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Probe Productions, Inc.

Financial Statements December 31, 2010 and 2009 and Independent Auditors Report

SyCip Gorres Velayo & Co.

COVER SHEET

1 5 1 5 5 3
SEC Registration Number

P R O B E

P R O D U C T I O N S ,

I N C .

(Companys Full Name)

1 3 g e ,

M a t i p i d Q u e z o n

S t r e e t , C i t y

S i k a t u n a

V i l l a

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

Cecilia L. Lazaro
(Contact Person)

922-9273
(Company Telephone Number)

1 2
Month

3 1
Day

A A F S
(Form Type)

Month

Day

(Fiscal Year)

(Annual Meeting)

(Secondary License Type, If Applicable)

Dept. Requiring this Doc.

Amended Articles Number/Section Total Amount of Borrowings

Total No. of Stockholders To be accomplished by SEC Personnel concerned

Domestic

Foreign

File Number

LCU

Document ID

Cashier

STAMPS Remarks: Please use BLACK ink for scanning purposes.

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SyCip Gorre Ve yo & Co. s la 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 Accreditatio n No. 0012 -FR-2

INDEPENDENT AUDITORS REPORT

The Board of Directors Probe Productions, Inc. 13 Matipid Street, Sikatuna Village Quezon City Report on the Financial Statements We have audited the accompanying financial statements of Probe Productions, Inc., which comprise the balance sheets as at December 31, 2010 and 2009, and the statements of income, statements of changes in equity and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. 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 for Small and Medium-sized Entities and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 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.

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A member firm of Ernst & Young Global Limited

-2Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Probe Productions Inc. as at December 31, 2010 and 2009, and its financial performance and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards for Small and Medium-sized Entities. Report on the Supplementary Information Required Under Revenue Regulations 15-2010 Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on taxes, duties and licenses in Note 18 to the financial statements is presented for the purpose of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of Probe Productions Inc. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Michael C. Sabado Partner CPA Certificate No. 89336 SEC Accreditation No. 0664-A Tax Identification No. 160-302-965 BIR Accreditation No. 08-001998-73-2009, June 1, 2009, Valid until May 31, 2012 PTR No. 2641561, January 3, 2011, Makati City March 14, 2011

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INDEPENDENT AUDITORS REPORT

The Board of Directors Probe Productions, Inc. Report on the Financial Statements We have audited the accompanying financial statements of Probe Productions, Inc., which comprise the balance sheets as at December 31, 2010 and 2009, and the statements of income, statements of changes in equity and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. 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 for Small and Medium-sized Entities and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 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.

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-2Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Probe Productions Inc. as at December 31, 2010 and 2009, and its financial performance and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards for Small and Medium-sized Entities. Report on the Supplementary Information Required Under Revenue Regulations 15-2010 Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on taxes, duties and licenses in Note 18 to the financial statements is presented for the purpose of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of Probe Productions Inc. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Michael C. Sabado Partner CPA Certificate No. 89336 SEC Accreditation No. 0664-A Tax Identification No. 160-302-865 BIR Accreditation No. 08-001998-73-2009, June 1, 2009, Valid until May 31, 2012 PTR No. 2641561, January 3, 2011, Makati City March 14, 2011

*SGVMC115430*

SyCip Gorre Ve yo & Co. s la 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 Accreditatio n No. 0012 -FR-2

INDEPENDENT AUDITORS REPORT

The Board of Directors Probe Productions, Inc. 13 Matipid Street, Sikatuna Village Quezon City We have audited the financial statements of Probe Productions, Inc. for the year ended December 31, 2010, on which we have rendered the attached report dated March 14, 2011. In compliance with Securities Regulation Code Rule No. 68, we are stating that the above Company has a total number of eight (8) stockholders owning one hundred (100) or more shares each.

SYCIP GORRES VELAYO & CO.

