTAIN LODGE TO DREAM IN
     The Hillside at Tagaytay Highlands

15   MERGING A COSMOPOLITAN LIFESTYLE
     WITH MOUNTAIN RESORT LIVING
     The Woodridge Park at Tagaytay Highlands



                                                 08
18   ARCHITECT’S NOTES:
     Designing Runs In The Genes of
     Woodridge Park Arch. Pablo Antonio, Jr.

19   INTERIOR DESIGNER’S NOTES:
     Liza Ampil Designs
     Elegant and Classy Model Units

20   WHAT’S NEW AT TAGAYTAY HIGHLANDS?

23   HPI ANNOUNCES FUTURE PROJECTS

25   CREATING WAYS FOR PEOPLE
     TO HELP PEOPLE
     SM and Filipino Bayanihan

26   CORPORATE GOVERNANCE

28   SPOTLIGHT
     on Independent Director:
     Gregorio U. Kilayko
                                                      23
30   FACES
     Board of Directors

32   FACES
     Executive Officers

33   FINANCIAL STATEMENTS

65   CORPORATE INFORMATION
                                                 12
                                                                       chairman’s message




I
    N 2007, YOUR COMPANY MARKED ANOTHER MILESTONE in an
    increasingly difficult economic environment. In spite of uncertain
    and threatening developments such as the uncontrollable rise
    in oil and commodities prices, and a general weakening in the
    global economy, your Company’s commitment to its clients and
    stakeholders remained unwavering.

       REVENUES GENERATED FROM                launched in late 2007. We are           We continue to appeal to our
       real estate sales more than doubled    presently developing its second phase   market base by providing better
       in 2007, with an increase of 107%.     which is projected to be completed      accessibility to our properties and
       Gross profit, likewise, doubled at      by the third quarter of 2008. 83% of    providing products and services that
       102%. Income from operations           Phase 1 has been sold, and, to date,    are relevant with the times. Hand in
       increased by 35% while net income      10% has already been committed to       hand with our vision is a firm resolve
       rose by 39%. This performance can      buyers in the newly-opened Phase 2.     to continue meeting the challenges
       only mean that our Stockholders’           Your Company is, likewise,          of the future with resilience and
       Equity has been enhanced even          developing The Woodlands Point,         determination. These values mirror
       more, by 4%.                           another major undertaking that          SM’s strength and endurance over its
            These figures reflect the focus     saw blueprint only in 2007, and         50-year history. I am optimistic that
       and discipline that were put into      which offers single-detached log        these very same values will carry your
       play in managing your Company’s        cabins amidst a forest of pine trees.   Company through to long years of
       growing portfolio of real estate       Site development will soon be           sustainability and success.
       projects.                              completed and construction of log            On behalf of the Board of
            Your Company has completed        cabins are scheduled to start by the    Directors, management and
       Phase 1 of The Horizon, a medium-      third quarter of 2008. This early,      the people who believe in our
       density residential condominium        28% of the property has already         vision, thank you for this golden
       development with Zen-inspired          been pre-sold.                          opportunity to be your partners.
       architecture, where 70% of the             We are also preparing to launch
       units have already been turned over    Pueblo Real in 2008, a lots-only
       to its homeowners.                     development at Tagaytay Midlands,
            For the Woodridge Park, the       conceived to be a village with a
       spacious and luxurious condominium     Santa Fe-Mexican architectural
       complex that exudes the rustic         theme.
       beauty of Colorado mountain                Once again, we have remained        HENRY SY, SR.
       resorts, 72% of the units have         true to our vision of uplifting the     Chairman
       been sold. Phase 1, consisting of      standards of community living in
       seven buildings, is scheduled for      the Highlands and the Midlands.
       completion by 2009.
            The Hillside, the first and only
       residential lot development at the
       Tagaytay Highlands complex, inspired
       by the log cabin communities of
       Northern US and Canada, was




                                                                                                       50th Anniversary Issue   3
president’s report




Y
                   EAR 2007 WAS AN INTERESTING YEAR.
                     On one side was a looming subprime mortgage crisis that was
                   threatening not only the US economy but the world’s as well.
                   Established financial institutions were staring at bankruptcy.
                   And a credit crunch was threatening a world recession.

                         ON THE OTHER SIDE was China              and from The Woodridge Park                  There are more encouraging
                         and India growing at double-digits       where 72% of the project has been       signs that your Company will
                         and overheating the world economy.       sold. Seven buildings that make up      continue to prosper well into the
                         Demand for more oil coupled with         the first phase of the Woodridge         next decade. For one, a new lots-only
                         a weakening US currency further          Park are nearing completion.            development is ready to be launched
                         disrupted stability.                          I am pleased to report that        in 2008. Called Pueblo Real at
                             In the Philippines, political        the Company’s other figures are          Tagaytay Midlands, its Phase I village,
                         uncertainties continued to keep          just as encouraging. Income from        Pueblo Uno, is planned to carry a
                         investors offshore. And while the        operations grew by a hefty 35%,         Santa Fe-Mexican theme which will
                         local currency remained strong, rising   from P137 million to P186 million.      feature a plaza with a community
                         prices of oil and basic commodities      Your Company’s net income after         center, swimming pool, winding
                         were negating the positive outlook       tax is in the black with a healthy      creek and nature trails with hanging
                         on the economy.                          39% increase, from P90 million in       bridges, pocket parks and bicycle
                             In the midst of all these            2006 to P125 million in 2007.           lanes. 86 lots have been earmarked
                         uncontrollable external factors and           Your Company also started to       for sale.
                         coming from a weaker-than-expected       acquire additional land adjacent             Phase 2 of The Hillside, The
                         performance in the real estate           to its developments as part of          Woodridge Park and The Horizon will
                         market, your Company judiciously         its land banking activities. Your       all be launched in 2008. This includes
                         responded with a thorough                Company’s cash position decreased,      an addition of 78 lots for The Hillside
                         assessment of the opportunities at       as foreseen, due to land bank           with an expected revenue of P450
                         hand.                                    investments which will ensure our       million; 3 buildings with 54 units for
                             I am happy to report that your       sustainability in the years to come.    The Woodridge Park with projected
                         Company, by combining prudence                                                   revenues of around P1 billion; and
                         with innovative sales and marketing      THRUSTS                                 10 low-rise buildings for The Horizon
                         strategies, delivered its best           Your Company looks at the               with the potential to generate P900
                         performance yet.                         future with more optimism and           million for Highlands Prime.
                                                                  confidence. More projects have                Your Company is at the threshold
                         INCREASED REVENUES                       been lined up to sustain our growth.    of an even more profitable year
                         Sales of the Company’s real estate       By 2008, with the completion of 7       ahead. We remain confident that we
                         developments exceeded the P1.3           of the 10 buildings earmarked for       will continue to deliver products that
                         billion mark for 2007. Highlands         The Woodridge Park, P1.1 billion in     are relevant to today’s lifestyles. And
                         Prime more than doubled its real         revenues can be expected.               we are optimistic that the market will
                         estate revenues of P715 million from         The Hillside’s Phase I, comprised   continue to seek us as we elevate
                         P345 million in 2006, posting a          of 102 lots, is expected to earn for    the standards of community life at
                         significant 107% increase.                the Company an additional P510          the Tagaytay Highlands and Tagaytay
                              Your Company’s revenues             million.                                Midlands.
                         came from the successful launch of           Site development and
                         The Hillside—the Company’s first          construction of log cabins at
                         lots-only development at Tagaytay        The Woodlands Point also
                         Highlands; from Phase I of The           commenced. Your Company
                         Horizon at Tagaytay Midlands where       projects revenues to be as high as
                         70% of its available 108 units has       P 1.8 billion from the sale of 60       ANTONIO A. HENSON
                         been turned over to its homeowners;      single-detached log cabins.             President




4   Annual Report 2007
50th Anniversary Issue   5
     TRENDS &
     EXPECTATIONS
                 ANTONIO A. HENSON
                           President
                     Highlands Prime, Inc.




    How would you characterize HPI’s 2007 performance? Were                      What can be expected from HPI in 2008?
    targets met and objectives achieved?                                              HPI will continue to be aggressive in the high-end market. We plan
         The year 2007 was a milestone year for us. Our sales exceeded           to launch three major projects for 2008.
    P 1.3 billion. Our accounting revenue doubled that of our 2006 results            The Woodlands Point consists of 60 single-detached log cabin
    of P345 million to P715 million. Our net income has also increased by        condominium units with views of the exclusive Tagaytay Highlands golf
    38% from that of our 2006 figure.                                             course, the Highlands communities and Laguna de Bay. The second is
    How are your existing projects, such as Woodridge Park,                      a subdivision development in Tagaytay Midlands which is just a stone
    progressing?                                                                 throw away from the world famous Tagaytay Midlands Golf Course.
         We are on track with all of the existing projects. Both sales take-up        Under conceptualization is the first luxury-condotel suites in
    and completion rates are within targets.                                     Tagaytay Highlands which we plan to build at a very prime location
         The Phase I of Woodridge Park is 60% taken up at the end of 2007        atop a mountain where homeowners can enjoy both the views of Taal
    and the turnover of units to buyers is targeted by the second half of        Lake and Laguna de Bay. The project will come with its set of exclusive
    2008. Given this success, we plan to launch Phase 2 by middle of 2008.       amenities and the units will be delivered fully-furnished.
    In fact, several units have already been reserved on that phase.             What is your prognosis for the residential market this year?
         Our other projects like The Hillside subdivision development at         What do you think is the greatest challenge it will face?
    Tagaytay Highlands is moving on well. Construction is expected to be              The residential market will remain bullish in 2008 but will not be
    completed by fourth quarter of 2008. Phase 1 of which is already 70%         exempted from challenges. One of which will be the high inflation
    sold at the end of 2007. Phase 2 take-up rate is also fast catching up.      rate. Developers will have to face the challenges of higher cost of
         A ‘Filipino-themed’ house we are constructing in Lakeview Heights       construction, as well as having a market that is more concerned with
    at Tagaytay Midlands is also scheduled for completion by March 2008.         getting ‘more value for money’.
    This house was recently sold even prior to its completion.                   What strategies will you pursue this year, given a more
    What makes your location, which is Tagaytay, more attractive to              challenging operating environment?
    buyers compared to other tourist and leisure destinations?                        We will continue to focus on our strengths and try our best to
         Tagaytay’s friendly distance from Metro Manila, its cool mountain       deliver products that our market wants.
    weather, the fresh air, great sceneries, as well as the availability of      How do you plan to stay ahead of your competition?
    wholesome family activities remain to be the major factors that set it            We will have to remain open to other opportunities, innovations
    apart from the other destinations.                                           and trends around us. We will continue to study and come up with a
    How would you describe a typical HPI client?                                 product mix that will serve our niche market. We shall also try our best
         A typical HPI client belongs to the upper A market, very upscale, a     to keep and strengthen our human resources, the very backbone of our
    CEO of a big corporation or an owner of a business, loves to play golf,      success. We will also continuously expand our land bank.
    owns several houses including vacation homes either here or abroad, in            What business synergies do you expect to realize by being a
    his 40s to 60s, loves getting away from the frenzied pace of city living,    part of the SM Group?
    loves being close to nature, and enjoys the cool weather and mountain             HPI can very well complement the whole SM group in its current
    breeze of Highlands where there is security, exclusivity and world-class     thrust of tourism and resort development. We can also see synergies in
    amenities.                                                                   capital sourcing and expenditures. We are proud to have the financial
    Do you expect overseas Filipinos to comprise a substantial part              strength and credibility of SM backing us in our endeavors.
    of your client base?                                                         How do you sustain in the long-run HPI’s successes?
         The number of overseas Filipinos who buy properties in the                   Again, HPI will continue to focus on providing the needs of our
    Philippines is increasing every year. In the case of Highlands Prime, the    niche market—the high-end leisure market—which is seldom served
    biggest chunk of our sales is still coming from the local market.            by other property developers. We shall also continue to improve on our
    What are the financing packages that your clients can avail of?               after-sales services so as to provide convenience, ‘peace of mind’ and
         HPI has created more flexible payment schemes and discounts              added value to our clients.
    to meet the demands of its market. We now have longer in-house                    Highlands Prime will also look for other attractive areas outside
    financing terms ranging from one to four years, and we have tie-ups           Tagaytay Highlands and see how we can duplicate the kind of
    with several banks which offer very competitive financing packages.           environment and atmosphere that Tagaytay Highlands is well-known for.




6   Annual Report 2007
hpi history




Highlands Prime, Inc.
Scales New Heights
In Leisure Property
Development at
Tagaytay Highlands
In the late nineties, the Asian financial crisis hounded the Philippines,
driving Belle Corporation, the developer of Tagaytay Highlands to find
ways to sustain its developments. Mr. Henry Sy, Sr., one of Highlands’
first homeowners, decided to breathe new life into the business in a bid
to preserve the pristine surroundings of his beloved Tagaytay getaway.
Mr. Sy, with his legendary business acumen, went about infusing funds
into Belle Corporation in exchange for majority shares in Highlands
Prime, Inc. (“HPI”). HPI owned then a major part of the lands at Tagaytay
Highlands and Midlands.

              INCORPORATED ON JANUARY                    The Horizon at Tagaytay            architectural theme; MiLago,
              15, 2001, HPI brought into the         Midlands (Phase I) was launched in     another lots-only development in
              development the proven business        2004, with six clusters of medium-     the Midlands; and the company’s
              track record and financial resources    density condominium buildings          biggest and most ambitious
              of the SM Group.                       featuring a minimalist Zen-inspired    project, to date, a yet-to-be-
                   HPI hit the ground running.       architecture. In 2006, the rustic      named luxury condotel project to
              Barely 15 months after its             Colorado mountain resort-inspired      be built on one of the highest and
              incorporation, the company was         condominium community of The           most breathtaking locations in
              listed on the Philippine Stock         Woodridge Park was introduced          Tagaytay Highlands.
              Exchange. Soon thereafter, it          to the market. 2007 was a big               Today, HPI is a major and
              embarked on trend-setting, upscale     year for HPI as it launched two        successful player in the high-end
              property development projects          big projects—The Hillside, the         leisure property development
              inside the Tagaytay Highlands and      first lots-only development in the      industry. Its existing projects
              Tagaytay Midlands complex.             Tagaytay Highlands complex where       enjoy robust market acceptance.
                   HPI’s initial foray into high-    homeowners can build their own         Along the way, HPI received
              end property development was           log cabins, and The Woodlands          various recognitions, such as the
              The Woodridge, launched in July        Point, a horizontal condominium        best condominium design award
              of 2002. The Woodridge inside          community which offers 60              from the Housing and Land Use
              Tagaytay Highlands is a complex of     luxurious single-detached log cabins   Regulatory Board.
              medium density, stone and timber       with Western red cedar accents and          The strength of HPI’s brand,
              condominium buildings with a total     details of glass and stone.            the tradition of success it carries
              of 138 units. Well accepted by the         In 2008, HPI is embarking on the   and the corporate values it
              market, the project was sold out       launch of several projects—Phase II    promotes attest to Mr. Henry Sy,
              even before the construction of its    of The Horizon and The Woodridge       Sr.’s unfailing and steadfast vision
              last building was completed.           Park; Pueblo Real, a residential       for growth and progress.
                   From that time on, there was no   lot development in Tagaytay
              stopping HPI’s progress.               Midlands with a Santa Fe-Mexican




                                                                                                              50th Anniversary Issue   7
                         Overlooking towering
                         mountain ridges and just
                         above Fairway 15 of the
                         Tagaytay Highlands golf
                         course, far, far away from
                         the maddening crowd
                         and frenetic urban living,
                         one is lord and master
                         of all he surveys in his
                         own rustic log cabin at
                         The Woodlands Point.
                             Bearing the distinct imprint of Highlands Prime properties, sixty such
                         homes of imported Western red cedar and stone masonry lie in the crisp
                         mountain air amid the scent of pine trees.
                             Inspired by log cabins of old in North America, Recio+Casas Architects
                         designed each home with high, wide picture windows oriented to
                         choice panoramic vistas for each of the single-detached units sprawled
                         expansively across 12 hectares.




8   Annual Report 2007
50th Anniversary Issue   9
        Log Cabin Luxury




         “Charming, cozy and complete,” HPI’s Senior
     Manager for Project Development, Ven Pasinos says,
     of The Woodlands Point. “While the place brims with
     modern conveniences and safety features, it gives
     residents the chance to enjoy nature up close and
     personal and connect to it.”
         Every room breathes luxury—from the central
     rooms’ high-ceilinged living and dining areas to the
     large bedrooms with walk-in closets and en-suite toilets
     and baths.
         The semi-furnished kitchen boasts of a complete
     cabinet system, a modern refrigerator, oven and
     cooking range, and a range hood.
         Classic models come in three-bedroom units, and
     four bedrooms for Luxury models, each with a maid’s
     room and driver’s quarters, both convertible to guest
     rooms. Floor areas range from 250 to 325 square
     meters.
         Engineered wooden floors, heat and smoke
     detectors, and a state-of-the-art reticulation system
     to ensure the homes are termite-free and in excellent
     all-weather condition—all features look to a lifetime of
     happy, idyllic mountain resort living.
         From sun-up to sundown, Tagaytay Highlands
     offers two 18-hole championship golf courses,
     an Olympic-size swimming pool, indoor sports at
     the Sports Center, a pampering spa, and over 20
     restaurants to pick from.
         Green thumb plant and salad lovers have a
     greenhouse stocked with organic vegetables and pine
     saplings from which to pick out their favorites.
         Nature helps set the tone for dreaming. The sunsets
     are longer at The Woodlands Point, and when evening
     sets in, the starlit sky inspires romantic poetry.




