DISRUPTION INNOVATION STRATEGY
“Create breakthroughs to close the growth gap and deliver new sources of value” DR. HITENDRA PATEL
Ayala at 185 Years: The Ayala Sustainability Our Leadership Business of Business Building: Faces of Our Social Blueprint: Bridging the | PAGE 20 The AC Energy Transformation Commitment | PAGE 14 Filipino to 2030 | PAGE 18 Story | PAGE 52 DISRUPTION INNOVATION STRATEGY DR. HITENDRA PATEL Helping individuals and teams know when to follow the rules, when to break the rules and when to make the rules, to drive 10x growth.
THE BIG PICTURE partnerships, new markets, and new transformational Disruption is inevitable, especially in our highly decisions. Amazon’s response is to treat every day technological, rapidly changing customer and as Day 1 to ensure that the company operates with increasingly more competitive business environment. a startup mindset: nimble, flexible, and constantly What is certain is that the future will continue to challenging the status quo. create shockwaves that will redefine if not reshape entire industries. Enterprises will have no choice THE BOTTOMLINE but to adapt to the speed of change and relentlessly The enemy of innovation is complacency, but the innovate to create value in new—and often last five years has shown that Ayala is anything but unexpected—ways. complacent. Ayala has made innovation a strategic imperative and its leaders broadly and frequently THE DETAILS communicate the importance of innovation. It has Today’s global landscape is dotted with the success invested in building innovation management systems stories of entrepreneurs whose unconventional across the organization and trained hundreds of ideas are upending tried and tested business individuals and teams in innovation, to be “future- models, and whose companies have displaced ready.” Ayala’s efforts have been recognized by the market leaders in every market. Brands like Apple, Global Innovation Management Institute as the Amazon, Alibaba, Facebook, Google, Netflix, Airbnb, first company to be Level 2 Certified in Innovation and Uber are synonymous with breakthroughs that Management in Southeast Asia. Composed of four are transforming the way we live, work, socialize, levels, this certification recognizes Ayala’s maturity in shop, travel, and entertain ourselves. Of course, terms of innovation as a management discipline and the magnitude of disruption has also led to the near corporate function. This is seen in Ayala’s continuing extinction of former market leaders like Blackberry, strong innovation performance, robust pipeline of Motorola, Kodak, and Sears. innovation projects, and broad mass of individuals trained in disruptive thinking and deployed to work How should companies evolve to survive the future? on several innovation initiatives.
The quick answer is to anticipate it and take nothing Ayala has aggressively pursued new opportunities for granted. Leaders will need to think differently and in energy, industrial technologies, infrastructure, act differently. Leaders will need to look beyond their healthcare, and education, while embracing a • “How Likely Is Your Industry to Be Disrupted? traditional models and plan for foreseeable growth solutions mindset that focuses on ethnology FIND OUT MORE This 2×2 Matrix Will Tell You” by Omar Abbosh, gaps. Leaders will have to imagine future worlds with and technology to guide its entry, build-out, and Much has been written about disruption and Vedrana Savic, & Michael Moore Millennials and Centennials interacting seamlessly expansion in these new industries. This approach innovation. To learn more, I highly recommend https://hbr.org/2018/01/how-likely-is-your-industry-to-be-disrupted-this-2x2-matrix-will-tell-you with robotic, biotech, artificial intelligence, and green has allowed Ayala to streamline and strengthen the following articles: • “Rapid, Iterative Experimentation Process – energy technologies. Leaders will have to go beyond its core assets in real estate, financial services, • “It’s the End of the World as We Know It” A ‘Lean Startup-Style’ Approach To Innovation” optimizing products and services and create new and telecommunications as well, allowing these by Hitendra Patel by Courtney Wood, Ron Jonash, & Mick Simonelli offerings and experiences, new business models, new subsidiaries to be more competitive and resilient. http://ixl-center.com/index.php/2019/04/02/its-the-end-of-the-world-as-we-know-it/ https://hbr.org/2018/01/how-likely-is-your-industry-to-be-disrupted-this-2x2-matrix-will-tell-you
2 AYALA CORPORATION 2018 INTEGRATED REPORT 1 STATEMENT FROM THE BOARD (GRI 102-32)
The Board ensures the integrity of this report and confirms that all disclosures on performance and impact on key material topics are fairly presented. The Board was supported by the Ayala management in providing high-level NOTE ON FORWARD-LOOKING STATEMENTS supervision to the internal teams who were convened to undertake the reporting process. Internal parties devoted significant efforts to ensure that This report contains statements describing the company’s objectives, the Ayala story is fairly presented in this report. Ayala also engaged external projections, estimates, and expectations, which may be “forward-looking parties, SyCip Gorres Velayo & Co. and DNV GL, to validate and assure statements” within the meaning of applicable securities laws and regulations. financial and non-financial disclosures to improve accuracy, objectivity, and Actual results could differ materially from those expressed or implied. Important overall report quality. The report was prepared under the supervision of the factors that could make a difference to the company’s operations include, among Chief Finance, Risk, and Sustainability Officer: Jose Teodoro K. Limcaoco. others, economic conditions affecting demand or supply and price conditions in the domestic and overseas markets in which the company operates, changes in The integrated report contains certain forward-looking statements which, government regulations, tax laws, and other statutes and incidental factors. by their nature, involve risk and uncertainty because they relate to future events and circumstances that may be beyond Ayala’s control. In addition, regulations of the Philippine Stock Exchange prohibit making price sensitive forecasts without considerable independent review and process. The directors therefore advise readers to use caution regarding interpreting any forward-looking statements in this report.
The Board unanimously approved this report on 12 March 2019, and authorized its release on 26 April 2019.
Jaime Augusto Zobel de Ayala Fernando Zobel de Ayala CHAIRMAN AND CEO PRESIDENT AND COO
Jose Teodoro K. Limcaoco CHIEF FINANCE, RISK, AND SUSTAINABILITY OFFICER
2 AYALA CORPORATION 2018 INTEGRATED REPORT 3 In this report, we also introduce the Ayala Sustainability Blueprint: Bridging the Filipino to 2030, our master plan to purposefully contribute to the UN Sustainable Development Goals (SDGs). We had ABOUT THIS a rigorous process that involved senior management and executives across the group to determine and solidify our targets in contributing to the SDGs. We also improved our data collection process, INTEGRATED REPORT following a more diligent approach to embed a culture of reporting. We analyzed our financial and non-financial data to ascertain our accomplishments and determine Ayala is committed to integrated thinking and a strong focus on sustainability with the publication of this the opportunities we can maximize to scale impact. All information were reviewed formally by the 2018 Integrated Report. We continue to improve our corporate reporting, giving emphasis on our value Investor Relations and Sustainability teams and approved by Ayala’s Management and Board of creation, strategy, and performance. This report gives a holistic view of our businesses and our impact Directors before publication. to economy, society, and environment.
REPORTING SCOPE REPORTING STANDARDS OUR APPROACH TO ON OUR FINANCIAL ON OUR SUSTAINABILITY FEEDBACK (GRI 102-50, 102-51, 102-52) EXTERNAL ASSURANCE STATEMENTS PERFORMANCE (GRI 102-53) (GRI 102-56)
This report states the results and We continue to adopt global best Our Board’s Audit Committee SyCip Gorres Velayo & Co., DNV GL is an independent We aim to foster strong value created by the conglomerate practices in reporting non-financial provides oversight on the a member firm of Ernst & Young organization and global provider stakeholder relationships for our key stakeholders. information. This report was performance of external International Ltd, is the external of certification, assurance and we welcome feedback It details our consolidated prepared in line with the guiding and internal auditors. auditor of the company’s assessment, and training and inquiries to help us financial, economic, social, principles and content elements It is mandated to review and financial statements, services that we engaged with improve our future reporting. and environmental performance of the Integrated Reporting
A copy of our financial statements can be accessed at www.ayala.com.ph.
4 AYALA CORPORATION 2018 INTEGRATED REPORT 5 TABLE OF CONTENTS 20 OUR LEADERSHIP 22 Message from the Chairman 26 Report of the President 30 Board of Directors 36 Management Committee OUR VISION OUR PURPOSE We will be the most relevant, innovative, A singular purpose drives us at Ayala: 38 OUR VALUE CREATION and enduring Philippine-based business making people’s lives better. Through our 40 Our Portfolio group, enabling shared value and prosperity businesses and investments, we harness 42 Our Financial Management Strategy for the many stakeholders we serve. today’s disruptive trends to generate 48 Our Business Model a far-reaching impact in the markets where 56 Our Outlook OUR MISSION we operate. This drives everything we do 60 Our Strategy Anchored on values of integrity, long-term as a company–from strategic development, 62 Risk Management vision, empowering leadership, financial management, talent management, 72 Stakeholder Engagement and with a strong commitment to national and deployment of synergies. 76 Materiality development, Ayala fulfills its mission to 78 The Ayala Sustainability Blueprint: ensure long-term profitability and value We live out this purpose by building and creation. Ayala creates synergies as it managing a portfolio of long-term strategic Bridging the Filipino to 2030 builds mutually-beneficial partnerships holdings in key industries. We select sectors 80 An Annual Look at Non-Financial Performance and alliances with those who share its ripe for disruption and where our resources, 96 Highlighting Results From Our 360o philosophies and values. expertise, and reputation can help unlock Sustainability Reporting Framework stakeholder value in a sustainable and OUR CORE VALUES risk-adjusted manner. By deploying and 104 BUSINESS REVIEW • Integrity converting our various forms of capital into 106 Ayala Land • Innovation and Strategy businesses and investments that are not only 110 Bank of the Philippine Islands • Empowering leadership profitable but resilient, we believe we can 114 Globe Telecom • Pride in Execution consistently deliver returns above our cost • Commitment to National Development of capital. 118 Manila Water 122 AC Energy 126 AC Industrials 130 AC Infrastructure 134 AC Health 138 AC Education 142 AC Ventures 146 Ayala Foundation
150 OUR CORPORATE GOVERNANCE 177 ANNEXES
A view of Ayala’s headquarters from the main thoroughfare.
6 AYALA CORPORATION 2018 INTEGRATED REPORT 7 AYALA AT A GLANCE
Ayala Corporation is one of the largest and most diversified business The Makati skyline at dusk. groups in the Philippines, with business interests in real estate, banking, telecommunications, water, NET INCOME power, industrial technologies, (IN BILLION PESOS) 31.8 infrastructure, healthcare, and 30.3 14.6% 11.0% 15.6% 10-YEAR 10-YEAR 10-YEAR education. Its social commitment NET INCOME CAGR RETURN ON COMMON EQUITY TOTAL SHAREHOLDER RETURN CAGR arm, Ayala Foundation, has programs 26.0 that focus on education, youth 22.3
leadership, sustainable livelihood, 18.6 and the promotion of arts and culture. With headquarters in Makati City and 12.8 P 1.4 P404 P200 11.2 10.6 TRILLION IN 10-YEAR BILLION IN 2018 10-YEAR TAXES BILLION 10-YEAR operations mainly in the Philippines, 9.4 it continues to grow its regional and 8.1 GROUP-WIDE CAPEX PAID BY THE AYALA GROUP PARENT CAPEX SPENT global footprint, serving millions of customers across all market segments. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 P1.2 P60.6 P302.4 TRILLION IN 2018 TOTAL ASSETS BILLION IN 2018 CASH AND BILLION IN 2018 REVENUES RETURN ON CASH EQUIVALENTS COMMON EQUITY (IN PERCENTAGES)
13.2 12.6 1.25 11.8% P48.80 12.2 12.1 2018 CURRENT RATIO 2018 LOAN TO VALUE RATIO 2018 EARNINGS PER SHARE
12.2 11
9.1 9.8
8.8 8.6 74.1 601.3 133,170 MILLION GLOBE CUSTOMERS IN 2018 GIGA WATT HOURS RENEWABLE JOBS GENERATED ENERGY GENERATED IN 2018 ACROSS THE AYALA GROUP IN 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
8 AYALA CORPORATION 2018 INTEGRATED REPORT 9 OUR 2018 MILESTONES MARCH AUGUST OCTOBER NOVEMBER • Manila Water acquires a • BPI raises US$600 million in • Ayala Land raises ₱8 billion from • AC Energy acquires a 20 percent and 18 percent stake senior unsecured bonds the issuance of five-year bonds, ~25 percent ownership in The in PT. Sarana Tirta Ungaran of representing the sixth and final Blue Circle to jointly develop and • Manila Water implements Indonesia and Eastern Water tranche of its ₱50 billion debt operate a pipeline of ~1,500MW of Thailand, respectively a joint venture project with securities program of wind projects across the Bulacan Water District to Southeast Asian region • Ayala Land increases direct develop and operate the water JANUARY JUNE • Manila Water receives approval ownership in Prime Orion supply system and sanitation • Manila Water enters into two • AC Energy partners with BIM • Manila Water receives the to develop, operate, and maintain Philippines to 67.2 percent separate joint ventures with Group of Vietnam to jointly franchise to operate facilities in Bulakan, Bulacan the water supply systems of from 63.1 percent San Fabian, Pangasinan and Tubig Pilipinas Group and City develop over 300MW of solar and maintain the water • AC Infrastructure, Unisys power projects in Ninh Thuan supply facilities and Tanauan, Batangas of Ilagan Water District for Philippines, and Aboitiz the development, operations, province, Vietnam septage management in InfraCapital submit an • IMI inaugurates its manufacturing Sta. Barbara, Pangasinan and maintenance of water unsolicited proposal for facility in Serbia, which caters to supply facilities in Malasiqui, the design and development the growing demand for automotive Pangasinan and Ilagan City, of a national identity products in the European region Isabela, respectively infrastructure solution • AC Infrastructure and partner Zalora affiliate Brillant launch APRIL Entrego, a technology-driven • IMI ranks 18th among end-to-end logistics and Manufacturing Market Insider’s FEBRUARY solutions provider • Ayala Land acquires an top 50 list EMS companies in the JULY additional 17.2 percent stake world based on revenues, moving • Manila Water gets approval • AC Health invests in AIDE, in MCT, bringing its ownership up from 20th in the previous year from Pagsanjan Water District a mobile home health app to design, rehabilitate, and DECEMBER to 66.25 percent SEPTEMBER expand the water supply • AC Energy partners with AMI • BPI raises ₱25 billion in fixed rate • AC Infrastructure together with Renewables Energy for the • AC Industrials enters the solar and sanitation facilities of its bonds, the first tranche of its Aboitiz InfraCapital, Alliance development of solar farms totaling energy business through the service area ₱50 billion peso bond and Global Group, Asia’s Emerging 80MW in Vietnam’s provinces acquisition of a controlling stake commercial paper program • IMI ranks the 5th largest Dragon Corporation, Filinvest of Khanh Hoa and Dak Lak in Merlin Solar Technologies automotive EMS company Development Corporation, • AC Health enters into an • AC Education acquires a worldwide by revenue size, JG Summit Holdings, and Metro • The Ayala and Yuchengco groups agreement with Jasminum ~96 percent stake in National MAY according to New Venture Pacific Investments Corporation, sign definitive agreements for Corporation for the acquisition Teachers College • AC Energy participates in the Research known as NAIA Consortium, the merger of AC Education of a 75 percent stake in Negros Australian renewables market are granted Original Proponent Grace, which operates over 70 • Globe approves the and iPeople, resulting in seven through a joint venture with establishment of a tower Status by the Department of educational institutions with a drugstores in the Central and international renewable energy company that will help Transportation and the Manila combined student population Western Visayas developer, UPC Renewables International Airport Authority of ~60,000 speed up the building • AC Industrials signs a and deployment of cellular for its unsolicited proposal to • BPI completes its stock rights • AC Industrials is appointed by distributorship agreement towers in the country rehabilitate, upgrade, expand, offering, raising ₱50 billion to operate, and maintain the Ninoy SAIC MAXUS Automotive as the with Kia Motors Corporation fund its business operations Aquino International Airport for official distributor of Maxus to distribute the Kia brand and expansion a period of 15 years vehicles in the Philippines in the Philippines
10 AYALA CORPORATION 2018 INTEGRATED REPORT 11 OUR GEOGRAPHIC REGION 8 - EASTERN VISAYAS WORLD MAP Biliran PRESENCE Eastern Samar Northern Samar Samar “We believe that this continued Leyte momentum in our performance Southern Leyte validates our long-term strategy of REGION 2 - CAGAYAN VALLEY REGION 9 - ZAMBOANGA PENINSULA building a more resilient portfolio by Batanes Zamboanga Sibugay investing in a combination of new Cagayan Zamboanga del Norte industries undergoing disruption and Isabela Zamboanga del Sur expanding on our strong franchises” Nueva Vizcaya Quirino REGION 10 - NORTHERN MINDANAO Bukidnon Jaime Augusto Zobel de Ayala REGION 3 - CENTRAL LUZON Camiguin Aurora Misamis Occidental Canada Bataan Misamis Oriental Bulacan Lanao del Norte Nueva Ecija LEGEND USA Pampanga REGION 11 - DAVAO China Japan Ayala Land Tarlac Compostela Valley Morocco BPI Zambales Davao del Norte Mexico Globe British Virgin Davao del Sur Saipan Islands Manila Water REGION 4A - CALABARZON Davao Occidental AC Industrials Batangas Davao Oriental Rwanda Kenya AC Infrastructure Cavite Seychelles AC Energy Laguna REGION 12 - SOCCSKSARGEN Quezon Sultan Kudarat Fiji AC Health Palau Island AC Education Rizal North Cotabato Botswana South Cotabato Chilehile AC Ventures REGION 4B - MIMAROPA Saranggani Marinduque Gen. Santos City Occidental Mindoro New Zealand PHILIPPINES Oriental Mindoro REGION 13 - CARAGA National Capital Region (NCR) Palawan Agusan del Norte Caloocan Romblon Agusan del Sur Las Pias Surigao del Norte Navotas REGION 5 - BICOL Surigao del Sur Makati Albay Dinagat Islands Hong Kong Taiwan Malabon Camarines Norte Mandaluyong Camarines Sur REGION 14 - CORDILLERA Norway Manila Catanduanes ADMINISTRATIVE REGION (CAR) Thailand Myanmar Marikina Masbate Abra Ireland Vietnam Muntinlupa Sorsogon Apayao Kuwait Pasig Benquet Cambodia Ifugao Israel Jordan Paraaque REGION 6 - WESTERN VISAYAS United Czech Bahrain Kingdom Republic Pasay Aklan Kalinga r Malaysia Saudi Qata Serbia Pateros Antique Mountain Province France Arabia Oman Quezon City Capiz Sulu Bulgaria Singapore Brunei
San Juan Iloilo Surigao del Sur Switzerland Dubai Taguig Guimaras (UAE) Valenzuela Negros Occidental REGION 15 - AUTONOMOUS REGION Indonesia OF MUSLIM MINDANAO (ARMM) REGION 1 - ILOCOS REGION REGION 7 - CENTRAL VISAYAS Basilan EUROPE MIDDLE EAST SOUTHEAST ASIA Ilocos Norte Bohol Cotabato Ilocos Sur Cebu Lanao del Sur La Union Negros Oriental Maguindanao Pangasinan Siquijor Tawi-Tawi
12 AYALA CORPORATION 2018 INTEGRATED REPORT 13 Here are their stories. FACES OF AYALA’S STARTING OVER WITH A LITTLE HELP EVERY FILIPINO CHILD . . . SOCIAL COMMITMENT FROM YOUR FRIENDS A PEACE HERO Shared by seven generations and spanning almost Sam Abanto, 48 years old, lost everything to Typhoon Bai Rohaniza Sumndad-Usman, AYLC batch 2003, two centuries, Ayala’s commitment to the country Ondoy but has rallied against all odds to eventually lead an is one of the youngest and staunchest peace advocates continues to evolve as it responds to the changing organic farming cooperative in Calauan, Laguna. With the in the country today. She founded Teach Peace Build needs of Filipinos. Deeply rooted in our heritage help of Ayala Foundation through the MDC Greens program, Peace Movement Inc., a non-partisan and is the belief that good business must not only Sam’s group found a way to better their lives through social non-profit organization that aims to make every Filipino bring solid financial returns but must equally entrepreneurship. Aside from growing ornamental plants child a peacebuilder. She regularly works onsite in bring positive change in communities. for Ayala Land’s developments, the group now grows organic Marawi and Maguindanao, where she brings various produce for healthy grocers and restaurants. Sam’s group has groups together to foster dialogue and understanding. We consciously integrate sustainability and recently taken ownership of the program by establishing a AYLC has inspired her to dream bigger. “AYLC was a shared-value principles into our core businesses cooperative called Inang Kalikasan. From a group of 10, the life-changer for me,” she said. “Our batch theme then and scale them to enrich everyday life. We build cooperative has grown to 30 people. Their ₱158,000 worth was ‘Everyday Leadership’. This is directly connected sustainable estates and services, and open of plant orders in 2015 has grown to ₱4.7 million in 2018. to what I do now. AYLC taught me how I can make a access to finance, education, healthcare, mass Sam is now approaching more agencies and potential difference.” To date, Ms. Usman’s movement for peace transport, and energy. partners to further scale their operations. has reached over 65,000 children, youth leaders, teachers, and young professionals. As our business grows, so does our responsibility TAKING THE ROAD LESS TRAVELED for good citizenship. This we exercise through Ann Marie Cunanan, batch 2004 of AYLC, is a young leader THE PRIVILEGE TO SERVE various social commitments, but close to our who quit her high-paying job to create a social enterprise— John Macneil Mendoza of CENTEX exemplifies Ayala’s hearts are these programs: one that merges philanthropy, community development, commitment to service and volunteerism. After finishing and tourism into an innovative business venture. Ann’s class valedictorian at CENTEX, John went to De La • Ayala Foundation’s Center of Excellence in company, Meaningful Travels PH, is a for-profit venture with Salle Lipa high school and Ateneo de Manila on full Public Elementary Education (CENTEX) – helping a strong non-profit core. The group aims to turn people’s scholarships. Now pursuing a career in international bright children from economically disadvantaged wanderlust into actions that enrich remote and poor relations, John still volunteers his time to various families communities. The enterprise upholds a host of sustainability causes. “One of the core values I learned in CENTEX ideals, including cultural heritage preservation, environmental was servant leadership,” he said. “While the school • the Ayala Young Leaders Congress – building a conservation, and the support of grassroots industries. For aimed to raise future leaders, it also taught us that community of like-minded youth leaders across Ann, AYLC inspired her to pursue her advocacies with leadership is not only about being at the forefront but the country to nurture nationalism and faithful vigor: “AYLC really helped me in terms of my formation as a is more about serving the community. It is easy to be stewardship; and leader. It was life-changing to be part of the program. A lot of blinded by prestige and achievements, but this will lead us, even after several years, are really doing something for the to a tiring life if they are one’s only goals. With servant • the HERO Foundation – where we country.” To date, Meaningful Travels has engaged over 600 leadership, one will always be aware that true service collaborate with other business leaders travelers and volunteers and has distributed almost 7,000 is less about the self, but is more about the people who in helping ensure a better future for school kits around the Philippines. gave one the privilege to serve.” the children of our fallen soldiers through education. A FATHER’S LEGACY, A SON’S CALLING On our 185th year, we pay tribute to the Staff Sergeant Jealvies Sarte, an officer under the Civil thousands of beneficiaries who continue to share Over the years, these Relations Service group of the Armed Forces of the Philippines, our business and social commitment to improving collaborations have given rise upholds the legacy of his father who died in the line of duty. He lives. Throughout 2019, Ayala citizens across the group will come together and scale key volunteer to many of the country’s was a scholar of HERO Foundation from high school to college inspiring servant leaders, programs in each business unit to achieve 185,000 and has served two Philippine Presidents and high-ranking hours of volunteer work in communities where we five of whom we are foreign delegates as close-in security. Today, Staff Sergeant live and work. grateful to have met. Sarte and his team serve as a conduit between civilians and the military, making sure that civilians have access to disaster relief Together, we are Committed to the Filipino. assistance and accurate information about military operations. To follow his passion and pay HERO’s support forward, Staff Sergeant Sarte decided to also pursue a career in the military Follow Ayala Corporation on Facebook or visit our website at www.ayala.com.ph to view our videos. despite losing his father to the same vocation. “Serving the country gives us an immense source of pride. It is the ultimate form of service for all of our troops here at the AFP.”