Michael C. Sabado Partner CPA Certificate No. 89336 SEC Accreditation No. 0664-A Tax Identification No. 160-302-865 BIR Accreditation No. 08-001998-73-2009, June 1, 2009, Valid until May 31, 2012 PTR No. 2641561, January 3, 2011, Makati City March 14, 2011

*SGVMC115430*
A member firm of Ernst & Young Global Limited

SyCip Gorre Ve yo & Co. s la 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 Accreditatio n No. 0012 -FR-2

INDEPENDENT AUDITORS REPORT TO ACCOMPANY INCOME TAX RETURN

The Board of Directors Probe Productions, Inc. 13 Matipid Street, Sikatuna Village Quezon City We have audited the financial statements of Probe Productions, Inc. for the year ended December 31, 2010, on which we have rendered the attached report dated March 14, 2011. 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, 2010 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.

Michael C. Sabado Partner CPA Certificate No. 89336 SEC Accreditation No. 0664-A Tax Identification No. 160-302-865 BIR Accreditation No. 08-001998-73-2009, June 1, 2009, Valid until May 31, 2012 PTR No. 2641561, January 3, 2011, Makati City March 14, 2011

*SGVMC115430*
A member firm of Ernst & Young Global Limited

PROBE PRODUCTIONS, INC. BALANCE SHEETS

December 31 2010 ASSETS Current Assets Cash (Note 5) Short-term investments (Note 6) Receivables (Note 7) Total current assets Noncurrent Assets Property and equipment (Note 8) Deferred tax assets - net (Note 16) Other assets (Note 9) Total noncurrent assets

2009

1,353,706 5,585,080 6,473,153 7,214,518 8,400,512 3,043,490 16,227,371 15,843,088 2,090,153 2,739,608 552,690 432,880 128,070 133,763 2,770,913 3,306,251 18,998,284 19,149,339

LIABILITY AND EQUITY Current Liability Accounts payable and accrued expenses (Note 10) Equity Capital stock Retained earnings Total Equity 1,010,252 1,269,868

12,225,000 12,225,000 5,763,032 5,654,471 17,988,032 17,879,471 18,998,284 19,149,339

See accompanying Notes to Financial Statements.

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PROBE PRODUCTIONS, INC. STATEMENTS OF INCOME

Years Ended December 31 2010 2009 REVENUE Advertising Fluctuation gain (loss) in value of short-term investments (Note 6) Interest Gain on sale of property and equipment Dubbing Miscellaneous EXPENSES AND CHARGES Production costs (Notes 12 and 14) General and administrative expenses (Notes 13, 14 and 15) Foreign currency loss INCOME BEFORE INCOME TAX PROVISION FOR INCOME TAX (Note 16) Current Deferred NET INCOME
See accompanying Notes to Financial Statements.

13,714,391 698,634 461,238 374,691 515 15,249,469 7,605,437 7,178,027 304,340 15,087,804 161,665 172,914 (119,810) 53,104 108,561

20,323,211 1,127,370 549,584 10,114 18,326 1,358 22,029,963 12,075,469 8,608,559 194,854 20,878,882 1,151,081 207,739 (18,222) 189,517 961,564

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PROBE PRODUCTIONS, INC. STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31 2010 CAPITAL STOCK - 1 par value Authorized - 20,000,000 shares Issued and outstanding - 12,225,000 shares RETAINED EARNINGS Balance at beginning of year Net income Balance at end of year
See accompanying Notes to Financial Statements.

2009

12,225,000 5,654,471 108,561 5,763,032

12,225,000 4,692,907 961,564 5,654,471

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PROBE PRODUCTIONS, INC. STATEMENTS OF CASH FLOWS

Years Ended December 31 2010 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation (Notes 8,12,13 and 14) Foreign exchange loss (Note 6) Gain on sale of property and equipment Interest income Fluctuation (gain )in value of short-term investments (Note 6) Operating income (loss) before changes in working capital Decrease (increase) in: Receivables Other assets Decrease in accounts payable and accrued expenses Net cash generated from (used for) operations Interest received Income tax paid Net cash flows used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Disposal of short-term investments (Note 6) Proceeds from sale of property and equipment Short-term investments (Note 6) Acquisition of property and equipment (Note 8) Net cash flows provided by (used in) investing activities NET DECREASE IN CASH CASH AT BEGINNING OF YEAR CASH AT END OF YEAR (Note 5)
See accompanying Notes to Financial Statements.