10   Annual Report 2007
architect’s notes
The Woodlands Point
Gets Top Designer
Arch. Bong Recio


A
                     rchitect Jose        within Tagaytay Highlands,
                     Pedro “Bong” C.      a lower density community;
                     Recio, who heads     in contrast with the other
                     the renowned         projects of HPI such as
                     architectural firm,   Woodridge, Woodridge Park,
                     Recio+Casas          and Horizon, which were more
                     Architects,          of mid-rise condominiums.
designed The Woodlands Point,             The success of the previous log
one of the current projects of            cabins resulted in a reprise of
Highlands Prime, Inc. (“HPI”) inside      such stand-alone units in The
the exclusive Tagaytay Highlands          Woodlands Point; but done in
mountain resort. In an interview,         a more cost-efficient manner.
Architect Recio shared his various        We also had to maximize the
thoughts and experiences in               view available from the units,          are locally sourced. He estimates that
designing The Woodlands Point.            because the whole property was          only 30% is imported. “We tried
     “As the architect of The             overlooking the golf course.”           to get as many of the materials as
Woodlands Point, the biggest                  He considers the large balconies,   possible locally. This is I think also in
challenge for me was trying               the distinct pitch of the roofs, and    keeping with green architecture,”
to accurately interpret HPI’s             the strong presence of stone and        Architect Recio clarified.
requirements and translating them         wood, as key design elements for             Working with nature and not
into a three-dimensional structure        the units, inspired in part by the      against it, having an appropriate
that they could eventually sell,”         hotel he visited in Yosemite National   and attractive design, and using
Architect Recio said.                     Park in California where the hotel’s    the correct materials, these are the
     HPI wanted him to design the log     designer utilized a lot of wood and     elements that made Architect Recio
cabins of The Woodlands Point so          big chunky stones. In addition, he      attain the desired look, feel, and
that they could blend with the terrain    capitalized on Tagaytay’s scenery,      ambiance for his latest HPI project.
and the gentle contours and lush          climate, and weather. This explains     “Once you step into The Woodlands
colors of the countryside. “We had        why he also used a lot of glass,        Point, which is just an hour and
to actually walk through the whole        which provided unobstructed             a half drive from Manila, you are
site even before it was ever graded       views of the mountain. “There’s         suddenly transported into a whole
or developed to ensure that the           glass from top to bottom, so that       new experience and environment.
placement of each unit will benefit        occupants could still enjoy the         That I think, is its greatest appeal,”
from the natural terrain,” he added.      majestic outdoor view even if they      Bong Recio concludes.
     To a large extent, the mountains     are indoors,” Architect Recio said.          Architect Bong Recio holds a
served as an inspiration for Architect    There are also wide balconies big       Bachelor of Science in Architecture
Recio in his work at The Woodlands        enough to accommodate outdoor           degree from the University of Santo
Point. “I wanted the detailing within     furniture. And for the times that       Tomas. During the seventies and the
each cabin to convey a sense of the       the temperature in Tagaytay dips to     eighties, he practiced his profession
outdoors; where homeowners feel           nippy levels, there are the requisite   in Hong Kong. There, he was
they are amidst a lot of open space,      fireplaces. “I think all these design    involved in major projects such as the
with trees all around. Heavy use          elements contribute to maximizing       Harbour City Complex in Kowloon,
of natural materials was therefore        the experience of being in a            the Discovery Bay in Lantao Island,
necessary, especially for the             mountain resort,” he adds.              and the Citiplaza at Quarry Bay.
exteriors. The mountainous terrain            In selecting the materials used          Included in Architect Recio’s long
pretty much dictated how the              for The Woodlands Point, Architect      list of noteworthy design projects
details of the cabins would come          Recio made sure that they appealed      in the Philippines are the Church of
out,” he explained.                       to as many senses as possible. “The     the Gesu at the Ateneo de Manila
     Asked about what other factors       cedar wood we used gives off that       University, the Shangri-La Resort
he considered in conceptualizing the      distinct, pleasant log cabin scent.     and Spa in Boracay, the Terrazas de
project, Architect Recio responded,       The occupants could actually see,       Punta Fuego in Nasugbu, Batangas,
“Woodlands Point was driven by the        smell, and feel real logs,” he said.    and the Manansala at the Rockwell
need for more stand alone homes           Interestingly, most of the materials    Center in Makati.




                                                                                                               50th Anniversary Issue   11
     Build A
     Mountain
     Lodge
     To Dream In
     This is the life—waking up
     to a day of perfect bliss—
     bird trills, the rustle of leaves
     in the cool morning breeze,
     the sweet scent of pine
     clusters, and majestic views
     as far as the eye can see to
     the east.
         The best part of all this may be enjoyed in a home at The Hillside in
     Tagaytay Highlands.
          The first and only residential lot development in the Highlands complex
     offered by Highlands Prime, homeowners build their own dream mountain
     lodges, choosing from sample log cabin designs, or designing their own to
     conform to Highlands Prime standards inspired by similar homes in northern
     United States and Canada.
         “We are giving our clients a free hand to make real their dream mountain
     log cabin,” HPI’s Project Development Manager Jeffrey Avelino says. “We want
     them to build their private spaces that are portraits of themselves, a house with
     their signature.”




12   Annual Report 2007
50th Anniversary Issue   13
     Build A Mountain Lodge
           to Dream In




     A total of 180 residential          Owners are allowed to build
                                    houses as high as 12 meters (two to
                                                                            Marketing and Advertising Senior
                                                                            Manager Rhodora Gamboa says.
     lots terraced on sloping       three storeys). “They can make use           Already, Phase 1 of the project
                                    of a nice mixture of rustic materials   development is 70 percent sold.
     terrain covers over 16         like logs and large stones,” Avelino         Adjacent to Camp Highlands,
     hectares of land, with lot     suggests. “Interiors that usually       the site is a few minutes away
                                    come with log cabin designs have        from leisure hotspots. Member-
     sizes ranging from 405         high ceilings, wooden flooring and a     homeowners of Tagaytay Highlands
     to 641 square meters.          stone fireplace,” he adds.               have unlimited access to world-class
                                         Surrounded by views of mountain    amenities including two 18-hole
     Meticulously master-           ridges nestled amid towering pine       championship golf courses, state-
     planned by SC & A              trees, the site looks down on the
                                    verdant plains of Canlubang and
                                                                            of-the-art sports facilities, more
                                                                            than 20 restaurants, clubhouse,
     Architects and Planners,       Highlands communities like the          swimming pool with gazebos, and
                                    log cabins of Woodlands Point and       parks galore.
     the project development        timber-and-stone Woodridge and               Country living at the Hillside
     offers an escape from the      Woodridge Park.                         offers a fresh alternative to city life
                                         “Tagaytay Highlands is known       and gives home-seekers a chance
     city’s frenzied lifestyle to   for its awe-inspiring landscapes.       to go wild with their imagination,
     wind-swept ridges with a       We want our residences open to          building and designing a home they
                                    landscaping, so residents will love     will love and can truly call their own
     brook running through it.      their homes inside and out,” HPI’s      in every respect.




14   Annual Report 2007
Merging a
Cosmopolitan
Lifestyle with
Mountain
Resort Living

                 50th Anniversary Issue   15
     Merging a Cosmopolitan
          Lifestyle with
     Mountain Resort Living




     “Lost, on a high and windy
     hill,” goes the song from the
     movie classic “Love is a Many
     Splendored Thing.” That is the
     dreamy-eyed sense one gets
     perched on one of Tagaytay
     Highlands’ highest elevations
     at The Woodridge Park.
          Stunning postcard views of          designed to offer dwellers majestic
     Laguna de Bay and its surrounding        views while lolling in the luxury of
     old communities and Canlubang,           their own mountain resort homes.
     and higher up the ridge those of the          “Aesthetically pleasing, The
     Tagaytay Highlands golf course, the      Woodridge Park is purposely
     mountains and sweet-smelling pine        designed to have the feel of
     crests in the cool air—everything one    living in a house, rather than in a
     could possibly dream of in a serene      condominium. The model unit’s
     mountain retreat is there.               interior design by Eliza Ampil
          The Woodridge Park is Highlands     creates a peaceful residential
     Prime’s latest residential development   setting—an out-of-the-city
     inspired by Colorado’s mountain          ambience—making use of large
     resorts and ski lodges.                  picture windows to give residents
          “Especially designed for            an unobstructed view of boundless
     large families, our mountain             sceneries,” HPI’s Marketing and
     condominiums offer private enclaves      Advertising Senior Manager
     to seekers of a posh, leisure-oriented   Rhodora Gamboa says.
     family community,” HPI’s Senior               Cool year-round, the climate
     Manager for Project Development          at Woodridge Park encourages the
     Rick Lim says. “The country              enjoyment of a kaleidoscope of
     condo is a modern rendering of           outdoor activities. A large park lies
     its predecessors’ rustic mountain        between it and The Woodridge.
     architecture,” he adds.                  Then, there are pocket parks and
          Master-planned by Architect         meticulously landscaped gardens
     Pablo R. Antonio, The Woodridge          providing excellent areas for
     Park is an offshoot of the strong        relaxation, barbecue parties, picnic
     demand for HPI’s first development        dining with friends, biking or even
     in Highlands, The Woodridge              a simple exploration of the verdant
     condominiums.                            neighborhood. Moonlight and
          With only three units on each       starlight walks, too, in the silvery
     floor, residents will have plenty of      glow of evening.
     room to tastefully decorate their             Golfing is just minutes away at
     spacious units. Floor areas range        the Tagaytay Highlands Golf Club.
     from 170 to 306 square meters            Indoor sports are found in the Sports
     offering two, three and four-            Center, and for simply lollygagging,
     bedroom units (plus a maid’s room)       the Country Club is yet another
     to suit each family’s requirements.      hanging-out spot. A wide array of
          Residents may opt for luxurious     restaurants provides a choice of
     two-storey units with cathedral          Western or Eastern cuisine.
     ceilings in the living and dining             Farewell to the hustle and bustle
     areas, or penthouse units with rustic    of city living, and just 70 minutes
     fireplaces to warm toes on colder         away, welcome to The Woodridge
     evenings. Both types have expansive      Park homes amid serene mountain
     glass windows and balconies              greenery.




16   Annual Report 2007
50th Anniversary Issue   17
         architect’s notes
         Designing Runs in the
         Genes of Woodridge Park
         Arch. Pablo Antonio, Jr.


       H
                             PI is known for        mostly wood. The bathroom tiles,
                             commissioning          fixtures and fittings are all of high-
                             some of the            end materials.”
                             country’s best               “We also created a park where
                             architects. So,        children can play, and allotted
                             it’s no wonder         enough open spaces for visitors’
                             Architect Pablo        parking. We made our parking
          Antonio was engaged to design             spaces much larger in order to
          The Woodridge Park, the upscale           accommodate SUV’s.”
          residential condominium project                 Looking at The Woodridge Park,
          that the company launched in 2006.        it is easy to appreciate that the
          Now a highly established architect,       building design blends well with
          Mr. Antonio takes pride in saying         the natural features of Tagaytay
          that he still draws inspiration from      Highlands. “Your whole atmosphere
          his father, the late Pablo Antonio,       in Tagaytay is rustic. You see a lot
          Sr., one of the Philippines’ three        of the outdoors—the greenery,
          National Artists for Architecture.        the rugged terrain and the stone
               In an interview, Architect           formations. So we used rustic
          Antonio shared with us his thoughts       architecture in keeping with the
          on The Woodridge Park project.            rustic atmosphere outside,” he says.
               “Highlands Prime wanted                    And what makes The Woodridge          gives him a deep sense of fulfillment.
          something that lies on the                Park unique? “Probably the setting.         “That’s the beauty of architecture.
          mountain, so we thought of doing a        Our setting is like in a plateau.           It gives you instant fulfillment when
          Colorado-style ski lodge, a mountain      We put the buildings on the                 you get compliments from the
          resort condominium,“Architect             edges so that homeowners get an             people who live in it, and also from
          Antonio explains.                         unobstructed view of the valley. And        your own personal satisfaction upon
               He revealed that the magnificent      the architecture, like I said, is quite     seeing your project. It’s like practicing
          view of Tagaytay was vital in the         unique,” he replies.                        medicine. The doctor is happy when
          design process. Architect Antonio               Beyond aesthetics, Architect          the patient gets cured. It’s the same
          said, “Our prime concern was for the      Antonio ensures that the structure is       thing with architecture, although
          homeowners to appreciate the views        stable. “Being a resident of Tagaytay       you have to wait probably a few
          of the outdoors, that’s why we put        myself, and experiencing very strong        months before all the action occurs.
          big window openings. Whenever we          typhoons in the area, we made the           But there’s a lot of satisfaction. You
          had an opportunity to put loft units,     roof structure very strong and heavy        see your concept completed. You’re
          we used a lot of glass.”                  by using special tiles,” he explains.       even happier when the users or unit
               Together with the company,                 He added that, “From the              owners are happy with the concept,”
          Architect Antonio carefully planned       beginning, the biggest challenge was        he concluded.
          the design and implemented key            how to make the buildings stable, it             Architect Pablo Antonio, Jr.
          features and amenities that would         being at the edge of a plateau. We          started his career designing semi-
          meet the requirements of HPI’s            asked Dr. Salvador Reyes, a doctorate       conductor facilities in 1979 when
          highly-sophisticated market. His          of soil to study the soil condition. I’ve   Texas Instruments commissioned
          enthusiasm ran high as he went into       been in practice for almost 45 years        him to be their architect. From
          the details.                              and I’ve never had an incident in any       semi-conductor facilities, he went
               “The units are very spacious,        of my projects; and I don’t intend to       on to design other projects such
          ranging from 170 to 306 square            have any in the future. We piled on         as hospitals, commercial and
          meters. As such, the living rooms         most of the buildings to make sure          office buildings, institutional and
          are much bigger. The kitchens have        that they were stable.”                     recreational projects and residential/
          plenty of space to accommodate a                His demeanor and stories gave         condominium projects. His prominent
          refrigerator and a freezer. The utility   away Architect Antonio’s love for his       projects include the Asian Hospital,
          rooms have provisions for a washing       profession. He revealed that every          Far Eastern University, Subic Bay
          machine and dryer. The floorings are       concept or design brought to life,          Yacht Club and Manila Polo Club.




18   Annual Report 2007
interior designer’s notes
Eliza Ampil
Designs Elegant and
Classy Model Units


                  G
                                           ive her any type of space and she would
                                           gladly welcome the task of designing it. I am
                                           comfortable in designing practically any type
                                           of space,” declares freelance interior designer
                                           Eliza Ampil. Being in practice for 15 years
                                           now, Ms. Ampil has designed various projects
                                           such as retail stores, offices, learning centers,
                  restaurants, bakeshops and residences.
                       Thus, it is not surprising that Ms. Ampil became one of the
                   talented interior designers tapped by Highlands Prime to design
                   their model units. Noteworthy among her projects are the posh
                    model units at The Woodridge, The Woodridge Park and The
                    Horizon. Her designs are impressive, sophisticated and stylish,
                    with all the design elements perfectly in place.
                         She shares that coming up with a good design entails a
                     lot of planning and paying attention to details. “My main task
                      was to create a design concept for the model unit assigned
                      to me. The overall look or concept should be suited and
                      consistent with the image HPI requires. I also procure all the
                       necessary furnishings and design elements for the unit. And
                       of course, the fun part is doing the actual arrangement of
                       the furniture and accessories,” she explains.
                             This versatile interior designer revealed that she draws
                        inspiration from the architectural design of the structure
                         and the picturesque view that surrounds it. “For The
                         Woodridge Park, the design concept I used was basically
                          traditional,” she says.
                                She added that the furnishings and the design
                           elements are important because they define the look
                           and ambiance of each unit. “Tagaytay is a cold place
                            with pleasingly distinctive attractions. A warm, cozy and
                            homey ambiance is right for the unit. So I opted to use
                             earthy toned color palette, lots of wooden furniture,
                             textured fabrics and period accent pieces,” she says.
                                   Her resourcefulness and creativity are likewise put
                              to good use in sourcing different items from numerous
                               suppliers, most of which are exporters. “The furniture
                               and other decorative items should match the design
                                concept or theme that I came up with. And keeping
                                 the highly sophisticated homeowners in mind, I also
                                 ensure that all the materials, furniture and decor used
                                  are of high quality and are tastefully chosen,” Ms.
                                  Ampil concluded.
                                       From excellent architecture to stylish interior
                                   designs, HPI certainly makes dream vacation homes
                                   a reality.