14 AYALA CORPORATION 2018 INTEGRATED REPORT 15 OUR CONTRIBUTION TO THE UNITED NATIONS
Access and Inclusivity Journey Productivity and Competitiveness Journey Responsible Growth and Innovation Journey Completing the SDGs
Ayala Foundation provided 324 jobs through sustainable livelihood programs for indigenous The Ayala group generated a total AC Energy generated 601GWh of renewable BPI distributed ₱170 billion worth communities in Talipanan, Mindoro and El Nido, of 133,170 jobs across the group energy from its wind and solar power plants, of agribusiness loans to support Palawan and for farmers in Calauan Laguna avoiding 342,071 tonnes of carbon agriculture and food security Ayala provides its employees with remuneration Ayala companies distributed ₱792 million within 10 to 20 percent above industry average AC Energy generated a total of 6,841GWh of to support poverty alleviation and livelihood power through its operating companies projects in communities BPI Direct BanKo provided microloans amounting 1:1.3 in male:female employee ratio to ₱3.3 billion from their 200 branches in the Ayala group Generika had 28.4 million sales to more than 40,000 self-employed transactions of generic medicines through micro-entrepreneurs IMI generated US$443 million in value-add 40 percent of managers ranked its 816 drugstores nationwide by manufacturing 832 million units from senior to executive in the Ayala group of products, supporting industries are female FamilyDOC provided affordable primary care on automotive, connectivity, and to 240,000 unique patients through its Globe served 74.1 million customers through emerging technology 54 community-based clinics in Luzon its robust network enabling 956 petabytes of Ayala group fosters equal opportunity information exchange and non-discrimination in the workplace MedGrocer delivered medicines to 6,300 unique individual customers and more than 460,000 GCash deployed Scan to Pay cashless payment employees of its 450 corporate clients systems to 45,000 retail establishments IMI and Globe diverted 98 percent and 12 percent of wastes from landfill, Manila Water removed 9,102 tons of AIDE tapped 798 medical professionals and Fuse lending disbursed loans to 77,000 respectively organic pollutants from used water provided on-demand healthcare services to recipients through its mobile financial over 250,000 subscribers in 74 cities and technology Globe through Project 1 Phone hauled Northwind’s biodiversity study municipalities across the country 288,243 kg of e-waste recorded 3 species of marine turtles Muntinlupa-Cavite Expressway serves an within the Bangui Bay average of 32,000 vehicles per day, Manila Water saved 3.9 million kWh of APEC Schools provided affordable quality potentially saving more than 393 million electricity through its various education to 18,120 students, of which liters of fuel and 17.7 million manhours energy efficiency initiatives in 2018 North Luzon Renewables’ biodiversity study 57 percent are from the D & E market yielded 69 bird species wherein 33 are Light Rail Manila Corporation served endemic, and 17 tree species, 2,012 students finished as APEC Schools’ 165 million passengers through its LRT 1 four of which are IUCN threatened species first batch of senior high graduates with over 95 percent train punctuality Ayala group companies planted 4,719 Ayala Land protects 52 IUCN red-list species AC Education supports the education of a seedlings through Project Kasibulan in El Nido Resorts and Lio Estate total of 10,892 students, through government subsidies of about ₱187 million Ayala Land through BellaVita provided 17,890 Ayala Land maintained 560 hectares Manila Water planted 40,000 seedlings in units of affordable and socialized housing in of carbon forest 100 hectares of land in La Mesa Watershed Ayala Foundation’s CENTEX Training Institute 10 provinces across the country and 500 seedlings in Nabaoy Watershed trained 865 teachers from 87 schools, and Ayala Land shifted 32 of its malls and offices reached 34,600 students since the program Ayala Land developed 300 hectares of green to renewable energy and avoided 102,000 Ayala continues to uphold good started in 2011 space in 13 of its estates for effective rainwater tonnes of carbon governance and respects human rights absorption and promotion of social interaction In partnership with Profuturo, Ayala Foundation Manila Water mounted solar panels in three trained 195 teachers on digital learning Ayala fosters protecting the young and Ayala Malls support 20 Point-to-Point (P2P) used water treatment facilities, generating technologies from 124 schools, benefiting conducted a Children’s Rights workshop bus routes to encourage commuters to use 177,000 kWh of electricity and avoiding 126 12,730 students for managers across the group public transportation tonnes of carbon Ayala garnered a higher than average score Manila Water delivered 1,160 million cubic BPI disbursed ₱10.8 billion worth of loans for sustainable energy projects of SMEs in the Global Child Forum’s Corporate Sector meters of water to more than 25 million and Children’s Rights Benchmark customers in the Philippines, Vietnam and mid-to-large size businesses, avoiding and Thailand 9.6 million tonnes of carbon
Manila Water treated 62.4 million cubic Ayala remains a member of the UN meters of used water from more than Global Compact Network Philippines 142,000 sewer connections
16 AYALA CORPORATION 2018 INTEGRATED REPORT 17 Champions and Core Targets on the Champions and Core Targets on the ACCESS & INCLUSIVITY JOURNEY PRODUCTIVITY & COMPETITIVENESS JOURNEY
SDG 1 No Poverty championed by Ayala Foundation SDG 8 Decent Work and Economic Growth championed Ayala Foundation will support anti-poverty frameworks by Ayala and BPI resulting in 50 percent reduction of extreme poverty in Ayala will support full and productive employment and AYALA’S SDG CHAMPIONS AFI project areas. decent work for all and equal pay for work of equal value Maximizing relevance and impact through focus by ensuring employment remuneration is 10-20 percent SDG 3 Good Health and Well-being championed above the industry average. by AC Health AC Health will champion Universal Health Coverage BPI will expand access to banking and financial services to in the country by providing the largest primary care 25 percent of the unbanked population of the Philippines network, expanding access to quality and affordable (addressable C and D market). medicines, and improving essential hospital and specialty services, touching the lives of one in five Filipinos. SDG 9 Industry, Innovation, and Infrastructure championed by Globe and AC Infrastructure SDG 4 Quality Education championed by AC Education Globe will lead the country’s digital transformation AC Education will help ensure equal access for all women by significantly increasing access to information and men for 85 percent (1,258,095) of non-working population and communications technology for consumers and (aged 15 to 24) to affordable and quality secondary and businesses, providing universal and affordable internet tertiary education, including university, through our own access in the Philippines for 90 percent of the population. schools and helping other institutions. AC Infrastructure will upgrade infrastructure to make them SDG 6 Clean Water and Sanitation championed sustainable, with increased resource efficiency and greater by Manila Water adoption of clean and environmentally sound technologies Manila Water will provide equitable, reliable and and industrial processes with 36,135 tonnes CO2e safe water access in all its concession, and continuously equivalent avoided. ACCESS & INCLUSIVITY increase access to new markets. SDG 11 Sustainable Cities and Communities championed by Ayala Land Ayala Land will enhance inclusive and sustainable urbanization by increasing sevenfold the number of launched affordable housing units. PRODUCTIVITY & COMPETITIVENESS
RESPONSIBLE GROWTH & INNOVATION
MARGINALIZATION UNTAPPED POTENTIAL IRRESPONSIBLE GROWTH Champions and Core Targets on the RESPONSIBLE GROWTH AND INNOVATION JOURNEY In Ayala, we keep a positive and proactive mindset To solidify our commitment to these journeys, each and see that businesses must go beyond making champion has a core target set that is aligned with SDG 7 Affordable and Clean Energy championed SDG 12 Responsible Consumption and Production profit. We ensure that our contributions are for the language of the SDGs with the same deadline of by AC Energy championed by Ayala the betterment of society and that we preserve the 2030. These core targets will be further supported AC Energy will increase its renewable energy portfolio Ayala will achieve an ambitious material footprint that natural resources for future generations as we by stretch targets which may also contribute to to 5 GW in the Philippines and in foreign markets. demonstrates sustainable management and efficient use of natural resources. grow. This paradigm was reinforced with the launch goals that are beyond those championed by each SDG 9 Industry, Innovation, and Infrastructure championed of the UN SDGs which aligns well with our thinking. business unit. The stretch targets of each business by AC Industrials composed of two business units: SDG 13 Climate Change championed by Ayala unit will also be released with their corresponding AC Automotive and IMI Ayala will strengthen resilience and adaptive capacity to Today, we acknowledge the three megatrends key performance objectives after a careful climate related hazards to natural disasters across all its that pose large threats to Filipinos while deliberation has been accomplished. With this AC Industrials will enable the first Philippine-manufactured, sites resulting in minimal casualties. having the most relevance in the industries we Integrated Report, we strengthen our commitment. commercially viable, and market-accepted electric vehicle, are in: marginalization, untapped potential and We proclaim our champions and their respective resulting in reduced emissions. On the demand side, its irresponsible growth. To combat these megatrends, core targets as we continue to concretize their distribution and retail group, AC Automotive, will promote low emission vehicles to the market, ensuring that each the Ayala Sustainability Blueprint outlines the three stretch targets and corresponding key performance brand offering has a minimum of one model not fully journeys to which we commit to take Filipinos to how objectives. All targets will be subjected to a review dependent on a combustion engine powertrain. Globally we envision them by 2030. Each journey includes every two to three years to ensure relevance. and on the manufacturing side, IMI will promote inclusive relevant UN SDGs with the companies from the group and sustainable industrialization by demonstrating To learn more about the Ayala Sustainability Blueprint, manufacturing value add of US$1 billion dollars across all who will champion them. please turn to page 78. developing countries where it has operations.
18 AYALA CORPORATION 2018 INTEGRATED REPORT 19 OUR LEADERSHIP
20 AYALA CORPORATION 2018 INTEGRATED REPORT 21 It is also encouraging to see that, even amid slower “We are undergoing a transformation journey growth, investment spending continues to climb as across the group to build a digital and future- government ramped up its infrastructure agenda ready Ayala. We recognize that to continue and businesses continued their capacity expansion thriving under a rapidly changing environment, initiatives. Investment spending as a percentage of we must evolve from traditional analog thinking GDP improved to 27 percent, the highest since 1996. into incorporating a digital perspective into our This should be seen as a significant contributor strategy and operations.” to sustainable growth for the country. Similarly, household consumption growth only slightly decelerated to 5.6 percent, still one of the committed and effective talent. Our real estate, strongest in the region. banking, telecommunications, and water units are distinct examples of our business-building ability - We are happy to report that Ayala has been developing them from the ground up and nurturing able to sustain its growth trajectory within them to become dominant industry players. this economic environment. We believe that this continued momentum in our performance More recently, we have been directing more validates our long-term strategy of building a more of our resources into our new business platforms resilient portfolio by investing in a combination in energy, industrial technologies, infrastructure, of new industries undergoing disruption and healthcare, and education. Over the past 10 years, expanding on our strong franchises. we have invested nearly ₱200 billion at the parent level to help these businesses build scale while As we took advantage of the favorable domestic employing an active portfolio management environment, we invested an unprecedented level approach to either realize value or drive the of capital across the Ayala group. Over the past 10 businesses, alone or with partners. years, our group has spent ₱1.4 trillion in capital expenditure to lay the foundation for our ambitious The bulk of our capital expenditure at the parent growth aspirations in our core businesses and scale level was deployed to AC Energy, which has started up our emerging businesses. to be a significant contributor to our portfolio. With its operations now beginning to show MESSAGE FROM predictability and combining this with some Throughout the years, we have always prided ourselves in our ability to incubate industry-leading opportunities for value creating divestments, we businesses by allocating new capital, setting up are pleased to see AC Energy starting to provide the THE CHAIRMAN the appropriate governance frameworks, using necessary revenue and income balance to some of our group corporate infrastructure, and assigning our more cyclical and longer gestation businesses. FELLOW SHAREHOLDERS,
Let me begin with a review of the macroeconomic economies, with most economies in the region environment we faced in 2018 to provide some experiencing tempered growth as external risks perspective on the economic forces that defined our weighed on local demand and exports. business environment in the past year. The macro- economic setting provides a crucial framework Here at home, the economy expanded 6.2 percent for the delivery of our business results, given our in 2018, slower than the 6.7 percent growth diversity as a multi-business investment house and recorded in the previous year, as inflation surged the many touch points we have across our economy. to a 10-year high but still with enough positive momentum to keep our growth initiatives in place. On the global front, the world economy was unable Higher global oil prices, food supply problems, to sustain the positive momentum of the previous the weaker peso, and the impact of the tax reform year, largely fueled by the Federal Reserves’ law put pressure on local prices at the end of 2018. aggressive interest rate hikes in reaction to an However, many analysts believe that a recovery expanding US economy. In addition, the rising is forthcoming as inflation softened at the start trade tension between the US and China, as well as of 2019, falling to a one-year low of 3.8 percent political uncertainties in Europe, dampened global in February 2019. business and investor confidence during the year. These developments trickled down to the ASEAN AC Energy partners with the BIM group to build over 300MW of solar power projects in Ninh Thuan province, Vietnam.
