SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A, AS AMENDED ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 141 OF THE CORPORATION CODE OF THE PHILIPPINES

1. 2. 4.

For the fiscal year ended: December 31, 2007 SEC Identification Number: Exact name of issuer as specified in its charter SPLASH CORPORATION 3. BIR Tax Identification No. 001-096-221

5.

Philippines Province, Country or other jurisdiction of incorporation or organization

6.

(SEC Use Only) Industry Classification Code:

7. HBC Corporate Centre, 548 Mindanao Ave., corner Quirino, Highway, Quezon City Address of principal officePostal Code 8. (02) 984-5555 Issuer's telephone number, including area code Not Applicable Former name, former address, and former fiscal year, if changed since last report.

9.

10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding ................................................................................................................................................... ....................................................................................................................................................................... .......................................................................................................................................................................

11. Are any or all of these securities listed on a Stock Exchange. Yes [ X ] No [ ]

If yes, state the name of such stock exchange and the classes of securities listed therein: Philippine Stock ExchangeCommon Stock 12. Check whether the issuer: (a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports); Yes [ X ] No [ ]

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

13. Aggregate market value of the voting stock held by non-affiliates; not applicable

DOCUMENTS INCORPORATED BY REFERENCE

(a) Audited Financial Statements of Splash Corporation attached as Exhibit I and Referred herein as the 2007 Financial Statements (b) Statement of Managements Responsibility for Financial Statements attached As Exhibit II (b) Supplemental Schedules required pursuant to SCR Rule, annex M of the Securities Regulation Code, attached as Exhibit III and referred to herein as The Supplemental Schedules

PART I - BUSINESS AND GENERAL INFORMATION Item 1. Business A. Description of Registrant 1. Business Development

Splash Corporation (the Company) was incorporated in the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) on September 30, 1991 primarily to develop, manufacture, bottle, pack, and market cosmetics and other beauty products, and pharmaceutical products in the Philippines and abroad. Before the Company listed its shares of stock with the Philippine Stock Exchange (PSE) on November 15, 2007, the Company is a whollyowned subsidiary of Splash Holdings, Inc. (SHI). Its registered office address is HBC Corporate Centre, 548 Mindanao Avenue corner Quirino Highway, Quezon City. On November 15, 2007, the Companys shares of stock were listed and traded in the PSE. After the listing, the Company is 70%-owned by SHI, who exercises control over the Company (see Note 16). Status of Planned Merger with Splash Nutraceutical Corporation (SNC) On April 21, 2006, the Board of Directors (BOD) and stockholders of the Company approved the Plan of Merger between the Company and SNC (the Parties) wherein the Company will be the surviving corporation. On September 18, 2006, the Articles of Merger were made and executed by and between SNC and the Company. In favor of the stockholders of SNC, the Company will issue 848,023 shares of the Company as mutually agreed upon by the parties. On November 9, 2006, the SEC approved the Articles and Plan of Merger, whereby the entire assets and liabilities of the SNC were transferred to and absorbed by the Company. On February 28, 2007, the parties amended the Articles of Merger deferring the effectivity of the merger to January 1, 2007. On April 24, 2007, the SEC approved

the amended Articles and Plan of Merger. On August 3, 2007, the SEC approved the deferral of the effectivity of the Merger between the Company and SNC to June 2008. On August 14, 2007, the respective BOD and the stockholders of the Constituent Companies (Splash Corporation and SNC) in the Merger, agreed and resolved to shorten the corporate existence of SNC, after complying with the requirements set forth by law. On September 6, 2007, the SEC approved the petition filed by the Company and SNC to set aside the Articles of Merger which was previously approved by SEC.2. Business of the Issuer (i) Principal products, markets and revenue contribution

The Companys products and brands are classified into 3 basic categories which, essentially, is based on the individual products and brands specific market positioning. From the perspective of a marketing company, Splash operating managers assess the market performance of these segments primarily revenue and profit performance to make decisions on resource allocation and the appropriate market interventions that must be done. These segments consist of: Naturals a group of products whose active ingredients are derived from natural or herbal sources. Revenues consist of sales of the following brands: Biolink VCO (Virgin Coconut Oil), Biolink Tea Tree Oil, Biolink Green Papaya, Extract (calamansi, papaya, avocado, and cucumber), and Baby Spa (VCO). Skin Care products that are positioned to provide total skin care solution through the innovative use of potent non-herbal active ingredients. Revenues are generated from the sales of the following brands: Maxipeel (exfoliants), SkinWhite (skin whitening), and Extraderm (anti-aging). Hair Care consists of hair care products. Revenues are derived from the sales of the following brands: Kolours (hair dye), Vitress (cuticle coat), and Control (hair dressing). Of the total net sales of P3.010.8 Billion in 2007, the contribution of each category (product group or segment) is as follows:

Product Category Naturals S Carekin Hair Care Total

Contribution to Net Sales 18.60% 58.55% 22.84% 100.00%

As of December 31, 2007, figures from AC Nielsen, an independent market monitoring company, show that Splashs products hold market leadership position in two (2) out of the three (3) categories or segments where the Company plays as shown by the following table:Market Share

Category / Brand / Product

Market Standing

Skin Care Maxipeel Exfoliant Extraderm Anti-aging Skin White Lotion Skin White Soap Naturals Extract Facial Cleanser

81% 43% 25% 36%

Market Leader Market Leader Market Leader Market Leader

11%

Challenger (2nd to the market leader)

Hair Care Kolours Premium Hair Dye

49%

Market Leader

Source: AC Nielsen Retail Audit, 31 Dec 2007

(ii)

Percentage of revenues and net income contributed by foreign markets

Out of the total gross revenue, 15% comes from foreign operation.(iii) Distribution Methods

Splashs distribution infrastructure is a combination of in-house and third party distributors. The Company delivers directly to strategic accounts, or what it calls the National Accounts Group. These accounts are Super Value, Inc. and Super SM (of the SM Group), Watsons, Mercury Drug, Inc., Robinsons and HBC. For other key accounts and outlets, Splash utilizes twenty-three (23) third party distributors. Each distributor is assigned to specific regions. Apart from National Accounts, Splash products are also being sold to two other major categories namely Modern Trade and General Trade. Modern Trade consists of all large accounts outside of the National Accounts, such as the Gaisano Group, Ever Gotesco, Puregold, Cherry Foodarama, The Landmark, etc.. General Trade is composed of small retail trade outlets including groceries, stand-alone drugstores, sari-sari stores and market stalls. In Metro Manila, South Luzon, North Luzon, and the Samar-Leyte island groups, goods are delivered over land using third party service providers. For the rest of Visayas and Mindanao regions, delivery is by sea using third party service providers. The Company employs demand-based production planning and inventory management systems. Each distributor

maintains an optimal level of inventory which is automatically replenished whenever inventory levels fall to re-order point. In overseas markets, the Company has established market presence in over 20 countries through its distributors and local exporters. These countries include Algeria, Australia, Bahrain, Canada, Egypt, Hong Kong, India, Indonesia, Iran, Japan, Jordan, Korea, Kuwait, Lebanon, Malaysia, Nigeria, Oman, Pakistan, Qatar, Saudi Arabia, Singapore, Sudan, United Arab Emirates, Vietnam and the United States (Guam and Saipan).

(iv)

Status of publicly announced products

In 2007, the Company introduced 14 new products, namely: Baby Spa line Biolink VCO Shampoo and Hot Oil Treatment Extract Deodorant Extract Papaya/Calamansi Extract Face Cream Extraderm Age Defy line Kolours Shampoo and Conditioner for color-treated hair Maxipeel Face Cream Maxi-peel Soap Maxi-peel Concealing Cream Skin White Deodorant Skin White Face Cream and Solution Tricks Exfocleanser Vitress Cuticle Coat (new variants)

For the calendar year 2007, sales from these new products contributed to 16% to total net sales. In the first quarter of 2008, the aggregate sales of these new products contributed 23% to total net sales.

(v)

Competition

The domestic personal care and toiletries market is highly competitive and is dominated by global multinational corporations (MNCs). The Company faces competition from the following MNCs, which have products competing directly with Splashs core products: Unilever Philippines, Inc. Colgate Palmolive Philippines, Inc. Procter & Gamble Philippines, Inc. Avon Products Manufacturing, Inc. Johnson & Johnson Philippines, Inc. Beiersdorf AG Sara Lee Philippines, Inc. LOreal Philippines, Inc.