                                                                                    50th Anniversary Issue   19
club amenities




     18-HOLE MINI GOLF COURSE




      What’s New at
 Tagaytay Highlands?
                                                   by Belle Corporation

                Both young and young at hearts may now experience         GOLF TOURNAMENTS TAKE
                                                                          on new heights in Tagaytay
            golf in a different level! Two additional golf amenities at   Highlands with the launch of the
              Tagaytay Highlands will certainly cater to every golfer’s   new driving range at Tagaytay
                                                                          Midlands. Completed in time
           fancy—the re-opening of the 18-hole mini golf course and       for the prestigious Mercedes-
             the newly constructed driving range located at Tagaytay      Benz Masters Philippines second
              Midlands. The mini-golf course, which is adjacent to the    leg of the ASEAN golf tour, the
                                                                          driving range is another world-
                 Country Club, resembles the Highlands and Midlands       class add-on facility with its vast
             golf courses. It is comprised of 18-holes topped with real   1,200 square meter area that is
                                                                          landscaped by Tifton 419 grass.
             Bermuda grass and world-class landscape which enables        It is definitely a sure hit both to
           one to experience the same thrill even in a small package!     amateur and professional golfers!




20    Annual Report 2007
    More than golf, Tagaytay
Highlands also takes pride in its
roster of over 20 food and beverage
outlets. Tagaytay Highlands
introduces another gastronomic
treat which will surely make one’s
stay worthwhile. These are the
Bistro Saratoga and Gourmet
Avenue. Situated at the heart of the
Flowerside Farm, the Bistro Saratoga
offers a myriad of international
cuisine, from pastries, organic
meals, salads to expertly-crafted
coffee and lattes.To cap off the
refreshing experience is the view of




                                       50th Anniversary Issue   21
club amenities




     GOURMET AVENUE




                           the greeneries. Bistro Saratoga leaves
                           you with not much of an option but
                           to indulge while staying healthy!
                               Gourmet Avenue on the other
                           hand is located at the second floor
                           of the Country Club—considered
                           as one of Highlands’ family spots.
                           Take a trip down Gourmet Avenue
                           which showcases authentic Japanese
                           food, Italian specialties and Asian
                           delicacies. If you can’t get enough,
                           treat yourself with sumptuous breads
                           and pastries of our award winning
                           Pastry Chef Philip at the Bread Shop.
                           Just a few more reasons to troop to
                           Highlands where dining pleasures is
                           of primary importance.




22    Annual Report 2007
future projects




Highlands Prime, Inc. redefines
leisure living with its upcoming
Santa Fe-Mexican themed
residential community, Pueblo Real.
The development is adjacent to
The Horizon, facing the Highlands
mountains to the north, the
Tagaytay ridge to the west, the
Tagaytay Midlands golf course to the
south and Mt. Makiling to the east.
MASTER-PLANNED TO PRESERVE the natural lay
of the land, Pueblo Real’s eco-friendly design will create
a place where wellness-centered living could thrive and
adventure would be a daily pursuit.
     Running through the whole community will be a
winding creek and a nature trail complemented with
bridges, pocket parks and bicycle lanes. Open spaces
will be retained at strategic spots within the village,
allowing the constant stream of cool, mountain breeze
to sweep over 38 hectares of beautiful country.
     The architectural styles of the village will be a
wonderful expression of beauty and functionality.
Landscaping appropriate to the area will be used to
enhance the village’s Old World charms. Tall palm and
coconut trees and colorful bougainvillea will capture
the eye as sinuous streets lead to attractive houses in
terracotta and vibrant shades.
     Homeowners will be encouraged to build rooftop
porches with beautiful spiral staircases and tiled risers,
where they can unwind and enjoy the Midlands sunset
and the ever-changing hues of the mountains right
above their homes.
     More than just being a showcase of beautiful
houses, Pueblo Real will also be a place where the
company of family and friends may be enjoyed outside
the homes. It will be the first village inside the Tagaytay
Highlands and Midlands complex to have a plazuela
with a village courtyard, lined with a café and a
convenience store. Adjacent to the plazuela will be a
swimming pool where social functions and gatherings
may be held.




                                                             50th Anniversary Issue   23
future projects


The Horizon
Phase II
IN 2008, HPI WILL EMBARK on the construction of
the second phase of its low-rise, minimalist Zen-inspired
condominium community in Tagaytay Midlands, The
Horizon. The upcoming clusters will feature a new and
improved design. Initial plans are for the construction of
10 smaller buildings with eight units each. There will only
be two units per floor, with an average floor area of 150
square meters. This effectively makes all units “corner’ units.
Covered rooftop terraces will be the added special features
of the penthouses.
    The Horizon is adjacent to The Alta Mira, overlooking the
Tagaytay Midlands golf course, Mt. Makiling and Taal Lake
and Volcano. It is the only development with its own putting
green and infinity and toddler pools.




MiLago
THE NAME SAYS IT ALL. “MiLago,” which means
‘my lake’ is HPI’s next residential lot development in Tagaytay
Midlands. Envisioned to have Tuscan-themed country
houses, this upcoming village’s location allows for a majestic
view of the famous Taal Lake and Volcano.




Luxury
Condotel
Living
HPI IS VENTURING INTO LUXURY CONDOTEL LIVING,
its biggest and most ambitious project, to date. The condotel
will be located at one of the highest elevations of Tagaytay
Highlands, with a 360-degree view of Taal Lake, Mt.
Makiling, Laguna de Bay and Palace in the Sky. The condotel
will showcase fully-furnished units ranging from studio-
type rooms to three-bedroom units. Owners who will not
use their units may leverage the management to rent and
manage their property as it would any other hotel room. The
focal point for this destination lodging will be a community
center boasting of shops, cafes, food & beverage outlets and
weekend bazaars.




24   Annual Report 2007
corporate social responsibility

CREATING WAYS FOR PEOPLE TO HELP PEOPLE:

SM and Filipino
Bayanihan
(An excerpt from the SM Foundation Annual Report)



        Armed with deep                             Education advocacy, formally ly
                                                                                 uality
                                                established in 1993, provides quality
        commitment,                             education to underprivileged but ut
                                                deserving students through the            toys to be distributed in depressed
        sincerity and a                         College Scholarship Program. To           communities. Book and medicine
        passion for service,                    date, SMFI has produced 974
                                                graduates coming from communities
                                                                                          donations are channeled through
                                                                                          SMFI’s Education and Health missions.
        SM Foundation, Inc.                     where SM malls are located all                 SM Kabalikat Sa Kabuhayan
                                                over the country: the National            Livelihood Program provides hands-
        (SMFI) strives to live                  Capital Region, Pampanga, Baguio,         on hybrid vegetable and fruit training
        up to its mission                       Batangas, Bulacan, Lucena, Cavite,        to farmers and conducts Trade Fairs
                                                Laguna, Rizal, Bacolod, Cebu, Iloilo,     for micro entrepreneurs to showcase
        to help thousands                       Davao and Cagayan de Oro.                 their businesses and marketing
        of disadvantaged                            Advancing public education’s
                                                furtherance and modernization,
                                                                                          competencies and to tie-up with
                                                                                          mainstream suppliers, thus improving
        who are deprived of                     SM Prime Holdings Inc. using              standards of living.
                                                SMFI as its vehicle has built 17               Underscoring the importance
        opportunities for a                     schoolbuildings in public schools and     of spiritual well-being, SM fervently
        brighter future.                        has donated close to three million        supports the religious community
                                                books supported by the Mall-based         by constructing and renovating
        Instituted in march 1983 by SM          Outreach Donate-A-Book program.           churches. Conducting its own
        Founder and Chairman Henry                  Encouraging health, multi-            religious activities and celebrating
        “Tatang” Sy, Sr., SMFI is the social    sectoral coordination and community       Sunday masses in all SM malls, SM
        action arm of the SM group of           participation, the Health advocacy        brings spirituality to the multitude.
        companies.It aspires to uplift lives    program, since 2001, has already               In partnership with Gawad
        by taking a holistic approach in        conducted 315 medical and dental          Kalinga, SM has built over 80 houses
        responding to the social needs of       missions benefiting over 200,000           in the SM Gawad Kalinga Village for
        underprivileged communities. “This      individuals. The Foundation acquired      homeless families.
        is our way of sharing the many          two Mobile Clinics in 2001 and                 Special projects allow for
        blessings that the SM Group has         2007. Stationed in SM malls, they         the Foundation to render quick-
        received for so many years,”            are equipped with up-to-date              response to victims of disasters
        Tatang says.                            medical technologies to perform           with Operation: Tulong Express.
             For more than two decades,         basic diagnostic tests for shoppers       Providing basic assistance and
        SMFI unceasingly envisions itself as    and by-standers. Aiming to not only       distributing donations from shoppers
        a channel for shoppers, employees,      heal but also provide a therapeutic       and sponsors, the Foundation has
        government and non-government           environment for patients, SMFI has        aided victims of tragedies such as
        organizations, media and companies      built a total of 36 wellness centers      the mudslide in Southern Leyte, the
        to reach out to the needy. Now, on      including pediatric activity centers,     evacuation of thousands of families
        its golden anniversary, SM intensifies   health centers, elderly centers and       in Albay due to a seismic activity, and
        corporate social responsibility by      hospice units.                            a medical mission for the affected
        allocating -P-50 million more for           A series of quarterly mall-based      families of the Guimaras oil spill,
        its projects—almost doubling the        programs—Share Your Extras,               among other calamities.
        budget for CSR.                         Donate-A-Book, Gamot Para Sa                   People helping people is
             The Foundation sets its eyes on    Kapwa and Make A Child Happy—             the philosophy that guides
        the following four core advocacies:     enable shoppers, private companies        SM Foundation and its social
        Education, Health and Medical           and organizations to share what they      soldiers—acknowledging the
        missions, Mall-based Outreach, and      have. Collection centers in the malls     biblical precept that we are,
        Community projects.                     gather clothing, books, medicines and     indeed, our brothers’ keepers.




                                                                                                           50th Anniversary Issue   25
corporate governance



H
                ighlands Prime, Inc. (HPI) firmly believes in and adheres to sound
                corporate governance. The company gives utmost priority to
                corporate transparency and public accountability in all of its
                undertakings.
                          AS SUCH, HPI developed and follows a Revised Manual on                  • Conducts itself with utmost honesty and integrity in the
                          Corporate Governance (CG Manual). The Board of Directors                  discharge of its duties and responsibilities, and acts in
                          (the Board), Executive Committee, management, and staff of                a manner characterized by transparency, accountability,
                          HPI commit themselves to the principles and best practices                and fairness.
                          contained in the CG Manual, and acknowledge that these
                          tenets guide the attainment of their corporate goals.                Duties and Responsibilities of a Director
                              Presented below are highlights of HPI’s CG Manual.               A director has the following specific duties and responsibilities:
                                                                                                  • Conducts fair business transactions with HPI and ensures
                          OBJECTIVE                                                                  that personal interest does not bias Board decisions
                          The CG Manual shall institutionalize the principles of good             • Devotes time and attention necessary to properly
                          corporate governance in the entire organization.                           discharge his duties and responsibilities
                               HPI believes that corporate governance, the system by              • Acts judiciously
                          reference to which companies are managed and controlled                 • Exercises independent judgment
                          and from which the organization’s values and ethics emerge,             • Has a working knowledge of the statutory and
                          is of utmost importance to HPI’s shareholders, and will                    regulatory requirements affecting HPI, including the
                          therefore undertake every effort possible to create awareness              contents of its articles of incorporation and by-laws,
                          throughout the entire organization.                                        the requirements of the SEC, and where applicable, the
                                                                                                     requirements of other regulatory agencies
                          COMPLIANCE SYSTEM                                                       • Observes confidentiality
                          Compliance Officer                                                       • Ensures the continuing soundness, effectiveness, and
                          To ensure adherence to corporate principles and best                       adequacy of HPI’s internal control environment.
                          practices, HPI appointed a Compliance Officer who monitors
                          the progress and status of HPI’s corporate governance                Executive Committee
                          activities. The Compliance Officer is the Corporate Secretary,        The Board created an Executive Committee. Members of
                          unless the Board explicitly appoints another officer of HPI.          this Executive Committee, numbering at least three, were
                              The primary objectives and functions of the Compliance           appointed by the Board from among its members. The
                          Officer, among others, are as follows:                                Executive Committee meets regularly or may call for special
                              • Promotes awareness of good corporate governance and            meetings to exercise all duties delegated to it by the Board.
                                 accountability within HPI                                          All decisions or actions made by the Executive Committee
                              • Monitors compliance with the provisions and                    during regular and special meetings shall be recorded and
                                 requirements of the CG Manual, determines violations,         presented to the Board for ratification. The Board has the
                                 and recommends penalty for violation thereof for further      power to change the members of the Executive Committee at
                                 review and approval by the Board                              any time, or to fill vacancies therein.
                              • Ensures compliance with the Code of Corporate
                                 Governance of the Philippines                                 Nomination Committee
                              • Issues a yearly certification on the extent of HPI’s            The Board created a Nomination Committee, which consists
                                 compliance with its CG Manual                                 of at least three members of the Board, one of whom must
                              • Appears before the Securities and Exchange Commission          be an independent director.
                                 (SEC) on behalf of HPI.                                           The Nomination Committee carries out the following tasks:
                                                                                                   • Ensures that the Board has an appropriate balance of
                          Board of Directors                                                          required industry knowledge, expertise, and skills
                          HPI’s current Board of Directors is composed of nine directors,             needed to govern HPI towards achieving its intended
                          two of whom are independent directors. It is the Board’s                    goals and objectives
                          responsibility to foster the long-term success of HPI.                   • Reviews and evaluates all candidates nominated to
                              In particular, the Board:                                               officer positions in HPI who, under the company’s By-
                              • Is responsible to the shareholders of HPI, the                        Laws, require Board approval prior to appointment or
                                 management of its assets for optimum performance,                    promotion
                                 and the strategy for its future development                       • Shortlists, assesses, and evaluates all candidates
                              • Sets the strategic objectives of HPI, establishes its vision          nominated to become a member of the Board.
                                 and mission, determines investment policy, agrees on
                                 performance criteria, and delegates to management the         Compensation and Remuneration Committee
                                 detailed planning and implementation of that policy, in       The Board created a Compensation and Remuneration
                                 accordance with appropriate risk parameters                   Committee, which consists of at least three members
                              • Monitors compliance with policies, and achievement             of the Board, one of whom must be an independent
                                 against objectives, by holding management accountable         director. The Compensation and Remuneration
                                 for its activity through the measurement and control of       Committee’s overall strategy is to ensure that employees
                                 operations by regularly reporting to the Board, including     are rewarded for their contribution to HPI’s operating
                                 monthly performance reporting and budget updates              and financial performance.




26   Annual Report 2007
    The Compensation and Remuneration Committee carries                   Subject to the control of the Board of Directors, the
out the following tasks:                                              President and CEO:
   • Establishes a formal and transparent procedure for                   • Supervise and control all of the business and affairs of
      developing policies and for setting the remuneration                  HPI
      packages of directors, executives, and other key senior             • In the absence of the Chairman or the Vice Chairman
      personnel                                                             of the Board, preside at all meetings of the Board and
   • Designates the amount of remuneration, which shall                     stockholders. If the President and CEO positions are not
      be in a level sufficient to attract directors, executives,             held by one individual, then the CEO shall preside unless
      and other key senior personnel needed to run HPI                      absent, in which case the President shall preside
      successfully                                                        • Together with other officers designated by the Board,
   • Develops a form of Full Business Interest Disclosure                   sign all checks, drafts, or other orders with respect to
      as part of the pre-employment requirements for all                    any funds of HPI maintained in any bank, certificates of
      incoming officers, which among others, compels all                     stock of HPI, any deed, mortgage, bond, contract, or
      officers to declare under the penalty of perjury all their             other instrument which the Board has authorized to be
      existing business interests or shareholdings that may                 executed
      directly or indirectly conflict in their performance of              • Perform all duties incident to the office of the President
      duties once hired                                                     and CEO, and such other duties as may be prescribed by
   • Disallows any director to decide his or her own                        the Board from time to time.
      remuneration
   • Submits for publication in the annual report a concise           The Corporate Secretary
      and understandable disclosure of compensation of its            The Corporate Secretary, who is a Filipino citizen and resident,
      directors and executive officers for the previous year and       is an officer of HPI. Her loyalty to the mission, vision, and
      the ensuing year                                                specific business objectives of HPI comes with her duties.
   • Develop a personnel handbook covering the same                   Considering her varied functions and duties, she must possess
      parameters of governance stated above.                          administrative, interpersonal, legal, financial, and accounting
                                                                      skills.
Audit Committee                                                            The Corporate Secretary has the following specific duties
The Board created an Audit Committee, which consists of               and responsibilities:
at least three members of the Board, preferably with an                    • Attends and records the proceedings of all regular and
accounting or finance background, one of whom shall be an                      special meetings of the Board, board committees, and
independent director. Each committee member has adequate                      stockholders
understanding or competence of HPI’s financial management                   • Keeps in safe custody the seal of HPI and when
systems and environment.                                                      authorized by the Board of Directors affix it when
     The Audit Committee carries out the following tasks:                     required to any instrument
    • Performs oversight financial and risk management                      • Gathers and analyzes all documents, records, and other
       functions specifically in the areas of managing credit,                 information essential to the conduct of her duties and
       market, liquidity, operational, legal and other risks of HPI           responsibilities to HPI
    • Provides oversight for the HPI’s internal and external               • Gets a complete schedule of the agenda at least for the
       auditors                                                               current year and puts the Board on notice before every
    • Recommends an external auditor to be selected and                       meeting
       appointed by the stockholders during each annual                    • Assists the Board in making business judgment in good
       stockholders’ meeting                                                  faith and in the performance of their responsibilities and
    • Reviews and approves all audit plans prior to the                       obligations
       conduct of the external audit                                       • Submits to the SEC, at the end of every fiscal year, an
    • Establishes an internal audit department and the                        annual certification regarding the attendance of the
       appointment of an internal auditor                                     directors during Board meetings.
    • Monitors the compliance of all financial reports with
       existing standards, laws, rules, and other regulatory          External Auditor
       requirements                                                   The board, through the Audit Committee, recommends
    • Submits for publication in the annual report a disclosure       to the stockholders a duly accredited external auditor who
       of fees and total expenditures on consultancy and non-         shall undertake an independent audit and shall provide
       audit work paid to and done by the external auditor            and perform an objective assurance on the preparation and
    • Elevates to international standards the accounting and          presentation of financial statements.
       auditing processes, practices and methodologies of HPI.            If an external auditor believes that the statements made in
                                                                      an annual report, information statement or proxy statement
The President and Chief Executive Officer                              filed during his engagement are incorrect or incomplete, he
HPI has a President and Chief Executive Officer (CEO). At the          shall present his views in those reports.
option of the Board, a person other than the President may
be designated CEO, at which instance the President may be             Internal Auditor
designated Chief Operating Officer (COO). The President and            HPI has in place an independent internal audit function which
CEO positions are both held by Filipino citizens. Being the           is performed by an Internal Audit Manager or a group of
principal officers of the Company, the President and CEO are           internal audit personnel, through which the Board, senior
persons of outstanding knowledge and integrity. The President         management, and stockholders shall be provided with
and CEO work and deal fairly and objectively with all the             reasonable assurance that the HPI’s key organizational and
constituents of HPI, namely, the Board, management, and               procedural controls are effective, appropriate, and complied
stockholders.                                                         with. The Internal Auditor reports to the Audit Committee.