22 AYALA CORPORATION 2018 INTEGRATED REPORT 23 its launch in March 2018, it now services the largest • We are committed to upskilling and empowering e-commerce players in the country as well as clients our talent base to help them adjust quickly to P200 BILLION from various industries. these changes and to institutionalizing a culture of 10-YEAR PARENT CAPEX SPENT curiosity, courage, and collaboration, so that we In education, we are awaiting regulatory remain ready for the challenges of a digital world. approval for the merger of AC Education with P1.4 TRILLION iPeople, the Yuchengco group’s education platform We are aware of the long and challenging road 10-YEAR GROUP-WIDE CAPEX SPENT that houses the Mapua University portfolio. The ahead in this digital transformation journey. merger brings together the seven educational However, with the engagement of our people institutions of the two groups, which together across all levels, we are confident that the digital AC Energy is now one of the fastest-growing power will offer quality education to students across and future-ready Ayala that we are aspiring for companies in the region having only started in all income segments and across their campuses can be built within the foreseeable future. 2011, with attributable generating capacity of over in various parts of the country. 1,600 megawatts across renewable and thermal As a final word, I want to thank you all for your platforms. It has recalibrated its strategy to focus Meanwhile, AC Health continues to ramp up its consistent support to Ayala and our institutional on renewable energy, with a target to assemble retail healthcare footprint. We are proud to say evolution throughout the years. As we celebrate five gigawatts in capacity across solar, wind, and that FamilyDoc, our community-based 3-in-1 clinic, our 185th anniversary this year, it gives us a great geothermal technologies by 2025. AC Energy has laboratory, and diagnostics facility, is now the sense of pride to see how we have been able to a pipeline of renewable projects in the Philippines, largest chain of primary care clinics in the country contribute to the country’s economic and social Vietnam, Australia, and Indonesia, which it has with 54 branches across Greater Metro Manila. VIA optronics provide best-in-class interactive display solutions. landscape through our businesses. These have had identified as priority markets. AC Health has a target to open 100 clinics by 2020. a significant multiplier effect on our communities: Our group spent significant time studying other from the capital we deploy, from the taxes we pay, More importantly, AC Energy has developed Alongside these developments, we are undergoing markets last year that are in the advance stages to the jobs we provide to thousands of individuals financial self-sufficiency and no longer requires a transformation journey across the group to build of digital maturity and we have allocated resources as well as to the reinvention we galvanize across capital deployment from Ayala to fund its expansion a digital and future-ready Ayala. We recognize to platforms that provide some visibility into multiple products, services, and entire industries. strategy. A testament to its ability to raise capital that to continue thriving under a rapidly changing emerging trends and technologies. Absorbing and independently is its successful issuance of environment, we must evolve from traditional learning from these experiences, we have become Our contribution to the country’s economic, social, US$410 million in a Green Bond offering, the analog thinking to incorporating a digital more deliberate and unified in mapping out our and environmental agenda has become part and first publicly syndicated US dollar Green Bond in perspective into our strategy and operations. own digital transformation journey and have parcel of the way we do things, and I have always Southeast Asia to be certified by the Climate Bonds elevated it into a group-wide strategic agenda. believed that this value proposition will remain Initiative. Moreover, it will start upstreaming capital As you know, we have started to participate in Underpinning our transformation framework to be an important cornerstone of our long-term back to Ayala through regular dividend payments businesses that are part of the current digital wave, are five critical components: success as an institution. beginning in 2019. particularly in e-commerce, fintech, and healthtech. These investments are designed to complement our • We will continuously look for ways to disrupt Meanwhile, the rest of our emerging businesses group’s traditional brick-and-mortar operations, and digitally transform our core businesses to are in varying stages of maturity. AC Industrials future-proof our existing portfolio, and broaden ensure that our companies remain relevant to continues to build its portfolio and now houses the digital experience of Filipinos. our partners and stakeholders in this environment platforms in global manufacturing, proprietary that is quickly being redefined by technology. enabling technologies, and high value products for Jaime Augusto Zobel de Ayala end markets. Its automotive retail and distribution • We will look to learn from and invest in CHAIRMAN AND CEO segment, AC Motors, now counts Kia Motors in its emerging technologies and trends at an early portfolio of vehicle brands in addition to Honda, stage. More importantly, we are aiming to build Isuzu, Volkswagen, and KTM. Kia is a solid global new business models to take advantage of these brand with a wide range of products that built a developments. strong foothold in our local motoring culture over the past two decades. • We will be bolder and more deliberate in our venture capital strategy, seeding new ideas AC Infrastructure has entered the logistics space, and disruptive businesses, and supporting a fast-growing sector boosted by rising consumer forward-thinking entrepreneurs with scalable, demand and growing e-commerce adoption. In innovative models. 2018, we spun off Zalora’s last-mile delivery services into Entrego, a technology-driven, end-to-end, Entrego has nationwide presence with 54 hubs. • We recognize that data and analytics will be a logistics and fulfillment solutions provider. After key strategic discipline and skill set in the future and are thus establishing a center of excellence to participate in and build competence in this space.
24 AYALA CORPORATION 2018 INTEGRATED REPORT 25 The strong results of its leasing business, which In addition, BPI continues to ramp up its includes office, malls, and hotels and resorts, microfinance arm, BPI Direct BanKo. Since its supported the strong buildup of Ayala Land’s creation three years ago, BanKo has disbursed recurring income portfolio during the year. loans amounting to over ₱4 billion to nearly This segment has grown faster since 2013, 56,000 entrepreneurs. Its number of branches at a compounded annual rate of 26 percent. has grown to 200 at the end of 2018. Meanwhile, its development income, which comprises residential, office and lot sales, Globe Telecom continues to benefit from its grew at a compounded annual rate of 18 percent investments in building its network capability and in the same period. offering differentiated content to meet the rapidly growing demand for data consumption. Bank of the Philippine Islands enjoyed strong growth in its core banking business during the year. In 2018, Globe’s profits reached ₱18.6 billion, However, this was tempered by higher provisions bolstered by data-related services across mobile, and operational spending, bringing its net income broadband, and corporate segments. These to ₱23.1 billion, up 3 percent from the previous year. segments were the top contributors to Globe’s topline growth, which already accounted for BPI continues to execute on its digitalization 61 percent of total service revenues. Driving this strategy aimed at strengthening its franchise under growth is the continuing shift of consumers from a rapidly changing environment. In the last three traditional voice and SMS services to data. Mobile years, BPI spent ₱11.6 billion to build its digital data traffic significantly rose from 600 petabytes infrastructure, with over a third of the amount last year to 956 petabytes, owing to greater allocated to building capability in new, cutting-edge consumer spending on these services, particularly ways. This initiative resulted in an average annual through higher prepaid top-ups. increase of 14 percent in transaction volumes during the period. It is interesting to note that as early as 2010, Globe had already seen the market shift towards More importantly, the bank’s digital transformation smartphones and data. It rolled out an ambitious is addressing financial inclusion as it facilitates growth strategy that enabled a digital revolution REPORT OF THE higher engagement with the unserved and in the Philippines. It invested in a new network underserved segments of the demographic, and ramped up its content offerings to cater to the particularly the micro, small, and medium Filipinos’ strong appetite for digital content. PRESIDENT enterprises and the lower-income consumer segments. With increased efficiencies and lower Globe continues to deploy capital to improve its FELLOW SHAREHOLDERS, strategic imperative to diversify our earnings stream cost, digitalization will make financial inclusion network infrastructure to address data traffic outside our four established businesses, Ayala Land, truly sustainable. growth and customer base as it ramped up its LTE As we review the past year, we feel fortunate BPI, Globe, and Manila Water, by ramping up the to have built a well-diversified portfolio that contribution of our new growth platforms. At the continued to thrive despite some setbacks in end of 2018, our emerging businesses accounted the domestic environment. for 15 percent of our equity earnings, largely driven by AC Energy. We are pleased to report that Ayala ended the year with a net profit of ₱31.8 billion, five percent Let me highlight some of the key developments in the higher from a year ago, boosted by our real estate, performance of our business units during the year. telecommunications, and power businesses. It is encouraging to see that our investments in Ayala Land continued to benefit from a robust real AC Energy have come to fruition as the company estate market as it continued to pursue a better starts to provide a significant contribution to our balance between its development and recurring earnings and value creation. income businesses. Its net income expanded 16 percent to ₱29.2 billion, primarily driven by These results bring us on track to our five-year the strong performance of its property development target of doubling our net income to ₱50 billion and commercial leasing businesses. by 2020. Included in our 2020 aspirations is a Manila Water’s facility in Cardona, Rizal will provide additional service facilities in the east zone once operational.
26 AYALA CORPORATION 2018 INTEGRATED REPORT 27 rollout. It spent ₱43.3 billion in capital expenditure AC Infrastructure continues to strengthen the AC Education and the Mapua University portfolio in 2018, equivalent to 32 percent of its service operations of its existing public-private partnership under the Yuchengco group, we can create a more revenues during the year. projects: the operations and maintenance of LRT1, significant impact on the education system of the the Muntinlupa-Cavite Expressway, and the beepTM country. Manila Water continues to expand its footprint payment system. across the Philippines and in the Southeast Asian As the world demands a more holistic engagement region. It won 13 new projects in 2018, including the It continues to explore new opportunities for growth. from businesses, with accountability to the broader two platforms in Thailand and Indonesia. In 2018, it set up Entrego, a logistics and fulfillment environment and not just their shareholder group, solutions platform, to capture the strong growth of we constantly strive to deliver a meaningful, lasting Its two new overseas platforms, East Water of e-commerce in the Philippines. Entrego is expanding impact on society in conjunction with our economic Thailand and PT Sarana Tirta Ungaran of Indonesia its presence nationwide with its 54 hubs covering aspirations. We remain committed to the UN Global coupled with the steady growth of its core Manila 95 percent of the country, serving clients in various Compact and its 10 principles, which are very much Concession lifted Manila Water’s net income in industries such as e-commerce, fintech, telco, and aligned with our own sustainability philosophy in 2018, growing six percent to ₱6.5 billion. This The Solenad Activity Center provides a cover to visitors financial services. It has begun plans to build a the Ayala group. was supported by the 28 percent positive tariff crisscrossing the mall in Nuvali. multi-use fulfilment facility south of Metro Manila, adjustment to be implemented on a staggered which is expected to be operational by 2020. Across the Ayala group, this philosophy has formed Furthermore, AC Energy has grown to become basis over a five-year period from 2018 to 2022. AC Infra has committed up to ₱580 million in capital part of our strategy and decision-making process in a self-sustaining business, with a balance sheet over the next few years to support Entrego’s planned recent years. To institutionalize this perspective, we that has gained sufficient capacity to fund its own Manila Water continues to look for more ways to growth and expansion. have designed a long-term sustainability blueprint strategic initiatives without capital deployment from improve its efficiencies, in the way it serves its that lays out specific targets and accountabilities the parent. In January 2019, it successfully raised customers and in developing new products and AC Health continued to pursue its vision of building across the Ayala group in support of the US$410 million in a Green Bond, which included solutions to serve as new growth platforms. In an integrated ecosystem that provides patients with achievement of the UN Sustainable Development two of the world’s largest development institutions, particular, we are excited about its new initiatives a seamless healthcare experience. Goals by 2030. Having a formal framework will the Asian Development Bank and the International on solid waste management and its potential to enable us to be more deliberate in monitoring and Finance Corporation as investors. solve our country’s huge waste disposal problem. Its retail health network continues to expand. evaluating our sustainability targets and will help Waste management is a sector that is ripe for Generika Drugstore added 66 new stores, bringing its us allocate resources to these initiatives more AC Industrials continues to assemble a portfolio disruption and presents opportunities which total network to 816 stores nationwide. Meanwhile, appropriately. Moreover, this level of transparency of businesses in disruptive technologies in Manila Water can capture in a responsible and FamilyDOC is now the largest chain of primary care effectively imposes greater accountability to rapidly-transforming industries such as sustainable manner. clinics in the country, with a total of 54 clinics at the execute on these aspirations. manufacturing and automotive. end of 2018. Since its establishment in December With over 1,600 megawatts of attributable 2015, FamilyDOC has served over 240,000 unique This desire to help bridge societal gaps has been In 2018, it acquired US-based solar technology firm generating capacity, AC Energy has become a patients. It now employs over a hundred doctors, embedded in our corporate culture and will Merlin Solar, which owns a portfolio of proprietary substantial pillar of our portfolio. Since 2015, who are undergoing an accredited in-house Family continue to define our direction in the coming technology that complements AC Industrials’ core it has contributed positively to our earnings stream Medicine Residency Program, which is the largest in years. We are fortunate to have individuals in our strength of providing manufacturing scale through with a combination of steady state operation of its the country. institution who share this thinking and enable its IMI’s global platform. Moreover, it is broadening assets and consistent value realization initiatives. execution across our many companies in the its display technology capabilities through a joint AC Health continues to explore partnerships in Ayala group. venture with Toppan Printing VTS. Headquartered In 2018, its net earnings expanded 16 percent hospitals and specialty centers, particularly in the in Japan, Toppan allows AC Industrials to offer new to ₱4.1 billion, largely driven by its domestic oncology space. It is in this light that I thank our Board of Directors solutions for customers in consumer electronics, thermal and renewable assets as well as a higher for their guidance and foresight, our management automotive, and industrial markets, complementing contribution from its Indonesia investments. Through AC Education, we aim to reinvigorate our and staff for their strong engagement across our VIA Optronics. country’s education system and make it relevant to many initiatives, and finally, our business partners AC Energy is now focusing on renewable energy. future employment requirements in an increasingly and our shareholders for their continued trust and In addition, AC Industrials is widening its automotive In 2018, it generated 2,800 gigawatt hours of digital world. Its chain of high schools, support to Ayala. distribution and retail group. It now counts Kia as its attributable energy, of which 48 percent was from APEC Schools, was borne out of the vision to newest brand under the AC Motors portfolio. renewable sources. enhance the employability of students through an innovative learning curriculum that includes English The past year, however, was challenging for To scale up, AC Energy is diversifying immersion and IT literacy. AC Industrials as the weaker performance of its internationally in markets that are supportive of automotive segment and startup losses from newly Fernando Zobel de Ayala renewable energy development. Through strategic In tertiary education, National Teachers College acquired businesses weighed on its results. Its net PRESIDENT AND COO partnerships, AC Energy is assembling a pipeline became part of AC Education in 2018, joining income dropped 53 percent year-on-year to of renewable projects of over 4,000 megawatts University of Nueva Caceres as part of our group. ₱578 million. This decline was partially offset by a across Vietnam, Australia, and Indonesia in Once we complete the merger between one-time gain in IMI. addition to the Philippines.
28 AYALA CORPORATION 2018 INTEGRATED REPORT 29 BOARD OF DIRECTORS
JAIME AUGUSTO ZOBEL DE AYALA FERNANDO ZOBEL DE AYALA EXECUTIVE DIRECTOR, CHAIRMAN, AND CHIEF EXECUTIVE OFFICER Filipino / 59 EXECUTIVE DIRECTOR, VICE CHAIRMAN, PRESIDENT, AND CHIEF OPERATING OFFICER Filipino / 58
DATE OF APPOINTMENT LENGTH OF SERVICE (as of 31 December 2018) DATE OF APPOINTMENT LENGTH OF SERVICE (as of 31 December 2018) Director of Ayala Corporation since May 1987 31 years Director of Ayala Corporation since May 1994 24 years
ACADEMIC / PROFESSIONAL QUALIFICATIONS ACADEMIC / PROFESSIONAL QUALIFICATIONS • B.A. in Economics (Cum Laude) from Harvard • Chairman and CEO of Ayala Corporation • B.A. Liberal Arts from Harvard College in 1982 • President and Chief Operating Officer of Ayala College in 1981 since April 2006 • CIM from INSEAD, France in 1993 Corporation since April 2006 • MBA at Harvard Graduate School of Business Administration in 1987 PRESENT DIRECTORSHIP(S)/ POSITION(S) Publicly Listed Company(s) – within Ayala Group: Columbus Holdings, Inc., Berkshires Holdings, Inc., PRESENT DIRECTORSHIP(S)/ POSITION(S) • Chairman of Ayala Land, Inc. and Manila Water Company, Inc. AKL Properties, Inc., AC Ventures Holdings Corp., Publicly Listed Company(s) – within Ayala Group: Other Non-Listed Company(s) – outside Ayala Group: • Director of Bank of the Philippine Islands, Globe Telecom, Inc., and Bonifacio Art Foundation, Inc. • Chairman of Globe Telecom, Inc., Integrated • Member of various business and socio-civic organizations and Integrated Micro-Electronics, Inc. • Director of LiveIt Investments, Ltd., AG Holdings Ltd., Micro-Electronics, Inc. and Bank of the in the Philippines and abroad, including the JP Morgan AC Infrastructure Holdings Corporation, Asiacom Philippines, Inc., Philippine Islands International Council, JP Morgan Asia Pacific Council, Publicly Listed Company(s) – outside Ayala Group: Ayala Retirement Fund Holdings, Inc., and AC Education, Inc. • Vice Chairman of Ayala Land, Inc. and Manila Mitsubishi Corporation International Advisory Council, • Independent Director of Pilipinas Shell Petroleum Corporation Water Company, Inc. and Council on Foreign Relations Other Non-Listed Company(s) – outside Ayala Group: • Member of the Board of the Singapore Management Other Non-Listed Company(s) – within Ayala Group: • Director of Honda Cars Philippines, Inc., Isuzu Philippines Other Non-Listed Company(s) – within Ayala Group: University, the global advisory board of University of Tokyo, • Chairman of AC International Finance Ltd., ALI Eton Property Corporation, and Manila Peninsula • Chairman of AC Education, Inc., Ayala Retirement and Eisenhower Fellowships Development Corporation, Liontide Holdings, Inc., AC Energy, • Member of the Board of INSEAD and Georgetown University Fund Holdings, Inc., AC Industrial Technology • Chairman of various advisory boards of Harvard University Inc., Ayala Healthcare Holdings, Inc., Automobile Central • Member of the International Advisory Board of Tikehau Capital Holdings, Inc., AC Ventures Holding Corp., such as Global Advisory Council, HBS Board of Dean’s Enterprise, Inc., Alabang Commercial Corporation, • Member of the Philippine-Singapore Business Council, INSEAD AC Infrastructure Holdings Corporation and Advisors, HBS Asia-Pacific Advisory Board, and of Accendo Commercial Corp., and Hero Foundation, Inc. East Asia Council, World Presidents’ Organization, and Chief Asiacom Philippines, Inc. Endeavor Philippines • Co-Chairman of Ayala Foundation, Inc. and Executives Organization • Co-Chairman of Ayala Foundation, Inc. • Chairman Emeritus of the Asia Business Council Ayala Group Club, Inc. • Chairman of Habitat for Humanity’s Asia-Pacific Capital and Ayala Group Club, Inc. • Co-Vice Chairman of the Makati Business Club • Vice Chairman of AC Industrial Technology Holdings, Inc., Campaign Steering Committee • Director of Alabang Commercial Corporation, Aurora Properties Incorporated, Vesta Property Holdings, Inc., • Trustee of Caritas Manila, Pilipinas Shell Foundation, and the Ayala International Pte. Ltd., AC Energy, Inc., Ceci Realty, Inc., Fort Bonifacio Development Corporation, National Museum Ayala Healthcare Holdings, Inc., Light Rail Manila Bonifacio Land Corporation, Emerging City Holdings, Inc., Holdings, Inc., and AG Holdings Ltd.