2009

161,665 718,759 258,100 (374,691) (461,238) (698,634) (396,039) (5,357,022) 5,692 (259,616) (6,006,985) 95,163 (150,655) (6,062,477) 5,925,716 374,691 (4,400,000) (69,304) 1,831,103 (4,231,374) 5,585,080 1,353,706

1,151,081 877,948 136,099 (10,114) (549,584) (1,127,370) 478,060 (376,540) 56,701 (69,163) 89,058 29,308 (188,098) (69,732) 870,840 10,114 (2,000,000) (934,996) (2,054,042) (2,123,774) 7,708,854 5,585,080

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PROBE PRODUCTIONS, INC. NOTES TO FINANCIAL STATEMENTS

1. Corporate Information Probe Productions, Inc. (the Company) was registered with the Philippine Securities and Exchange Commission on May 24, 1988 primarily to engage in the operations and activities of radio and television broadcast stations and production of radio, television and movie programs. The registered office address of the Company is at 13 Matipid Street, Sikatuna Village, Quezon City. In 2010, the Company stopped its operation when its flagship program Probe Profiles ended last June 30, 2010 which is the main income stream of the Company. It indicates the existence of material uncertainty which cast doubt that the Company will continue as a going concern. 2. Basis of Preparation Basis of Preparation The Companys financial statements have been prepared under the historical cost convention method and are presented in Philippine Peso (). All amounts are rounded to the nearest peso unless otherwise indicated. Statement of Compliance The accompanying financial statements of the Company have been prepared in compliance with accounting principles generally accepted in the Philippines (Philippine GAAP), as set forth in Philippine Financial Reporting Standards for Small and Medium-sized Entities (PFRS for SMEs). These are the Companys first annual financial statements prepared in compliance with PFRS for SMEs. The Companys financial statements until December 31, 2009 had been prepared in accordance with Philippine GAAP for non-publicly accountable entities (NAPAEs). The Company applied Section 35, Transition to the PFRS for SMEs, in preparing the financial statements, with January 1, 2010 as the date of transition. The Company has consistently applied the accounting policies set forth below to all the years presented, except those relating to the classification and measurement of financial instruments. An explanation of how the PFRS for SMEs has affected the reported financial position, financial performance and cash flows of the Company is provided in the succeeding paragraphs. The preparation of the Companys financial statements in conformity with PFRS for SMEs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Companys accounting policies. The areas involving a high degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. The Preface to PFRS for SMEs provides that the PFRS for SMEs shall be used by entities that meet the definition of an SME, as set forth in the SEC En Banc Resolution dated August 13, 2009.

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The SEC defines SMEs for financial reporting purposes as entities that meet all of the following criteria:
a) Total assets of between 3 million and 350 million or total liabilities of between 3 million and

b) c) d) e)

250 million; Not required to file financial statements under Securities Regulation Code Rule 68.1; Not in the process of filing financial statements for the purpose of issuing any class of instruments in a public market; Not holders of secondary licenses issued by a regulatory agency, such as banks, investment houses, finance companies, insurance companies, security brokers/dealers, mutual funds and pre-need companies; and Not public utilities.

3. Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous financial year except for the adoption of PFRS for SMEs starting January 1, 2010. As stated above, these are the Companys first annual financial statements prepared in compliance with PFRS for SMEs. The adoption of PFRS for SMEs did not have material impact on the Companys financial statements except for the following:

Section 28, Employee Benefits Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees, including directors and management. This section applies to all employee benefits, except for share-based payment transactions. The Company had no unamortized actuarial gain (loss) in 2009 and 2008, thus, restatement on the Companys financial statements is not required. Section 29, Income Tax This section covers accounting for income tax. It requires an entity to recognize the current and future tax consequences of transactions and other events that have been recognized in the financial statements. These recognized tax amounts comprise current tax and deferred tax. Current tax is tax payable (refundable) in respect of the taxable profit (tax loss) for the current period or past periods. Deferred tax is tax payable or recoverable in future periods, generally as a result of the entity recovering or settling its assets and liabilities for their current carrying amount, and the tax effect of currently unused tax losses and tax credits. The adoption of this standard resulted to disclosing the valuation allowance that was provided on the Net Operating Loss Carryover (NOLCO) that is deemed not recoverable in future periods (Note 16). The Company deemed that there is no enough taxable income in the future from which the NOLCO may be applied, thus, a full allowance was recognized for NOLCO.