                                                                                                                 50th Anniversary Issue    27
spotlight


              Gregorio U. Kilayko
            is a highly accomplished
             investment banker and
            is today the Chairperson
               of ABN AMRO Bank
                 (Philippines) Inc.



             MEET ANOTHER
              HIGHLANDS
             INDEPENDENT
               DIRECTOR
AS SUCH, IGGY KILAYKO, as he is           spent many weekends in Tagaytay                How would you describe
better known, is mainly responsible       Highlands, and thus I have gotten to      your experience of being the
for the Dutch bank’s overall              know this beautiful place rather well.    company’s independent director?
investment banking operations in               What are your specific                     I have enjoyed immensely the
the country. These include mergers        responsibilities as an independent        board meetings of HPI. Here, I
and acquisitions, equity and              director?                                 am able to observe closely the
capital market transactions, and               As an independent director, I        well-known business acumen of
restructuring advisory, among others.     am expected to contribute to the          Henry Sy Sr. and his sons, Henry,
     Prior to joining ABN AMRO,           board by providing constructive           Jr. and Hans. I have also learned so
he was the founding head of               criticism. By staying away from day-      much from my fellow independent
ING Barings’ investment banking           to-day issues, I am expected to give      director, Washington Sycip, whose
business in the Philippines. During       independent views of the company.         insights into different issues reflect
his tenure, he lead-managed many          In effect, I help ensure that the         his long experience in the business
of the country’s largest equity raising   interests of the minority shareholders    community, both here and abroad.
initiatives such as those of Petron,      are adequately addressed. Moreover,            In your view, what is the
Meralco, Jollibee, and SM Prime           I am the chairman of the audit            company’s best competitive
Holdings, Inc.                            committee. The committee assists          advantage?
     Mr. Kilayko served as a governor     the board of directors in its oversight        In my view, HPI’s best advantage
of the Philippine Stock Exchange.         function of ensuring the integrity        is the fact that it belongs to the SM
In addition, he was also a director       of HPI’s financial statements and its      Group. The group enjoys excellent
of the exchange’s board and               compliance with legal regulatory          reputation for quality projects. It
was chairperson of its strategic          requirements. In addition, we review      is always able to deliver on what
development committee. He also            the performance of the company’s          it promises, largely because of
served in government, having              internal audit department and its         ample financial resources and
worked for the Bureau of Energy           independent auditor.                      management talents.
Development and the Philippine                 Which among your past and                 How could that advantage be
National Oil Company.                     present work experience has               further strengthened?
     He holds a Master in Business        greatly helped you in functioning              It can further be strengthened
Administration degree, majoring in        as an independent director? How           by taking advantage of the synergies
finance, from the Wharton School           were those experiences of help?           between HPI and the other
of the University of Pennsylvania.             My experiences as research           companies of the SM group. For
He also earned a Master in Energy         analyst and investment banker of          example, HPI can possibly play a role
Management and Policy degree from         multinational organizations have          in the development of Hamilo Coast.
the same university. Iggy graduated       greatly helped me in functioning               How was the year just passed
cum laude from the De La Salle            as an independent director. Those         (2007) for the company?
University in Manila, with a Bachelor     jobs entailed me to look closely               2007 has been a good year for
of Science degree in Industrial           at many corporations, especially          HPI despite the relatively tough
Management Engineering.                   on how they are managed. I                second half. The growing Philippine
     Iggy Kilayko imparts to us his       believe I am able to provide certain      economy has been positive for
various thoughts and insights on          recommendations based on what I           resort properties, as more Filipinos
what and how it is to be an HPI           have learned from those jobs. Also,       are able to afford leisure homes.
independent director.                     during board discussions, I am able       Tagaytay Highlands, with its superb
     Since when were you an               to contribute my knowledge of             facilities, is an obvious choice for
independent director of HPI?              capital markets and the Philippine        many of these buyers.
     I have been an independent           economy in general.                            What is your 2008 prognosis
director of HPI since the company’s            What would you consider              for the company?
inception in 2001.                        your greatest contribution to                  This year is certainly not going to
     What do you think are the            the company as an independent             be easy for any property company,
main reasons why you were                 director?                                 including HPI. With the weak US real
invited to be an independent                   My involvement in resolving          estate market, the usual demand
director?                                 financial related issues brought           from Filipinos in North America may
     I think the main reasons why I       up to the board, particularly those       perhaps disappear. On the other
was invited to be an independent          concerning the raising of funds           hand, the pronounced inflation could
director are that first, I am very         for the company’s new projects. I         make investments in HPI’s projects
familiar with HPI, having helped          have also been involved in looking        good investments.
conceptualize and implement the           for solutions to previous problems
spin-off of the company from Belle        related to conflicting interests
Corporation; and second, as an            among the different entities in
owner of a unit in Belleview, I have      Tagaytay Highlands.




                                                                                                      50th Anniversary Issue   29
faces: board of directors




                                                                             Henry T. Sy, Jr., Vice Chairman




       Henry Sy, Sr., Chairman                                               Willy N. Ocier, Vice Chairman



     HENRY S. SY, SR., CHAIRMAN, is the founder of the SM Group            WILLY N. OCIER, VICE CHAIRMAN, is also the Vice-Chairman of
     of Companies. He opened the first Shoemart Store in 1958 and has       Belle Corporation, Tagaytay Highlands Int’l. Golf Club, Chairman of
     been to the fore in SM Group’s diversification into shopping center,   Tagaytay Midlands Golf Club, Sinophil Corporation and APC Group,
     bank and financial services, tourism and real estate industries.       Inc. Previously, he was the President and the Chief Operating Officer
                                                                           of Eastern Securities Development Corporation.
         Directorships held in other companies:
         SM Investments Corporation - Chairman                             HENRY T. SY, JR., VICE CHAIRMAN, is also the Vice Chairman of SM
         SM Prime Holdings, Inc. - Chairman                                Investments Corporation and SM Development Corporation, Director of
         SM Development Corporation - Chairman                             SM Prime Holdings, Inc., Banco de Oro and San Miguel Corporation. He
         Banco de Oro Universal Bank - Chairman Emeritus                   also holds board positions in several companies within the SM Group.
         China Banking Corporation - Honorary Chairman
                                                                           HANS T. SY, DIRECTOR, holds several key positions in the SM Group.
     ANTONIO A. HENSON, PRESIDENT, is a Director and member                He is the President of SM Prime Holdings, Inc., Executive Vice President
     of the Executive Committee of Belle Corporation; Mr. Henson is        of Shoemart, Inc., First Executive Vice President of SM Investments
     also a Director of BDO Leasing and Finance Inc., Chairman of the      Corporation, and a Director of SM Development Corporation, SM
     Philippine Estates Corporation and Chairman of the Universal Light    Keppel Land, Inc. and Belle Corporation. He is Vice Chairman of
     Rail Corporation. He was formerly the President of Asia’s Emerging    the Board and Executive Committee Chairman of China Banking
     Dragon Corporation, President and CEO of the Clark Development        Corporation and Chairman of Tagaytay Highlands International Golf
     Corporation, Commissioner of the Mt. Pinatubo Commission              Club, Inc.
     and General Manager and Director of the National Development
     Corporation and some of its major subsidiary corporations. He         ROGELIO R. CABUÑAG, DIRECTOR, is the Officer-In-Charge
     served as Undersecretary of the Department of Trade and Industry      and a Director of Belle Corporation. He is also the President and
     and was a Partner of the SyCip Gorres Velayo & Co. Mr. Henson is      Chief Operating Officer of SM Development Corporation, Director
     a Certified Public Accountant.                                         and Executive Vice President of SM Synergy Properties Holdings




30   Annual Report 2007
   Hans T. Sy, Director                                Antonio A. Henson, Director                    Rogelio R. Cabuñag, Director




   Jacinto C. Ng, Jr., Director                        Washington Z. Sycip, Director                  Gregorio U. Kilayko, Director



Corporation; and a Director of Keppel Phils. Holdings, Inc. He is also a   Senior Adviser to the Board of Directors of Metrobank; Member of
Director of Tagaytay Highlands International Golf Club, Inc., Tagaytay     the Board of Trustees of Ramon Magsaysay Award Foundation and
Midlands Golf Club and The Country Club at Tagaytay Highlands.             Eisenhower Exchange Fellowships; Member of the Board of Overseers
Prior to joining the SM Group, he held key executive positions in          of Columbia University Graduate School of Business (New York);
other financial institutions.                                               Honorary Life Trustee of the Asia Society (New York); Board Member
                                                                           of the International Advisory of the American International Group &
JACINTO C. NG, JR., DIRECTOR, is the Chief Operating Officer of             Council on Foreign Relations, New York; and Member of the Board of
Earth+Style Corporation; Director and Treasurer of both Republic           Directors of major companies in the Philippines.
Biscuit Corporation and Suncrest Foods, Inc. and a Director of the
following companies: Belle Corporation; Asia United Insurance
Corporation, Extraordinary Development Corporation, Manila Bay
Development Corporation, Earth+Style Corporation, Quantuvis                   BOARD COMMITTEES
Resources Corporation and One Asia Development Corporation.
                                                                              Compensation or                    Audit Committee
GREGORIO U. KILAYKO, INDEPENDENT DIRECTOR, is the                             Remuneration Committee             Gregorio U. Kilayko
Chairman of ABN Amro’s banking operations in the Philippines.                 Washington Z. Sycip                Washington Z. Sycip
He was the founding head of ING Baring’s stockbrokerage and                   Henry T. Sy, Jr.                   Rogelio R. Cabuñag
investment banking business in the Philippines and a Philippine Stock         Willy N. Ocier
Exchange Governor in 1996 and 2000. He was a director of the                  Antonio A. Henson                  Executive Committee
demutualized Philippine Stock Exchange in 2003.                                                                  Henry Sy, Sr.
                                                                              Nomination Committee               Willy N. Ocier
                                                                              Henry Sy, Sr.                      Henry T. Sy, Jr.
WASHINGTON Z. SYCIP, INDEPENDENT DIRECTOR, is the founder                     Washington Z. Sycip                Antonio A. Henson
of The SGV Group ; Chairman Emeritus of the Board of Trustees and             Willy N. Ocier                     Rogelio R. Cabuñag
Board of Governors of Asian Institute of Management, Philippines;             Antonio A. Henson                  Jacinto C. Ng, Jr.




                                                                                                                           50th Anniversary Issue   31
faces: executive officers




       Antonio A. Henson          Ma. Angelina B. Magsanoc                  Roberto M. Antonio
       President                  VP-Finance/Corporate Information Officer   Assistant Vice President




       Beatriz P. Lampas          Atty. Corazon I. Morando                  Atty. Chester T. Bordeos
       Assistant Vice President   Corporate Secretary                       Asst. Corporate Secretary




                                                                            not in photo:
                                                                            Virginia A. Yap, Treasurer




32   Annual Report 2007
HIGHLANDS PRIME, INC.

Financial Statements
34    Independent Auditors’ Report to Accompany Income Tax Return
35    Independent Auditors’ Report on Supplementary Schedules
36    Statement of Management’s Responsibility for Financial Statements
37    Independent Auditors’ Report
38    Balance Sheets
39    Statements of Income
40    Statements of Changes in Equity
42    Statements of Cash Flows
43    Notes to Financial Statements




                                                                          50th Anniversary Issue   33
          FINANCIAL STATEMENTS




         HIGHLANDS PRIME, INC.
         INDEPENDENT AUDITORS’ REPORT TO ACCOMPANY INCOME TAX RETURN



         The Stockholders and the Board of Directors
         Highlands Prime, Inc.
         SM Corporate Offices, Building A
         1000 Bay Boulevard, Central Business Park
         Bay City, Pasay City



         We have audited the financial statements of Highlands Prime, Inc. for the year ended December 31, 2007, on which we have
         rendered the attached report dated March 17, 2008.

         In compliance with Revenue Regulations V-20, we are stating the following:

         1. The taxes paid or accrued by the above Company for the year ended December 31, 2007 are shown in the Schedule of Taxes and
            Licenses attached to the Annual Income Tax Return.

         2. No partner of our Firm is related by consanguinity or affinity to the president, manager or principal stockholders of the
            Company.




         SYCIP GORRES VELAYO & CO.




         Belinda B. Fernando
         Partner
         CPA Certificate No. 81207
         SEC Accreditation No. 0467-A
         Tax Identification No. 102-086-538
         PTR No. 0015195, January 3, 2008, Makati City

         March 17, 2008




34   Annual Report 2007
HIGHLANDS PRIME, INC.
INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY SCHEDULES



The Stockholders and the Board of Directors
Highlands Prime, Inc.
SM Corporate Offices, Building A
1000 Bay Boulevard, Central Business Park
Bay City, Pasay City



We have audited in accordance with Philippine Standards on Auditing, the financial statements of Highlands Prime, Inc. included
in this Form 17-A and have issued our report thereon dated March 17, 2008. Our audits were made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The schedules listed in the Index to Financial Statements and
Supplementary Schedules are the responsibility of the Company’s management. These schedules are presented for purposes of
complying with Securities Regulation Code Rule 68 and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all
material respect the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.



SYCIP GORRES VELAYO & CO.




Belinda B. Fernando
Partner
CPA Certificate No. 81207
SEC Accreditation No. 0467-A
Tax Identification No. 102-086-538
PTR No. 0015195, January 3, 2008, Makati City

March 17, 2008




                                                                                                                  50th Anniversary Issue   35
          FINANCIAL STATEMENTS




         HIGHLANDS PRIME, INC.
         STATEMENT OF MANAGEMENT’S RESPONSIBILITY
         FOR FINANCIAL STATEMENTS


         The management of Highlands Prime, Inc. is responsible for all information and representations contained in the balance sheets
         as of December 31, 2007 and 2006 and statements of income, changes in stockholders’ equity and cash flows for each of the three
         years in the period ended December 31, 2007, 2006 and 2005. The financial statements have been prepared in conformity with
         accounting principles generally accepted in the Philippines and reflect amounts that are based on the best estimates and informed
         judgment of management with an appropriate consideration to materiality.

         In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to
         ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and
         liabilities are recognized. The management likewise discloses to the Company’s audit committee and to its external auditor: (i)
         all significant deficiencies in the design or operation of internal controls that could adversely affect its ability to record, process,
         and report financial data; (ii) material weaknesses in the internal controls; and (iii) any fraud that involves management or other
         employees who exercise significant roles in internal controls.

         The Board of Directors reviews the financial statements before such statements are approved and submitted to the stockholders of
         the Company.

         Sycip Gorres Velayo & Co., the independent auditors and appointed by the stockholders, has examined the financial statements
         of the Company in accordance with auditing standards generally accepted in the Philippines and has expressed its opinion on the
         fairness of presentation upon completion of such examination, in its report to the Board of Directors and stockholders.




                                                                   Henry Sy, Sr.
                                                         Chairman of the Board of Directors




                             Willy N. Ocier                                                               Virginia A. Yap
                             Vice-Chairman                                                                   Treasurer




36   Annual Report 2007
HIGHLANDS PRIME, INC.
INDEPENDENT AUDITORS’ REPORT



The Stockholders and the Board of Directors
Highlands Prime, Inc.