30 AYALA CORPORATION 2018 INTEGRATED REPORT 31 XAVIER P. LOINAZ RAMON R. DEL ROSARIO, JR. DELFIN L. LAZARO ANTONIO JOSE U. PERIQUET LEAD INDEPENDENT DIRECTOR Filipino / 75 INDEPENDENT DIRECTOR Filipino / 74 NON-EXECUTIVE DIRECTOR Filipino / 72 INDEPENDENT DIRECTOR Filipino / 57
DATE OF APPOINTMENT DATE OF APPOINTMENT DATE OF APPOINTMENT DATE OF APPOINTMENT • Director of Ayala Corporation since April 2009 • Director of Ayala Corporation since April 2010 • Director of Ayala Corporation since January 2007 • Director of Ayala Corporation since September 2010 • Lead Independent Director of Ayala Corporation since April 2017 LENGTH OF SERVICE (as of 31 December 2018) LENGTH OF SERVICE (as of 31 December 2018) LENGTH OF SERVICE (as of 31 December 2018) LENGTH OF SERVICE (as of 31 December 2018) • 8 years as Director • 12 years • 8 years as Director • 9 years as Director • 6 years as Independent Director (reckoning from 2012, • 6 years as Independent Director (reckoning from 2012, • 6 years as Independent Director (reckoning from 2012, in compliance with SEC Memorandum Circular No. 9, ACADEMIC / PROFESSIONAL QUALIFICATIONS in compliance with SEC Memorandum Circular No. 9, in compliance with SEC Memorandum Circular No. 9, series of 2011) • BS Metallurgical Engineering from University series of 2011) series of 2011) of the Philippines in 1967 • 2 years as Lead Independent Director ACADEMIC / PROFESSIONAL QUALIFICATIONS • MBA (with Distinction) at Harvard Graduate School ACADEMIC / PROFESSIONAL QUALIFICATIONS • BSC-Accounting and AB Social Sciences (Magna cum Laude) of Business in 1971 • AB Economics from Ateneo de Manila University in 1982 ACADEMIC / PROFESSIONAL QUALIFICATIONS from De La Salle College in 1967 • Masters of Science in Economics at the Oxford University, • AB Economics degree from Ateneo de Manila University in 1963 • MBA at Harvard Business School in 1969 PRESENT DIRECTORSHIP(S)/ POSITION(S) UK in 1988 • MBA-Finance at Wharton School, University of Pennsylvania • Managed Phinma since 2002 and brings with him a wealth Publicly Listed Company(s) – within Ayala Group: • MBA at University of Virginia, USA in 1990 in 1965 of experience in leading a diversified conglomerate • Director of Ayala Land, Inc., Integrated Micro- • Director of DBP Insurance Brokerage from 2010 to 2012 • President of the Bank of the Philippine Islands Electronics, Inc., Manila Water Company, Inc., • Chairman of Deutsche Regis Partners from 1999 to August 2010 from 1982 to 2004 PRESENT DIRECTORSHIP(S)/ POSITION(S) and Globe Telecom, Inc. • Awarded as Best Strategist from 2003 to 2010 and as Best • President of Bankers Association of the Philippines Publicly Listed Company(s) – outside Ayala Group: Analyst in 2009 to 2010 by the Fund Managers Association from 1989 to 1991 • President and Chief Executive Officer of Phinma Corporation Other Non-Listed Company(s) – within Ayala Group: of the Philippines • Chairman of PHINMA Energy Corp. and PHINMA Petroleum • Chairman and President of A.C.S.T. Business Holdings, Inc., • Honorary Investment Adviser to the British Government from PRESENT DIRECTORSHIP(S)/ POSITION(S) and Geothermal, Inc. Vice Chairman and President of Asiacom Philippines, Inc., 2016 to 2017 Publicly Listed Company(s) – within Ayala Group: Director of AC Industrial Technology Holdings, Inc., • Independent Director of Bank of the Philippine Islands Other Non-Listed Company(s) – outside Ayala Group: AYC Holdings, Ltd., AC International Finance, Ltd., and PRESENT DIRECTORSHIP(S)/ POSITION(S) • President and Chief Executive Officer of Philippine Purefoods International Limited Publicly Listed Company(s) – within Ayala Group: Other Non-Listed Company(s) – within Ayala Group: Investment Management, Inc. • Independent director of Bank of the Philippine Islands • Independent Director of BPI Family Savings Bank, • Chairman of Araullo University, University of Iloilo, University of Other Non-Listed Company(s) – outside Ayala Group: and BPI/MS Insurance Corporation Pangasinan, Cagayan de Oro College, Southwestern University, • Chairman of Atlas Fertilizer & Chemicals, Inc. Publicly Listed Company(s) – outside Ayala Group: St. Jude College, United Pulp and Paper Co., Inc., PHINMA • Director of Probe Productions, Inc. • Independent director of ABS-CBN Corporation, DMCI Holdings, Other Non-Listed Company(s) – outside Ayala Group: Power Generation Corporation, PHINMA Renewable Energy The Max’s Group of Companies, and The Philippine Seven • Trustee of E. Zobel Foundation Corp., One Subic Power Generation Corp., PHINMA Microtel Corporation • Chairman of Alay Kapwa Kilusan Pangkalusugan and Hotels, Inc., PHINMA Hospitality, Inc., and Philippine Business XPL Manitou Properties, Inc. for Education Other Non-Listed Company(s) – within Ayala Group: • Vice Chairman of Phinma Foundation, Inc., Phinma • Chairman of BPI Asset Management and Trust Corporation Property Holdings Corp., Caritas Manila, and Philippine Business for Social Progress Other Non-Listed Company(s) – outside Ayala Group: • Director of Union Galvasteel Corp. and other PHINMA • Chairman of Campden Hill Group, Inc. managed companies • Independent director of Albizia ASEAN Tenggara Fund • Trustee of National Museum, Ramon Magsaysay Award • Trustee of Lyceum of the Philippines University Foundation, and Makati Business Club • Member of the Dean’s Global Advisory Council at the University of Virginia’s Darden School of Business
32 AYALA CORPORATION 2018 INTEGRATED REPORT 33 KEIICHI MATSUNAGA NON-EXECUTIVE DIRECTOR Japanese / 54
DATE OF APPOINTMENT • Director of Ayala Corporation since April 2017
LENGTH OF SERVICE (as of 31 December 2018) • 2 years
ACADEMIC / PROFESSIONAL QUALIFICATIONS • Graduate from the Faculty of Law at Waseda University in 1988 • Connected with Mitsubishi Corporation for 30 years in various leadership positions
PRESENT DIRECTORSHIP(S)/ POSITION(S) Publicly Listed Company(s) • Nil
Other Non-Listed Company(s) – within Ayala Group: • Director of Portico Land Corp.
Other Non-Listed Company(s) – outside Ayala Group: • General Manager of Mitsubishi Corporation Manila Branch • Chairman of International Elevator & Equipment, Inc. • President of MC Diamond Realty Investment Phils., MC Oranbo Investment, MC Cavite Holdings, Inc., and FMT Kalayaan, Inc. • Director of Century City Development II Corporation (CCDC II), Isuzu Philippines Corporation, Kepco Ilijan Corporation, Trans World Agro-Products Corp., Japanese Chamber of Commerce & Industry of the Philippines (JCCIPI), and The Japanese Association Manila, Inc. (JAMI)
The Makati Central Business District is a major economic hub in the country.
34 AYALA CORPORATION 2018 INTEGRATED REPORT 35 MANAGEMENT COMMITTEE
TOP L-R* BOTTOM L-R* PAOLO MAXIMO F. BORROMEO JOHN PHILIP S. ORBETA President and CEO, Chief Human Resource Officer AC Health and Group Head, and Group Head, Corporate Corporate Strategy and Resources Development FERDINAND M. DELA CRUZ FERNANDO ZOBEL DE AYALA President and CEO, Manila Water President and Chief Operating Officer BERNARD VINCENT O. DY President and CEO, Ayala Land JOSE TEODORO K. LIMCAOCO Chief Finance Officer, Chief Risk RUEL T. MARANAN Officer, Chief Sustainability Officer, President, Ayala Foundation and Group Head, Finance (GRI 102-20) ERNEST LAWRENCE L. CU ARTHUR R. TAN President and CEO, Globe Telecom President and CEO, AC Industrials and CEO, JAIME AUGUSTO ZOBEL DE AYALA Integrated Micro-Electronics, Inc. Chairman and JOSE RENE GREGORY D. Chief Executive Officer ALMENDRAS President and CEO, CEZAR P. CONSING AC Infrastructure and Group Head, President and CEO, Public Affairs Bank of the Philippine Islands
JOHN ERIC T. FRANCIA President and CEO, AC Energy
ALFREDO I. AYALA President and CEO, AC Education
SOLOMON M. HERMOSURA Chief Legal Officer, Chief Compliance Officer, Corporate Secretary, Data Protection Officer, and Group Head, Corporate Governance
36 AYALA CORPORATION 2018 INTEGRATED REPORT 37 OUR VALUE CREATION
38 AYALA CORPORATION 2018 INTEGRATED REPORT 39 OUR 30.9%* 100%* 100%* Purveyor of the Filipino Industrial technologies Investing in educational PORTFOLIO digital lifestyle, supported investments focused institutions to deliver by a robust telecom on electronics affordable high quality infrastructure manufacturing, vehicle education that improves retail, and enabling employability of students (approximately technologies US$5B market cap)
47.0%* 51.4%* 100%* 100%* Leading and most Regional player in water Growing portfolio of key Holding company for diversified property infrastructure services infrastructure projects and Ayala’s investments developer in the country and development businesses to support the in international real with the largest landbank growing needs of the estate, as well as (approximately Philippines opportunities in disruptive (approximately US$1.1B market cap) sectors and emerging US$11B market cap) business models
48.6%* 100%* 100%* Pioneering financial A fast-growing regional Developing an integrated The conglomerate’s social institution and one energy platform with ecosystem focused on development arm, with key of the most profitable investments in renewable affordable medicine and program areas in education, banks in the country and conventional power access to healthcare youth leadership, assets and development, services sustainable livelihood, (approximately operations and retail and the promotion of arts and culture US$8B market cap) supply capabilities
*Effective economic ownership and market capitalization as of December 31, 2018 *Effective economic ownership as of December 31, 2018
40 AYALA CORPORATION 2018 INTEGRATED REPORT 41 We examine whether Ayala can bring its unique on risks is carried out and responsible persons advantage to these opportunities and disrupt or are identified to execute the business plan. If the OUR FINANCIAL innovate existing business models. We study the Investment Committee approves the proposed industry carefully, mapping out its structure, major investment, it is then endorsed to the Finance players, and potential competition in the areas we Committee of the Board. are contemplating. Assessments are conducted to MANAGEMENT CAPITAL ALLOCATION determine if the proposed business can fill a need and if the business model conforms with our view The Finance Committee of the Board is currently of the future. composed of the CEO, the COO, and two non- STRATEGY executive directors, one of whom is an independent For example, in 2018, we decided to support BPI’s director. The Finance Committee is responsible for ₱50 billion stock rights offer and thus subscribed all finance matters of Ayala, including allocating to our proportionate share of the offer, or close to capital to our different business ventures. The ₱25 billion. We believe that BPI’s business plan Finance Committee reviews investment proposals of sustained profitable loan growth, focusing on as endorsed by the Investment Committee and if the SME and consumer markets and in investing it sees fit, will determine an amount of capital to in technology as it continues on its digitalization assign to the proposed business. Capital is allocated journey will lead to value creation. Continued and committed over a set time frame (usually three strong GDP growth, moderately rising interest to five years), which ensures that management has rates (leading to margin expansion) and a growing the funds to execute their proposed business plan. young technology-aware middle class support our The Finance Committee endorses the recommended investment thesis. capital allocation to the Board of Directors which has final approval over all investments. TESTING FOR VIABILITY Following the evaluation, Corporate Strategy and PERFORMANCE REVIEW Finance work together to build a business plan The Investment and Finance Committees review the and test for viability. Assumptions are tested performance of each business unit at least twice a year: a general review, which covers Ayala’s portfolio Ayala’s key executives in a huddle to exchange thoughts on relevant issues. and challenged; financial models are built and stressed. Economic returns are measured under of businesses; and a specific business unit review. different scenarios. While the Corporate Strategy In the latter, the business unit’s performance is Ayala sees itself as a steward of our core businesses As a company, we allocate capital to investments and Corporate Finance teams are responsible for measured against several metrics including the and a builder of new enterprises. Our core that we believe can deliver significant value building the business case and financial model, current budget (How are we doing this year?), the businesses are those we have developed over the over time. We follow a process that evaluates the Comptrollership and Treasury teams model latest medium-term plan (Is execution in line with past decades and which have grown to be market opportunities; tests for business and financial the effect the business may have on Ayala’s overall our goals?) and often, against competitors (How do leaders. These businesses provide us a steady viability; identifies risk; designates business owners performance – balance sheet, income statement, we measure against others?). The objective of these stream of earnings and dividends that fund our and a responsible management team; provides and cash flows. This dual review ensures not only reviews is to refine capital allocation depending on operating expenses, allow us to meet our interest capital over a period of time, allowing management business viability but also an understanding of the performance, and if needed, suggest changes to the obligations and dividend expectations, and enable to execute a defined plan; and reviews performance potential risks to Ayala’s strong and conservative business plans or strategies. us to raise capital to fund our new enterprises. regularly. Our gating process involves many groups balance sheet. within the company, including Corporate Strategy FUNDING STRATEGY Ayala believes in maintaining a strong balance sheet Ayala prides itself on being a builder of businesses. and Development; Finance; a management-led GATING PROCESS and a conservative stance towards our capital and We seek to grow sustainable businesses of scale Investment Committee; the Board’s Finance All investment proposals that progress beyond debt levels. We believe that recycling capital is that meet the needs of society, or that conform to Committee and the Board of Directors. the Corporate Strategy and Finance groups are part of our business model. We want to ensure that our view of the future. We look for areas where we presented to the Investment Committee. The EVALUATING OPPORTUNITIES when attractive opportunities arise, we have the can innovate, disrupt traditional business models, Investment Committee is made up of Ayala’s key As a company we are always open to new areas ability to fund these investments. or build on opportunities where capital has been senior officers and may invite other senior group of investment. We identify opportunities and scarce. Moreover, we pursue opportunities where executives to provide insight. The Investment assess emerging markets and economic trends. Just as the Finance Committee is responsible we can make a difference through our experience Committee then reviews the business plan and When presented with opportunities or as for recommending investments to the Board, and existing businesses, and where we may have a the strategy for execution. A thorough discussion strategic advantage through our partners and our investment ideas are developed, the Corporate it is also responsible for recommending changes to ability to raise capital. Strategy group is tasked with evaluating these.