(vi)

Sources and availability of raw materials

The Company sources its raw materials, primarily chemicals, fragrances and packaging materials from external suppliers. The Company implements a supplier accreditation process that considers the following as critical performance criteria: quality, pricing, and timely delivery. Splash Corporation buys its raw material requirements locally to improve delivery lead times. Imported raw materials are procured through the local affiliates or representatives of foreign suppliers. Purchases are paid in pesos to mitigate currency risks. As a consequence, cost is slightly higher but this is compensated by lower inventory carrying costs and foreign exchange risk. The Company normally has two (2) or more accredited suppliers for each type of raw and packaging materials, ensuring continuous supply in case of specific supplier issues. The Company enjoys 60- to 90- day payment terms with its suppliers.

(vii)

Dependence on major customers

The Companys customers may be classified as to account type or customer group. Classified per account type, the Companys customers are the National Account Group, Modern Trade and General Trade (defined in paragraph iii Distribution Methods). Customers may also be grouped as National Accounts and Distributors.Under both classifications, customer type contributions to total sales do not indicate dependence on major customers.

Account Group MODERN TRADE GENERAL TRADE NATIONAL ACCOUNTS Total

Contribution to Total Sales 32% 39% 29% 100%

Customer Group NATIONAL ACCOUNTS DISTRIBUTORS Total

Contribution to Total Sales 29% 71% 100%

The National Accounts Groups contribution to total sales of 29% consist of sales generated from six (6) large retail firms. On the other hand, the distributors 71% contribution to total sales came from 23 distributors servicing more than 10,000 retail outlets (Modern and General Trade).

(viii)

Transaction with and/or dependence on related parties

The Company sells to the following affiliates: HBC, Inc. and PT Splash Indonesia. HBC accounts for less than 5% of total Company sales while PT Splash Indonesia accounts for less than 1%. Transactions with these affiliates are strictly on an arms-length basis.(ix) Patents, trademarks & licenses

The Company owns the following patents:Patent No. 2-1997- 15095 2-1999-00320 2-1996-8471 Description A Skin Care Composition for Use as a Facial Cleanser Skin Care Composition A Skin Care Composition for the Treatment of Acne & Pigmentary Disorder A Topical Composition for the Treatment of Acne & Pigmentary Disorder Surfactant-based Liquid Cleansing Preparation w/ Whitening Benefit for Face & Body Skin Care Composition A Whitening Food Supplement Composition Glutathone/ Vitamin C/ Alpha Lipoic Acid A Palatable Coconut Oil Food Supplement (VCO with Flavor) Expiration 29-Jun-15 12-Jul-06 26-Jul-16

22-Jul-10

2-2003-000284 2-2001-00091 2-2001-000110 2-2004-000075 1-2005-00239 2-2006-000391 2-2006-000125 2-2006-000126 2-2006-000124 2-2006-000297 3-2007-000070 3-2007-000071

24-Aug-08 12 Jul 2006[1] 11-Mar-11 11-Mar-24

A Skin Lotion Composition with Virgin Coconut Oil A Herbal Tea A Herbal Tea A Herbal Tea A New Soap Composition with Virgin Coconut Oil as Additive A Roll-on Deodorant Container (Hexagonal design)

18-Sep-13 29-Mar-13 29-Mar-13 29-Mar-13 19-Jul-13

1-Feb-22 A Utility Container (hexagonal-shaped jar) 1-Feb-22

[1] Extension for protection of products under 2-1999-00320

The Company owns the following trademarks:

Registration No Reg Date 48537 SR-8360 55239 55158 55238 55782 55778 57063 62088 66513 66414 4-1996-113860 4-1998-008546 4-1998-01241 4-1998-01242 4-1998-007644 4-1999-009264 4-1998-001246 4-1999-002061

Title of Mark

18-Jul-90 Splash Hair Polish & Design 7-Sep-90 Splash Extract Label 28-May-93 Extraderm 28-May-93 Splash Deowhitener 28-May-93 Splash 18-Aug-93 Splash Keratin Emulsion 18-Aug-93 Splash Keratin Wave 23-Feb-94 HIYAS 1-Dec-95 RBH 19-Nov-98 Nutress 4-Nov-98 Deowhitener 22-Jun-02 Extract Mestiza 4-Jul-02 MEDIX 20-Jan-03 Extract and Leaf Device 20-Jan-03 Deowhitener & Device logo 13-Nov-03 Extract Therapy 14-Dec-03 Splash Research Institute Device 18-Jan-04 Skinwhite 5-Dec-04 Versatile

4-2000-002761 4-2000-002759 4-2000-002757 4-2000-005670 4-2002-008760 4-2002-008761 4-2002-007366 4-1997-117079 4-2003-006486 4-2002-000144 4-1996-106926 4-1999-003960 4-1999-003961 4-2005-008940

7-Feb-04 http:/ / splash.spi.com.ph 7-Feb-04 http:/ / splash.sri.com.ph 7-Feb-04 http:/ / splash.sii.com.ph 21-May-04 S Whitekin 21-May-04 Age-Defy 21-May-04 Oil Out 1-Jul-04 Renewhite 3C 10-Feb-05 Kolours Premium & Device 16-Nov-05 Biolink 25-Dec-05 MAXI-PEEL 20-Nov-05 LOGO (Stylized Letters C & S) 18-Sep-06 Extract Ace 18-Sep-06 Extract Aqua (in stylized form) 13-Nov-06 VCO Manila & Device

4-2005-001948 4-2005-009654 4-2004-004210 4-2000-007747

8-Jun-06 Splash Research Institute & Device 11-Dec-06 Tropical Success 25-Jun-06 ILLUMIDERM 30-Jul-06 EXFOSHIELD

Registration No Reg Date 4-2005-009569 4-2005-000922 4-2005-002534 4-2005-002535 4-2005-002536 4-2005-003452 4-2005-007543 4-2005-007544 4-2005-007592 4-2005-009265 4-2005-010100 4-2006-000873 4-2006-002997 4-2006-002998 4-2006-009235 4-2007-002163 4-2007-001829 4-2007-001842 4-2004-011213 4-2004-011583 4-2006-011013 4-2006-011015 4-2006-011016 4-2006-011017 4-2006-011446 4-2006-011447 4-2007-001833 4-2007-001834 4-2007-001835 4-2007-001837 4-2007-003150 4-2007-004518 4-2007-005807 4-2007-005808 4-2007-005809 4-2007-005810 4-2005-002534 4-2006-011014 4-2007-002159 4-2007-002160

Title of Mark

14-May-07 Coconut Manila & Device 28-May-07 Naturally Beautiful 10-Sep-07 ACCUHERB & Device 26-Feb-07 Livemore S Illuminate & Devicekin 26-Mar-07 THERAHERB VCO & Device 21-May-07 Sugarcheck Powered by SCIENCE Inspired by 30-Apr-07 NATURE 30-Apr-07 TheraHerb VCO & Device 26-Mar-07 REJUVI 4-Jun-07 Color & Care for Asian Hair 26-Feb-07 HIYASORGANICS& Device Galing ng Pinoy, Ipagmalaki & Open 25-Jun-07 Hand Device 6-Aug-07 Claritone-D Formula 22-Oct-07 Soothing Naturals 25-Jun-07 Skinwhite & Device 19-Nov-07 Cover and Clean 19-Nov-07 Extraderm and "e" Device 24-Sep-07 SPLAS CONTROL & DeviceH 26-Mar-07 Oil of Beauty & Device 26-Feb-07 LIVEMORE & DEVICE 16-Jul-07 VITRES VITA-INJEKS 25-Jun-07 VITRES HAIRENOVATES 25-Jun-07 VITRES HAIR I-C-US 25-Jun-07 ILLUMINOSITE 16-Jul-07 MULTIDETOX 10-Sep-07 KIKAY Academy & Device 24-Sep-07 HAIR MED 24-Sep-07 HAIR MEDIC 24-Sep-07 PowerCLEANSER 24-Sep-07 PowerCREAMS 10-Sep-07 VCO Hydrolock 24-Sep-07 TEENSPA 19-Nov-07 NutriLock-B5+Moisture 19-Nov-07 ProNourish-E+Moisture 19-Nov-07 VCO Tri-LauriCare 19-Nov-07 Dr. Coconut 10-Sep-07 ACCUHERB & Device S CALP-DETOX27-Aug-07 VITRES S KIN27-Aug-07 S MED KIN27-Aug-07 S MEDIC

Registration No Reg Date 4-2005-009654 4-2005-008940 4-2005-003453 4-2005-005985 4-2006-002996 4-2006-008642 25-Jan-08 25-Jan-08 22-Feb-08 7-Mar-08 7-Mar-08 7-Mar-08

Title of Mark TROPICAL SUCCESS VCO MANILA & dev HEALTHY BLUSH VITRESS NATURAL BABY SPA LAURICO

In addition, the Company registered the trademarks of its core brands (Maxipeel,

Extraderm, Skin White, Biolink, Theraherb) in 22 countries that include the USA, UAE, Canada, Taiwan, Thailand, Vietnam, Brunei Darussalam, Cambodia, China/Hongkong, India, Indonesia, Iran, Jordan, Kuwait, Laos PDR, Malaysia, Myanmar, Qatar, Saudi Arabia, Singapore, South Korea, and the European union (comprising of 29 countries).(x) Effect of existing or probable governmental regulations on the business

None. The Company regularly monitors the regulatory environment and participates actively in industry associations, namely: CCIP (Chamber of Cosmetic Industry of the Philippines) which is also the Philippine representative organization to the ASEAN Cosmetic Association (ACA); CHIPI (Chamber of Herbal Industry of the Philippines, Inc.); HADSAP (Health and Dietary Supplement Association of the Philippines); and PSCS (Philippine Society for Cosmetic Science, Inc.)