We have audited the accompanying financial statements of Highlands Prime, Inc., which comprise the balance sheets as at December
31, 2007 and 2006, and the statements of income, statements of changes in equity and statements of cash flows for each of the three
years in the period ended December 31, 2007, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine
Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to
the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance
with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Highlands Prime, Inc. as
of December 31, 2007 and 2006, and its financial performance and its cash flows for each of the three years in the period ended
December 31, 2007, in accordance with Philippine Financial Reporting Standards.



SYCIP GORRES VELAYO & CO.




Belinda B. Fernando
Partner
CPA Certificate No. 81207
SEC Accreditation No. 0467-A
Tax Identification No. 102-086-538
PTR No. 0015195, January 3, 2008, Makati City

March 17, 2008




                                                                                                                     50th Anniversary Issue   37
          FINANCIAL STATEMENTS




         HIGHLANDS PRIME, INC.
         BALANCE SHEETS



                                                                                               December 31
                                                                                      2007                            2006
         ASSETS
         Current Assets
         Cash and cash equivalents (Notes 6, 15 and 21)                       P88,232,269                     P340,211,415
         Receivables (Notes 7, 15 and 21)                                      367,614,850                     232,726,654
         Residential units and subdivision lots for sale (Note 8)              399,079,718                     528,283,884
         Land and development costs (Notes 9 and 16)                           635,183,243                     150,362,079
         Available-for-sale investments (Notes 15 and 21)                       51,200,000                      43,400,000
         Prepaid expenses and other current assets                              60,393,160                      13,737,208
              Total Current Assets                                           1,601,703,240                   1,308,721,240

         Noncurrent Assets
         Noncurrent contracts receivable from
              sale of real estate (Notes 7 and 21)                             137,235,035                       55,216,101
         Land held for future development (Notes 13 and 15)                  1,765,555,999                    1,835,713,182
         Property and equipment - net (Note 10)                                  8,333,494                         7,214,943
         Investment properties - net (Note 11)                                  70,947,119                       95,963,725
         Deferred tax assets (Note 18)                                                   –                       12,772,962
         Other noncurrent asset                                                  2,000,000                        2,000,000
              Total Noncurrent Assets                                        1,984,071,647                   2,008,880,913
                                                                            P3,585,774,887                   P3,317,602,153

         LIABILITIES AND EQUITY
         Current Liabilities
         Accounts payable and other current liabilities
             (Notes 12, 15 and 21)                                           P408,523,624                     P262,170,641
         Income tax payable                                                             –                       16,625,248
             Total Current Liabilities                                        408,523,624                      278,795,889

         Noncurrent Liabilities
         Long-term debt (Notes 13, 15 and 21)                                 500,000,000                      500,000,000
         Pension benefit liability (Note 14)                                      1,733,547                         787,590
         Deferred tax liability - net (Note 18)                                 44,700,319                               –
             Total Noncurrent Liabilities                                     546,433,866                      500,787,590

         Equity
         Capital stock (Note 16)                                             2,246,244,622                   2,246,244,622
         Additional paid-in capital                                             76,560,296                       76,560,296
         Retained earnings                                                      310,597,315                    230,640,920
         Unrealized mark-to-market loss on available-for-sale investments        (2,584,836)                     (15,427,164)
              Total Equity                                                   2,630,817,397                    2,538,018,674
                                                                            P3,585,774,887                   P3,317,602,153

         See accompanying Notes to Consolidated Financial Statements.




38   Annual Report 2007
HIGHLANDS PRIME, INC.
STATEMENTS OF INCOME



                                                                      Years Ended December 31
                                                                                                          2005
                                                                                                 (As restated -
                                                                      2007            2006              Note 2)

REVENUE
Revenue from real estate sales (Note 15)                       P715,117,435    P345,461,625       P647,731,265
Income from land use (Note 15)                                            –      58,827,164                  –
Rent income (Notes 11 and 15)                                    2,472,683        4,074,951          2,870,557
Interest (Notes 6, 7 and 15)                                     6,179,844        8,341,114         13,849,990
Others                                                             682,710        4,025,053            383,242
                                                               724,452,672      420,729,907        664,835,054
Gain on disposal of property and equipment
    and investment properties                                    18,922,201       2,649,508                   –

COSTS AND EXPENSES
Cost of real estate                                             427,247,906     203,195,489        352,382,997
Operating expenses (Notes 14, 15 and 17)                         59,740,723      51,031,454          37,910,178
Commissions                                                      42,745,399      17,897,784         24,093,168
Interest (Notes 13 and 15)                                       27,819,544      13,689,083                   –
                                                                557,553,572     285,813,810        414,386,343

INCOME BEFORE INCOME TAX                                        185,821,301     137,565,605        250,448,711

PROVISION FOR (BENEFIT FROM)
    INCOME TAX (Note 18)
Current                                                           3,466,733      55,498,643         64,353,141
Deferred                                                         57,473,281      (7,996,055)        13,028,721
                                                                 60,940,014      47,502,588         77,381,862

NET INCOME                                                     P124,881,287     P90,063,017       P173,066,849

Basic/ Diluted Earnings Per Share (Note 19)                          P0.06            P0.04              P0.08

See accompanying Notes to Consolidated Financial Statements.




                                                                                                50th Anniversary Issue   39
          FINANCIAL STATEMENTS




         HIGHLANDS PRIME, INC.
         STATEMENTS OF CHANGES IN EQUITY




                                                                                         Capital Stock (Note 16)
                                                                                                                   Subscription
                                                                               Issued      Subscribed                Receivable
         At January 1, 2007                                             P1,997,037,167   P249,207,455                         P–
         Changes in fair value of
            available-for-sale investments                                          –               –                          –
         Transferred to profit or loss
         Net income                                                                 –               –                          –
         Total income during the year                                               –               –                          –
         Cash dividends - P0.02 per share                                           –               –                          –
         At December 31, 2007                                           P1,997,037,167   P249,207,455                         P–


         At January 1, 2006                                             P1,997,037,167   P249,207,455                         P–
         Net loss directly recognized
            in equity                                                               –               –                          –
         Net income                                                                 –               –                          –
         Total income during the year                                               –               –                          –
         Cash dividends - P0.05 per share                                           –               –                          –
         At December 31, 2006                                           P1,997,037,167   P249,207,455                         P–


         At January 1, 2005                                             P1,997,037,167   P249,207,455              (P249,207,455 )
         Collections during the year                                                –               –                249,207,455
         Net income                                                                 –               –                          –
         Cash dividends - P0.05 per share                                           –               –                          –
         At December 31, 2005                                           P1,997,037,167   P249,207,455                         P–

         See accompanying Notes to Consolidated Financial Statements.




40   Annual Report 2007
                                         Unrealized
                                     Mark-to-Market
                                   Loss on Available
    Additional        Retained               for Sale
Paid-in Capital       Earnings           Investment        Total Equity
  P76,560,296     P230,640,920         (P15,427,164)    P2,538,018,674


             –               –           12,784,657         12,784,657
                             –                57,671             57,671
             –     124,881,287                     –       124,881,287
             –     124,881,287           12,842,328        137,723,615
             –     (44,924,892)                    –       (44,924,892)
  P76,560,296     P310,597,315          (P2,584,836)    P2,630,817,397


  P76,560,296     P252,890,134                    P–    P2,575,695,052


             –               –           (15,427,164)       (15,427,164)
             –      90,063,017                     –         90,063,017
             –      90,063,017           (15,427,164)        74,635,853
             –     (112,312,231)                   –       (112,312,231)
  P76,560,296     P230,640,920          (P15,427,164)   P2,538,018,674


  P76,560,296      P192,135,516                   P–    P2,265,732,979
             –               –                     –        249,207,455
             –     173,066,849                     –       173,066,849
             –     (112,312,231)                   –       (112,312,231)
  P76,560,296     P252,890,134                    P–    P2,575,695,052




                                                        50th Anniversary Issue   41
          FINANCIAL STATEMENTS




         HIGHLANDS PRIME, INC.
         STATEMENTS OF CASH FLOWS



                                                                                        Years Ended December 31
                                                                                                                            2005
                                                                                                                   (As restated -
                                                                                        2007              2006            Note 2)
         CASH FLOWS FROM OPERATING ACTIVITIES
         Income before income tax                                               P185,821,301      P137,565,605     P250,448,711
         Adjustments for:
              Interest expense (Notes 13 and 15)                                  27,819,544        13,689,083                 –
              Loss (gain) on disposal of property
                    and equipment and investment properties (Notes 10 and 11)    (18,922,201)       (2,649,508)          136,980
              Depreciation and amortization (Notes 10, 11 and 17)                  7,604,081          7,768,335        7,732,383
              Interest income (Note 15)                                           (6,179,844)        (8,341,114)     (13,849,990)
         Operating income before working capital changes                         196,142,881       148,032,401      244,468,084
         Decrease (increase) in:
              Receivables                                                        (216,781,910)      (37,212,617)     (97,680,541)
              Residential units and subdivision lots for sale                     129,204,166     (375,498,911)      (37,805,241)
              Land and development costs                                        (484,821,164)      133,470,081       (84,172,678)
              Prepaid expenses and other current assets                           (46,655,952)       (9,225,189)       (4,444,425)
         Increase in accounts payable and other current liabilities               141,452,757        76,870,168       38,566,285
         Pension benefit liability (Note 14)                                            945,957          182,917           172,045
         Net cash generated from (used for) operations                          (280,513,265)       (63,381,150)      59,103,529
         Interest received                                                           6,054,624        7,012,552        13,697,711
         Interest paid                                                             (22,919,318)     (10,525,850)                –
         Income taxes paid                                                        (20,091,981)      (61,163,769)     (60,335,420)
         Net cash provided by (used in) operating activities                     (317,469,940)    (128,058,217)       12,465,820
         CASH FLOWS FROM INVESTING ACTIVITIES
         Decrease (increase) in:
              Land held for future development                                     70,157,183       (4,276,800)       16,930,751
              Other noncurrent asset                                               5,042,328          (660,000)                –
         Proceeds from disposal of property and equipment
              and investment properties                                           40,372,626        11,056,246             3,776
         Additions to property and equipment and
              investment properties (Notes 10 and 11)                              (5,156,451)      (5,206,367)       (2,614,202)
         Net cash provided by investing activities                               110,415,686           913,079        14,320,325
         CASH FLOW FROM FINANCING ACTIVITIES
         Proceeds from loans (Note 13)                                          200,000,000       500,000,000                  –
         Payments of:
              Loans                                                             (200,000,000)                –                 –
              Cash dividends                                                      (44,924,892)    (112,312,231)     (112,312,231)
         Net cash provided by (used in) financing activities                       (44,924,892)     387,687,769      (112,312,231)
         NET INCREASE (DECREASE) IN CASH
              AND CASH EQUIVALENTS                                              (251,979,146)     260,542,631        (85,526,086)
         CASH AND CASH EQUIVALENTS
              AT BEGINNING OF YEAR                                               340,211,415        79,668,784      165,194,870
         CASH AND CASH EQUIVALENTS
                    AT END OF YEAR (Note 6)                                     P88,232,269       P340,211,415      P79,668,784

         See accompanying Notes to Consolidated Financial Statements.




42   Annual Report 2007
HIGHLANDS PRIME, INC.
NOTES TO FINANCIAL STATEMENTS



1.   Corporate Information

     Highlands Prime, Inc. (the Company) was incorporated in the Philippines and is engaged in property development, focusing
     primarily on the high-end leisure property market. The Company’s property assets consist of undeveloped land, land
     developments, subdivision lots and finished residential units located around the vicinity of Tagaytay Highlands International
     Golf Club, Inc. (THIGCI) in Tagaytay City, Cavite and Tagaytay Midlands Golf Club, Inc. (TMGCI) in Batangas.

     The registered office address of the Company is SM Corporate Offices, Building A, 1000 Bay Boulevard, Central Business Park
     Bay City, Pasay City.

     The Company’s shares of stock are listed and traded on the Second Board of the Philippine Stock Exchange, Inc. (PSE).

     The accompanying financial statements of the Company were authorized for issue by the Board of Directors (BOD) on
     March 17, 2008.


2.   Basis of Preparation and Statement of Compliance

     2.1 Basis of Preparation

     The financial statements of the Company have been prepared under the historical cost basis except for available-for-sale (AFS)
     investments that are measured at fair value. The financial statements are presented in Philippine peso, which is the Company’s
     functional and presentation currency under PFRS. Amounts are rounded off to the nearest peso unit except when otherwise
     indicated.

     2.2 Statement of Compliance

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


3.   Summary of Significant Changes in Accounting Policies and Disclosures

     3.1 Changes in Accounting Policies

     The Company adopted the following amended PFRS and Philippine Interpretations based on International Financial Reporting
     Interpretations Committee (IFRIC) interpretations during the year. Adoption of these revised standards and interpretations did
     not have any effect on the financial performance or position of the Company except for the additional disclosures.

     • Philippine Accounting Standard (PAS) 1, “Amendment - Presentation of Financial Statements: Capital Disclosures” — This
       amendment requires the Company to make new disclosures to enable users of the financial statements to evaluate the
       Company’s objectives, policies and processes for managing capital. The additional disclosures are shown in Note 20.

     • PFRS 7, “Financial Instruments: Disclosures” — This standard requires disclosures to improve the information about financial
       instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from
       financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, as well as
       sensitivity analysis to market risk. It replaces PAS 30, “Disclosures in the Financial Statements of Banks and Similar Financial
       Institutions,” and the disclosure requirements in PAS 32, “Financial Instruments: Disclosure and Presentation.” It is applicable
       to all entities that report under PFRS.

       The Company adopted the amendment to the transitional provisions of PFRS 7, as approved by the Financial Reporting
       Standards Council of the Philippines, which gives transitory relief with respect to the presentation of comparative information




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          FINANCIAL STATEMENTS




                for the new risk disclosures about the nature and extent of risks arising from financial instruments. Accordingly, the
                Company does not need to present comparative information for the disclosures required by paragraphs 31–42 of PFRS 7,
                unless the disclosure was previously required under PAS 32. Adoption of this standard resulted to the inclusion of additional
                disclosures such as market risk sensitivity analysis, contractual maturity analysis of financial liabilities and aging analysis on
                financial assets that are neither past due nor impaired (see Notes 7 and 20).

              • Philippine Interpretation IFRIC 7, “Applying the Restatement Approach under PAS 29, Financial Reporting in Hyperinflationary
                Economies” — This interpretation requires that when a country becomes hyperinflationary, PAS 29 must be applied as if
                the country had always been hyperinflationary and it provides guidance on calculating deferred taxes and comparatives.
                The interpretation did not result to any significant impact on the financial statements as the Company does not operate in a
                hyperinflationary economy.

              • Philippine Interpretation IFRIC 8, “Scope of PFRS 2” — This interpretation requires PFRS 2 to be applied to any arrangements
                in which the entity cannot identify specifically some or all of the goods received, in particular where equity instruments are
                issued for consideration which appears to be less than fair value. The interpretation has no impact on the financial position
                or performance of the Company.

              • Philippine Interpretation IFRIC 9, “Reassessment of Embedded Derivatives” — This interpretation states that the date to assess
                the existence of an embedded derivative is the date that an entity first becomes a party to the contract, with reassessment
                only if there is a change to the contract that significantly modifies the cash flows. The interpretation has no impact on the
                financial position or performance of the Company.

              • Philippine Interpretation IFRIC 10, “Interim Financial Reporting and Impairment” — This interpretation requires that an
                entity must not reverse an impairment loss recognized in a previous interim period in respect of goodwill or an investment
                in either an equity instrument or a financial asset carried at cost. As the Company had no impairment losses previously
                reversed, the interpretation has no impact on the financial position or performance of the Company.

              3.2 Future Changes in Accounting Policies

              The Company did not early adopt the following standards, amendments and interpretations which have been approved but are
              not yet effective:

              • Revised PAS 1, “Presentation of Financial Statements” — This will become effective for annual periods beginning on or after
                January 1, 2009. PAS 1 has been revised to enhance the usefulness of information presented in the financial statements.
                Companies will need to consider whether to present the statement of comprehensive income as a single statement or two
                statements. This may also impact the information disclosed in the other announcements by the Company, such as press
                releases. The adoption of this revision will not have a material impact on the Company’s financial statements.

              • PAS 23, “Amendment, Borrowing Costs” — This was issued in March 2007, and becomes effective for financial years
                beginning on or after January 1, 2009. The standard has been revised to require capitalization of borrowing costs when such
                costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready
                for its intended use or sale. The Company does not expect any significant impact arising from the adoption of the standard
                in 2009.

              • PFRS 8, “Operating Segments” — This will be effective January 1, 2009 and will replace PAS 14, “Segment Reporting.” The
                standard which adopts a management approach to reporting segment information is required for adoption only by entities
                whose debt or equity instruments are publicly traded, or are in the process of filing with the Philippines Securities and
                Exchange Commission for purposes of issuing any class of instruments in a public market. The Company does not expect
                any significant impact arising from the adoption of the standard in 2009.

              • Philippine Interpretation IFRIC 11, IFRS 2 - “Group and Treasury Share Transactions” — This interpretation will be effective
                March 1, 2007. This requires arrangements whereby an employee is granted rights to an entity’s equity instruments to be
                accounted for as an equity-settled scheme by the entity even if (a) the entity chooses or is required to buy those equity
                instruments (e.g., treasury shares) from another party, or (b) the shareholder(s) of the entity provide the equity instruments
                needed. It also provides guidance on how subsidiaries, in their separate financial statements, account for such schemes when
                their employees receive rights to the equity instruments of the parent. The Company does not expect any significant impact
                arising from the adoption of the standard in 2009.