42 AYALA CORPORATION 2018 INTEGRATED REPORT 43 Ayala’s capital structure, including new issuances 1. Maintaining a pre-defined cash flow adequacy BPI -10.6 percent). Our current loan to value ratio We continue to manage our obligations to ensure of debt, equity or hybrid structures, declarations of ratio, which ensures that the cash we receive at remains low and indicates that for every ₱11.80 of that we are not overly exposed to market liquidity, dividends, and share buy backs. Ayala is sufficient to meet all our cash obligations debt we carry, we have ₱100 of assets behind it. foreign exchange, and interest rate risks. Our arising from expenses, interest, and dividends. average cost of debt rose slightly to 4.6 percent Since 2011, Ayala has invested over ₱160 billion in The LTV does not include the impact of the per annum during 2018 as a consequence of higher our different business units. In 2018, we invested 2. Maintaining a maximum loan to value ratio, which fixed-for-life perpetual bonds as these are floating rate loans as interest rates rose in the over ₱26 billion in BPI’s stock rights offer, ₱3 billion measures the ratio of our net debt to the total value perpetual securities and do not have to be second half of 2018. in IMI’s stock rights offer, and ₱6.8 billion in of our assets. Tracking this ratio daily provides repaid. Gross debt increased to ₱104.4 billion, AC Energy, among others. management and the Board a measure as to how offset by an end-2018 cash balance, which At the end of 2018, our debt maturities are much of our value is funded by debt. It also acts as brought net debt to ₱95.9 billion. At the parent well-spread out and in compliance with our While we have relied on debt to fund most of these a tool to use in a market downturn, as it helps frame level, net debt to equity ratio rose to 0.81 to 1. internal policy of not having maturities exceeding investments, we raised equity capital to maintain a decision as to whether we should sell assets to 20 percent of total debt on a yearly basis. The 2019 our strong balance sheet. In 2018, we raised ₱8.07 prune our debt levels or take on additional debt to maturity tower is accounted for by our $300 million FINANCIAL METRICS 2016 2017 2018 billion by selling 8.81 million common shares to a buy undervalued assets. (in millions pesos) exchangeable bond, which is currently in the money. single long-term strategic investor at a price that At the end of 2018, US$7.2 million of this bond Parent Debt* 76,002 83,313 104,419 was a 1.08 percent discount to the 30-day volume 3. Maintaining a maximum amount of debt due each had already converted into shares of Ayala Land. average weighted price. We raised ₱12.4 billion of year. We spread out debt maturities across many Parent Cash 16,422 18,644 8,512 equity capital in November 2014 through the sale years and avoid concentrating maturities in a single Net Debt 59,580 64,699 95,907 Our fixed to floating rate mix of 88/12 in 2018 of 18.78 million common shares and a total of ₱23.5 year. This ensures that an external event that might Gross Asset Value 538,288 702,480 685,904 puts Ayala in a favorable position in a rising rate billion in preferred shares in 2013 and 2014. affect refinancing in any given year does not cause Parent Net Debt to environment. Peso obligations are 64 percent of our 0.56 0.59 0.81 significant problems. Equity Ratio total obligations and our US dollar denominated CAPITAL RAISING Loan to Value 11.1% 6.4% 11.8% obligations are more than offset by US dollar cash Our strategy as regards to debt is to raise debt 4. That foreign-currency denominated debt is Cost of Debt 4.3% 4.2% 4.6% and long-term foreign currency investments. opportunistically in the public markets and rely on used to finance foreign-currency denominated strong and transparent banking relationships in investments or that if non-peso debt is used to the loan markets. In 2016 and 2017, we raised DEBT MATURITY PROFILE (IN MILLIONS OF PESOS) FIXED/FLOATING RATE DEBT MIX fund peso investments, that such debt be hedged. (Percentage Of Total Parent Debt ₱20 billion through two-peso bond issues: 20000 Including Debt Guaranteed by Parent) a seven-year bond with a coupon of 3.92 percent 5. Maintaining a minimum ratio of fixed rate loans and an eight-year bond with a coupon of to floating rate loans to ensure that our cost 25% 7% 12% 4.82 percent. Both bonds set record lows for of capital carries a similar characteristic to 15,596 coupons for those tenors. In September 2017, we the investments we make as our investments raised US$400 million through a groundbreaking are long term in nature. 15000 perpetual bond with a fixed-for-life coupon of 13,195 75% 93% 88% 5.125 percent. This perpetual, which as its name BALANCE SHEET Our balance sheet continues to be strong with 11,808 implies has no maturity, was the first bond of its 10,975 kind to be issued by an ASEAN corporation. significant debt capacity and a well spread out 10,095 2016 2017 2018 maturity profile. This is also augmented by an optimal 10000 Fixed Floatin g Our strong credit is shown in our capital raising, foreign exchange and interest rate mix and a healthy 8,455 and supported by wide access to bank loans. cashflow adequacy ratio. CURRENCY MIX OF DEBT (Percentage Of Total Parent Debt We maintain committed lines from both local Including Debt Guaranteed by Parent) and foreign banks that ensure we have sources Ayala’s loan to value ratio, which compares our net 5,474 of funds available when opportunities arise. debt to the market value of our investments, is a good 5000 4,075 34% 42% 36% measure of our relative indebtedness and our capacity DEBT POLICIES to take on or service these obligations. At the end of Our debt policies ensure that we can comfortably 975 974 2018, our loan to value ratio increased to 11 percent 66% 58% 64% service our interest and operating expenses; meet from the 6.4 percent in 2017. The increase is a result maturing obligations; and have the confidence to of the debt we took on to fund our investments in 2018 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2016 2017 2018 face or take advantage of market downturns. The (BPI, IMI, AC Energy) and the fall in 2018 of the market PHP USD equiv. in PHP PHP USD policies include: prices of our listed shares (ALI -9.0 percent,
*Parent debt includes debt that is guaranteed by the parent
44 AYALA CORPORATION 2018 INTEGRATED REPORT 45 SHARE PRICE PERFORMANCE LIST OF PREFERRED SHARES AND BONDS AC Share Price Performance versus PSEi (2018 Year-end = 100) PSEi AC ISSUER TYPE AMOUNT COUPON ISSUANCE MATURITY DETAILS 120 Preferred shares 10th year repricing: 5-year BVAL + 150bps Pref B Series 1 ₱10.0Bn 5.250% November 15, 2013 Perpetual 15th year repricing: 10-year BVAL + 300bps (ACPB 1) Preferred shares 5th year repricing: 5-year BVAL + 175bps Pref B Series 2 ₱13.5Bn 5.575% November 5, 2014 Perpetual 10th year repricing: 10-year BVAL + 300bps (ACPB 2) Voting 100 Preferred Shares ₱200.0Mn 3.695% May 20, 2010 Perpetual Every 3rd year repricing: 3-year BVAL (non-listed) First put option: May 12, 2016 10-year (up to 20% of outstanding) Putable Bond, ₱10.0Bn 6.800% May 12, 2011 May 12, 2021 Second put option: May 12, 2019 Fixed Coupon Ayala (up to 100% of outstanding) Callable on: May 11, 2022 (at 101.000%) 15-year May 11, 2023 (at 100.750%) Callable Bond, ₱10.0Bn 6.875% May 11, 2012 May 11, 2027 May 11, 2024 (at 100.500%) Fixed Coupon May 11, 2025 (at 100.375%) May 11, 2026 (at 100.250%) 7-year Callable on January 7, 2022 60 Callable Bond, ₱10.0Bn 3.920% July 7, 2016 July 7, 2023 (at 100.250%) JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Fixed Coupon 8-year Callable on August 10, 2023 Callable Bond, ₱10.0Bn 4.820% February 10, 2017 February 10, 2025 (at 100.250%) Fixed Coupon ₱10 billion of this amount. The PSEi and Ayala ended Dividends from Put option on May 2, 2017 Exchangeable Subsidiaries/Associates 2016 2017 2018 Call option by issuer anytime after the year at 7,466.02 and ₱900.00, 13 percent and AYCFL Bond to US$300.0Mn 0.500% May 2, 2014 May 2, 2019 (in millions pesos) May 2, 2017 if ALI price exceeds 130% 11 percent lower from the previous year, respectively. (Guaranteed ALI Shares of prevailing exchange price Ayala Land 3,358 3,385 3,547 by Ayala) Perpetual Bond, Callable on September 13, 2022 DIVIDENDS BPI 3,418 3,419 2,896* US$400.0Mn 5.125% September 13, 2017 Perpetual Fixed Coupon (at 100.000%) Ayala’s policy is to provide a regular fixed Globe 3,575 3,745 3,745 semi-annual cash dividend to common shares. Manila Water 1,096 1,113 1,086 SHARE PRICE PERFORMANCE For voting preferred shares, the dividend rate AC Industrials 209 215 271 The local index started 2018 strong, reaching an The BSP raised rates 25 basis points in May, is 1.875 percent per annum. For non-voting Others 241 201 76 all-time high of 9,078.37 in January. However, followed by a similar hike in June. While Preferred B Series 1 and Series 2 shares, the towards the end of the first quarter, global markets welcomed by economists and market followers, dividends are given at 5.25 percent and TOTAL 11,897 12,078 11,622 were spooked by trade provocations of US President many felt that the BSP acted belatedly. The peso 5.575 percent per annum, respectively. Donald Trump, who imposed a series of tariffs on depreciated to a low of ₱54.41 to the dollar Dividend Yield-Common 0.80% 1.00% 0.70% Chinese imports. At the same time, the Philippine in October and inflation continued to rise. It is the company’s policy to treat all shareholders Cash dividend per share ₱5.76 ₱6.92 ₱6.92 inflation rate rose to the upper limit of the Bangko equally, ensuring payment of dividends in an Market price per share, ₱756.00 ₱727.00 ₱1,040.00 Sentral’s two to four percent target range. The new Inflation woes became more pronounced in equitable and timely manner—within 30 days start of year tax reform law passed at the end of 2017, TRAIN the second half as global oil prices surged to after being declared and finally cleared. Package 1, which raised excise taxes for fuel, has a year-high of US$75 per barrel and strong typhoons *A portion of dividends were retained at Liontide Holdings in order to meet obligations arising out of the debt raised to fund been partly blamed for this. struck the agricultural areas in Luzon, causing In 2018, we declared total dividends per its participation in BPI’s 2018 rights offering. further spike in food prices. The BSP continued to common share of ₱6.92. We understand that Ayala’s shares were affected when Mitsubishi hike rates, raising its policy rate by 25 basis points our shareholders view our dividends as a regular Corporation trimmed its stake in the company in each of its Monetary Board meetings in August, source of both income and capital returns and in March, selling 8.5 million shares in an overnight September and November. Despite the subsequent strive to maintain consistent distributions from placement, causing the share price to fall rate hikes, foreign investors continued to sell local year to year. Moving forward, we will continue 7.2 percent overnight and 9.4 percent in the stocks. The local index recorded ₱57 billion of to revisit potential sustainable increases in the next six months as investors took this as a foreign outflows with Ayala accounting for regular dividend rate, with the continued capacity signal to take profits. to make new or additional investments as the primary consideration.
46 AYALA CORPORATION 2018 INTEGRATED REPORT 47 Ayala has maintained its strong position in the market in large part due to proactive and strategic management of its financial, intellectual, human, and relationship capital. Moving forward, OUR BUSINESS MODEL the company shall continue to manage these capitals, to ensure they are harnessed in a way that creates the best possible value for all our stakeholders.
VALUE WE DRAW FROM WHAT WE DO VALUE WE CREATED IN 2018 TARGETS FOR 2020
FINANCIAL CAPITAL ALLOCATION Using quantitative and qualitative criteria and a FINANCIAL CAPITAL • Earnings that are growing, consistent, • Strong, diversified portfolio earnings multi-step management approach, we allocate Strong financial position including: and risk-adjusted and returns amid economic cycles financial resources to businesses we believe • Reliable operational cash flow • Net Income: ₱31.8B • Net Income: ₱50B provide the best risk-adjusted stakeholder • Affordable, reliable access to • Return on Equity: 12.2 percent • Return on Equity: 15 percent returns over the long term debt supported by a robust • Reliable dividends and total shareholder returns • Market Capitalization rank: 1st or 2nd capital allocation process PORTFOLIO MANAGEMENT • Market Capitalization was ₱568.1B at end We carefully evaluate the performance of our of 2018-2nd largest among conglomerates subsidiaries vis-à-vis market behavior to make • Average cost of debt is at ~4.6 percent good judgement on increasing investment or INTELLECTUAL CAPITAL divestment in a timely manner • Deep expertise of Philippine We maintained market leadership and • Positively disrupt, transform the ecosystem and key industries STRATEGIC BUSINESS DEVELOPMENT strengthened expertise in our businesses, industries, and impact the markets • Corporate culture focused • We continue to explore new sectors, geographies, including: we serve on lifelong learning and expert partners to develop new business • Ayala Land in integrated mixed-use • Robust governance and models that will drive our growth master planned communities risk approach • Globe in wireless market and as a • We identify partnership opportunities among purveyor of the Filipino digital lifestyle our business units and create an environment • AC Energy as a regional player in energy for collaborative innovation development and power generation HUMAN CAPITAL NON-FINANCIAL CAPITAL MANAGEMENT • Best-in-class talent across • Management excellence as evidenced by • Continue to be the employer of choice for • Human resources development departments and disciplines award-winning teams across Finance, Risk, a highly motivated employee base We continue to build competencies to support • Diversity of talent, including Sustainability, Investor Relations, Governance • Maintain an empowering and motivating the growing requirements of our businesses global perspective and mindset and Strategy environment that allows people to effectively • Developing future Ayala leaders leverage their knowledge, relationships, and • Strong corporate governance • Good quality of life for employees and their expertise to drive value We continually improve our policies and families • Prepare workforce for potential disruption monitor our practices to ensure we are at par • A competent workforce of more than from increasing adoption of digital with the best standards of corporate governance 64,000 employees across our businesses technology in business • Stakeholder Management SOCIAL AND RELATIONSHIP We continue to listen to our stakeholders and CAPITAL keep them informed on matters important to • Partner of choice: Our businesses maintained • Sustain the ongoing relationship with • Strong relationships with a vast their decision-making strong partnerships with over 40 leading existing business partners while keeping network of business partners, companies in the Philippines and from our doors open for new ventures and investors, communities, academe, • Brand Management across the globe partnerships and other relevant entities We continue to build and protect our brand • Satisfied shareholders and stakeholders • Ayala remains a strong and trusted brand • Strong, trusted Ayala brand by ensuring we deliver on our promise, and • Strong and recommended Ayala brand effectively communicate what we stand for as a company
48 AYALA CORPORATION 2018 INTEGRATED REPORT 49 good judgement on timely increase in investment or to our creditors, suppliers, business partners and divestment. This process enables us to strengthen affiliates. We also ensure that taxes are paid on our portfolio, manage our risks, and take advantage time in the domiciles we operate in. of growth opportunities in our different businesses. We treat all our stakeholders with dignity, fairness, We use our social capital such as our relationships and respect. With a strong corporate governance with a vast number of business partners and our process, our relationships stand the test of time and trusted brand to pursue new ventures in different remain legally, ethically, and economically sound. sectors, geographies, and market segments. Our This, together with our strong Ayala brand, allows partners’ trust in our brand facilitates forging of us to be the business partner of choice and maintain partnerships needed to build new business models close ties with more than 40 leading companies in that deliver products and services that address the Philippines and across the globe. gaps in the market and contribute to sustainable development. We also leverage on the expertise We strive to be the employer of choice—providing within our business units to form synergies that a safe working environment, ample opportunities help us deploy new innovative business models. for career advancement, and competitive These businesses generate financial capital that compensation that motivates our employees and The Ayala Group Mancom meets regularly to discuss updates and key issues. enables us to realize meaningful returns. allows them to provide for their families. In recent years, we have also begun to transform our talent WHAT WE DRAW FROM TO CREATE VALUE Reputational Strength: The strong and trusted Through these integrated processes, we convert base to not only ensure that we can compete in the Financial Capital: Our four main sources of Ayala brand enables us to maintain strategic our various forms of capital into our key outputs— industries of the future, but also take advantage funding: regular cash dividends from our operating partnerships in the Philippines and across the leading businesses and profitable investments of ongoing shifts in the nature of work – such units, strategic divestments and value realization globe. We keep close linkages and strive to balance that generate sustainable value, which we as flexible working arrangements, the growing opportunities, competitive issuances of high-quality the individual needs of our many stakeholders – strategically realize for the benefit of all our prevalence of freelancing and the digitalization corporate debt, and equity that has historically met investors and other capital market participants, internal and external stakeholders. of work functions. We also nurture the next with keen demand from long-term shareholders, creditors and suppliers, business partners and generation of Ayala leaders that will further allow us to maintain a strong financial position and affiliates, government agencies and regulators, HOW WE REALIZE AND SHARE THE VALUE drive our businesses into continual growth. a robust capital allocation process. employees, customers, and industry associations. WE CREATE Through active and disciplined management of our Intellectual Capital: Our deep expertise in key HOW WE TRANSFORM CAPITAL AND With our expertise, group synergies, and strong portfolio, we deliver robust financial value—stable industries as well as experience in Philippine GENERATE VALUE brand reputation, our companies maintain profits, regular cash dividends, and above-market business borne out of 185 years of existence, We transform the four capitals into value through dominance in their sectors. All these enables capital gains—at optimized levels of risk to our allow us to create and grow businesses positioned our key business activities. Our financial capital is us to innovate our business models and to offer investors and other capital market participants. We for leadership in their sectors. We have developed allocated into businesses that we believe provide transformative products and services that make ensure that our balance sheet remains strong with a robust corporate governance process and risk the best risk-adjusted long-term stakeholder life better for our customers and the communities significant debt capacity to service cash obligations approach that enables us to conduct our businesses returns and create shared value for society. Our we care for, and to contribute to sustainable with the highest standards of integrity, engage intellectual capitals such as our deep expertise development. our stakeholders with greater transparency and of Philippine ecosystem and key industries and accountability, and adapt to increasing complexities robust governance and risk approach, enables and volatilities in the global landscape. us to make more informed investment decisions. These processes efficiently transform our financial Human Capital: Our ability to execute on our capital into ownership of assets, such as in power, strategies is driven by our skilled and diversely real estate, water utility, and telecommunications, experienced talent pool, and management which in turn generates additional financial capital expertise and discipline. We take pride in where our returns are derived from. growing best-in-class talent across all our divisions, and have a corporate culture Our financial, intellectual and human capitals focused on lifelong learning and innovation. are vital in our portfolio management. They help us carefully evaluate the performance of our subsidiaries vis-à-vis market behavior to make Ayala’s efforts to build a robust culture of innovation was recognized by the Global Innovation Management Institute as the first company to be Level 2 Certified in Innovation Management in Southeast Asia.
50 AYALA CORPORATION 2018 INTEGRATED REPORT 51 With the critical gaps in physical infrastructure In support of its 2025 aspiration, AC Energy is against the backdrop of a growing economy, we saw establishing a footprint internationally, particularly BUSINESS OF BUSINESS-BUILDING: potential in power as a sustainable business and as in markets where an enabling environment for a crucial sector in sustaining the country’s progress. renewable energy have been put in place. It has THE AC ENERGY identified Vietnam, Indonesia, and Australia in Ayala has always viewed structural shifts in an addition to the Philippines as core markets. In TRANSFORMATION STORY industry as an opportunity for positive disruption partnership with regional and local players, it has VALUE CREATION CASE STUDY and value creation. At that time, the power secured a pipeline of renewable projects of over industry was undergoing reforms that enabled 4,000 megawatts across these markets. greater private sector participation, particularly in renewable energy. Furthermore, AC Energy has built up its balance sheet as a self-sustaining business with sufficient Pioneering spirit and reinvention have been and services, these businesses have served as Since its inception, Ayala has spent approximately capacity to fund its own investments without integral pillars of Ayala’s brand of value creation. catalysts for transforming the country’s economic ₱40 billion in capital expenditure to bankroll additional capital from Ayala. Its 2025 targets In its 185-year history, Ayala has established and social landscape. The expertise we have AC Energy’s pipeline of projects across renewable require an equity commitment of US$2 billion, a solid track record of building businesses established in incubating new businesses from and thermal platforms. To build scale faster, which AC Energy will independently support on from the beginning and steering their strategic the ground up has always been part and parcel of AC Energy has partnered with various regional a combination of fund-raising exercises via the transformation as industry-leading players. our function as a conglomerate. This attribute has and local players with complementary assets and capital market, debt, and capital recycling from served as our key value proposition, maintained our skills, which it can leverage off with its own. Having value realization initiatives. In January 2019, it We identify opportunities in sectors that are relevance, and kept our edge in a highly competitive only started eight years ago, AC Energy has quickly made its debut in the capital market and raised either in nascent stages or are undergoing and volatile environment. grown from a standing start into a significant power US$410 million in a Green Bond issuance, the disruption to over time create strong franchises company, with over 1,600 megawatts in attributable first publicly syndicated US dollar Green Bond that help bridge structural and societal gaps and A more recent case study of Ayala’s business- capacity in 2018. in Southeast Asia to be certified by the Climate contribute to the country’s development agenda. building ability is AC Energy, which we established Bonds Initiative. back in 2011 to support our expansion strategy. Over the past couple of years, AC Energy has By deploying capital, installing the proper Back then, we set out a long-term strategic deliberately redesigned its strategy to focus on Today, AC Energy has progressed to become a governance framework, utilizing our corporate imperative to diversify out of our four core renewable energy. It can be recalled that we critical driver of Ayala’s portfolio, contributing infrastructure, and bringing in the right talent, franchises to achieve a healthy mix of earnings entered the sector at a time when the Philippines 10.4 percent to our equity earnings in 2018. With Ayala has produced groundbreaking businesses stream and sectoral exposure in our portfolio. We was faced with a looming power shortage and an aggressive growth strategy in place and a track in blue chip institutions such as Ayala Land, thus identified AC Energy as a new growth platform needed reliable and affordable baseload capacity. record of successful execution over the past eight BPI, Globe, and Manila Water. With foresight, and allocated substantial amount of resources to Since then, the economics, efficiencies, and the years, we expect AC Energy to be a key catalyst for innovative thinking, and game-changing products establish a meaningful presence in the space. ability to build renewable technology to scale Ayala’s growth and evolution in the years to come. has improved significantly. AC Energy is taking advantage of this opportunity and has since overweighted its investments in this space, particularly in solar, wind, and geothermal. In 2018, it generated 2,800 gigawatts of attributable energy, 48 percent of which came from renewable sources.
AC Energy is committed to scaling up its renewables portfolio and has set a target of achieving five gigawatts in capacity across these renewable technologies by 2025, with renewables contributing at least 50 percent In 2018, AC Energy entered the Australian Renewables of total energy output. In parallel, AC Energy market through a joint venture with international is reducing its exposure to thermal energy. renewable energy developer UPC Renewables.