These give the Company a proactive stance particularly in terms of adequate preparations in case of changes in the regulatory environment. The Company complies with all regulatory requirements.

(xi)

Government Regulation

To ensure the safety and well-being of its consumers, Splash complies with the regulatory requirements of the Bureau of Foods and Drugs (BFAD). Before a product can be released to the public, Splash products are registered through the submission of documentary and technical requirements to the BFAD. These include the necessary testing methods and results used. The registration process for cosmetic products may be accomplished in a minimum of thirty (30) working days, depending on the findings and the completeness of requirements. As part of regulatory controls for the Cosmetics Industry, the Department of Health (DOH) has further adopted the ASEAN Harmonized Cosmetic Scheme and ASEAN Technical Documents insofar as they are not in conflict with Philippine National Laws. The scheme aims for the mutual recognition of product registration approvals for cosmetics amongst the Member States, hence, allowing the products to be marketed in these territories. To ensure that product integrity and operations quality are achieved, the following licenses and certifications: License to operate permit from the DOH-BFAD for the Company to operate as manufacturer, trader, distributor, exporter and wholesaler of drug and cosmetic products.

Good Manufacturing Practices (GMP) certificate of conformance to set standards and best practices (both for facility and processes) recognized globally in the manufacturing and quality control of cosmetic and drug products. The DOH-BFAD conducts periodic audit and inspection. Philippine Coconut Authority (PCA) Certificate ensures compliance to local trade regulations for coconut-based products. Halal Certification issued by the Philippine Ulama Congress Organization, Inc. which certifies that the active ingredients and other raw materials used for the Companys products have been clinically tested and found safe and do not contain animal-based ingredients or animal fat.

(xii)

Research and Development

The Company established the Splash Research Institute to continuously develop new products that would satisfy the rapidly growing needs of the personal care market by employing cutting-edge technology. By adopting the open innovation concept, the Company collaborates with its suppliers to come up with new and better product formulations in a cost effective manner. Splash has developed a flexible brand and product creation process that allows Splash to readily respond to changes in consumer preferences. The Company strives to have at least two (2) years worth of new products in the pipeline, at any given time.

The SRIs interdependent departments Product Research and Development,PackagingInnovations,ProductTestingand Documentation, and Skin Research are synergized towards creating innovative products that are relevant to the felt and latent needs of consumers.(xiii) Cost and effect of compliance with the environmental laws

The company has consistently complied with all environmental laws and regulations and provides costs allocation for such compliance.(xiv) Total Number of employees

As of December 31, 2007 registrant had 304 full time employees. Out of the total employees, 254 are at the Plant Site and 50 are at the Corporate Office. The company has no plan of hiring additional staff. The Company is non-unionized.(xv) Major risk/s involved in the business of the Company

Risk of economic slowdown Significant deterioration in the Philippine economy may adversely affect consumer sentiment and lead to a reduction in demand for the Companys products. High inflation rate would result in consumers prioritizing the basic or essential goods. Regulatory risk The products being manufactured, marketed and sold by the Company are subject to standards and regulations set forth by government and regulatory agencies particularly the DOH-BFAD and the DTI which from time-to-time may introduce new rules and regulatory policies or promulgate changes in the interpretation or enforcement of existing laws and regulations, which might directly affect the operations and profitability of the Company and/or may be costly to comply with. Constant monitoring of the regulatory environment and membership to industry associations and lobby groups mitigate this risk [please see paragraph (x)]. Product liability risk In the course of its operations, the Company might inadvertently manufacture and market defective or substandard products which could bring about harmful effects to its customers such as skin irritation and allergies, among others. To mitigate this risk, the Company through its Splash Research Institute, does exhaustive clinical testings before a product is introduced to the market. It also adheres to strict manufacturing standards to avert the production of defective products [please refer to paragraph (xi)]. Risk of product infringement The Company may experience cases of infringement on its products, inventions, processes and proprietary rights from competitor companies or other groups which may result in reduction in sales and profitability. The Company protects and builds its brands by registering its trademarks with the Bureau of Trademarks of the Philippine Intellectual Property Office. Weakening R&D and marketing capabilities The Companys continuous growth hinges largely on the ability of its R&D to develop new innovative products and the ability of its marketing group to create or enhance brand equity. Companys future growth may be adversely affected by the inability of its R&D to introduce develop new value-adding and innovative products and/or its inability to effectively market products. Over the years, Splash has been investing heavily to upgrade and harness its R&D capabilities through investments in new technology, state-of-the-art equipment and developing a roster of competent and seasoned R&D specialists. The Companys Management Training recruits talented new graduates from the countrys top colleges and universities and mold them into top notch marketing and sales professionals who will someday take the leadership helm of the Company. Rising intensity of competition The personal care business is highly competitive with large multi-national companies aggressively competing for market shares. and The and said

Extensive R&D and large investments in brand building serve as high barriers to entry in the beauty and personal care industry. This has limited the number of major players to a few multinational and local companies. Splashs marketing expertise and its responsive R&D infrastructure would be effective in thwarting the threat intensified competition.

Item 2. Properties The Companys industrial plant area, where substantially all of its operations are conducted, is currently situated at F. Lazaro Street, West Canumay, Valenzuela City with an estimated site area of 29,410 square meters and floor area of 20,910 square meters. The properties and structures located in the plant include the following: Production Building, Finished Goods Warehouse, the Splash Research Institute Building, Chemical Storage Building, Soap Plant, Canteen, Power House, Engineering Building, Substation, Recovery Warehouse, Guard House, Multi-purpose Hall, Alcohol Storage and the Waste Water Plant. The Company also has a property located at T. Santiago Street, West Canumay, Valenzuela City with an estimated lot area of 7,243 square meters and floor area of 5,200 square meters, which houses the Splash Foundation Social Development Center. The foregoing properties have no limitations on their ownership by the Company.

Item 3. Legal Proceedings

The Company is a party to some cases and assessments which are pending in courts or are under protest. Management and the Companys legal counsels strongly believe that the liabilities, if any that may result from the final outcome of these cases and assessments will not materially affect the Companys financial position and results of operations.Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders for the fiscal year ending December 31, 2007

PART II OPERATIONAL AND FINANCIAL INFORMATION Item 5, Market for Issuers Common Equity and Related Stockholder Matters 1. Market Information The companys common shares are traded at the Philippine Stock Exchange The following is the high and low price per share for each week from November 15 to December 31, 2007:

Week # Listing Date 1 2 3 4 5 6

FromTo 15-Nov-07 16-Nov 23-Nov 24-Nov 1-Dec 2-Dec 9-Dec 10-Dec 17-Dec 18-Dec 25-Dec 26-Dec 31-Dec

High 9.00 8.00 7.24 7.24 7.70 8.18 7.97

Low 8.40 7.57 6.75 6.58 7.53 7.88 7.77

2.