44   Annual Report 2007
     • Philippine Interpretation IFRIC 12, “Service Concession Arrangements” — This interpretation will become effective January
       1, 2008. This interpretation which covers contractual arrangements arising from entities providing public services is not
       relevant to the Company’s current operations. The Company does not expect any significant impact arising from the adoption
       of the standard in 2009.

     • Philippine Interpretation IFRIC 13, “Customer Loyalty Programmes” — This interpretation will become effective for annual
       periods beginning on or after July 1, 2008. This interpretation requires customer loyalty award credits to be accounted
       for as a separate component of the sales transactions in which they are granted and therefore part of the fair value of the
       consideration received is allocated to the award credits and deferred over the period that the award credits are fulfilled. The
       Company does not expect any significant impact arising from the adoption of the standard in 2009.

     • Philippine Interpretation IFRIC 14, “PAS 19 -The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
       Interaction” — This interpretation was issued on July 2007 and will become effective for annual periods beginning on or
       after January 1, 2008. This interpretation provides guidance on how to assess the limit on the amount of surplus in a defined
       benefit scheme that can be recognized as an asset under PAS 19, “Employee Benefits.” The Company expects that this
       Interpretation will have no impact on the financial position or performance of the Company as all defined benefit schemes
       are currently unfunded. The Company does not expect any significant impact arising from the adoption of the standard in
       2009.


4.   Summary of Significant Accounting and Financial Reporting Policies

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

     Financial Instruments
     Financial assets and financial liabilities within the scope of PAS 39 are classified as financial assets at fair value through profit
     or loss (FVPL), loans and receivables, held-to-maturity (HTM) investments, or AFS investments, financial liabilities at FVPL, and
     other financial liabilities, as appropriate. Financial assets and financial liabilities are recognized initially at fair value, plus, in
     the case of financial instruments not at FVPL, directly attributable transaction costs.

     The Company determines the classification of its financial assets and financial liabilities on initial recognition and, where
     allowed and appropriate, re-evaluates this designation at each financial year-end.

     All regular way purchases and sales of financial assets are recognized on the trade date, which is the date that the Company
     commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery
     of assets within the period generally established by regulation or convention in the marketplace.

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

     For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation
     techniques.

     Financial Assets at FVPL. Financial assets at FVPL include financial assets held for trading, derivatives, and financial assets
     designated upon initial recognition as at FVPL.

     Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives,
     including separated embedded derivatives are also classified as FVPL unless they are designated as effective hedging instruments
     or a financial guarantee contract.




                                                                                                                         50th Anniversary Issue   45
          FINANCIAL STATEMENTS




              Financial assets may be designated at initial recognition as at FVPL if the following criteria are met:

              • the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the
                assets or liabilities or recognizing gains or losses on them on a different basis;

              • the assets or liabilities are part of a group of financial assets or financial liabilities which are managed and their performance
                evaluated on a fair value basis, in accordance with a documented risk management strategy; or

              • the financial asset or financial liability contains an embedded derivative that would need to be separately recorded.

              Financial assets at FVPL are recorded in the balance sheet at fair value. Changes in fair value are recognized in the statement
              of income. Interest earned or incurred is recorded in interest income or expense respectively, while dividend income is
              recognized in the statement of income when the right to receive payment has been established.

              An embedded derivative is separated from the host contract and accounted for as a derivative if all of the following conditions are
              met: a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics
              and risks of the host contract; b) a separate instrument with the same terms as the embedded derivative would meet the
              definition of a derivative; and c) the hybrid or combined instrument is not recognized at fair value through profit or loss.
              Reassessment of embedded derivatives is only done when there are changes in the contract that significantly modifies the
              contractual cash flows.

              As of December 31, 2007 and 2006, the Company has no financial assets at FVPL.

              Loans and Receivables. Loans and receivables are nonderivative financial assets with fi xed or determinable payments that
              are not quoted in an active market. After initial measurement, loans and receivables are carried at amortized cost using the
              effective interest method less any allowance for impairment. Gains and losses are recognized in the statement of 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 balance sheet date. Otherwise, these are classified as
              noncurrent assets.

              This category includes contracts and other receivables of the Company (see Note 7).

              HTM Investments. HTM investments are quoted nonderivative financial assets which carry fi xed or determinable payments and
              fi xed maturities and which the Company has the positive intention and ability to hold until maturity. After initial measurement,
              HTM investments are measured at amortized cost. This cost is computed as the amount initially recognized minus principal
              repayments, plus or minus the cumulative amortization using the effective interest rate method of any difference between the
              initially recognized amount and the maturity amount, less allowance for impairment. This calculation includes all fees and
              points paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction
              costs and all premiums and discounts. Gains and losses are recognized in the statement of income when the investments are
              derecognized or impaired, as well as through the amortization process. Assets under this category are classified as current
              assets if maturity is within 12 months from the balance sheet date and noncurrent assets if maturity is more than a year.

              As of December 31, 2007 and 2006, the Company has no HTM investments.

              AFS Investments. AFS financial assets are those nonderivative financial assets that are designated as available-for-sale or are
              not classified as FVPL, loans and receivable or HTM investments. After initial recognition, AFS financial assets are measured
              at fair value with unrealized gains or losses being recognized directly in the equity, recorded as “Unrealized mak-to-market
              loss on AFS investments.” When the investment is disposed of, the cumulative gain or loss previously recorded in the equity
              is recorded in the statement of income. Interest earned or paid on the investments is reported as interest income or expense
              using the effective interest rate method. Dividends earned on investments are recognized in the statement of income when the
              right of payment has been established. AFS investments are classified as noncurrent assets unless the intention is to dispose
              such assets within 12 months from balance sheet date.

              The fair value of AFS financial assets consisting of any investments that are actively traded in organized financial markets is
              determined by reference to quoted market bid prices at the close of business on the balance sheet date.

              As of December 31, 2007 and 2006, the Company’s AFS investments are discussed in Notes 15 and 21.




46   Annual Report 2007
Other Financial Liabilities. This category pertains to financial liabilities that are not held for trading or not designated as at
FVPL upon the inception of the liability. These include liabilities arising from operations or non-interest bearing loans and
borrowings.

The financial liabilities are recognized initially at fair value and are subsequently carried at amortized cost, taking into account
the impact of applying the effective interest method of amortization (or accretion) for any related premium, discount and any
directly attributable transaction costs.

This category includes long-term debt and accounts payables and other current liabilities (see Notes 12 and 13).

Impairment of Financial Assets
The Company assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.

Assets Carried at Amortized Cost. If there is objective evidence that an impairment loss on assets carried at amortized cost has
been incurred, the amount of the loss 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 been incurred) discounted at the financial
asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the
asset is reduced through the use of an allowance account. The amount of the loss shall be recognized in statement of income.
The financial assets, together with the associated allowance accounts, are written off when there is no realistic prospect of
future recovery.

The Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually
significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is
included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively
assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues
to be recognized are no longer included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognized, the previously recognized impairment loss is reversed, to the extent that the
carrying value of the asset does not exceed its amortized cost at the reversal date. Any subsequent reversal of an impairment
loss is recognized in the statement of income.

In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as, continued default
in payment of the customers on their maturing obligations, customers’ bankruptcy and status of receivables under litigation)
that the Company will not be able to collect all of the amounts due under the original terms of the invoice. For the purpose
of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry,
collateral type, past-due status and term as well as per product line.

Assets carried at cost. If there is an objective evidence that an impairment loss has been incurred on an unquoted equity
instrument that is not carried at fair value because its fair value cannot be reliably measured, or on derivative asset that is
linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the
difference between the carrying amount and the present value of estimated future cash flows discounted at the current market
rate of return for a similar financial asset.

AFS investment. In case of quoted equity investments classified as AFS financial assets, impairment would include a significant
or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment loss, the
cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss
on that financial asset previously recognized in the statement of income - is removed from the statement of changes in equity
and recognized in the statement of income. Impairment losses on equity investments are not reversed through the statement
of income. Increases in fair value after impairment are recognized directly in the statement of changes in equity.

Derecognition of Financial Assets and Liabilities
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when:

• the rights to receive cash flows from the asset have expired;

• the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without
  material delay to a third party under a “pass-through” arrangement; or




                                                                                                                      50th Anniversary Issue   47
          FINANCIAL STATEMENTS




              • the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the
                risks and rewards of the asset, or (b) 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 and has neither transferred nor retained
              substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of
              the Company’s continuing involvement in the asset.

              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 a derecognition of the original
              liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the
              statement of income.

              Offsetting Financial Instruments
              Financial assets and financial liabilities are offset and the net amount reported in the balance sheet 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. This is not generally the case with master netting agreements, and the related
              assets and liabilities are presented gross in the balance sheet.

              Residential Units and Subdivision Lots for Sale
              Residential units and subdivision lots for sale are carried at the lower of cost and net realizable value. Costs include the
              acquisition cost of the land plus costs incurred for development and improvement of the properties. Net realizable value is the
              estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs to sell.

              Land and Development Costs
              Land and development costs are carried at the lower of cost and net realizable value. Costs include the acquisition cost of land
              and costs incurred for development and improvement of the properties. Net realizable value is the estimated selling price in
              the ordinary course of business, less estimated costs of completion and estimated costs to sell.

              Land Held for Future Development
              Land held for future development is valued at the lower of cost and net realizable value. Costs include purchase price and
              other costs directly attributable to the acquisition. Net realizable value is the selling price in the ordinary course of business,
              less estimated costs to sell.

              Property and Equipment
              Property and equipment are stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and any
              accumulated impairment in value. Such cost includes the cost of replacing part of such property and equipment when that cost
              is incurred if the recognition criteria are met.

              Depreciation is calculated on a straight-line basis over the useful lives of the property and equipment.

              The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate
              that the carrying value may not be recoverable.

              The property and equipment’s residual values, useful lives and methods of depreciation and amortization are reviewed, and
              adjusted if appropriate, at each financial year-end.

              An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise
              from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between
              the net disposal proceeds and the carrying amount of the item) is included in the statement of income in the year the item is
              derecognized.

              Investment Properties
              Investment properties consist of condominium units and related improvements thereon, that are being leased. These are
              carried at cost less accumulated depreciation and any impairment in value. Depreciation is computed using the straight-line
              method over the estimated useful lives of investment properties.




48   Annual Report 2007
The carrying amount includes the cost of replacing part of existing investment properties at the time that cost is incurred if the
recognition criteria are met; and excludes the costs of day-to-day servicing of investment properties.

Investment properties are derecognized when either they have been disposed of or when the investment properties are permanently
withdrawn from use and no future economic benefits are expected from its disposal. Any gains or losses on the retirement or
disposal of investment properties are recognized in the statement of income in the year of retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use, evidenced by ending of owner-
occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are
made from investment properties when, and only when, there is a change in use, evidenced by commencement of owner-
occupation or commencement of development with a view to sell.

Borrowing Costs
Borrowing costs are generally expensed as incurred.

Impairment of Non-financial Assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs
to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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
assessment of the time value of money and the risks specific to the asset. Any impairment loss is recognized in the statement
of 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 income. After such a reversal the depreciation charge is 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.

Provisions
Provisions, if any, are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and 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 assessment 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.

Contingencies
Contingent liabilities are not recognized in the financial statements but are disclosed in the notes to financial statements 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 in the notes to financial statements when inflows of economic benefits are probable.

Revenue and Cost Recognition
Revenue is recognized to the extent that it is probable that the economic benefit will flow to the Company and the revenue can
be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:

Real Estate Sales. Revenue and costs from sales of completed projects is accounted for using the full accrual method. The
percentage of completion method is used to recognize income from sales of projects where the Company has material
obligations under the sales contracts to complete the project after the property is sold. Under this method, gain is recognized
as the related obligations are fulfilled, measured principally on the basis of the estimated completion of a physical portion of
the contract work. Any excess of collections over the recognized receivables are included in the “Accounts payable and other
current liabilities” account in the balance sheet.




                                                                                                                 50th Anniversary Issue   49
          FINANCIAL STATEMENTS




              Real estate costs that relate to the acquisition, development, improvement and construction of the condominium units are
              capitalized. The capitalized costs of condominium units are charged to operations when the related revenues are recognized.

              For income tax purposes, full recognition is applied when at least 25% of the selling price has been collected in the year of
              sale. Otherwise, the installment method is applied.

              Interest Income. Revenue is recognized as the interest accrues, taking into account the effective yield on the asset.

              Rental Income. Rental income from investment properties is accounted for on a straight-line basis over the lease term.

              Pension Benefits
              The cost of providing benefit under the defined benefit plan is determined using the projected unit credit actuarial valuation
              method. Actuarial gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial
              gains and losses at the end of the previous reporting year exceeded 10% of the higher of the defined benefit obligation and
              the fair value of plan assets at that date. Gains or losses are recognized over the expected average remaining working lives
              of the employees participating in the plan. The past service cost is recognized as an expense on a straight-line basis over the
              average period until the benefits become vested. If the benefits are already vested immediately following the introduction of,
              or changes to, a pension plan, past service cost is recognized immediately.

              The defined benefit liability is the aggregate of the present value of the defined benefit obligation and actuarial gains and losses
              not recognized reduced by past service cost not yet recognized and the fair value of plan assets out of which the obligations
              are to be settled directly. If such aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate
              of cumulative unrecognized net actuarial losses and past service cost and the present value of any economic benefits available
              in the form of refunds from the plan or reductions in the future contributions to the plan.

              Operating Lease
              The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangements and
              requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and
              the arrangement conveys a right to use the asset.

              Company as a Lessee. Finance leases, which transfer to the Company substantially all the risks and benefits incidental to
              ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at
              the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction
              of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
              reflected in profit or loss.

              Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is
              no reasonable certainty that the Company will obtain ownership by the end of the lease term.

              Operating lease payments are recognized as expense in the statement of income on a straight-line basis over the lease term.

              Company as a lessor. Leases where the Company does not transfer substantially all the risks and benefits of ownership of the
              asset are classified as operating leases.

              Income Tax

              Current Tax. Current 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 each balance sheet date.

              Deferred Tax. Deferred tax is provided using the liability method on temporary differences at each balance sheet 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.

              Deferred tax assets are recognized for all deductible temporary differences and carryforward benefit of unused minimum
              corporate income tax (MCIT), to the extent that it is probable that taxable profit will be available against which the deductible
              temporary differences and the carryforward benefit of unused MCIT can be utilized.




50   Annual Report 2007
     The carrying amount of deferred tax assets is reviewed at each balance sheet 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 asset to be utilized. Unrecognized
     deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that
     future taxable profit will allow the deferred tax asset to be recovered.

     Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year 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 balance sheet date.

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

     Earnings per share (EPS)
     Basic/ diluted EPS is calculated by dividing the net income for the year attributable to the shareholders by the weighted average
     number of shares outstanding during the year.

     Events after Balance Sheet Date
     Post year-end events that provide additional information on the Company’s position at the balance sheet date (adjusting events)
     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.


5.   Significant Accounting Judgments, Estimates and Assumptions

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

     • Revenue Recognition

       Management considered the detailed criteria for the recognition of revenue from the sale of property units set out in PAS
       18, Appendix, “Revenue Recognition for Sales of Property Units under Pre-completion Contracts,” and the related Philippine
       Interpretation Q&A 2006-1 in determining whether the Company had transferred to the buyer the significant risks and rewards
       of ownership of the property. Percentage of completion of development is determined based on engineer’s judgment and
       estimates on the physical portion of contract work done and that the development is beyond the preliminary stage.

     • Operating Leases

       The Company leases out its investment properties. The Company has determined that it does not transfer the significant risks
       and rewards of ownership of these properties.

     Estimates and Assumptions. The key assumptions concerning the future and other key sources of estimation uncertainty at
     balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
     within the next financial year are discussed below:

     • Allowance for Doubtful Accounts

       The Company maintains an allowance for doubtful accounts at a level considered adequate to provide for potential
       uncollectible receivables. The Company performs a regular review of the age and status of these accounts, designed to
       identify accounts with objective evidence of impairment and provide the appropriate allowance for impairment losses. The
       review is accomplished using a combination of specific and collective assessment approaches, with the impairment losses
       being determined for each risk grouping identified by the Company. The Company uses specific criteria in determining
       whether the receivables will be assessed on a specific approach such as, continued default in payment of the customers on
       their maturing obligations, customers’ bankruptcy and status of receivables under litigation. The Company uses collective
       assessment approach for receivables, other than those that were subjected to specific assessment approach. For the purpose
       of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as
       industry, collateral type, past-due status and term as well as per product line.

       The carrying value of receivables amounted to P504.9 million and P287.9 million as of December 31, 2007 and 2006,
       respectively (see Note 7).




                                                                                                                             50th Anniversary Issue   51
          FINANCIAL STATEMENTS




              • Net realizable value of residential units and subdivision lots for sale, land and development costs, and land held for future
                development.