Representatives from AC Energy, Ayala, and the Singapore Exchange at the ceremonial banging of the gong to signify the listing of the company’s Green Bond.
52 AYALA CORPORATION 2018 INTEGRATED REPORT 53 APEC SCHOOLS: EMPOWERING YOUNG FILIPINOS 18,000 THROUGH ACCESSIBLE, QUALITY STUDENT POPULATION EDUCATION 23 BRANCHES IN METRO MANILA VALUE CREATION CASE STUDY AND CALABARZON
The Philippines is entering a demographic window Manila and the Calabarzon region. APEC is TROY NICO SERDENA PAUL DARRYL MARCO that has the potential to create a highly productive able to produce graduates who are IT-literate, workforce over the next decade. With the rapid possess effective business communication and job as a customer service representative with one of 53% changes taking place in an increasingly digital critical thinking skills, and are equipped with PASSING RATE IN SELECTIVE COLLEGES APEC’s employer partners. After only a few months ENTRANCE EXAM environment, it is imperative that we prepare broadly applicable service, sales and support skills, on the job, Troy gained recognition from his employer this young population for the profound changes as well as industry and job-specific knowledge. as one of the top 100 performers in his account. He in future employment needs. Its learning modules, which have been co-designed continues to work to save enough money for college with employer partners, also provide its students tuition, so he can pursue a course in Psychology. However, the lack of sufficient access to affordable with valuable soft skills and work habits such as grit quality education has led to massive dropout rates and persistence, reliability, integrity, and curiosity. APEC Schools’ unique features also include and quality issues across all educational levels in a technology-enabled classroom with which the country. At Ayala, we see this as an opportunity APEC graduated its first cohort of Grade 12 students all students are provided with digital tools for positive disruption, and a chance to contribute in 2018. Of the 296 senior high school graduates such as Chromebooks and tablets. It employs to our country’s human capital development. seeking employment, 275 (92 percent) received an English-immersive environment and a job offers and 248 (84 percent) were employed student-centric methodology that promotes Through our APEC Schools, now the largest chain within 120 days after graduation, with significantly confidence, collaboration, and independence. of stand-alone private high schools in the country, above-average starting salaries, comparable to APEC Schools graduates its first cohort in 2018. Filipino students receive the education they need to those of college graduates. One of these working This approach has helped many APEC graduates make go on to college, or to find entry-level professional students was Troy Nico Serdena, an 18-year old it to a college of their choice. Of over 800 students employment. graduate from APEC Schools’ G. Tuazon branch. who applied to selective colleges such as Polytechnic University of the Philippines, University of the Started only in 2013, APEC now has a student After graduating from senior high school, Troy Philippines, Pamantasan ng Lungsod ng Maynila, population of 18,000 across its 23 branches in Metro decided to work to help his parents, and landed a FEU Tech, University of Santo Tomas, La Salle, and Ateneo, 53 percent were accepted. Paul Daryl Marco from Mindoro is one such student. After finding out about APEC Schools, he left home and went to Manila where he secured a scholarship at APEC. He excelled in class, was elected student council president, APEC’s learning modules have been co-designed with and graduated with honors. He is currently taking employer partners. up engineering at Polytechnic University of the Philippines as a scholar of the Department of Science and Technology.
Troy and Paul are just two examples of students whose lives were transformed by APEC. Going forward, we hope to be able to empower more Filipino students by deploying the appropriate knowledge and skills that will enable them to thrive in a rapidly evolving environment, and achieve their aspirations.
APEC Schools is now the largest chain of stand-alone pri- APEC students are equipped to meet the challenges after senior high - either transitioning to a college degree or seeking employment. vate high schools in the country.
54 AYALA CORPORATION 2018 INTEGRATED REPORT 55 Ayala defines its strategy in the context of key global, regional, and local trends that we believe will impact markets, sectors and businesses in which we choose to invest and operate. We monitor the OUR OUTLOOK evolving macro-political environment and adapt our strategy posture and investment decisions to ensure we remain in the best position to leverage and mitigate the impact of these forces.
DESCRIPTION HOW OUR STRATEGY DESCRIPTION HOW OUR STRATEGY ADDRESSES THIS ADDRESSES THIS
RISING While 2018 witnessed slowing growth on We continue to prioritize the Philippines STRUCTURAL Our businesses, at varying degrees, Through collaborative relationships with policymakers, CONSUMER household spending due to rising inflation, with most of our businesses positioned to REFORMS are impacted by shifts in laws and the academe, and partner organizations, our Public CLASS domestic consumption continues to be a both contribute to and grow alongside the regulations. We have witnessed Policy team continues to provide support to the Ayala main driver of the Philippine economy. country’s development. Our core business substantial structural reforms group on the legal and regulatory aspects of business As an increasing number of Filipinos units continue to cater to the banking, take place across the tax system, operations. In 2018, consistent with Ayala’s vision to become eligible to enter the labor force, telecom, real estate, and utility needs of the healthcare, education, and labor, increase shared value among its stakeholders, the we foresee that Philippine economic growth growing consumer class. Globe has become as well as pockets of legislation Public Policy Unit participated in policy discussions prospects—and consumption in particular— the market leader in wireless market share that have improved ease of doing on reform initiatives on tax, health, education, remain strong. Our demographic dividend with 74.1 million subscribers across prepaid business. Some of our businesses labor, and ease of doing business which affect the given our young, growing population is and postpaid. Ayala Land is exploring new that support the country’s physical group’s operations as well as contribute to the overall further augmented by continued strong business models in real estate such as infrastructure development require economic growth and development of the country. remittances and rising average incomes. The Flats, dormitories in the heart of the us to continue working closely The team, along with our Regulatory Council, serves This expanding base of urbanized, central business district to allow people to with the government, such as in as our platform to collaborate, exchange insights and middle-income consumers with discretionary live closer to work. We further believe in water, transport infrastructure, and proactively help senior management stay abreast income unlocks demand for products and supporting the growing young labor force telecommunications. Meanwhile, of new laws and changing government policies, and services. Further, we believe that with the by addressing the skills gap through our other industries are witnessing a manage risks arising from the continuously evolving advent of technology as well as increasing education investments. structural shift in dynamics given policy environment. access and awareness, this rising consumer new government measures. class has changing demands and lifestyles that require new innovations in terms of both product and service delivery. We believe that to create sustainable We have recently completed our sustainability GROWING and long-term value, private blueprint, Bridging the Filipino to 2030. We are IMPORTANCE enterprises must continue to strive for increasingly deliberate about our contributions to the OF ESG a deeper engagement with society to Sustainable Development Goals, and are committed DIGITAL Beyond a growing consumer class, we believe Over the years, we have nurtured an address the various environmental, to addressing three pillars: access and inclusivity; TRANSFORMATION that consumer demands and lifestyles have innovation mindset, empowering our social, and governance issues we productivity and competitiveness; and responsible changed and continue to do so, following business units to continuously transform face today – such as marginalization, growth and innovation. Each business unit has global trends and increasing access to themselves while remaining cognizant that large untapped potential of our committed to actionable and measurable initiatives, technology – such as the ubiquity of internet the pace and scale of their transformations human capital, climate change, and exploring group-wide synergies across initiatives such connectivity and smart devices around the varies – with some business units irresponsible growth leading to lasting as waste management and climate change mitigation, country. In the realm of online shopping, undergoing large-scale transformations, environmental damage. In response to among others. We emphasize carbon reduction across for instance, speed and convenience have while others focus on smaller process and such issues, we see a trend towards multiple businesses and are focused on measuring become top priorities; therefore, efficient service improvements. With this innovation renewables, reduction in carbon our impact by increasing our efforts on SROI and payment capabilities and logistics fulfillment mindset, we have also become more open footprint, and new inclusive business institutionalizing Sustainable Development Goals as and delivery are key. Beyond changing to invest in new industries and explore models. To complement these, we a performance metric for our leaders. Beyond this, consumer habits, we also see emerging new business models, resulting in also see more professional investment AC Energy is accelerating its focus on renewable energy technology-enabled challengers enter our high-technology investments at management firms increasing their projects across Asia Pacific, recently raising the first traditional industries to deliver new AC Industrials, digital healthcare focus on socially responsible investing Climate Bond Initiative-certified dollar-denominated products and services in innovative ways, technologies at AC Health, greater strategies. green bond in Southeast Asia, ensuring that funds will as well as new ecosystems that deliver value investments in fintech and logistics, and be used for projects that will deliver a low-carbon and and create better customer experiences. expanded venture initiatives across the climate resistant economy. group, among others. Finally, we continue to grow our data analytics capabilities as a group and remain committed to creating a more open and collaborative culture, focused on lifelong learning and innovation.
56 AYALA CORPORATION 2018 INTEGRATED REPORT 57 DESCRIPTION HOW OUR STRATEGY ADDRESSES THIS
CHINA’S China’s influence has grown significantly Ayala continues to engage with China GROWING over the past decade, reshaping how on multiple fronts. For AC Motors, we INFLUENCE countries around the world do business have started to work together to leverage and think about trade. Threat of trade Chinese automobile manufacturers, such wars rattled markets worldwide, as as Volkswagen’s China partnership, as investors feared a slowdown in global well as Maxus. In telco, Globe continues growth. For the Philippines and the rest to deepen its partnership with Huawei of Southeast Asia, the long-term impact and together, we are exploring piloting remains unclear, with some government 5G technology in the Philippines. We have officials speculating that this could be also continued to grow our partnership Ayala Senior Management visits the Facebook campus in Silicon Valley, California, USA. good for Southeast Asia as China diverts with Alipay through Mynt. Moreover, we its orders to the region, or have a negative recognize the increasing influence of China impact given the interconnectedness of on the Philippine economy, and we have supply chains between China and the increased our investments strategically. region. However, what remains clear is For example, Ayala Land is looking to that China’s influence in the Philippines launch its first Philippine-Sino Industrial continues to grow as the current Park over the next few years and has administration continues to ally itself already launched Esta Galleria with with China. This is evidenced through the NYZ Ceramics Group. influx of Chinese tourists in the past two years, the increasing presence of Chinese businesses, and the inflow of Chinese buyers and its subsequent impact on the real estate market. Meanwhile, in the realm of technology, China’s rapid advancement has started to tip the balance of different industries such as affordable smartphones AC Health’s Generika pharmacy provides free blood check-up Students of AC Education are supported by digital tools for and mobile payments. These developments to its customers. better learning. all have far-reaching implications on how we fundamentally do business.
Ayala signs an agreement with the Yuchengco group to merge AC Education with iPeople.
58 AYALA CORPORATION 2018 INTEGRATED REPORT 59 OUR STRATEGY FIVE VISION PILLARS
STAKEHOLDER • Align our strategy to the national development agenda EMPOWERMENT • Partner with respected local and global insitutions FINANCIAL Build a strong, growing, and diversified portfolio that • Attract the best talent possible STRENGTH can withstand and take advantage of economic cycles
2018 PERFORMANCE • Continued to increase earnings capacity and quality in 2018 2018 PERFORMANCE • Strengthened commitment to integrate sustainability with strategy • Increasingly diversified returns through exposure in varied industries through the Ayala Sustainability Blueprint: Bridging the Filipino to 2030 • Develop a culture of continuous learning to create a highly KEY PERFORMANCE NET INCOME GREW SUSTAINED OUTPERFORMED PHILIPPINE productive workforce INDICATORS TO ₱31.8 Billion DOUBLE-DIGIT STOCK EXCHANGE INDEX ROE AT 12.2% IN TOTAL SHAREHOLDER KEY PERFORMANCE ROBUST STAKEHOLDER LAUNCH OF THE AYALA RETURN INDICATORS ENGAGEMENT DISCUSSED SUSTAINABILITY BLUEPRINT: IN PAGES 72 TO 75 BRIDGING THE FILIPINO TO 2030
REINVENTION AND GROWTH Positively disrupt, transform, and impact the markets we serve BUSINESS Create and support clear industry-leading businesses LEADERSHIP that show sustainable growth potential 2018 PERFORMANCE • Rising earnings contribution of emerging businesses as AC Energy and AC Industrials continues to scale 2018 PERFORMANCE • Listed businesses are leaders in their industries KEY PERFORMANCE EQUITY EARNINGS CONTRIBUTION CONTINUED TO INVEST • Recognized as among the best in the Philippines for management INDICATORS FROM EMERGING BUSINESSES ₱17.6 BILLION IN NEW excellence, corporate governance, sustainability, and AT 15% GROWTH PLATFORMS investor relations
KEY PERFORMANCE RANKED NO. 1 BEST MANAGED AYALA, AYALA LAND, GLOBE, INDICATORS COMPANY AND BEST GROWTH AND MANILA WATER RANKED STRATEGY BY FINANCEASIA AMONG TOP 50 PUBLICLY LISTED GEOGRAPHIC • Strategically expand internationally, with a focus on Southeast Asia COMPANIES IN ASEAN (BY ACGS) EXPANSION • We have identified key business units to strategically drive RANKED NO. 1 BEST CEO AND the group’s international growth – namely, AC Industrials, BEST CFO BY FINANCEASIA RANKED 1ST BEST AC Energy, Manila Water, and Ayala Land CORPORATE GOVERNANCE AYALA PRESIDENT AWARDED BY INSTITUTIONAL INVESTOR MAP MANAGEMENT AWARD 2018 PERFORMANCE • Expanded presence in Vietnam, began operations in Indonesia OF THE YEAR RANKED 3RD BEST INVESTOR and continued to deepen presence in Australia RELATIONS BY FINANCEASIA KEY PERFORMANCE SUCCESSFULLY DEPLOYED CAPITAL IN RANKED 2ND BEST IR COMPANY BY INSTITUTIONAL INVESTOR INDICATORS KEY STRATEGIC MARKETS TO FURTHER RANKED 1ST BEST ESG OUR INTERNATIONAL FOOTPRINT BY FINANCEASIA
RANKED 2ND BEST ANALYST DAYS BY INSTITUTIONAL INVESTOR
60 AYALA CORPORATION 2018 INTEGRATED REPORT 61 RISK MANAGEMENT
Risks and Opportunities (GRI 102-15) manage risks and opportunities, has matured Over the years, the practice of risk management and become more robust that it encourages has improved significantly, which allowed a better integrated thinking. This integrated thinking understanding of the organization’s risk and guides the alignment of our strategy with risks opportunities. Stakeholders are more engaged and opportunities. With the mapping of risks to today, in search for greater transparency and the five vision pillars, management gains a better accountability for managing the impact of risk, understanding of how risks impact their choice while also critically evaluating the leadership’s of strategy. The dialogue adds perspective to ability to realize opportunities. Organizations have the strengths and weaknesses of a strategy as become more adaptive to change and have started conditions change, and how well a strategy fits into to think strategically how to manage the increasing the organization’s vision and mission. Integrating complexity, volatility, and ambiguity of the global risks with business objectives provides an effective landscape. way for management to ensure how risks can impact Sustainability strategy and manage them well. In effect, risk In a similar manner, Ayala’s risk management management strategy is embedded in the business Mega Trends framework, designed to strengthen the risk-aware strategy. This, in return, helps create trust and culture across the group and to identify, assess and strengthen confidence among stakeholders.
VISION PILLARS
Financial Reinvention Geographic Stakeholder Business Strength and Growth Expansion Empowerment Leadership Portfolio Management Adapted from Deloitte Competition Partnerships and Alliances Innovation and Technology
Synergy This thinking also started the conversation of factors affecting our operations, we relied on our Capital Markets including sustainability in the 2018 risk assessment. management’s foresight and creativity in reviewing Funding The management team was introduced to the eight and prioritizing our risk exposures. FUNDAMENTAL RISKS sustainability megatrends and revisited Ayala’s Political and Regulatory top risks through the lens of sustainability and On the next page is the prioritization of the 13 risk understanding these as risk components. Clearly, categories, which are based from the common risk Brand and Reputation more work is needed to fully integrate sustainability language developed by the ERM Council in 2016 to Governance and Controls KEY PRINCIPAL RISK CATEGORIES KEY PRINCIPAL in the current risk management process. aid group reporting and facilitate risk aggregation. Talent Following the diagram is the discussion of Ayala’s Business Resiliency Succeeding the discussion of risks through the lens top six risks. Please contact [email protected] Information Security and Cyber of sustainability and understanding various external for the discussion of the remaining risks.
62 AYALA CORPORATION 2018 INTEGRATED REPORT 63 The risk may potentially result in lives lost, Services Unit, who handles crisis management, substantial damage to properties, delayed also tracks frequency of typhoons, earthquakes, AYALA’s 2018 RISK HEAT MAP business operations, suspended projects, and terrorism threats.