Holders

Per data provided by the Companys stock transfer agent (Stock Transfer Service, Inc.), there were 10 named holders of the companys outstanding shares of common stock as of December 31, 2007, 29.99% of which were lodged as PCD Nominee Corp. The details are as follows:NAME 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Splash Holdings HSBC HSBC SB Equities Inc. Citibank NA Angping & Asso. Securities, Inc. First Metro Securities Brokerage Corp. MBTC-Trust Banking Corp. Abacus Securities Corp. Intra-Invest Securities, Inc. ATR Securities Inc. Asia Sec Securities, Inc. AB Capital Securities Inc. AIG Philam Savings Bank BDO Securities Corp. R. Coyiuto Securities, Inc. RCBC Trust & Investment Division Ran Asia Securities Corp. The First Resources Mngt. & Securities Corp. HDI Securities, Inc. Top 20 Shareholders Others/Various Total Outstanding Shares HOLDINGS 522,312,245 30,613,000 27,903,343 26,023,554 23,420,000 15,824,000 13,569,210 10,072,000 9,429,000 3,977,000 3,808,000 3,406,000 3,138,000 3,021,000 2,659,000 2,533,000 2,227,000 2,167,000 2,145,000 1,651,000 709,898,352 36,262,005 746,160,357 OWNERSHIP 70.0% 4.1% 3.7% 3.5% 3.1% 2.1% 1.8% 1.3% 1.3% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3% 0.2% 95.1% 4.9% 100%

3. Dividends Information on the declaration of cash dividends by the Companys Board of Directors follow:Declaration Date August 31, 2007 December 15, 2007 Dividend per Share Amount Record Date August 31, 2007

P 1.59 P 1.67

P 350,000,000

178,786,584 December 31, 2005

There was no dividend declaration to stockholders in 2006. On August 22, 2007, the Company entered into a Floating Rate Notes Facility Agreement (Notes Facility) for the issuance of P 1,000,000,000 FRNs to a syndicate of lenders in order to pay all its outstanding short-term and long-term obligations. The FRNs were issued on August 31, 2007 and are payable in five annual installments starting August 31, 2007. The Notes Facility provides, among other terms and conditions, that, for as long as the FRNs remain outstanding, the Company is subject to certain negative covenants requiring prior written approval from the majority of the Note Holders for specified acts which include, but is not limited to the declaration or payment of dividends in excess of fifty percent (50%) of the Companys net income.

4.

Recent Sales of Unregistered Securities

There was no issuance of additional shares during the year under review. (B) Description of Registrants Securities The Registrants 223,848,107 common shares are listed in the Philippine Stock Exchange. There are 746,160,357 total shares issued and outstanding.

Item 6. Managements Discussion and Analysis or Plan of Operation Results of Operations: Revenues Net sales registered double digit growth of 25% to reach P3,010.8 million at year-end 2007 on the back of the strong performance of the Naturals segment which registered 59% year-on-year growth. Hair Care segment grew by almost 11% while the Skin Care segment was steady at close to 6% growth. Business Segments and Market Performance The Naturals segment benefited from the launch of new products. Of the 14 new products launched in 2007, five (5) are with the Naturals segments. New products contributed 16% to total sales.

The year 2007 saw the diversification of the Companys product portfolio. In 2006, two-thirds (or almost 66%) of total sales were generated by the Skin Care segment. The year 2007 saw significant increases in the contribution of Hair Care and Naturals segments.

Business Segment

Hair Care S Carekin Naturals Total

Contribution to Total Sales (%) 20072006 18.7%20.1% 58.3%65.7% 23.0%14.1% 100.0%100.0%

The Company, however, is built on its core Skin Care segment. In 2007, the lead brands of the segment continue to maintain market leadership as shown by the December 31, 2007 exit market shares of AC Nielsen:Market Share

Category / Brand / Product

Market Standing

Skin Care Maxipeel Exfoliant Extraderm Anti-aging Skin White Lotion Skin White Soap

81% 43% 25% 36%

Market Leader Market Leader Market Leader Market Leader

Naturals

Extract Facial Cleanser

11%

Challenger (2nd to the market leader)

Hair Care Kolours Premium Hair Dye

49%

Market Leader

Source: AC Nielsen Retail Audit, 31 Dec 2007

Expenses Total cost of goods sold and operating expenses increased by 23.6% from 2,179 million in 2006 to P2,693 million in 2007. However, in terms of cost-to-sales ratio, total costs and expenses in 2007 was 89% of total sales compared with 91% in 2006 and 91.5% in 2005. Cost of goods sold (COGS) increased to 48.9% of sales which is 3.3% higher than the 45.6% COGS-to-Sales ratio in 2006. This is attributable to the higher COGS of new products which, on the average, are 5 percentage points higher than the Companys standard COGS-to-sales ratio of 45% since new products are generally introduced to the market at lower price points. The higher COGS, however, was offset by the relatively lower operating expenses. While in terms of peso value, operating expenses increased by almost 12% in 2007 vis--vis 2006, costto-sales ratio was down to 4.8% with 40.4% in 2007 and 45.2 in 2006.

The main contributors to this relatively lowering of operating expenses were: Advertising and promotions (where marketing and selling expenses were lumped) which accounted for close to 24% of sales, a significant reduction from the 27% cost-to-sales ratio in 2006 and close to 30% in 2005. This does not mean, however, that the Company has become less aggressive in its marketing and selling initiatives. It continues to be so except that it is applying efficient and therefore cost-effective approaches. As can be seen in 2007, advertising and promotions grew by 11.4% while sales grew by 25.5%. Expenses for outside services was reduced by half from P124.6 million in 2006 to P72.1 million in 2007.For the Full Year Ended2007 2006 2005

Net Sales Cost of Goods SoldPer cent to sales Advertising and promotions Personnel costs Outside services Transportation and travel Taxes and licenses Depreciation and amortization

3,010,832,030 2,399,082,430 1,475,161,099 1,093,979,127 48.9%45.6%722,012,581 180,573,643 72,136,430 67,327,381 18,070,934 648,144,571 150,258,167 124,681,966 43,680,597 17,338,075

2,693,315,149 1,246,473,809 46.3%797,461,106 112,831,099 114,329,804 48,520,064 20,094,432

16,278,060 Insurance Rent Communication, light and water Supplies Repairs and maintenance Others 13,663,113 11,939,319 11,894,820 7,548,380 4,256,903 92,217,805 1,217,919,369

32,150,829 10,019,762 8,173,075 6,561,015 5,825,660 3,199,565 35,327,157 1,085,360,439

56,019,169 4,757,749 6,318,937 10,300,599 5,645,055 3,420,677 37,434,957 1,217,133,648

Per cent to sales

40.4%

45.2%

45.2% 2,463,607,45791.5%

TOTAL COSTS & EXPENSESPer cent to sales

2,693,080,468 2,179,339,56689.4% 90.8%

Net Income As a result of top-line growth and the effective management of costs and expenses, the Companys net income grew 32% to P271.2 million from P205.5 million in 2006. Recurring income (income from operations) grew almost 44% from P219.7 million in 2006 to P317.7 million in 2007. The Companys claim for a P47.5 million tax refund which was granted by the Court of Tax Appeals (CTA) on May 6, 2008 resulted in a one-time impact of P46.5 million (amount of tax

refund minus legal expenses).1 Key Indicators

Key Indicators Net Sales Sales of new products EBIT Net Income after Tax

For the Full Year Ended 31 December 31 December YoY Change (%) 20072006 3,010,832,030 2,399,082,43025% 464,933,125174%169,615,12 216,127,55262,602,40321% 4205,484,80271,233,65532% 0

1Market Shares of Core Brands: Maxipeel Exfoliant Extraderm Anti-aging Skin White Lotion Skin White Soap Extract Facial Cleanser Kolours Premium Hair Dye

81% 43% 25% 36% 11% 49%

66%not launched yet

30% 47% 10% 52% 5.30 5.54 4.65 5.15

23% n/a -17% -23% 10% -6%

Trade receivable turnover Inventory turnover1

14% 8%

Based on the AC Nielsen Retail Audit as of 31 Dec 2007 / 2006

With its double-digit sales and profit growth, the Companys key indicators understandably showed a pattern of growth. Sales of new products more than doubled, a critical indicator of success for the Companys innovation process. The loss of market share points of some brands were immediately addressed with more aggressive marketing and sales initiatives that were projected to produce positive results in the first quarter of 2008. As measures of supply chain efficiency, trade receivable and inventory turnover ratios both registered marked improvements over that of 2006.