                The Company writes down the carrying value of residential units and subdivision lots for sale, land and development
                cost, and land held for future development whenever the net realizable value becomes lower than cost due to changes in
                market prices or other causes. The carrying value is reviewed regularly for any decline in value. The carrying values of
                residential units and subdivision lots for sale, land and development cost and land held for future development amounted to
                P399.1 million, P635.2 million and P1,765.6 million, respectively as of December 31, 2007 and P528.3 million, P150.4 million
                and P1,835.7 million, respectively, as of December 31, 2006 (see Notes 8 and 9).

              • Impairment of AFS Investments

                The Company follows the guidance of PAS 39 in determining when an investment is impaired. This determination requires
                significant judgment. In making this judgment, the Company evaluates, among other factors, the duration and extent to
                which the fair value of an investment is less than its cost; and the fi nancial health of and near-term business outlook for the
                investee, including factors such as industry and sector performance, changes in technology and operational and financing
                cash flow.

                The Company treats AFS investments as impaired when there has been a significant or prolonged decline in the fair value
                below its costs or where there are objective evidence that impairment exists. The determination of what is “significant” or
                “prolonged” requires judgment. The Company treats ‘significant’ generally as 20% or more of the original cost of investments,
                and ‘prolonged’ as greater than six months. In addition, the Company evaluates other factors including normal volatility in
                share prices for quoted securities and the future cash flows and discounted factors for unquoted securities.

                If the assumption made regarding the duration that, and extent to which the fair value is less than cost, the Company would
                suffer an additional loss in its financial statements, representing the write down of cost at its fair value.

                The AFS investments amounted to P51.2 million and P43.4 million as of December 31, 2007 and 2006, respectively.

              • Estimated Useful Lives of Property and Equipment and Investment Properties

                The useful life of each of the Company’s property and equipment and investment properties is estimated based on the period
                over which the asset is expected to be available for use. Such estimation is based on a collective assessment of industry
                practice, internal technical evaluation and experience with similar assets. The estimated useful life of each asset is 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 asset. It is possible, however, that future results of operations could
                be materially affected by changes in the amounts 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 and investment properties would
                increase the recorded operating expenses and decrease noncurrent assets.

                The carrying amounts of property and equipment as of December 31, 2007 and 2006 amounted to P8.3 million and P7.2
                million, respectively (see Note 10). The carrying amount of investment properties as of December 31, 2007 and 2006
                amounted to P70.9 million and P96.0 million, respectively (see Note 11).

              • Impairment of Nonfinancial Assets

                An impairment review is performed when certain impairment indicators are present.

                Determining the value in use of property and equipment and other nonfinancial assets, which require 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 property and equipment and investment properties and other assets associated with
                an acquired business are impaired. Any resulting impairment loss could have a material adverse impact on the Company’s
                financial condition and results of operations.

                The preparation of estimated future cash flows involves significant judgment and estimations. While the Company believes
                that the assumptions are appropriate and reasonable, significant changes in the assumptions may materially affect the
                assessment of recoverable values and may lead to future impairment charges.




52   Annual Report 2007
       There were no provision for impairment losses recognized in 2007, 2006 and 2005. The carrying values of property and
       equipment and investment properties are disclosed in Notes 10 and 11, respectively.

     • Deferred Tax

       The Company’s assessment on the recognition of deferred tax on nondeductible or nontaxable temporary differences is
       based on the forecasted taxable income of the following reporting period. This forecast is based on the Company’s
       past results and future expectations on revenues and expenses. Deferred tax assets amounted to P12.8 million as of
       December 31, 2006 (see Note 18).

     • Pension Benefits

       The cost of defined benefit plan is determined using actuarial valuations. The actuarial valuation involves making assumptions
       about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases.
       Due to long term nature of this plan, such estimates are subject to significant uncertainty.

       As of December 31, 2007 and 2006, pension benefit liability amounted to P1.7 million and P0.8 million, respectively
       (see Note 14).



6.   Cash and Cash Equivalents

     This account consists of:

                                                                                         2007                                   2006
       Cash on hand and in banks                                                   P9,312,680                             P10,236,519
       Short-term placements (see Note 15)                                         78,919,589                             329,974,896
                                                                                  P88,232,269                            P340,211,415

     Cash in banks earns interest at the respective bank deposit rates. Short-term placements are made for varying periods of up to
     three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term
     placement rates. The interest income earned related to cash as of December 31, 2007 and 2006, amounted to P3.2 million and
     P3.9 million, respectively.



7.   Receivables

     This account consists of:

                                                                                         2007                                  2006
       Contracts receivable from sale of real estate                             P479,463,645                           P207,158,192
       Less noncurrent portion                                                    137,235,035                             55,216,101
                                                                                  342,228,610                            151,942,091
       Receivable from a related party (Note 15)                                   16,108,648                              9,574,178
       Advances to contractors                                                      4,841,801                             59,817,957
       Others                                                                       4,435,791                             11,392,428
                                                                                 P367,614,850                           P232,726,654

     Contracts receivable from sale of real estate are generally on 1 to 2 years’ term and bear interest at market rates. Total
     interest income earned related to the contracts receivable as of December 31, 2007 and 2006, amounted to, P2.2 million and
     P3.9 million, respectively. Other receivables pertain to nontrade transactions with third parties involving amount that are
     individually insignificant.

     Advances to contractors are considered as non-financial instruments as it will be applied against future billings from
     contractors.




                                                                                                                      50th Anniversary Issue   53
          FINANCIAL STATEMENTS




         8.   Residential Units and Subdivision Lots for Sale

              This account consists of:

                                                                                         2007                               2006
                At cost:
                  Residential units                                              P349,255,357                       P472,409,563
                  Subdivision lots                                                 49,824,361                         55,874,321
                                                                                 P399,079,718                       P528,283,884



         9.   Land and Development Costs

              This account consists of:

                                                                                         2007                               2006
                At cost:
                  Land                                                          P202,053,585                         P22,429,818
                  Development costs                                              433,129,658                         127,932,261
                                                                                P635,183,243                        P150,362,079



         10. Property and Equipment

                                                                                                 2007
                                                                      Office
                                                                  Furniture    Transportation          Leasehold
                                                                and Fixtures      Equipment        Improvements             Total
              Cost:
                Balance at beginning of year                     P2,838,498        P7,447,975           P650,119     P10,936,592
                Additions                                           942,937         2,225,133            342,859        3,510,929
                Disposals                                                 –        (1,761,818)                 –       (1,761,818)
                Balance at end of the year                        3,781,435         7,911,290            992,978      12,685,703
              Accumulated depreciation
                and amortization:
                Balance at beginning of year                      P944,964        P2,380,327            P396,358      P3,721,649
                Depreciation and amortization                      668,562         1,394,023              83,793        2,146,378
                Disposals                                                 –        (1,515,818)                 –       (1,515,818)
                Balance at end of the year                        1,613,526        2,258,532             480,151       4,352,209
              Net book value                                     P2,167,909       P5,652,757            P512,827      P8,333,494



                                                                                                 2006
                                                                      Office
                                                                   Furniture   Transportation         Leasehold
                                                                and Fixtures      Equipment        Improvements             Total
              Cost:
                Balance at beginning of year                     P1,823,560        P3,256,546           P650,119      P5,730,225
                Additions                                         1,014,938         4,191,429                  –       5,206,367
                Balance at end of the year                        2,838,498          7,447,975           650,119      10,936,592
              Accumulated depreciation
                and amortization:
                Balance at beginning of year                        471,818         1,445,542             317,197      2,234,557
                Depreciation and amortization                       473,146           934,785              79,161      1,487,092
                Balance at end of the year                          944,964         2,380,327            396,358       3,721,649
              Net book value                                     P1,893,534        P5,067,648           P253,761      P7,214,943




54   Annual Report 2007
    Depreciation and amortization are computed using the straight-line method over the following estimated useful lives of the
    assets:

           Office furniture and fi xtures                                               5 years
           Transportation equipment                                                   5 years
           Leasehold improvements                                                     5 years or term of lease,
                                                                                          whichever is shorter



11. Investment Properties

                                                                                           2007                             2006
       Cost:
         Balance at beginning of year                                              P119,581,310                     P130,180,531
         Additions                                                                    1,645,522                                –
         Disposals                                                                 (26,842,666)                      (10,599,221)
         Balance at end of the year                                                 94,384,166                       119,581,310
       Accumulated depreciation and amortization:
         Balance at beginning of year                                                23,617,585                       19,528,825
         Depreciation and amortization                                                5,457,703                        6,281,243
         Disposals                                                                   (5,638,241)                      (2,192,483)
         Balance at end of the year                                                  23,437,047                       23,617,585
       Net Book Value                                                               P70,947,119                      P95,963,725

    This account pertains to certain condominium units and related improvements that are available for lease to third parties.
    Depreciation is computed using the straight-line method over the estimated useful life of 20 years.

    The fair value of investment properties amounting to P152.9 million and P291.0 million as of December 31, 2007 and 2006,
    respectively, was determined based on current selling price of similar properties.

    The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing seller in an
    arm’s-length transaction.

    The amount of income recognized from the lease of investment property amounted to P2.5 million in 2007, P4.1 million in 2006
    and P2.9 million in 2005.



12. Accounts Payable and Other Current Liabilities

    This account consists of:

                                                                                          2007                             2006
       Trade                                                                       P216,961,776                      P78,177,946
       Retention                                                                     63,518,613                       46,938,123
       Customers’ deposits and advances                                              54,780,110                       90,511,235
       Accrued expenses:
         Commission                                                                  23,633,579                       14,899,621
         Utilities and others                                                          6,751,450                       1,103,486
         Interest                                                                     4,900,226                        3,163,233
       Due to a shareholder (see Note 15)                                            15,000,635                       15,000,635
       Withholding taxes                                                               7,494,714                       2,404,664
       Subscriptions payable                                                          1,340,000                        1,340,000
       Others                                                                        14,142,521                        8,631,698
                                                                                   P408,523,624                     P262,170,641

    Others consist of various liabilities which are not individually significant.




                                                                                                                  50th Anniversary Issue   55
          FINANCIAL STATEMENTS




         13. Long-Term Debt

              This account consists of the following loans:

              • P200.0 million loan from Metropolitan Bank and Trust Company (MBTC), which is subject to a floating rate based on the
                prevailing interest rate on 3 month MART 1 plus 1.0% at the drawdown date. The maturity date of the loan is 5 years from
                the drawdown date. The principal shall be payable in eight (8) equal amortization to commence at the end of the thirteenth
                (13th) quarter from the initial drawdown date. Based on the loan agreement, the Company shall comply with the minimum
                current ratio and a maximum debt/ equity ratio. As of December 31, 2007, the Company is in compliance with the agreement.
                Interest expense incurred as of December 31, 2007, amounted to P3.0 million.

              • P300.0 million loan from MBTC, which is subject to a fi xed rate of 7.4% computed based on the prevailing interest rate on
                MART 1 plus 1.0% at the drawdown date. The loan is payable lump sum in five years. Based on the loan agreement, the
                Company shall comply with the minimum current ratio and a maximum debt/equity ratio. As of December 31, 2007, the
                Company is in compliance with the agreement. As of December 31, 2007 and 2006, the total interest expense incurred
                amounted to P22.4 million and P3.3 million, respectively.

              • P200.0 million loan from China Banking Corporation (CBC), which is subject to a floating rate based on the prevailing interest
                rate on 3 month MART. The loan from CBC is secured by a mortgage of certain real properties with a carrying value of
                P230.7 million as of December 31, 2006. The loan was fully paid in 2007. The total interest expense incurred in 2007 and
                2006 amounted to P2.0 million and P5.7 million, respectively.

                As of December 31, 2007, the Company has unused credit facility with CBC of P300.0 million.



         14. Pension Benefits

              The Company has an unfunded, contributory defined benefit pension plan covering all regular and permanent employees. The
              benefits are based on employees’ projected salaries and number of years of service.

              The following tables summarize the components of benefit expense recognized in the statements of income and the pension
              benefit liability recognized in the balance sheets for the plan:

              Benefit Expense

                                                                                                2007               2006              2005
              Current service cost                                                           P909,425           P120,130          P120,130
              Interest cost on benefit obligation                                               49,782             27,832            51,915
              Net actuarial gain recognized                                                   (13,250)                 –                 –
              Past service cost                                                                     –             34,955                 –
              Benefit expense                                                                 P945,957           P182,917          P172,045

              Pension Benefit Liability

                                                                                                 2007              2006              2005
              Defined benefit obligation                                                     P4,234,561           P414,851          P231,934
              Unrecognized actuarial loss (gain) on obligation                              (2,501,014)          372,739           372,739
              Pension benefit liability                                                     P1,733,547           P787,590          P604,673




56   Annual Report 2007
    Movement of Pension Benefit Liability

                                                                                        2007            2006               2005
    Pension benefit liability at beginning of year                                   P787,590         P604,673           P432,628
    Benefit expense                                                                    945,957         182,917            172,045
    Pension benefit liability at end of year                                        P1,733,547        P787,590           P604,673

    Changes in the present value of the defined benefit obligation are as follows:

                                                                                        2007            2006               2005
    Defined benefit obligation at beginning of year                                    P414,851        P231,934           P432,628
    Current service cost                                                              909,425         120,130            120,130
    Past service cost                                                                       –          34,955                  –
    Interest cost                                                                      49,782          27,832             51,915
    Actuarial loss (gain) on obligation                                             2,860,503               –           (372,739)
    Defined benefit obligation at end of year                                        P4,234,561        P414,851           P231,934

    As of December 31, 2007, the latest actuarial valuation date, the experience adjustment amounted to P1.1 million.

    The principal actuarial assumptions used to determine the pension benefits are as follows:

                                                                                        2007             2006              2005
    Discount rate                                                                         8%              12%               12%
    Salary increase                                                                      10%              10%               10%

    The Company has no planned contribution next year.



15. Related Party Transactions

    Parties are considered to be related if one party has the ability to control the other party or exercise significant influence
    over the other party in making financial and operating decisions. This includes: (a) individuals owning, directly or indirectly
    through one or more intermediaries, control or are controlled by, or under common control with the Company; (b) associates;
    and (c) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant
    influence over the Company and close members of the family of any such individual.

    Belle Corporation (Belle)
    Belle is a shareholder of the Company. Principal transactions with Belle pertain to purchase of parcels of land amounting
    to P21.5 million in 2005 and charges of common expenses amounting to P1.3 million in 2005. Payable to Belle amounted to
    P15.0 million as of December 31, 2007 and 2006.

    In 2006, certain properties of the Company were used by THIGCI through Belle. In consideration for the use of these
    properties, Belle transferred 70 TMGCI shares to the Company in 2006 with an approximate value of P58.8 million. The shares
    are classified as AFS investments in the balance sheet. In 2007, 6 TMGCI shares were sold to various individuals. The gain
    arising from sale of shares amounted to P57,671.

    THIGCI
    The Company owns certain condominium units in the THIGCI Executive Conference Center (ECC), which are made available
    for lease to entities that wish to hold conferences/seminars. The Company and THIGCI share 50-50 of the ECC income. The
    Company’s share in the ECC income amounted to P2.5 million in 2007, P4.1 million in 2006 and P2.9 million in 2005.




                                                                                                                 50th Anniversary Issue   57
          FINANCIAL STATEMENTS




              Banco de Oro Universal Bank (BDO)
              The Company has short-term placements with BDO, an associate of a shareholder, amounting to P16.0 million and
              P130.0 million as of December 31, 2007 and 2006, respectively. Interest income recognized arising from short-term placement
              with BDO amounted to P1.5 million in 2007, P2.2 million in 2006 and P7.1 million in 2005.

              SM Investments Corporation (SMIC)
              The Company, as a lessee, entered into an agreement with SMIC, a shareholder, for the lease of its office space renewable every
              year upon mutual consent of the parties. Under the terms of the lease agreement, rent expense is computed based on the area
              occupied multiply by a certain rate agreed upon by both parties. Rent expense amounted to P0.7 million in 2007, P0.7 million
              in 2006 and P0.8 million in 2005.

              CBC
              The Company has short-term placements with CBC, an associate of a shareholder, amounting to P62.9 million as of
              December 31, 2007. There were no outstanding short-term placements with CBC as of December 31, 2006. Interest income
              recognized arising from short-term placement with CBC amounted to P0.8 million in 2007.

              The Company also has a loan from CBC amounting to P200.0 million in 2006. Interest expense recognized amounted to
              P2.0 million and P5.7 million in 2007 and 2006, respectively. Interest rates and other information are disclosed in Note 13. The
              loan was fully paid in 2007.

              Key Management
              Revenue from sale of residential units amounted to P17.4 million in 2007 and P17.6 million in 2006. Related receivables
              amounted to P14.3 million and P11.8 million as of December 31, 2007 and 2006, respectively.

              Compensation of key management personnel of the Company comprised of short-term employee benefits amounting to
              P4.4 million in 2007, P3.7 million in 2006 and P2.6 million in 2005.