5 10 15 20 25 and eroded public trust and confidence, 1 Political and Regulatory if not handled properly. In relation to information technology 5 2 Business Resiliency (IT)-related disasters, the Information and Communications Technology (ICT) 3 Portfolio Management Thus, the Ayala group’s functional units 4 8 12 16 20 periodically review and enhance business Unit of the company has processes and 4 Competition 4 8 1 recovery plans, increase employee awareness procedures in place to ensure timely 5 Brand and Reputation in disaster management thru training, response to IT incidents. Moreover, the 6 3 ICT Unit developed an IT Disaster Recovery 3 6 9 12 15 6 Information Security and Cyber drills, and reminders, and collaborate with government agencies for shared resources and Policy and Plan which details the measures for 4 2 3 7 Innovation and Technology mutual assistance. In addition, the Group Risk protecting and recovering IT infrastructure in 7 8 Market Management Team regularly reviews adequacy the event of a disaster. It also explains how the LIKELIHOOD 2 4 6 8 10 IT infrastructure will support critical business 9 Talent of insurance coverages. The Corporate Support 2 9 5 operations during the recovery period. 10 Governance and Controls 12 10 1 2 3 4 5 11 Funding 3. Portfolio Management loss of relevance in the market or industry and 13 11 12 Partnerships and Alliances 1 Ayala’s inability to align portfolio management inability to create value for stakeholders. 13 Synergy strategy with business objectives may result in 1 2 3 4 5 its failure to provide the right balance of risk To mitigate this risk, Ayala rebalances its IMPACT and return. Portfolio Management risk went portfolio regularly within its risk appetite by up by two points this year. analyzing portfolio twice a year, including capital management, valuation, investment, 1. Political and Regulatory The changes in political and regulatory The management team was concerned and divestment opportunities. The group defined this risk as the inability landscapes may pose challenges in tracking with overdiversification and Ayala becoming to anticipate changes in the political and compliance, may result in higher cost of a financial investor, resulting in it not being The Strategic Planning Unit cultivates market regulatory landscapes that may result in the compliance, delayed projects, and possible able to have significant influence in the intelligence, compares key metrics with group being unable to shield its profitability loss of business. Overall, this risk may impact management. In addition, factors, such competition, analyzes annual innovation trends and brand value. This remained to be the the Ayala group’s profitability and brand value. as rise of disruptive technology that may and new sectors, and strengthens Ayala’s gating #1 risk of Ayala and the group. replace subsidiary’s business model, process, where all possible business ventures Ayala’s Public Policy Unit and the group’s unfavorable industry regulations, and are discussed and monitored. The CFO, thru its Key issues and concerns considered were the Regulatory Council regularly identify, monitor, geopolitical environment in operations Financial Planning and Corporate Finance and varying interpretations and implementation and evaluate new policy issues across sectors outside of the country, were considered Asset Management teams, complements these of new laws and regulations, and the different and industries. The unit is also in-charge of during the prioritization activity. Please activities with regular deep-dive analysis of mindset and priorities of local and national maintaining and strengthening relationships refer to Outlook discussion on pages 56 to 59. portfolio and business unit performance. The government officials in the Philippines and in with all levels of government by conducting Senior Management Team is also expected to operations abroad. In addition, climate change policy dialogues and consultations among This risk has significant impact in financial strengthen relationships and establish networks was discussed as a potential sustainability others. Please refer to Stakeholder Engagement- terms: missed targets and expensive funding with potential partners and advisers. factor that can be used to drive political and Government Agencies and Regulators discussion mechanisms, and reputational aspect: regulatory climate in the future. Climate change on page 72 to 75 for additional information. and global warming are relevant topics to the Philippines as an island country. 4. Competition Competition risk remained at #4. It is defined as Competition risk may impact our profitability the inability to meet the desired market position because of missed targets, our brand and 2. Business Resiliency With the Philippines ranked as the fourth most that may directly impact financial health and reputation as we lose relevance in the market The inability of the organization to restore disaster-prone country globally where a majority brand value of the group. or industry, and our ability to create value to normal operations following natural or of our assets and employees are located and our stakeholders. man-made disasters was ranked #2, with the heightened terrorism activities within Ayala was concerned with new market entrants higher by five points from the previous year. the region, the robustness of each company’s that can potentially turn into competitors in the This is being monitored side-by-side with business continuity management system industries that our subsidiaries operate in. Also portfolio management risks. In addition, requires review and improvement. considered during the ranking were the non- we leverage on the brand and reputation of traditional competition coming from disruptive Ayala in developing partnerships and alliances. technology and the shift in customer behavior.
64 AYALA CORPORATION 2018 INTEGRATED REPORT 65 5. Brand and Reputation protect the brand. A brand health study was Ayala’s brand and reputation are significant conducted in prior year and its results informed value drivers. Ayala is known for its good our programs and activities in protecting the governance and integrity, making it a company brand. In addition, Ayala of choice for partners, lenders, bankers, future is more active in social media than its employees, communities, and customers. The competitors and needs to continue to engage risk of not being able to maintain our stature as the next generation of customers to build its a company of choice may result in significant brand. Ayala tracks its social media indices, difficulty in creating and/or maximizing value such as shares and likes, to monitor its brand for all stakeholders decreased by two points likeability and level of engagement. from previous year’s prioritization exercise. This risk may also increase cost of capital, loss We are also including in our tracking issues of potential partners or investors, and pose related to human rights and we are purposive Ayala conducts annual risk assessments attended by senior leaders, risk owners, and risk designates. difficulty managing Ayala’s growing portfolio. in monitoring diversity in our talent pool because these are important sustainability The following sections discuss the programs and activities designed to maintain the robustness and relevance Five years ago, this was our #1 risk and the considerations to continuously strengthen of the risk management framework in Ayala. management team put in significant efforts to our brand and reputation. Risk Architecture (GRI 102-30) Through the Risk Management and Related Party 6. Information Security and Cyber and sensitive personal information are secured Transactions Committee, the Board of Directors Despite the drop by three places, Information to maintain data confidentiality. The Learning maintains its oversight role in the operationalization Security and Cyber Risk remained to be at the and Organization Development Unit, together of the enterprise risk management framework, first half of Ayala’s top risks. Failure to ensure with the Public Policy Unit, holds an annual supports the value creation in an entity and strong and adequate information security training for all employees to strengthen their prevent decline that may emanate from principal controls to safeguard confidentiality, integrity awareness on the data privacy act. and emerging risks. The Committee provides and availability of critical information may appropriate transparency and visibility into the impact the Ayala group’s business viability The ICT unit has detection and monitoring organization’s and the group’s risk management Ayala CFO, CRO, and CSO Jose Teodoro K. Limcaoco delivers and reputation. process in place. On a regular basis, the ICT practices and ensures that the company has his closing message at the first Integrated Risk Management and Sustainability Summit. Unit updates antivirus software and performs effective risk management in place. The Committee Beyond cyber attacks, Ayala is concerned vulnerability test on its assets to preserve reviews its performance on an annual basis and Management committees also provide support to with the risks involved in handling confidential its security from increasing cyber threats. proposes improvements as needed. information of individuals and organizations. It also conducts regular review of security the CRO by ensuring the existence of a structure The Data Privacy Act of 2012 went into effect measures employed by third parties and at the operating level that will communicate and The Chief Risk Officer (CRO), being the risk monitor key principal and emerging risks. They also two years ago, and penalties for violations communicates standard ICT requirements management advocate for the company and the pertaining to personal information include fines to all outsourced system providers. This will ensure that risks are discussed during project and group, reports to the Committee any improvement investment meetings. and imprisonment. More so, human rights to warrant consistency and alignment in the in the design, implementation and maintenance privacy is a sustainability issue that must be security measures deployed across Ayala’s of the enterprise risk management roadmap. The significantly considered in managing this risk. business IT infrastructure. With more frequent Finally, the risk owners, as business unit leaders, Group Risk Management and Sustainability Unit are responsible for managing the risks they face in and progressively sophisticated cyber threats, supports the CRO by designing activities that As a mitigating measure for data privacy Ayala also saw an opportunity to forge synergy the day-to-day operations within the established enhance the organization and the group’s risk risk framework. They have the responsibility to concerns, the ICT Unit has a data privacy within the group to institutionalize a centralized intelligent culture, formulating risk management framework and manual in place, which security operations center that will monitor identify, measure, monitor, control, and report on strategies, evaluating tools and techniques for risks to management. detail how all processes involving personal security and provide timely incident response. risk assessment, and monitoring key principal and emerging risks. It also convenes the ERM Council, The Internal Audit, on the other hand, assesses a group comprising the risk officers of all Ayala’s the effectiveness of the risk mitigation measures business units, for risk framework alignment, proposed by the risk owners and provides continuous risk process improvement, and other an independent assurance of the adequacy, group-wide projects. effectiveness, and efficiency of the risk management process.
66 AYALA CORPORATION 2018 INTEGRATED REPORT 67 Risk Management Strategy (GRI 102-11) Risk Maturity Assessment Meanwhile, Ayala Corporation’s risk maturity is at the coverage is provided to all current operations The risk management practices in Ayala are Best practice states that the assessment of 4.0, five basis points lower from its initial score within the Ayala group. On top of the full policy anchored on its enterprise risk management the maturity of the risk management process be of 4.5 in 2015. The participants of the workshop limit, an additional cover is specifically dedicated roadmap, which highlights milestones in the performed every two or three years. Ayala engaged were conservative in their responses, encouraging to directors and officers. Despite the improvements linking of risk management to strategy and Aon Risk Solutions to execute a group-wide risk everyone to raise the bar in implementing the risk in coverage and wordings, the group generated integration of risk management to sustainability. management maturity assessment, the first management program. Despite this decrease in premium savings as well. Ayala has successfully completed the first and round of which was completed in 2015. rating, the company significantly outperforms the second phases of the roadmap and is currently benchmark group in most areas. Ayala is notably Another insurance line that was simplified was the revisiting the alignment of risk management with The Aon Risk Maturity Index is designed to capture strong in cross-functional risk understanding, public and product liability cover. Previous policies business strategy and daily operations and the and assess an organization’s risk management alignment of risk management and budgeting showed that different entities across the group integration of sustainability into risk management. practices and provide participants with immediate processes, board roles and responsibilities for risk purchase minimal limits through multi-line feedback in the form of a Risk Maturity Rating management, and understanding and appreciation policies, while others have liability programs From 2013 to 2015, Ayala transformed risk and actionable steps for improvement. Aon has of upside of risks. Conversely, the company needs to embedded in their omnibus policy for property management from being compliance-driven to partnered with the Wharton School of the University improve on self-insured risk valuation and collection damage insurance. The new structure for general value protection and creation activity. This involved of Pennsylvania to develop the Index and conduct of information from strategic partners. liability sought to reduce administration costs and a shift from the old view of risks as distinct and joint research on the relationships between risk duplication of cover. Furthermore, the group policy separate, towards a mindset that understands the management practices and actual performance. Optimizing the Ayala group’s risk features an unlimited coverage for public liability. interconnectedness and interdependency of risks Through this study, the Ayala group evaluated the transfer strategy Finally, a uniform coverage for property damage and that require collaborative risk mitigation strategies. effectiveness of the improvements implemented Started in 2016, Ayala continues to consolidate business interruption was afforded for the entire From 2016 onwards, Ayala intensified its risk since 2015. Similarly, Ayala’s roadmap was revised to and centralize insurance procurement to secure Ayala group. The policy uses true all-risk policy management program by capitalizing on activities address other potential areas for improvement. better coverage and consistent wordings, as well that linked risk management with business strategy, as premium savings, for all business units across which further strengthened and embedded the The Ayala group average risk maturity is 4.1, on the group. The group has placed its first optimized practice at all levels of the organization. In 2018, a scale of 1 to 5, with 1 reflecting a low level of motor car insurance program, which generated a Ayala continued to explore on the value proposition maturity and 5 being considered very mature. premium savings and allowed for wider coverage, of risk management by assessing the effectiveness There is an increase of five basis points from its as well as enhanced policy wording, administration of its risk management program and streamlining initial score of 3.6 in 2015. This score implies and employee benefits. The program is believed to opportunities and positive impact. that overall, the Ayala group of companies has be the first of its kind in the country with all terms developed a clear understanding of their respective combined in one policy. Risk Appetite organization’s risks and applies a consistent Recognizing that it is a relevant driver for strategic execution of mitigation strategies to address Aside from the motor car insurance program, the decision-making, the Board approved the these risks. In addition, the group demonstrated Group Risk Management Team, together with the management-recommended risk appetite for the a continued strong executive sponsorship on risk risk and insurance officers of the group, placed an company. The senior management also identified management within each business. Operational optimized political violence cover. The policy covers non-negotiable risks and set the risk limits for each business processes and practices also establish all political violence perils with widened occurrence of the drivers of four impact areas, i.e., financial, and utilize thresholds to set risk limits and definition, liability cover, and other extensions. people, compliance, and reputational. These limits express expectations for acceptable risks and Previously, only four business units from the group shall be referred to when making business decisions risk management performance. procure a terrorism and sabotage cover. With on projects and investments. the optimized program, the cover extends to all business units with premium savings. AON RISK MATURITY INDEX RATING SCALE
ABOVE AVERAGE The directors’ and officers’ liability insurance was also optimized for the group in 2018. Previously, Ayala, together with AON, gathers insurers who supported separate policies were bought throughout the Ayala’s group-wide insurance optimization program. group with different wordings, insurers, limits, 1 1.5 2 2.5 3 3.5 4 4.5 5 and deductibles. Through the optimized program, Initial to Initial Basic Advanced Basic to Advanced
BELOW AVERAGE
68 AYALA CORPORATION 2018 INTEGRATED REPORT 69 wordings, hence exclusions are reduced. Limits possible threats in the future. Furthermore, conducting research on current and emerging are set per occurrence, regardless of the number as we acknowledge the importance of integrating risk and sustainability mega trends, engaging of locations, removing the issue of aggregate limit risk management and sustainability, we introduced risk management experts, and collaborating erosion. More so, a portion of the premium is sustainability megatrends in the risk assessment with internal stakeholders to ensure that the allocated for risk management bursary, a central process, and senior officers of the corporation right perspective is in place for the annual risk fund to pay for the rolling program of pre-loss discussed how these can be translated to risks or assessment – an activity where senior officers are engineering consultation, together with other risk become a risk mitigation measure or opportunities. gathered to identify and analyze risks, evaluate management initiatives such as valuation study, and prioritize risks, allocate resources, and plan business interruption study, NATCAT modelling Risk Management Process risk mitigation strategy accordingly. As we go among others. Following ISO 31000, the risk management process through this process, we interact with stakeholders Sunny Verghese, CEO and Co-Founder of OLAM International at Ayala starts with establishing the context by at the different levels of organization for alignment and Chairman of WBCSD, delivers his keynote speech at Ayala’s identifying external and internal factors that that allows people to understand the risks of any Integrating Risk Management and Sustainability first Integrated Risk Management and Sustainability Summit. With the theme “Working Better by Working may impact value creation and value protection activity they undertake, and how this may affect Together”, Ayala held its first Integrated Risk objectives. We continuously innovate and enhance the risks being managed by others. and Sustainability Summit. One of its objectives our approach in establishing the context by was to start the conversation on the necessity and importance to integrate the two fields and how it can be done. Global experts and speakers DELOITTE’S RISK CULTURE FRAMEWORK from international organizations graced the event to give light on the integration process. It was attended by almost 400 participants, including Risk culture influencers senior and mid-level officers, and staff across the group. Risk Competence The collective risk management The integration of the two disciplines are vital today Global and regional speakers contribute in the first Integrated competence of the organization with the accelerated pace of change in the business Risk Management and Sustainability Summit of Ayala. Motivation landscape brought about by business disruptions, Through this activity, Ayala gained insights into The reason why people manage global megatrends and changes in stakeholder employee views and unit-level tendency to take Risk risk the way they do mindset. According to the World Business risks, assessed the employees’ ability to identify and Culture Council for Sustainable Development (WBCSD), understand organizational risks, and identified Relationships a harmonious blending of risk management and gaps to address and enhance risk awareness. sustainability will result in businesses being able How people in the organization interact with others to protect themselves from emerging challenges, On a 6-point scale, with 1 as the lowest and 6 as giving them the opportunity to create more value the highest, Ayala was rated between 4 (Slightly Organization and drive greater performance. Furthermore, Agree) and 5 (Agree) across the 16 risk culture How the organizational environment Deloitte affirms that an enterprise risk management indicators. The survey suggests that Ayala’s risk is structured and what is valued program that includes ESG risks helps connect risk, culture is strong in the areas of Knowledge, Skills, strategy, and decision-making, which in turn makes and Risk Orientation, while it needs improvement in companies more resilient and competitive. Challenges, Policies, Procedures and Processes, and Recruitment and Induction. Risk culture survey In line with embedding a risk-aware culture, the Risk Management Protocol Group Risk Management and Sustainability Team The Group Risk Management and Sustainability conducted a risk culture survey, encompassing Unit continues to be innovative in the tools and all employees from staff to senior management. methodologies it uses. In 2018, it employed a It followed Deloitte’s Risk Culture Framework, mix of black swan approach and risk sensing which consists of 16 risk culture indicators aligned methodology in identifying and assessing risks. to four risk culture influencers: risk competence, This is on the premise that Ayala recognizes motivation, relationships, and organization. events currently not perceived as risks to be
70 AYALA CORPORATION 2018 INTEGRATED REPORT 71 We continue to improve our stakeholder engagement to ensure that our business strategies are aligned to what is material to them. We ensure that the outcomes of the engagement initiatives across the STAKEHOLDER group are utilized as valuable insights into our business decisions and that management approaches are implemented for the best interest of our stakeholders. We remain committed to integrity, transparency, ENGAGEMENT and accountability in both our policies and practices as we engage with our various key stakeholders. (GRI 102-21, 102-40, 102-42, 102-43, 102-44)
INVESTORS AND SHAREHOLDERS BUSINESS PARTNERS AND AFFILIATES updates and financial performance, project Ayala encourages active participation and regular Our business partnerships are driven by a mutual pipelines, compliance to covenants, accreditation dialogues with institutional and retail investors and desire to creating value and enhancing capability requirements, procurement policies, and sell-side analysts. Through Investor Relations, a unit through sharing of complementing strengths and on-time release of due payments. In addressing under the Finance Group, information requirements expertise. Before engaging with potential partners, their concerns, we ensure that we perform of the investing public and minority shareholders we perform due diligence through an internal touch-point meetings, give regular updates, are fully disclosed to securities regulators on time. team or a third-party assessor. We firmly conduct conduct roadshows particularly for bondholders our business professionally and adhere to high and insurance markets, organize trainings and The Investor Relations Unit holds quarterly standards of governance. accreditations, and release on-time payments. media and analyst briefings, supports the annual stockholders’ meeting, and engages Operating on the same principles of timeliness, with institutional and retail investors through integrity, and transparency, our Senior Management one-on-one meetings, conference calls, and Team regularly engage with business partners e-mail. In 2018, four analyst briefings were held and affiliates through high-level meetings and to discuss the quarterly financial and operating dialogues to address topics of concern on financial results and a special analyst briefing to discuss performance, governance, commercial viability, recent developments on AC Energy. The briefings business outlook, and management strategies. were made accessible to overseas analysts and To familiarize ourselves and our business partners investors via a conference call facility. with our respective operations, an operations Manila Water provides Sustainability 101 workshops visit is scheduled on a per need basis. Further, for its suppliers. The company holds regular briefings and meetings we participate in relevant global organizations with investment and financial analysts, during to keep abreast of developments in industry GOVERNMENT AGENCIES AND REGULATORS which they are given access to senior management. sectors we are in. Government agencies and regulators provide an In addition, the Investor Relations Unit, together enabling environment for businesses to succeed. with senior management, regularly attends investor Abiding by laws and regulations is the first step Ayala conducts regular dialogues to address the concerns to be a responsible organization and we ensure conferences and holds non-deal roadshows to of its stakeholders. update Ayala’s local and foreign institutional that we adhere to the rulings that apply to our investors and overseas shareholders on the are immediately made available online to provide business units. We also conduct policy dialogues macroeconomic and socio-political environment, easy access for the investing community. and consultations, submit required reports, corporate strategy, including long-term goals and provide regular briefings and updates, and support financial targets. In 2018, Ayala participated in 12 Ayala continues to strengthen its investor legal lectures when requested. In instances institutional investor conferences and non-deal relations framework. In 2018, the Investor where concerns were raised, we dialogue with government representatives, provide training roadshows held in Asia, Europe, the United States, Relations Unit organized the fourth Ayala Group Ayala forges strong and meaningful partnerships. and the Philippines. Further, Ayala engaged in 66 Investor Relations Summit to keep management to company officers and employees, and when one-on-one sessions and conference calls with abreast of best practices, global trends, and CREDITORS AND SUPPLIERS needed, we update our company policies to align overseas institutional investors and analysts to perspectives on the equities market and the As we pursue our business objectives, we with relevant laws and regulations. To support all discuss company updates and developments. evolving role of investor relations. The summit are cognizant that an eco-system of reliable, these initiatives, the Ayala group established the was attended by senior leadership and investor competent and responsible creditors and Regulatory Council in 2015 to engage government Ayala regularly updates its website to ensure that relations officers of Ayala and its listed subsidiaries, suppliers is critical. And as such we value our agencies and regulators and to ensure that disclosures to the regulators and presentations at who listened to international speakers and panelists relationships with them. This denotes our respect dialogues are continuing. Please refer to page 64 for analyst briefings and annual stockholders’ meetings share their thought leadership. to their concerns on obtaining regular company more information.