Effect on the Statement of Cash Flows for 2009 There is no material differences between the Companys statement of cash flows prepared under PFRS from SMEs and statement of cash flows prepared under Philippine GAAP for NPAEs.

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4. Summary of Significant Accounting Policies Use of Judgments, Estimates and Assumptions The preparation of the financial statements in conformity with PFRS for SMEs requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions used in the accompanying financial statements are based upon managements evaluation of relevant facts and circumstances as of balance sheet date. Actual results could differ from such estimates. Revenue and Cost Recognition Revenue is recognized when it is probable that the economic benefits associated with the transactions will flow to the Company and the amount of revenue can be measured reliably. The following specific recognition criteria must also be met before revenue is recognized: Advertising revenue and production costs Advertising revenue is recognized when services are rendered and earned and production costs are recognized when incurred. Interest income Interest income on cash in banks is recognized as it accrues. Cash Cash includes cash on hand and in banks. Cash in banks earns interest at the prevailing bank deposit rates. Short-term Investments Short-term investments are made for varying periods depending on the immediate cash requirements of the Company and earn interest at the respective short-term investment rates. Short-term investments are recorded in the balance sheet at fair value. Changes in fair value are recorded under Fluctuation gain (loss) in value of short-term investments account in the statement of income. Interest earned is recorded in interest income. Receivables Receivables are recognized and carried at billable amounts less any allowance for doubtful accounts. A provision for doubtful accounts is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of provision is the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the effective interest rate. The provision is recognized in the statement of income. Property and Equipment Property and equipment, except for land, are carried at cost less accumulated depreciation and any impairment in value. Land is carried at cost less any impairment in value. The initial cost of property and equipment comprises its purchase price, including import duties, taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance, are normally charged against income in the period the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of

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property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property and equipment. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, as follows: Building Production equipment Office furniture, fixtures and equipment Transportation equipment Years 10 2-3 2-3 3

The estimated useful lives of the property and equipment are reviewed annually based on factors that include asset utilization, technological changes, environmental factors and anticipated use of the property and equipment to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property and equipment. Impairment of Assets The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying values may not be recoverable. If any such indication exists or where the carrying values exceed the estimated recoverable amounts, the assets or cash-generating units are written down to their recoverable amounts. The recoverable amount of property and equipment is the greater of net selling price and value in use. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the statement of income. Retirement Cost Retirement costs are actuarially determined using the projected unit credit method. This method reflects services rendered by employees up to the date of valuation and incorporates assumptions concerning employees projected salaries. Retirement costs include current service cost plus amortization of past service cost, experience adjustments and changes in actuarial assumptions over the expected average remaining working lives of the covered employees. Income Tax Current tax Current tax assets and liabilities for the current and prior period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted at the balance sheet date. Deferred tax Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the 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, with certain exceptions. Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits from excess of minimum corporate income tax (MCIT) over regular corporate income tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is probable that taxable profit will be available against which the deductible temporary

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differences and carryforward of unused tax credits from excess MCIT and NOLCO can be utilized. 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 assets to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are applicable 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. Equity Capital stock is measured at par value for all shares issued. Retained earnings represent accumulated earnings of the Company less dividends declared. Provisions Provisions 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. General and Administrative Expenses General and administrative expenses constitute costs of administering the business. These are recognized as expenses when incurred. Foreign Currency Transactions The Companys financial statements are presented in Philippine Peso, which is the functional and presentation currency. Transactions in foreign currencies are initially recorded at the Philippine peso currency rate ruling at the date of the transaction. However, monetary assets and liabilities denominated in foreign currencies are retranslated at the Philippine peso closing rate of exchange prevailing at the balance sheet date. All differences are taken to profit or loss during the period of retranslation. Contingencies Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed when an inflow of economic benefits is probable. Subsequent Events Post year-end events that provide additional information about the Companys 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 the financial statements when material.