1

On April 7, 2005, the Company applied with the BIR for administrative claim for refund for excess income taxes paid

for the taxable year 2002 amounting to =47,469,548 arising from its retroactive application of the income taxP exemption incentives under RA No. 7459. On May 29, 2007, the Court of Tax Appeals (CTA) Second Division decided in favor of the Company and ordered the BIR to refund the said claim. The BIR filed a Motion for Reconsideration with the CTA and on October 30, 2007, the said Motion for Reconsideration filed by the BIR was denied. On December 7, 2007, the BIR filed a Petition for Review with the CTA En Banc and on May 6, 2008, the En Banc unanimously decided in favor of the Company. Management and its Legal Counsel believe that the decision of the CTA and CTA En Banc have persuasive effect and usually serve as a judicial guide. They believe that the fact of the CTA are entitled to the highest respect and the Supreme Court generally respects and refrains from setting aside conclusions reached by the CTA, which by the very nature of its function, is exclusively dedicated to the consideration, resolution of tax problems and has developed an expertise on the subject, unless there is a clear showing of abuse or improvident exercise of authority on its part. Based on the above facts, the Company recognized the receivable from the BIR amounting to =47,469,548 andP recognized Benefit from income tax for the same amount in 2007. (Notes from the Companys 2007 Audited Financial Statements)

Liquidity and Capital Resources The Companys financial position remained strong, backed up by solid operating cash flows and liquidity. Total assets at the end of 2007 amounted P4,497.6 million compared to P2,014.4 million in 2006. This translates into an increase of 123%. Cash and short-term placements amounted to P1,975 million at the end of 2007. This is 1,766% higher than that of the year 2006. Net cash flow from operations reached P103.2 million, a 33.9% decrease from last years P156.2 million mainly due to trade receivable and inventory turnovers. Net cash flow from investing activities amounted to (P127.5) million, a 130% increase from last years (P55.5) million due to investment in machinery and equipment. Net cash flow from financing activities amounted to P1,895.9 million, a 2,402.9% increase from last years (P78.9) were due to mostly from the proceeds from sales of shares of stocks. With total debts of P1,785.8 million at year end 2007, the Companys debt-to-equity ratio was 0.66, a dramatic fall from year-end 2007 of 1.77. This level is well within the 1.5:1 debt-to-equity limit prescribed by the FRN Agreement2.2

On August 22, 2007, the Company entered into a Floating Rate Notes (FRNs) Facility Agreement (Notes Facility) for the issuance of =1,000,000,000 FRNs to a syndicate of lenders (four local financial institutions) inP order to pay all its outstanding short-term and long-term obligations (see Notes 14 and 15). The FRNs were issued on August 31, 2007 and are payable in five (5) annual installments. As of December 31, 2007, the maturities of the FRNs at nominal values, excluding the unamortized debt issuance costs follow: Due in 22008 22009 22010 22011 22012 Amount =50,000,000P 50,000,000 50,000,000 50,000,000 800,000,000 =1,000,000,000P

The FRNs bear interest starting August 31, 2007 and such interest is payable on each interest payment date which falls three months after the preceding interest payment date, in the case of the first interest payment date, after August 31, 2007. The rate of interest for such interest period shall be based on the Interest Rate 1 Setting Date by reference to the three- (3) month Philippine Dealing System Treasury Rate 1 at approximately 11:16 A.M., Manila time, on such date, plus an interest spread of 165 basis points (1.65%) per year. All payments by the Company under the Notes Facility, whether of principal, interest, fees, early redemption or otherwise, shall be made without set-off or counterclaim for indemnifiable taxes, and are free and clear and without any deduction or withholding on account of any indemnifiable taxes, unless such withholding is required by law. The Notes Facility provides, among other terms and conditions, that, for as long as the FRNs remain outstanding, the Company is subject to certain negative covenants requiring prior written approval from

SPLASH CORPORATIONQuezon City

MARKETABLE SECURITIES DECEMBER 31, 2007

Name of issuing entity and description of each issue Short-term Cash Investments: PLANTERS DEV'T BANK BANK OF COMMERCE WORLD PARTNERS BANK METROBANK

Number of shares or principal amount of bonds and notes

Amount shown in the balance sheet

Income received and accrued

3,104,942 10,000,000 300,000,000 1,400,000,000

3,349,142 10,055,019 300,000,000 1,409,642,948

244,200 55,019 39,674 9,642,948

Total

1,713,104,942

1,723,047,109

9,981,841

the majority of the Note Holders for specified acts which include, but are not limited to: amendment of Articles of Incorporation and other organization documents, e.g., materially changing the nature of its present business; entering into merger or consolidation; granting of loans or advances to or investment in which its directors, officers, stockholders and other related persons except those made in the ordinary course of business; creation of lien with respect to any of its properties; sale or lease of assets; guaranteeing indebtedness; prepaying long-term indebtedness except for those provided in Section 2.07 of the Notes Facility; entering into additional loans; entering into any new management contracts; declaration or payment of dividends in excess of fifty percent (50%) of the Companys net income for the most recent fiscal year; purchase, redeem, retire or otherwise acquire for value its capital stock; declare or pay management bonuses or profits sharing; and execute any act which shall have a material adverse effect. In addition, the Notes Facility provides that the Company has to maintain a ratio of current assets to current liabilities of at least 2.0 times and its equity-to-debt ratio should not be more than 1.5 times until final payment date. As of December 31, 2007, the Company is in compliance with the negative debt covenants.

In the event of default as provided under the Note Facility, the default penalty is 2% per month, or a fraction of a year. The Notes Facility also provides for early redemption, at the option of the Company, starting at the end of the thirty-sixth (36th) month from the issue date, without premium or penalty. In addition, the Company has a one-time option, at any interest rate settling date, to convert the interest from a floating interest rate structure to a fixed interest rate structure on the remaining life of the outstanding amount of the Notes. The fixed interest rate shall be based on the applicable Fixed Base Rate plus a spread of 165 basis points (1.65%) per annum subject to certain conditions stipulated in the Notes Facility. Long-term debt to equity ratio, on the other hand, was 0.35, a very slight improvement over 2006s 0.36.

Note: The above pertains to the Company's cash equivalents as of December 31, 2007.

SCHEDULE A

AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES, RELATED PARTIES AND PRINCIPAL STOCKHOLDERS December 31, 2007

Name and designation of debtor

Balance at beginning of period

Deductions Additions Amounts collected Amounts written off Current Noncurrent

Balance at end of period

Not Applicable

Note: Receivables from officers, employees and related parties are within the ordinary course of business.

There are no amounts receivable from directors, officers, employees, related parties and principal stockholders other than those arising from the ordinary course of business.

SCHEDULE B

NON-CURRENT MARKETABLE EQUITY SECURITIES, OTHER LONG-TERM INVESTMENTS IN STOCKS AND OTHER INVESTMENTS December 31, 2007

Name of issuing entity and description of investment

BEGINNING BALANCE ADDITIONS No. of shares or principal amount of bonds and notes Amount in pesos No. of shares or principal amount of bonds and notes Amount in pesos DEDUCTIONS

ENDING BALANCE No. of shares or principal amount of bonds and notes Dividends received from investments not accounted for by equity method Amount in pesos

Equity in earnings for the period

Others Unrealized valuation gain

Distribution of earnings by investee

Others Unrealized valuation loss

Available-forsale investments: Wack Wack Golf and Country Clubm, Inc. GMA 7 Professional Services, Inc. Total

-

13,400,000.00

-

-

5,600,000.00

-

-

-

19,000,000.00

-

-

13,400,000.00

100,000 50,000

850,000.00 200,000,000.00 200,850,000.00

-

5,600,000.00

-

(80,000.00) (80,000.00)

100,000 50,000

770,000.00 200,000,000.00 219,770,000.00

-

SCHEDULE C

INDEBTEDNESS OF UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES DECEMBER 31, 2007

Name of Affiliate

Balance at beginning of period

Balance at end of period

Not Applicable

SCHEDULE D

PROPERTY, PLANT AND EQUIPMENT DECEMBER 31, 2007

Classification

Beginning balance

Additions at cost

Retirements

Other charges additions (deductions)

Ending balance

Land Building and Improvements Machinery and Equipment Transportation Equipment Office Furniture and Fixtures Other Equipment Assets for Installation

396,570,795.00 419,083,619.00 220,210,291.00 54,232,134.00 15,602,560.00 141,542,080.00 10,839,180.00 713,643.00 1,063,726.00 10,513,377.00 1,170,760.00 1,490,154.00 5,633,467.00

-

2,634,154.00 -

(246,956,454.00) -

149,614,341.00 419,797,262.00 221,274,017.00 62,111,357.00 16,773,320.00 143,032,234.00 16,472,647.00

Total

1,258,080,659.00

20,585,127.00

2,364,154.00 (246,956,454.00)

1,029,075,178.00

SCHEDULE E

***Reclassed to Land for Development, net of recognized sales (see note 11 to the financial statements for a more detailed discussion).