         16. Capital Stock

              The composition of the Company’s capital stock is as follows:

                                                                                                             Number of Shares
                                                                                                  2007             2006                 2005
              Authorized - 4,000,000,000 shares at P1 par value
              Issued                                                                      1,997,037,167      1,997,037,167      1,997,037,167
              Subscribed                                                                    249,207,455        249,207,455        249,207,455
              Less subscriptions receivable:
                 Balance at beginning of year                                                        –                   –        249,207,455
                 Collections during the year                                                         –                   –       (249,207,455)
                 Balance at end of year                                                              –                   –                  –
                                                                                           249,207,455         249,207,455        249,207,455
                                                                                         2,246,244,622      2,246,244,622      2,246,244,622




58   Annual Report 2007
On March 1, 2001, the Company’s stockholders approved the following resolutions:

• Increase in the Company’s authorized capital stock from P100,000, divided into 100,000 shares to P4.0 billion divided into
  4 billion shares, both with a par value of P1 per share.

• Subscription of Belle with an aggregate amount of P2.15 billion consisting of assignment of certain real estate properties and
  receivables of Belle, in exchange for shares of stock of the Company amounting to P1.17 billion (1.172 billion shares) and
  P980.3 million (980.3 million shares), respectively.

• Application for the listing on the PSE and conduct of an initial public offering (IPO) of the Company’s common shares.

On May 18, 2001, Belle entered into a subscription agreement with the Company to transfer its real estate properties amounting
to P1.172 billion in exchange for the Company’s 1.172 billion shares of stock.

On July 31, 2001, Belle entered into a Memorandum of Agreement (MOA) with SM Investments Corporation and affiliated
companies (collectively referred herein as “SM Group”) whereby the latter has offered to buy Belle’s investment in the Company.
SM Group has agreed to purchase from Belle 1.098 billion shares or 51% of the Company’s outstanding capital stock after the
Securities and Exchange Commission (SEC) approval of the increase in authorized capital stock. Under the agreement, the
purchase price to be paid by SM Group for the shares shall be the offer price of the Company’s common shares at the latter’s
IPO (which offer price was then estimated to be P2.330 per share). If the IPO offer price of the Company’s share varies from
the estimated price of P2.330 per share, corresponding adjustment shall be made in the purchase price.

On January 4, 2002, the resolutions approved by the Company’s stockholders on March 1, 2001 were approved by the SEC on
the condition that the corresponding shares of stock to be issued on the real estate properties assigned shall be held in escrow
by the SEC and shall be released only upon presentation of the proof of the transfer or the certified true copy of title thereto, in
the name of the transferee-corporation to be submitted to the SEC within 90 days from the date of approval of the application
extendible for justifiable reasons.

In March 2002, the Company submitted to the SEC the abovementioned requirements.

Under the MOA, Belle granted a call option to SM Group to purchase an additional 9% of the Company’s outstanding shares of
stock after the listing or a total of 193.7 million shares at an exercise price of P1 per share on or before February 28, 2002. The
call option was exercised by SM Group on February 8, 2002.

In 2004, the Company issued a total of 350.8 million shares to Belle in consideration for the transfer of land titles which are
already free from liens and mortgages. The shares issued, with a par value of P1 per share, are part of the P600.0 million in
subscriptions receivable due from Belle. In 2005, the Company received the remaining land titles from Belle with fair value of
P249.2 million as consideration for the remaining subscription receivable with the same amount.




                                                                                                                  50th Anniversary Issue   59
          FINANCIAL STATEMENTS




         17. Operating Expenses

              This account consists of:

                                                                                                 2007             2006               2005
              Taxes and licenses                                                          P11,777,405       P12,559,871       P6,056,824
              Salaries, wages and employee benefits (see Note 14)                           11,955,343         8,515,200         7,074,945
              Depreciation and amortization                                                 7,604,081         7,768,335         7,732,383
              Advertising and promotions                                                    6,894,487         2,978,026         2,211,660
              Directors’ fee                                                                2,291,765         1,810,000         1,710,000
              Transportation and travel                                                     5,705,773         3,069,838         2,523,467
              Meetings and conferences                                                      1,967,869         1,700,283        2,244,704
              Professional fees                                                              1,101,421          764,330           769,783
              Entertainment, amusement and recreation                                       1,038,881           783,072           647,212
              Association dues                                                              1,032,021         1,400,212         1,710,353
              Rent (see Note 15)                                                              995,500         1,302,487           785,862
              Securities and janitorial                                                       766,469           236,476           163,090
              Communications                                                                   781,106          601,112           400,476
              Listing, filing and registration fee                                             685,568         1,699,275           474,327
              Light, power and water                                                           672,745          559,173           480,759
              Insurance                                                                       526,227           672,476           866,366
              Repairs and maintenance                                                          499,932        1,456,969           331,163
              Office supplies and printing                                                     468,594           398,051           313,203
              Others                                                                        2,975,536         2,756,268         1,413,601
                                                                                          P59,740,723       P51,031,454       P37,910,178



         18. Income Tax

              The components of the Company’s net deferred assets (liability) are as follows:

                                                                                                2007                                2006
                Unrealized gross profit on real estate sales                             (P45,307,061)                        P12,497,305
                Pension liability                                                             606,742                             275,657
                                                                                         (P44,700,319)                        P12,772,962

              The reconciliation of provision for income tax computed at the statutory income tax rate to provision for income tax as shown
              in the statements of income follows:

                                                                                                2007               2006             2005
              Provision for income tax computed
                at statutory income tax rates of 35%
                in 2007 and 2006 and 32.5% in 2005                                        P65,037,455       P48,147,962       P81,395,831
              Income tax effects of:
                Interest income already subjected
                   to a lower final tax rate                                                (4,688,880)       (1,358,682)       (3,443,126)
                Unallowable interest expense                                                   591,439          713,308                 –
                Change in income tax rate                                                            –                –          (570,843)
                                                                                          P60,940,014       P47,502,588       P77,381,862




60   Annual Report 2007
19. Basic/ Diluted EPS Computation

    Basic/ diluted EPS is computed as follows:

                                                                                        2007                2006               2005
    (a)   Net income                                                             P124,881,287         P90,063,017       P173,066,849

    (b) Weighted average number of
         outstanding shares of stock for the year:
         Common shares issued                                                    2,246,244,622      2,246,244,622       1,997,037,167
         Additions during the year                                                           –                  –          49,841,491
                                                                                 2,246,244,622      2,246,244,622      2,046,878,658

    Basic/ diluted EPS (a/b)                                                             P0.06               P0.04              P0.08



20. Financial Risk Management Objectives and Policies

    The Company’s principal financial instruments comprise mainly of cash and cash equivalents and long-term debt. The main
    purpose of these financial instruments is to raise finance for the Company’s operations. The Company has various other
    financial assets and liabilities such as Contracts receivable from sale of real estate and trade payables, which arise directly from
    its operations.

    The main risks arising from the Company’s financial instruments are credit risk, interest rate risk and liquidity risk. The
    Company’s BOD and management review and approve policies for managing each of these risks and they are summarized
    below.

    Credit Risk
    The Company only trades with recognized, creditworthy third parties. It is the Company’s policy that all customers who wish
    to trade on credit are subject to credit verification procedures. Receivable balances are monitored on an ongoing basis with the
    result that the Company’s exposure to bad debts is not significant. Given the Company’s diverse base of customers, it is not
    exposed to large concentrations of credit risk.

    As of December 31, 2007 and 2006, there were no significant credit concentrations.

    With respect to credit risk arising from the other financial assets of the Company, which comprise cash and cash equivalents
    and AFS financial assets, the Company’s exposure to credit risk arises from default of the counterparty, with a maximum
    exposure equal to the carrying amount of these instruments as stated below:

                                                                                        2007                                   2006
      Cash and cash equivalents                                                   P88,232,269                           P340,211,415
      Receivables
        Contracts receivable from sale of real estate                             479,463,645                             207,158,192
        Receivable from a related party                                            16,108,648                               9,574,178
        Others                                                                       4,435,791                             11,392,428
      Available-for-sale investments                                               51,200,000                             43,400,000




                                                                                                                      50th Anniversary Issue   61
          FINANCIAL STATEMENTS




              As of December 31, 2007, the analysis of receivables that were past due but not impaired are as follows:

                                                          Neither past
                                                              due nor                                Past due but not impaired
                                                  Total      impaired        30 days       60 days            90 days       120 days       360 days
              Contracts receivable from
                sale of real estate       P479,463,645    P457,984,076     P1,123,368     P770,061          P618,577    P12,100,603      P6,866,960
              Receivable from
                a related party             16,108,648       6,529,338      9,579,310            –                 –              –               –
              Others                         4,435,791       4,435,791              –            –                 –              –               –
                                          P500,008,084    P468,949,205    P10,702,678     P770,061          P618,577    P12,100,603      P6,866,960


              The table below shows the credit quality of the Company’s receivables based on their historical experience with the corresponding
              debtors as of December 31, 2007.

              The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the
              Company’s credit ratings of receivables as of December 31, 2007. The Company’s credit rating is based on individual borrower
              characteristics and their ability to settle their accounts at earliest possible time.

                                                                                          Neither Past Due Nor Impaired
                                                                         High Quality   Medium Quality       Low Quality                     Total
              Cash and cash equivalents                                   P88,232,269               P–                P–               P88,232,269
              Receivables
                Contracts receivable from sale
                  of real estate                                          320,749,041                –                       –          320,749,041
                Receivable from a related party                             6,529,338                –                       –            6,529,338
                Others                                                      4,310,571          125,220                       –            4,435,791
              AFS investments                                              51,200,000                –                       –           51,200,000
                                                                         P471,021,219         P125,220                      P–         P471,146,439

              High quality receivables pertain to those receivables from clients or customers that always pay on time or even before the
              maturity date. Medium quality includes receivables that are collected on their due dates provided that they were reminded or
              followed up by the Company. Those receivables which are collected consistently beyond their due dates and require persistent
              effort from the Company are included under Low quality.

              As of December 31, 2007, cash and cash equivalents and AFS investments amounting to P88.2 million and P51.2 million,
              respectively, are considered high quality as these pertain to deposits in reputable banks and quoted golf club shares.

              Interest Rate Risk
              The Company’s exposure to the risk for changes in market interest rates relates primarily to the Company’s long-term debts
              subject to floating interest rates as discussed in Note 13.

              The loans aggregating P500.0 million will mature in five years.

              The other financial instruments of the Company are noninterest-bearing and, therefore, not subject to interest rate risk.

              The following table demonstrates the sensitivity of the Company’s profit before tax due to a reasonably possible change in
              interest rates in the next reporting period with all other variables held constant. There is no other impact on the Company’s
              equity other than those already affecting the profit and loss.




62   Annual Report 2007
                                                                        Increase/Decrease                        Effect on Profit
                                                                          in Interest Rate                             before tax
  2007                                                                         +1.0%                                 (P2,000,000)
                                                                               -1.0%                                   2,000,000

Liquidity Risk
The Company’s exposure to liquidity risk relates to raising funds to meet obligations associated with financial liabilities.

The Company manages its liquidity profile to be able to finance capital expenditures and service maturing debts. To cover its
financing requirements, the Company intends to use internally generated funds and available short-term credit facilities.

As part of its liquidity risk management, the Company regularly evaluates its projected and actual cash flows. It also continuously
assesses conditions in the financial markets for opportunities to pursue fund raising activities, in case any requirements arise.

The table below summarizes the maturity profile of the Company’s financial liabilities as of December 31, 2007 based on
undiscounted payments:

                            Due and                                                                   120 days
                         Demandable              30 days           60 days           90 days         and more                 Total
Long-term debt
  including interest               P–                 P–                P–        P8,623,675     P663,849,825      P672,473,500
Trade                      11,495,605                  –       201,475,836                 –        3,990,335       216,961,776
Retention                   5,449,722                           13,865,281        42,738,544        1,465,066        63,518,613
Customers’ deposits
  and advances             54,780,110                  –                 –                   –               –        54,780,110
Accrued expenses
  Commission                        –                  –        23,633,579                 –                 –        23,633,579
  Utilities and others        198,272          1,089,043         5,464,135                 –                 –          6,751,450
  Interest                          –          4,900,226                 –                 –                 –         4,900,226
Due to a shareholder       15,000,635                  –                 –                 –                 –        15,000,635
Subscriptions payable               –                  –                 –                 –         1,340,000         1,340,000
Others                        579,100         12,237,995           790,622           534,804                 –        14,142,521
                          P87,503,444        P18,227,264      P245,229,453       P51,897,023      P670,645,226    P1,073,502,410

Foreign Currency Risk
The Company’s exposure to foreign currency risk is minimal because most if its transactions are denominated in its functional
currency.

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 shareholder value.

The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To
maintain or adjust the capital structure, the Company may adjust the return of capital to shareholders or issue new shares. No
changes were made in the objectives, policies or processes in 2007 and 2006.

Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. This ratio is calculated
as net debt divided by equity. Net debt pertains to the sum of accounts payable and other current liabilities and long-term debt
less cash and cash equivalents. Equity comprises capital stock.




                                                                                                                 50th Anniversary Issue   63
          FINANCIAL STATEMENTS




              The Company’s gearing ratios as of December 31, 2007 and 2006 are as follows:

                                                                                               2007                                   2006
                Long-term debt                                                         P500,000,000                          P500,000,000
                Accounts payable and other current liabilities                           408,523,624                            262,170,641
                Less cash and cash equivalents                                           (88,232,269)                          (340,211,415)
                Net debt                                                                 820,291,355                            421,959,226
                Capital stock                                                          2,246,244,622                         2,246,244,622
                Equity and net debt                                                   P3,066,535,977                        P2,668,203,848

                Gearing ratio                                                                     37%                                  16%



         21. Financial Instruments

              Fair Values of Financial Instruments
              Set out below is a comparison by category of the carrying amounts and fair values of all the Company’s financial instruments
              that are carried in the financial statements as of December 31, 2007 and 2006:

                                                                            Carrying Amount                          Fair Value
                                                                             2007             2006                 2007              2006
              Cash and cash equivalents                               P88,232,269      P340,211,415         P88,232,269       P340,211,415
              AFS investments                                          51,200,000       43,400,000           51,200,000         43,400,000
              Loans and receivables:
                Contracts receivable from sale of real estate         479,463,645         151,942,091       427,975,784       135,808,185
                Receivable from a related party                        16,108,648            9,574,178       16,108,648          9,574,178
                Others                                                   4,435,791         11,392,428         4,435,791         11,392,428
                Total loans and receivables                           500,008,084         172,908,697       448,520,223        156,774,791
                                                                     P639,440,353        P556,520,112      P587,952,492      P540,386,206

              Other financial liabilities:
                Accounts payable and other current liabilities       P408,523,624       P262,170,641       P408,523,624       P262,170,641
                Long-term debts                                       500,000,000        500,000,000        506,671,176        522,430,498
                Total financial liabilities                           P908,523,624       P762,170,641       P915,194,800       P784,601,139



              AFS investments. The fair value of AFS investments were taken from quoted market prices at balance sheet date.

              Cash and cash equivalents, receivables and accounts payable and other current liabilities. Due to short-term in nature of
              transactions, the fair value approximates the carrying value at balance sheet date.

              Long-term debt. For the P300.0 million long term debt, the estimated fair value is based on the discounted value of future
              cash flows using risk free rate, plus credit spread of 100 basis points, of 5.2% to 6.9% in 2007 and 6.1% to 7.0% 2006. For the
              remaining long-term debt, repricing is done on a quarterly basis, thus the carrying value approximates its fair value.




64   Annual Report 2007
Published by HIGHLANDS PRIME, INC.
Concept and Design by OP Communications, Inc.
Copywriting by Orendain and Associates,
     SMIC-Investor Relations, HPI Marketing
Photography by Wig Tysmans, Philip L. Sison,
     Pueblo Real Images courtesy of Loreto Bay, Mexico

COMPANY HEADQUARTERS
Highlands Prime, Inc.
One E-Com Center
10th Floor, Harbor Drive, Mall of Asia Complex
CBP-1A, Pasay City 1300 Philippines
Tel. No.: (632) 857-0100
Fax No.: (632) 857-0245
www.highlandsprime.com

LEGAL COUNSEL
SM Corporate Offices
Corporate Legal Department
One E-Com Center
10th Floor, Ocean Drive, Mall of Asia Complex
CBP-1A, Pasay City 1300 Philippines

EXTERNAL AUDITOR
Sycip, Gorres, Velayo & Co.
SGV Building, 6760 Ayala Avenue, Makati City, Philippines

INTERNAL AUDITOR
Uy Singson Abella & Co.
Philippine Stock Exchange
26/F Suite 2603 CD West Tower
Exchange Road, Ortigas Center, Pasig City, Philippines

BANKERS
Banco De Oro
China Banking Corporation
International Exchange Bank
Metropolitan Bank and Trust Company

STOCKHOLDER INQUIRIES
Highlands Prime, Inc.’s common stock is listed and traded on
the Philippine Stock Exchange under the symbol “HP”.

Inquiries regarding dividend payments, account status,
address changes, stock certificates, and other pertinent
matters may be addressed to the company’s transfer agent:

Professional Stock Transfer, Inc.
1003 10/F City & Land Mega Plaza
ADB Avenue cor. Garnet Street, Ortigas Center,
Pasig City, Philippines
Telefax: (632) 687-2733

SEC Form 17-A
The financial information in this report, in the opinion of the
management, substantially conforms with the information
required in the ’17-A Report’ submitted to the Securities
and Exchange Commission. Copies of this report may be
obtained free of charge upon written request addressed to
the office of the Corporate Secretary.

				
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