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5. Cash This account consists of: Cash on hand Cash in banks 73,411 2009 103,411 1,280,295 5,481,669 1,353,706 5,585,080 2010

Cash in banks earns interest at the prevailing deposit rates. 6. Short-term Investments Short-term investments consist of money market placements with maturities of more than three (3) months up to one (1) year and earn interest at the prevailing short-term investments rates ranging from 0.02% to 7.88% in 2010 and 0.02% to 7.88% in 2009. The investment was disposed in 2010. Beginning balance Disposal Interest income earned Fluctuation gain Foreign exchange loss Ending balance 2010 5,165,261 (5,925,716) 319,921 698,634 (258,100) 2009 4,593,452 (870,840) 451,378 1,127,370 (136,099) 5,165,261

In 2010, the Company has a total time deposit account with a local commercial bank amounting 6,400,000 with interest rate of 4.19% per annum. For the year ended December 31, 2010, interest income earned amounted to 73,153. 7. Receivables This account consists of: Due from DLL, Inc. Creditable withholding tax Due from Unlimited Productions, Inc. (UPI) (Note 11) Trade accounts receivable Advances to employees 2010 2009 5,925,716 1,357,417 1,249,560 1,032,456 84,923 8,400,512 346,020 1,434,300 13,610 3,043,490

Due from DLL is noninterest bearing and are generally collectible in the short-term.

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8. Property and Equipment The rollforward analysis of this account follows:


2010 Production Equipment 12,551,045 50,499 (1,481,316) 11,120,228 11,637,793 692,465 (1,481,316) 10,848,942 271,286 2009 Production Equipment 20,009,014 905,149 (8,363,118) 12,551,045 19,168,691 832,220 (8,363,118) 11,637,793 913,252 Office Furniture, Fixtures and Transportation Equipment Equipment 1,666,734 29,847 1,696,581 1,626,748 45,728 1,672,476 24,105 2,926,365 2,926,365 2,926,364 2,926,364 1 Office Furniture, Fixtures and Transportation Equipment Equipment 1,696,581 18,805 (128,161) 1,587,225 1,672,476 26,293 (128,161) 1,570,608 16,617 2,926,365 (1,310,909) 1,615,456 2,926,364 1 (1,310,909) 1,615,456

Land Cost At January 1, 2010 Additions Retirements/Disposal At December 31, 2010 Accumulated Depreciation At January 1, 2010 Depreciation (Note 14) Retirements/Disposal At December 31, 2010 Net Book Value as at December 31, 2010 1,802,250 1,802,250 1,802,250

Building 3,542,367 3,542,367 3,542,367 3,542,367

Total 22,518,608 69,304 (2,920,386) 19,667,526 19,779,000 718,759 (2,920,386) 17,577,373 2,090,153

Land Cost At January 1, 2009 Additions Retirements/Disposal At December 31, 2009 Accumulated Depreciation At January 1, 2009 Depreciation (Note 14) Retirements/Disposal At December 31, 2009 Net Book Value as at December 31, 2009 1,802,250 1,802,250 1,802,250

Building 3,542,367 3,542,367 3,542,367 3,542,367

Total 29,946,730 934,996 (8,363,118) 22,518,608 27,264,170 877,948 (8,363,118) 19,779,000 2,739,608

In the ordinary course of business, the Company acquires property and equipment either through purchase or in exchange for services. For assets acquired on account, the full contract price is recorded and the related liability is recognized. Depreciation charged against current operations amounted to 718,759 and 877,948 in 2010 and 2009, respectively (Notes 12, 13 and 14).