ACCUMULATED DEPRECIATION December 31, 2007

Description Building and Improvements Machinery and Equipment Transportaion Equipment Office Furniture and Fixtures Other Equipment

Beginning balance 291,687,324.00 204,257,567.00 38,758,162.00 15,256,667.00 135,834,655.00

Additions charged to costs and expenses 27,243,611.00 10,331,534.00 8,248,918.00 898,215.00 4,009,497.00

Retirements 2,024,368.00 -

Other charges additions (deductions) -

Ending balance 318,930,935.00 214,589,101.00 44,982,712.00 16,154,882.00 139,844,152.00

Total

685,794,375.00

50,731,775.00

2,024,368.00

-

734,501,782.00

SCHEDULE F

INTANGIBLE ASSETS - OTHER ASSETS DECEMBER 31, 2007

Description

Beginning Balance

Additions at cost

Charged to cost and expenses

Charged to other accounts

Other charges additions (deductions)

Ending balance

Not Applicable

SCHEDULE G

LONG TERM DEBT DECEMBER 31, 2007

Title of issue and type of obligation

Amount authorized by indenture

Amount shown under caption "Current portion of floating rate notes payable" in related balance sheet

Amount shown under caption "Floating rate notes payablenet" in related balance sheet

"Debt Issuance Costs - net of amortization" under Other Assets in related balance sheet

Terms

Floating Rate Note (FRN) Payable

1,000,000,000

46,990,002

938,426,801

14,583,197

The FRNs were issued on August 31, 2007 and are payable in five (5) annual installments. The FRNs bear interest starting August 31, 2007 and such interest is payable on each interest payment date which falls three months after the preceding interest payment date, in the case of the first interest payment date, after August 31, 2007. (see Note 13 to the financial statements for more detailed discussion).

SCHEDULE H

INDEBTEDNESS TO AFFILIATES AND RELATED PARTIES DECEMBER 31, 2007

Name of Affiliate

Balance at beginning of period

Balance at end of period

Not Applicable

SCHEDULE I

GUARANTEES OF SECURITIES OF OTHER ISSUERS DECEMBER 31, 2007

Name of issuing entity of securities guaranteed by the company for which this statement is filed

Title of issue of each class of securities guaranteed

Total amount guaranteed and outstanding

Amount owned by person for which statement is filed

Name of guarantee

Not Applicable

SCHEDULE J

CAPITAL STOCK DECEMBER 31, 2007

Title of Issue

Number of shares authorized

Number of shares issued and outstanding

Number of shares reserved for options, warrants conversion and other rights

Number of shares held by affiliates

Directors, officers and employees

Others

Common

1,000,000,000

746,160,357

522,312,245

10,005

223,838,107

SCHEDULE K

COVER SHEET

AS09196206SEC Registration Number

SPLASH D A( Subs

CORPORATION idiary , Inc . of ) Splash

Holdings

(Companys Full Name)

HBC 548 Qui r

Corporate Mindanao ino Highway,

Centre Avenue

, corner

Quezon

Ci

ty

(Business Address: No. Street City/Town/Province)

Mr. Emmanuel P. Manucom(Contact Person)

984-5555(Company Telephone Number)

12Month

31Day

AAFS(Form Type)

04Month

19Day

(Calendar Year)

(Annual Meeting)

Not Applicable(Secondary License Type, If Applicable)

Dept. Requiring this Doc.

Amended Articles Number/Section Total Amount of Borrowings

153Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number

LCU

Document ID

Cashier

STAMPS Remarks: Please use BLACK ink for scanning purposes.

*SGVMC3080 64*

SGV

&

CO

SyCip Gorres Velayo & Co.6760 Ayala Avenue 1226 Makati City Philippines

Phone: (632) 891-0307 Fax:(632) 819-0872 www.sgv.com.ph BOA/PRC Reg. No. 0001 SEC Accreditation No. 0012-FR-1

INDEPENDENT AUDITORS REPORT

The Stockholders and the Board of Directors Splash Corporation HBC Corporate Centre 548 Mindanao Avenue corner Quirino Highway Quezon City

We have audited the accompanying financial statements of Splash Corporation (a subsidiary of Splash Holdings, 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. Managements 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 auditors 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 entitys 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 entitys 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.

SGV & Co is a member practice of Ernst & Young Global

*SGVMC3080 64*

-2-

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Splash Corporation 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.

Teresita M. Baes Partner CPA Certificate No. 27222 SEC Accreditation No. 0065-AR-1 Tax Identification No. 102-081-050 PTR No. 0017574, January 3, 2008, Makati City May 9, 2008

SGV & Co is a member practice of Ernst & Young Global

*SGVMC3080 64*

SPLASH CORPORATION(A Subsidiary of Splash Holdings, Inc.)

BALANCE SHEETSDecember 31 20062007 ASSETS Current Assets Cash and cash equivalents (Notes 4 and 17) Receivables - net (Notes 5, 8, 11 and 17) Current portion of note receivable (Notes 8 and 17) Advances to a stockholder (Notes 10 and 17) Inventories - net (Notes 6 and 11) Prepaid expenses and other current assets (Notes 7 and 22) Total Current Assets Noncurrent Assets Note receivable- net of current portion (Notes 8 and 17) Property, plant and equipment - net (Notes 9, 11, 14 and 15) Available-for-sale investments (Note 10) Land for development (Note 11) Deferred income tax assets (Note 22) Other noncurrent assets Total Noncurrent Assets TOTAL ASSETS

P1,975,037,566= 1,024,454,563 50,030,502 137,370,246 328,675,357 79,624,991 3,595,193,225

=P111,860,452 543,919,691 259,987,715 220,357,825 182,458,658 63,316,113 1,381,900,454

200,122,007 572,286,284 294,573,396 13,400,000 219,770,000 141,956,454 38,221,629 37,045,274 8,627,072 8,952,549 632,534,985 902,419,680 P4,497,612,905==P2,014,435,439

LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued expenses (Note 12) Current portion of floating rate notes payable (Note 13) Bank loans (Notes 9,13 and 14) Current portion of long-term debt (Notes 9, 13 and 15) Total Current Liabilities Noncurrent Liabilities Floating rate notes payable - net (Note 13) Long-term debt - net of current portion (Notes 9, 13 and 15) Retirement benefits liability (Note 20) Total Noncurrent Liabilities Total Liabilities Equity (Note 16) Capital stock Additional paid-in capital Unrealized valuation gain (loss) on available-for-sale financial assets (Note 10) Retained earnings Total Equity TOTAL LIABILITIES AND EQUITY

P762,491,968= =P513,424,363 46,990,002 360,000,000 105,805,556 979,229,919 809,481,970

938,426,801 37,930,101 976,356,902 1,785,838,872 746,160,357 1,676,712,406

261,368,056 46,999,434 308,367,490 1,287,597,409 107,312,250 257,378,165

(976,900) 4,543,100 363,124,515 284,358,170 2,711,774,033 726,838,030 P4,497,612,905==P2,014,435,439

See accompanying Notes to Financial Statements.

*SGVMC3080 64*

SPLASH CORPORATION(A Subsidiary of Splash Holdings, Inc.)

STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

Capital Stock BALANCES AT JANUARY 1, 2005 Net income for the year Cash dividends - P1.67 per share (Note 16)= BALANCES AT DECEMBER 31, 2005 Net income for the year Recovery in market value of AFS investments (Note 10) Total recognized income and expense for the year BALANCES AT DECEMBER 31, 2006 Net income for the year Recovery in market value of AFS investments (Note 10) Total recognized income and expense for the year Cash dividends - P1.59 per share (Note 16)= Issuance of common stock (Note 16) BALANCES AT DECEMBER 31, 2007 638,848,107

Unrealized Valuation Gain (Loss) on Available-for-Sale AdditionalInvestments Paid-in Capital(Note 10)

Retained Earnings (Note 16)

Total

P107,312,250= P257,378,165= 107,312,250 257,378,165

(P2,376,900)= P139,919,062= P502,232,577= (2,376,900) 196,507,237 (178,786,584) 157,639,715 205,484,800 196,507,237 (178,786,584) 519,953,230 205,484,800

107,312,250

257,378,165

1,400,000 1,400,000 (976,900) 205,484,800

1,400,000 206,884,800 726,838,030 271,233,655

363,124,515 271,233,655

1,419,334,241

5,520,000 5,520,000 271,233,655

5,520,000 276,753,655 (350,000,000) 2,058,182,348

(350,000,000)

P746,160,357 P1,676,712,406==

P4,543,100= P284,358,170 P2,711,774,033==

See accompanying Notes to Financial Statements.

*SGVMC3080 64*

SPLASH CORPORATION(A Subsidiary of Splash Holdings, Inc.)