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9. Other Assets This account consists of: Prepaid value-added tax (VAT) Investment in preferred shares Receivable from a travel agency Rental deposits Others 2010 53,811 21,000 5,000 8,000 40,259 128,070 2009 53,811 21,000 10,694 8,000 40,258 133,763

The prepaid VAT represents the amount of VAT remitted prior to the collection of the related billings. Others account consists of cash performance bonds and deposit. 10. Accounts Payable and Accrued Expenses This account consists of: Accounts payable (Note 8) Accrued expenses Output VAT Withholding taxes payable Other payables 2010 736,290 180,206 93,756 1,010,252 2009 674,690 112,000 386,085 95,714 1,379 1,269,868

Output VAT is presented net of input VAT. As of December 31, 2010 and 2009, input VAT amounted to 10,644 and 20,232, respectively. 11. Related Party Transactions Transactions between related parties are based on terms similar to those offered to non-related parties. Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions and the parties are subject to common control or common significant influence. Related parties may be individuals or corporate entities. Related party transactions consist mainly of noninterest-bearing cash advances to UPI for working capital requirements amounting 1,032,456 and 346,020 as of December 31, 2010 and 2009, respectively (Note 7).

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12. Production Costs This account consists of: Talent fees Salaries and wages Depreciation (Notes 8 and 14) Fuel and oil Transportation and travel Meal expenses Post production Rental of production facilities Supplies Repairs and maintenance Outside services 2010 3,496,024 2,136,420 692,464 389,103 333,420 179,103 145,341 98,105 96,907 38,550 7,605,437 2009 4,044,224 4,490,757 832,220 640,676 698,273 287,841 282,845 95,790 478,885 112,847 111,111 12,075,469

13. General and Administrative Expenses This account consists of: Retirement cost (Note 15) Communication, light and water Outside services Salaries and wages Employee benefits Taxes and licenses (Note 18) Insurance General administration Supplies Entertainment, amusement and recreation (Note 16) Repairs and maintenance Depreciation (Notes 8 and 14) Advertising and promotions Courier, postage stamps and telegram Trainings and seminars Miscellaneous 2010 2,529,579 1,117,178 960,729 861,806 533,943 278,381 270,919 231,815 137,067 96,899 69,831 26,295 10,272 693 52,620 7,178,027 2009 1,049,251 1,843,000 1,053,064 1,848,936 998,328 317,790 240,582 124,518 304,913 348,166 292,234 45,728 57,306 22,479 2,240 60,024 8,608,559

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14. Depreciation Depreciation is distributed as follows: Production costs (Note 12) General and administrative expenses (Note 13) 2010 692,464 26,295 718,759 2009 832,220 45,728 877,948

15. Retirement Plan The Company has a funded, noncontributory, defined benefit pension plan covering substantially all of its regular employees. The benefits are based on years of service and compensation on the last year of employment. Past service costs are amortized over the expected average future service years of plan members estimated to be 20.3 years in 2010 and 2009. Total retirement cost amounted to 2,529,579 and 1,049,251 in 2010 and 2009, respectively (Note 13). In 2010, the Company paid separation pay amounting 2,363,579 to its retired employees. Based on the actuarial valuation report as of September 30, 2008, computed using the projected unit credit method, the actuarial accrued liability amounted to 7,452,358. The principal actuarial assumptions used to determine pension benefits included investment yield rate of 5% and salary increase rate of 10% per annum. The Companys annual contribution to the retirement plan consists of a payment covering the current service cost for the year plus payments toward funding the actuarial accrued liability. 16. Income Tax Provision for income tax consists of: 2010 Current: Final MCIT Deferred 53,104 Provision for income tax pertains to final tax and MCIT. Income taxes include corporate income tax, as discussed below, and final taxes paid at the rate of 20.0%, which is a final withholding tax on gross interest income from debt instruments and other deposit substitutes. 22,259 150,655 (119,810) 189,517 188,098 (18,222) 2009 19,641

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Effective November 1, 2005, Republic Act (RA) No. 9337, an act amending the National Internal Revenue Code (NIRC of 1997), provides that the RCIT rate shall be 35.0% until January 1, 2009. Starting January 1, 2009 the RCIT rate shall be 30.0%. Interest allowed as a deductible expense is reduced by an amount equivalent to 42.0% of interest income subjected to final tax starting November 1, 2005 until December 31, 2008. Starting January 1, 2009, interest allowed as deductible expense shall be reduced by 33%. Revenue Regulations No. 10-2002 defines expenses to be classified as entertainment, amusement and representation (EAR) expenses and sets a limit for the amount that is deductible for tax purposes. EAR expenses are limited to 0.5% of net sales for sellers of goods or properties or 1% of net revenue for sellers of services. For sellers of both goods or properties and services, an apportionment formula is used in determining the ceiling in such expenses. EAR expenses (included under General and administrative expenses account in the statements of income) amounted to 96,899 in 2010 and 348,166 in 2009 (Note 13). As of December 31, 2010, the Company did not recognize its deferred tax assets on NOLCO because of its limited capacity to take advantage of their benefits, thus, full valuation allowance was recognized. Details of which are as follow: NOLCO Year Incurred 2010 MCIT Year Incurred 2008 2009 2010 Amount 215,084 188,098 150,655 553,837 Expired Balance 215,084 188,098 150,655 Expiry Year 2011 2012 2013 Amount 74,669 Expired Balance 74,669 Expiry Year 2013

The net deferred tax assets as of December 31, 2010 and 2009 relate to the tax effects of the following: 2010 Deferred tax assets: Unamortized past service cost Unrealized foreign exchange loss Nondeductible expense Less deferred tax liabilities: Unearned income 449,093 91,302 12,295 552,690 552,690 2009 497,542 58,456 12,295 568,293 135,413 432,880

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A reconciliation of the Companys statutory income tax rate to effective income tax rate follows: 2010 Statutory income tax rate Add (deduct) tax effects of: Changes in unrecognized deferred tax assets Excess of MCIT over RCIT Interest income subjected to final tax Income subject to other tax rate Expired MCIT Nondeductible expense Expired NOLCO Effective income tax rate 30.00% 93.19 46.19 (6.88) (129.65) 32.85% 30.00% (7.68) (2.98) (0.85) (29.38) 12.93 3.33 11.09 16.46% 2009

17. Contingencies The Company has various contingent liabilities arising in the ordinary conduct of business which are either pending decision by the courts or being contested, the outcomes of which are not presently determinable. In the opinion of management and its legal counsel, the eventual liability under these lawsuits or claims, if any, will not have a material or adverse effect on the Companys financial position and results of operations. No provisions were made during the year. 18. Disclosures Required Under Revenue Regulations 15-2010 The Company reported and/or paid the following taxes in 2010: Value Added Tax The Companys sales are subject to output value added tax (VAT) while its importations and purchases from other VAT-registered individuals or corporations are subject to input VAT. The VAT rate is 12.0%
a. Net Sales/Receipts and Output VAT declared in the Companys VAT returns filed for the

year. Net Sales/ Receipts Taxable Sales: Sales of services Others 13,714,906 374,691 14,089,597 Output VAT 1,645,789 44,963 1,690,752

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b. Input VAT Balance at January 1, 2010 Current years domestic purchases/payments for: Goods for resale/manufacture or further processing Goods other than for resale or manufacture Capital goods subject to amortization Capital goods not subject to amortization Services lodged under cost of goods sold Services lodged under other accounts Claims for tax credit/refund and other adjustments Balance at December 31, 2010 c. Information on the Companys importation for 2010 The Company does not undertake importation activities.
d. Other Taxes and Licenses for 2010

20,231 44,755 3,440 181,772 (239,554) 10,644

Taxes and licenses, local, and national, include real estate taxes, licenses and permits for 2010: License and permits fees Real estate taxes Documentary stamp taxes Others e. Withholding Taxes Details of withholding taxes in 2010 follow: Withholding taxes on compensation and benefits Expanded withholding taxes Final withholding taxes f. 252,827 389,896 642,723 Tax Assessment and Cases The Company has no deficiency tax assessments, whether protested or not. The Company has not been involved in any tax cases under preliminary investigation, litigation and/or prosecution in courts or bodies outside the BIR. 260,431 4,368 360 13,222 278,381

19. Approval of the Financial Statements The accompanying financial statements have been approved and authorized for issuance by the Board of Directors on March 14, 2011.

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