STATEMENTS OF INCOME

Years Ended December 31

2007 NET SALES (Notes 11 and 17)

2006

2005

==P3,010,832,030 P2,399,082,430 P2,693,315,149= 1,093,979,127 1,246,473,809 1,446,841,340

COST OF GOODS SOLD (Notes 11 and 18) 1,475,161,239 GROSS PROFIT OPERATING EXPENSES (Notes 17 and 19) INTEREST INCOME (Notes 4, 5, 8, 17 and 21) INTEREST EXPENSE (Notes 13, 14, 15 and 21) OTHER INCOME (CHARGES) Foreign exchange loss - net (Note 7) Reversal of excess provision (Note 12) Others INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Note 22) NET INCOME Earnings Per Share (Note 24)See accompanying Notes to Financial Statements.

1,535,670,791 1,305,103,303

(1,217,919,369) (1,085,360,439) (1,217,133,648)

36,022,712 (74,509,990)

2,580,950 (62,655,776)

32,427,866 (53,775,244)

(14,836,325) 7,619,896 272,047,715 814,060

(7,330,087) 60,461,525 3,328,078 216,127,554 10,642,754

(13,713,563) 4,039,666 198,686,417 2,179,180 =P196,507,237 =P1.83

P271,233,655= =P205,484,800 P0.95= =P1.91

*SGVMC3080 64*

SPLASH CORPORATION(A Subsidiary of Splash Holdings, Inc.)

STATEMENTS OF CASH FLOWSYears Ended December 31 20062007 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Interest expense (Notes 13, 14, 15 and 21) Depreciation and amortization (Notes 9 and 19) Interest income (Notes 4, 5, 17 and 21) Unrealized foreign exchange loss Gain on sale of property and equipment Reversal of excess provision (Note 12) Operating income before working capital changes Decrease (increase) in: Receivables Inventories Prepaid expenses and other current assets Increase (decrease) in: Accounts payable and accrued expenses Retirement benefits liability (Note 20) Net cash generated from operations Income taxes paid Interest received Net cash flows from operating activities P272,047,715= 74,509,990 50,731,775 (36,022,712) 12,220,520 (814,489) 372,672,799 (329,449,802) (146,216,699) (49,497,453) 274,989,605 (9,069,333) 113,429,117 (13,918,678) 3,756,502 103,266,941 =P216,127,554 62,655,776 78,113,226 (2,580,950) 1,040,176 (736,742) (60,461,525) 294,157,515 (179,231,185) 60,270,048 4,540,752 (34,433,608) 27,837,504 173,141,026 (19,514,404) 2,580,950 156,207,572 2005

=P198,686,417 53,775,244 110,145,075 (32,427,866) 7,669,817 (380,050) 337,468,637 (221,206,263) (5,460,818) 178,161 (13,936,112) (3,531,800) 93,511,805 (8,512,093) 2,996,936 87,996,648

CASH FLOWS FROM INVESTING ACTIVITIES Cash advances to a stockholder Additions to property, plant and equipment (Note 9) Proceeds from sale of property and equipment Increase in other noncurrent assets Decrease in other investments Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of capital stock - net (Note 16) Proceeds from availment of: Floating rate notes Bank loans Payments of: Bank loans Long-term debt Dividends Interest Net cash flows from (used in) financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) See accompanying Notes to Financial Statements.

(117,012,421) (20,585,127) 1,424,276 (1,175,477) 9,835,205 (127,513,544)

(52,986,905) (2,901,900) 1,067,375 (665,880) (55,487,310)

(167,370,920) (16,456,954) 3,060,783 15,000,000 (165,767,091)

2,058,182,348 985,416,803 280,000,000 (640,000,000) (367,173,612) (350,000,000) (70,431,990) 1,895,993,549

433,500,000 270,000,000 (220,000,000) (499,826,389) (62,655,776) (78,982,165)

100,000,000 300,000,000 (90,000,000) (78,000,000) (178,786,584) (52,744,377) 469,039

(8,569,832) 1,863,177,114 111,860,452 P1,975,037,566=

(137,747) 21,600,350 90,260,102 =P111,860,452

1,325 (77,300,079) 167,560,181 =P90,260,102

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SPLASH CORPORATION(A Subsidiary of Splash Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

1. Corporate Information General Splash Corporation (the Company) was incorporated in the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) on September 30, 1991 primarily to develop, manufacture, bottle, pack, and market cosmetics and other beauty products, and pharmaceutical products in the Philippines and abroad. Before the Company listed its shares of stock with the Philippine Stock Exchange (PSE) on November 15, 2007, the Company is a wholly-owned subsidiary of Splash Holdings, Inc. (SHI). Its registered office address is HBC Corporate Centre, 548 Mindanao Avenue corner Quirino Highway, Quezon City. On November 15, 2007, the Companys shares of stock were listed and traded in the PSE. After the IPO wherein the Company offered 30% of outstanding shares (both primary and secondary) to the public, the Company is now 70%-owned by SHI, who exercises control over the Company (see Note 17). The accompanying financial statements were authorized for issuance by the BOD on May 9, 2008. On September 6, 2007, the SEC approved the petition filed by the Company and Splash Nutraceutical Corporation (SNC) on August 21, 2007 to set aside the Articles and Plan of Merger and the Amended Articles and Plan of Merger dated April 24, 2007 and August 3, 2007, respectively, which were previously approved by the SEC. Accordingly, the merger was not effected in the financial statements.

2. Summary of Significant Accounting and Financial Reporting Policies Basis of Financial Statement Preparation The accompanying financial statements have been prepared under the historical cost basis, except for derivative financial instruments and available-for-sale (AFS) financial assets which have been measured at fair value. The financial statements are presented in Philippine peso, which is the Companys functional currency. Statement of Compliance The Companys financial statements have been prepared in conformity with Philippine Financial Reporting Standards (PFRS). Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous years, except for the following new PFRS, amendments to existing Philippine Accounting Standard (PAS) and Philippine Interpretations from International Financial Reporting Interpretations Committee (IFRIC) interpretations which the Company has adopted during the year: Amendments to PAS 1, 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 Companys objectives, policies and processes for managing capital. These new disclosures are shown in Note 27.

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PFRS 7, Financial Instruments: Disclosures, introduces new disclosures to improve the information about financial statements. 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 of market risk. It replaces disclosure requirements of PAS 32, Financial Instruments: Disclosure and Presentation and PAS 30, Disclosure in the Financial Statements of Banks and Similar Financial Institutions. 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 for the new risk disclosures about the nature and extent of risks arising from financial instruments. Accordingly, the Company did not present comparative information for the disclosures required by paragraphs 31-42 of PFRS 7, unless the disclosure was previously required either under PAS 32 or PAS 30. Adoption of PFRS 7 resulted in additional disclosures. These disclosures include presenting the different classes of loans and receivables and rollforward of allowance for doubtful accounts (see Note 5), aging of financial assets and credit quality of past due but not impaired financial assets and sensitivity analysis as to changes in interest and foreign exchange rates (see Note 27).

Philippine Interpretation IFRIC 7, Applying the Restatement Approach under PAS 29, Financial Reporting for Hyperinflationary Economies (effective for annual periods beginning on or after March 1, 2006). This Interpretation provides guidance on how to apply the requirements of PAS 29 in a reporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency, when the economy was not hyperinflationary in the prior period, and the entity therefore restates its financial statements in accordance with PAS 29. This Interpretation has no impact on the Companys financial statements.

Philippine Interpretation IFRIC 8, Scope of PFRS 2. This Interpretation requires PFRS 2 to be applied to any arrangements where equity instruments are issued for consideration which appears to be less than fair value. The Interpretation has no impact on the Company because currently, the Company does not have share-based options. Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives.This Interpretation establishes that the date to assess the existence of an embedded derivative is the date an entity becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. Adoption of this Interpretation did not have any significant impact on the financial statements. Philippine Interpretation IFRIC 10, Interim Financial Reporting and Impairment. This Interpretation addresses whether the frequency of reporting should affect the amount of any impairment charge recognized in an annual reporting period relating to goodwill, and available-for-sale equity investments. Adoption of this Interpretation did not have any impact on the financial statements.

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Future Changes in Accounting Policies The Company opted not to early adopt the following new and amended accounting standards and Philippine Interpretations that have been approved but not yet effective as of December 31, 2007: PFRS 8, Operating Segments (effective for annual periods beginning on or January 1, 2009). This PFRS adopts a management approach to reporting segment information. PFRS 8 will replace PAS 14, Segment Reporting. The information reported would be that which management uses internally for evaluating the performance of operating segments and allocating resources to those segments. Such information may be different from those reported in the balance sheet and statement of income and companies may need to provide explanations and reconciliations for the differences. The Company will assess the impact of this standard on its current manner of reporting segment information.

PAS 23 (R), Borrowing Costs (effective for annual periods 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 expects that this revised standard will have no impact on the Companys financial statements. Philippine Interpretation IFRIC 11, PFRS 2, Group and Treasury Share Transactions (effective for annual periods beginning on or after March 1, 2007). This Interpretation requires arrangements whereby an employee is granted rights to an entitys equity instrument 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 shareholders of the entity provide the equity instrument 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 currently does not have any stock option plan and therefore, does not expect this Interpretation to have an impact on its financial statements.

Philippine Interpretation IFRIC 12, Service Concession Arrangements (effective for annual periods beginning on or after January 1, 2008). This Interpretation covers contractual arrangements arising from public-to-private service concession arrangements if control of the assets remain in the public hands but the private sector operator is responsible for construction activities as well as for operating and maintaining the public sector infrastructure. This Interpretation is not relevant to the Company.

Philippine Interpretation, IFRIC 13, Customer Loyalty Programmes (effective for annual periods beginning on or after July 1, 2008). This Interpretation addresses accounting by the entity that grants award credits to its customers. This Interpretation applies to customer loyalty award credits that: (a) an entity grants to its customers as part of sales transaction, i.e. a sale of goods, rendering of services or use by a customer of entity assets; and (b) subject to meeting any further qualifying conditions, the customers can redeem in the future for free or discounted goods or services. The Company is currently assessing the impact of this Interpretation when it becomes effective in July 2008.

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Philippine Interpretation, IFRIC 14, PAS 19, Limit of Defined Benefit Asset, Minimum Funding Requirement and their Interaction (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 plan that can be recognized as an asset under PAS 19, Employee Benefits. The Company will assess the impact of this Interpretation on its current manner of accounting for its pension assets. PAS 1, Revised Presentation of Financial Statements (effective for financial years beginning on or after January 1, 2009). The standard separates owner and non-owner changes in equity. The statements of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line. In addition, the standard introduces the statement of comprehensive income, which presents all items of income and expense recognized in profit or loss, together with all other items of recognized income and expense, either in one single statement, or in two liked statements. The Company is currently assessing the impact of the revised standard on its financial statements.

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 from dates of acquisition and that are subject to an insignificant risk of changes in value. Financial Assets and Financial Liabilities Date of recognition The Company recognizes a financial asset or a financial liability in the balance sheet when it becomes a party to the contractual provisions of the instrument. In the case of a regular way purchase or sale of financial assets, recognition and derecognition, as applicable, is done using settlement date accounting. 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 market place.

Initial recognition of financial instruments All financial assets and financial liabilities are recognized initially at fair value. Except for financial instruments measured at fair value through profit or loss (FVPL), the initial measurement of all financial assets includes transaction costs. The Company classifies its financial assets in the following categories: financial assets at FVPL, loans and receivables, heldto-maturity (HTM) investments, and AFS investments. The Company also classifies its financial liabilities into financial liabilities at FVPL and other financial liabilities. The classification depends on the purpose for which the investments were acquired and whether they are quoted in an active market. The Company determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a component that is a financial liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity, net of any related income tax benefits.

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The Company has no financial instruments classified as HTM investments. Determination of fair value The fair value of financial instruments that are actively traded in organized financial market is determined by reference to quoted market bid prices at the close of business at the balance sheet date. When the 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 methodologies. Valuation methodologies include net present value techniques, comparison to similar instrument for which market observable prices exist and other relevant valuation models. Day 1 profit Where the transaction price in a non-active market is different from the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Company recognizes the difference between the transaction price and fair value (a Day 1 profit) in the statement of income, unless it qualifies for recognition as some other type of asset. In cases where use of data is made which are not observable, the difference between the transaction price and model value is only recognized in the statement of income when the inputs become observable or when the instrument is derecognized. For each transaction, the Company determines the appropriate method of recognizing the Day 1 profit amount.

Financial assets and financial liabilities at FVPL Financial assets and financial liabilities at FVPL include financial assets and liabilities held for trading purposes, derivative financial instruments or those financial assets and liabilities designated upon initial recognition as at FVPL. Financial assets and financial liabilities are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivative instruments, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments or a financial guarantee contract. Financial assets and financial liabilities may be designated at initial recognition as at FVPL if any of 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 a different basis; or the assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance are evaluated on a fair value basis in accordance with a documented risk management or investment strategy; or the financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.

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Financial assets and financial liabilities at FVPL are recorded in the balance sheet at fair value. Changes in fair value are accounted for in the statement of income. Interest earned or incurred is recorded as interest income or expense, respectively. The Companys embedded derivative is included under this category. Embedded Derivative 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 FVPL. The Company assesses whether embedded derivatives are required to be separated from the host contracts when the Company first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The Company determines whether a modification to cash flows is significant by considering the extent to which the expected future cash flows associated with the embedded derivative, the host contract or both have changed and whether the change is significant relative to the previously expected cash flows on the contract. The Company has identified certain contracts with embedded third-currency derivatives (see Note 27). Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition measurement, such assets are subsequently carried at amortized cost using the effective interest method, less any allowance for impairment losses. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. 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 of the balance sheet date. Otherwise, these are classified as noncurrent assets (see Notes 5 and 8). The Companys cash and cash equivalents, receivables, notes receivable and advances to a stockholder are classified under this category. AFS investments AFS investments are non-derivative financial assets that are designated as such or do not qualify to be classified as designated as at FVPL, loans and receivables or HTM investments. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions.

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After initial recognition, the Company measures its AFS investments at fair value with gains or losses being recognized as a separate component of equity under Unrealized Valuation Gain (Loss) on Available-for-Sale Investments until the investment is derecognized or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the statement of income. These financial assets are classified as noncurrent assets unless there is intention to dispose such assets within 12 months of the balance sheet date.

When the fair value of AFS investments cannot be measured reliably because of lack of reliable estimates of future cash flows and discount rates necessary to calculate the fair value of unquoted equity instruments, these investments are carried at cost, less any allowance for impairment losses. When the security is disposed of, the cumulative gain or loss previously recognized in equity is recognized in the statement of income. Where the Company holds more than one investment in the same security, these are deemed to be disposed of on a first-in-first-out basis. Interest earned on the AFS investment is reported as interest income using the effective interest rate. Dividends earned are recognized on the statement of income when the right to receive payment is established. The losses arising from impairment investments are recognized in the statement of income.

The Companys AFS investments consist of investments in quoted and unquoted equity shares and are classified under noncurrent assets (see Note 10). Other financial liabilities This category pertains to financial liabilities that are not held for trading or designated as at FVPL upon the inception of the liability. These include liabilities arising from operations (e.g. accounts payable and accrued liabilities) and loans and borrowings. All loans and borrowings are initially recognized at fair value less debt issue costs associated with the borrowings. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any debt issue costs, and any discount or premium on settlement. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortization process. The Companys other financial liabilities consist of accounts payable and accrued expenses, floating-rate notes payable and bank loans. Impairment of Financial Assets The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets may be impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event) and that loss event or events has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Objective

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evidence of impairment may include indications that the borrower is experiencing significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Assets carried at amortized cost If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through the use of an allowance account. The amount of the loss shall be recognized in the statement of income. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery.

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 will be reversed. Any subsequent reversal of an impairment loss is recognized in the statement of income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. With respect to 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. AFS investments carried at fair value If an AFS investment carried at fair value is impaired, an amount comprising the difference between its cost and its current fair value, less any impairment loss previously recognized in the statement of income, is transferred from equity to the statement of income. In the case of equity investment classified as AFS investments, objective evidence of impairment would include a significant or prolonged decline in the fair value of the investments below its cost. Reversals of impairment losses in respect of equity instruments classified as AFS are not recognized in the statement of income.

Assets carried at cost If there is objective evidence that an impairment loss has been incurred in an unquoted equity instrument that is not carried at fair value because fair value cannot be reliably measured, or on a 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 assets carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset.

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Renegotiated receivables The Company seeks to restructure receivables rather than to take further legal actions. This involves extending the payment arrangements and the arrangement of the new receivable conditions. Once the terms have been renegotiated, the receivables are no longer considered past due. Management continuously reviews renegotiated receivables to ensure that future payments are likely to occur. The receivables continue to be subject to individual or collective impairment assessment.

Derecognition of Financial Assets and Financial Liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized where: a. the right to receive cash flows from the asset has expired; b. the Company retains the right to receive cash flows from the asset, but has assumed a obligation to pay them in full without material delay to a third party under a pass-through arrangement; or c. the Company has transferred its right to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Company has transferred its right 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 Companys continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to r