72 AYALA CORPORATION 2018 INTEGRATED REPORT 73 CUSTOMERS EMPLOYEES The Ayala group actively engages customers to Our employees are our primary customers and understand their concerns mostly in areas of their well-being is important to us. Operating on quality of service, convenience, affordability, the belief that empowered employees perform to and reliability. To respond to these, we created their utmost potential, we provide strong support consumer touch points across our businesses to our workforce through different channels. On using various platforms like hotlines, social media engagement, we provide activities and events channels, website, and marketing events. We also such as sports tournaments, holidays or season conduct annual and periodic satisfaction surveys celebrations, special wellness events, and other and briefings, including regular visits to existing quarterly activities. For professional development, clients when needed. We are always open to we provide training and conferences, planning
immediately address concerns that arise from our and learning sessions, online learning tools, Ayala provides continuous learning to its workforce. Ayala is a founding member of the UN Global Compact Philippines. consumers and endeavor to immediately resolve and require annual performance appraisal to issues reported. Our companies measure customer determine performance results and areas for townhall meetings. Our employees are also given and industry meetings. We also take part in satisfaction using metric relevant to their industry. improvement. We also provide career development opportunities for volunteerism such as reforestation industry surveys, studies, and working committee Below is the results of the group’s customer and succession plans. To address grievances, we and forest protection activities and blood donation meetings. We value building collaborative networks satisfaction survey for the last three years. remain open to one-on-one discussions and provide to name a few. and support long-term memberships. Moreover, we continue to forge partnerships across the COMMUNITIES industries we are at to contribute to discussions on COMPANY METRIC DESCRIPTION 2018 2017 2016 We also strive to keep a strong relationship business development, adoption of new rules and Ayala Land CSAT rating Percent of tenants satisfied with APMC’s property management 86% 92% 93% with the communities we work with by providing regulations, and setting of industry standards and services capacity building activities and livelihood market practice. Globe Net Promoter Score A measure of how likely customers recommend its service to others 38% 27% 22% education. Further, we give effort to promote (-100% means everybody are detractors while +100% means everybody are promoters) local hiring for our businesses. Ayala Foundation, OTHER STAKEHOLDERS Manila Water Service complaints Percent of service-related complaint resolved 99% 96% 98% the social commitment arm of the Ayala Group, We reach more stakeholders through various resolution primarily heads various social and community channels such as press briefings, conferences, Billing complaints Percent of service-related complaint resolved 99% 95% 96% development programs. We explore possibilities media events, interviews, social media, resolution of having local communities as part of our workforce corporate websites, and other communication IMI Philippines CSAT rating Scoring guideline that covers specific customer requirements such 4.60 4.66 4.61 as Quality, Cost, Delivery, and Responsiveness that are defined and or partner suppliers in the areas we operate in. platforms. Our group ensures that our agreed with customers Please refer to pages 80 to 81 for our community stakeholders are updated on our financial, Honda CSAT (sales) Percent of customers who are satisfied with new vehicles sales 96% 97% 97% engagement activities. environmental, and social performance, as well as on our business developments, strategies, CSAT (services) Percent of customers who are satisfied with vehicle service provided 90% 84% 96% new products and services. Isuzu CSAT (sales) Percent of customers who are satisfied with new vehicles sales 89% 88% 90%
CSAT (services) Percent of customers who are satisfied with vehicle service provided 87% 96% 87%
Volkswagen CSAT (sales) Percent of customers who are satisfied with new vehicles sales 89% 89% -
CSAT (services) Percent of customers who are satisfied with vehicle service provided 83% 89% -
Generika CSAT (internal) Percent of customers who are satisfied with Generika’s services 82% 63% 55% based on internal measurement CSAT (external) Percent of customers who are satisfied with Generika’s services 80% 90% 89% based on third party measurement MedGrocer CSAT (internal) Percent of customers who are satisfied with MedGrocer’s services 94% 90% 86% based on internal measurement Ayala fosters strong relationships with communities. CSAT (external) Percent of customers who are satisfied with MedGrocer’s services 92% - - based on third party measurement FamilyDOC Net Promoter Score A measure of how likely customers recommend its service to others 56% 80% - INDUSTRY ASSOCIATIONS (-100% means everybody are detractors while +100% means Ayala and the UP School of Economics conduct dialogues. everybody are promoters) We actively participate in industry activities that are relevant to our business units. Such activities LRMC Customer complaint Percent of complaints resolved 100% - - resolution rate include conferences, forums, industry workshops,
74 AYALA CORPORATION 2018 INTEGRATED REPORT 75 MATERIALITY(GRI 102-29, 102-31) Materiality assessment is a regular process that we undertake in Ayala since 2013 as an early adoption of the GRI G4 reporting framework which was implemented in the 2014 reporting. The assessment guides the identification, prioritization, evaluation, and management of key concerns of stakeholders. This process in defining the material factors across our business units and various stakeholders remain guided by the GRI standards. We further aligned its scope by including the 10 Principles of the UN Global Compact when Ayala became a founding member of the local network in 2016. Our material factors are best depicted in the Ayala 360° Sustainability Reporting Framework in the succeeding page.
We commit to ensure that our identified material factors remain relevant with the changing business landscape.
water, and other materials we utilize to deliver our products and services. Further, we determined the effect of our operations on climate change through the emissions and waste that we generate and the biodiversity we affect.
Social Material Factors Our social material factors cover topics on the well-being of our employees and our engagement with communities, good governance, and satisfaction of our customers. Factors related to our workforce include employee engagement, training Economic Material Factors and development, hiring and attrition, occupational Our economic material factors are based on the health and safety, and labor-management relations. value that our companies directly and indirectly Further, this includes an assessment on whether we contribute to society. Our direct contributions are effectively uphold human rights principles such as relevant because they reflect how we distribute child labor, forced labor, anti-corruption, diversity, the economic value we generate to various equal opportunity, and anti-discrimination in our stakeholders such as capital providers, suppliers, operations and dealings with suppliers. employees, government, and communities. On THE AYALA 360O SUSTAINABILITY the other hand, our indirect contributions give On good governance, we look at our group-wide a deeper understanding of our economic efforts performance on anti-corruption, security, and data REPORTING FRAMEWORK and performance. It demonstrates our impact to privacy. While on communities, we gauge how well the growth of SMEs and our partners in the supply we have included the locals that we serve in our Ayala views that complying with ESG requirements The framework gives a comprehensive look at the chain, access to quality products and services of the value proposition, including indigenous people and is the first step towards becoming a responsible material factors, indicators, and metrics that our vulnerable sector, and resilience to climate change. the marginalized. organization and is imperative to creating shared businesses focus on through three major segments Also considered in our indirect contributions are our value. The 360° Sustainability Reporting Framework namely: Economic Resilience, Environmental foreign and domestic investments that enable us to Finally, the satisfaction of our customers with is the result of the materiality process across Stewardship, and Social which is further divided into grow our businesses. our products and services and our adherence to the Ayala group, and it reflects the ESG metrics three: Meaningful Jobs, Human Rights Adherence, customer data privacy were also identified to be where we base our performance. This framework and Good Governance. Consequently, this framework Environmental Material Factors material across the group. is updated whenever we perform our materiality complements with the UN Sustainable Development Our environmental factors across the group are reviews. Thus, the framework shown above remains Goals and was thus used to support the creation of varied in nature and scale due to the diversity of The full list of our material factors with their the same because the same set of material factors the Ayala Sustainability Blueprint: Bridging the Filipino our business units. They were identified based on positive and negative impacts, link to principal were deemed still relevant upon our materiality to 2030. Certain indicators and metrics in the wheel our businesses’ dependency on various natural risks, related management approaches, and review in 2018. are considered vital to measure the achievement of capitals and the magnitude of their impact on the performance indicators can be found at the the goals set in the blueprint. environment. Our key resources include: energy, Annex on page 182 to 193. To learn more about our policy, practices, and sustainability philosophy, please visit www.ayala.com/commitment-sustainability 76 AYALA CORPORATION 2018 INTEGRATED REPORT 77 THE AYALA IDENTIFYING MEGATRENDS THREE JOURNEYS TO 2030 In the course of developing this blueprint, Ayala After the rigorous process guided by the noted the three megatrends that posed the biggest aforementioned five principles and vision SUSTAINABILITY development challenges to Filipinos today and are for the Filipino in 2030, Ayala firmly commits relevant to the group: Marginalization, Untapped to bring the Filipino to embark on three journeys: Potential, and Irresponsible Growth. BLUEPRINT Access & Inclusivity Journey BRIDGING THE FILIPINO TO 2030 First, Marginalization, is a phenomenon that will ensure that the Filipino has access affects majority of the Philippine population, to basic needs such as safe and clean water, threatening health, mortality, attainment and other necessities critical to health, Ayala was one of the first companies to align with A PRINCIPLED APPROACH of quality education, and the well-being of education, and sanitation. This journey the UN Sustainable Development Goals (SDGs) We took a systematic approach in the creation households by having access to basic necessities. prioritizes the vulnerable sector, ensuring during its launch in 2015. We anchored on the SDGs of our Sustainability Blueprint and operated In 2018, the Philippines ranked 113 out of 189 that they are included and helped to holistically as a perfect framework to align our purpose under five principles: countries in the Human Development Index, grow to be positive contributors to society. of accelerating the future by seeing potential, indicating that the country needs to make making businesses better, and improving lives. Outside-in massive strides to improve education and Productivity & Competitiveness Journey 1 We made a careful assessment of the external healthcare, and ensure inclusive growth. will enable the Filipino to be safe and have We achieved a milestone the following year, 2016, business environment and needs of society stability. This includes giving opportunities for when we published our first Integrated Report. and determined where it is relevant to Second, Untapped Potential, refers to the missed meaningful and productive employment, ensuring The 2016 report was the first of its kind in the contribute. This is in contrast to taking the opportunities for the working class because of that the people also have access to necessary Philippines and featured a comprehensive look approach of looking at Ayala’s products and unemployment, underemployment, lack of access infrastructures, technologies, products, and at the Ayala group’s contribution to the SDGs. services and choosing certain sectors. to financial services, inefficient infrastructure, services that are needed for them to function In the same year, we became a founding member lack of access to safe dwellings, other services at their best in a globally connected economy. of the UN Global Compact Network (UNGC) Bold leadership and conveniences. Philippines and we also began to incorporate 2 Executives across the group made a Responsible Growth & Innovation Journey the 10 Principles of UNGC into our sustainability firm commitment to demonstrate industry Last, Irresponsible Growth, speaks to unfetered will address the need for resilience against reporting framework. The 2017 Integrated Report leadership in linking our businesses to the and thoughtless development which can affect vulnerability to climate hazards. In this journey, built on the foundations of the previous report, SDGs and to communicate it in order to future generations. This includes concerns related Ayala aims to contribute in reducing reliance and shows how we as a group of companies have inspire others. to waste management, climate change, and other on fossil fuels, to increase the demand for continued to contribute to the SDGs. We also put negative environmental impacts that are brought more sustainable alternatives and lifestyles, emphasis on the specific SDGs on which each Impact at scale on by societal consumption including growth and to seek innovative solutions to manage business unit has a particular impact. 3 Ayala puts emphasis on creating signficant of organizations. negative impact to the environment long-term impact. This helps ensure and communities. To remain relevant in our drive to create shared continuity and the magnitude of our positive A VISION OF THE FILIPINO IN 2030 value, the Ayala group made a conscious decision effect on various sectors. With the three megatrends above serving as With these three journeys serving as paths to to further deepen our commitment to the SDGs. challenges to overcome, Ayala envisions that the envisioned Filipino of 2030, Ayala sets its After a rigorous process with key executives, we Focus 2030 will see a Filipino who is healthy, educated, business units to advocate the SDGs that fall are now more deliberate in our contribution and 4 Our companies will champion SDGs that are has access to safe and affordable water, is naturally in place per journey, completing the adopted the language of the SDGs for the targets naturally related to their businesses, with economically secure, has access to financial Ayala Sustainability Blueprint. Each SDG champion we set in our Ayala Sustainability Blueprint: core targets to be attained by 2030. services, information communication, and clean will maximize relevance and impact through focus, Bridging the Filipino to 2030. energy. The Filipino will be able to move freely ensuring that their respective targets are achieved. Public-private partnerships and efficiently, have peaceful dwellings, and 5 Ayala recognizes that the government and manage wastes effectively. We envision the The Ayala group commits to this blueprint, communties where we operate in are essential Filipino who, in every sense of the word, with each business unit setting a core target that is partners in scaling sustainability, and in is a responsible global citizen. aligned to the SDGs to assure significant contribution realizing SDGs 16 and 17. to the goals by 2030. We acknowledge that our business units have initiatives that go beyond the SDGs that they champion and we encourage them to continue contributing to other SDGs.
78 AYALA CORPORATION 2018 INTEGRATED REPORT 79 (GRI 203-2, 413-1) (GRI 203-2, 413-1)
Total revenue generated by the Iraya-Mangyans Ayala Foundation also works with relocated Meanwhile, AC Health provides quality AN ANNUAL LOOK amounted to ₱4.2 million wherein about families in Calauan, Laguna. With MDC Greens, a healthcare through its various business units AT NON-FINANCIAL ₱1.4 million was distributed to the weavers. subsidiary of Ayala Land’s construction arm Makati such as FamilyDOC, Generika, MedGrocer, and Aide. PERFORMANCE About 127 students from the weavers’ families Development Corporation, they established the were beneficiaries of Ayala Foundation’s K-6 Calauan Ornamental Plant Farming Program in 2012 FamilyDOC continues to address the gap in primary CREATING SHARED VALUE ACROSS THE GROUP financial assistance. To promote good health, which supplies plants used to landscape estates, care and preventive health by providing a chain With the advent of the Ayala Sustainability Ayala Foundation supports a healthcare center hotels, and resorts. The farm expanded its size from of accessible and affordable community-based Blueprint, the group continues to monitor the in the community which has served a cumulative two to five hectares. However, the income of the 31 clinics. These clinics offer outpatient services relevant sustainability topics and results that form number of 7,624 patients in 2018. farmers decreased by five percent in 2018 due to and diagnostic facilities with an on-site Generika our strong foundation in creating shared value. seasonality of purchase orders. In the second half pharmacy. Another group of weavers that Ayala Foundation of the year, their monthly income reached a high of ACCESS AND INCLUSIVITY JOURNEY supports are the women of Sibaltan, El Nido, ₱7,745 but this was unable to offset the low income FamilyDOC widened its base within Metro Manila, Ayala Foundation, the social commitment Palawan. The community is assisted in scaling during the lean months. Rizal, Laguna, and Cavite from 21 in 2017 arm of the Ayala group, is one of the pioneer up the production of buri2 palm merchandise, in to 54 branches in 2018. At the end of 2018, corporate foundations in the country and improving their operations, and in providing market In 2017, Ayala Foundation conducted an assessment FamilyDOC had served a total of 240,000 unique runs various development programs. To cite a few, linkage opportunities. Ayala Foundation also aids in covering 25 Calauan farmers and found out that the patients, a 370 percent increase from last year. they work with the indigenous community of Iraya- other forms of livelihood such as vegetable farming, program improved their quality of life. This afforded With this increase in branches and unique patients, Mangyan in Talipanan, Mindoro, and Sibaltan, pandan making, and retail of farm-based products, them the ability to acquire basic and transport FamilyDOC ensures that their medical community El Nido in Palawan, and a group of ornamental which generated 213 jobs in 2018, a 170 percent needs, to improve shelter, and to address education is growing to effectively cater to their needs. farmers in Calauan, Laguna. increase from the 80 jobs generated in 2017. and health concerns. FamilyDOC offers a residency program accredited by the Philippine Academy of Family Physicians In Mindoro, Ayala Foundation helps the Iraya- Scaling efforts in the Palawan area, Ayala for doctors in Family and Community Medicines. Mangyan community to preserve their tradition Foundation partnered with Ayala Land in 2016 1:6 Currently, they have 97 resident doctors from of weaving beautiful and functional products to conduct a rapid appraisal of communities FOR EVERY ₱1 OF INVESTMENT TO MDC 79 doctors in 2017, who are available from from nito1 vines, and further assists in selling the near the Lio tourism estate. The assessment ORNAMENTAL PLANT FARM, ₱6 RETURNS 8:00 am to 8:00 pm from Mondays to Saturdays. said products. The Iraya-Mangyans also undergo guided Ayala Foundation in creating its TO THE FARMER workshops and learning sessions to enhance community development plan for the barangays Patients are guaranteed a 45-minute service their skills in masonry, electrical, dressmaking, in the vicinity that need assistance on education, These efforts of Ayala Foundation contribute to their turn-around time which significantly improved and agriculture. The overall initiatives of Ayala health, livelihood, and water. Currently, they are core target of reducing extreme poverty in their by 10 minutes in 2018. This, together with their Foundation continue to generate 80 jobs within measuring the effectiveness of their community project areas. They will put mechanisms in place to aggressive expansion contributed to the the community. interventions through the Social Return On increase results. substantial increase in their patients served. Investment framework, results of which will be published within 2019.
FAMILYDOC ~28 MILLION 54 CLINICS GENERIC MEDICINE SALES COUNT FOR GENERIKA CALOOCAN PATEROS ~ 240,000 CAVITE PARANAQUE UNIQUE PATIENTS FOR FAMILYDOC LAGUNA QUEZON CITY ~ LAS PINAS RIZAL 6,300 MARIKINA TAGUIG UNIQUE RETAIL CUSTOMERS The culture of the Iraya-Mangyan community is reflected The Calauan Ornamental Plant Farming program has helped PASIG VALENZUELA in their woven products. displaced families since 2012. FOR MEDGROCER
1 - Nito Plant, a type of climbing fern that abundantly grows in the Philippines 2 - Buri Plant, a native palm tree in the Philippines
80 AYALA CORPORATION 2018 INTEGRATED REPORT 81 (GRI 203-2) (GRI 203-2)
On the pharmacy sector, Generika promotes Another tool from Generika is Gamot Guide quality essential health care services. With their (Levels 7-12) through progressive teaching methods high quality, reasonably priced and safe generic (Medicine Guide), a printed instruction on outlook on expansion, they are geared towards in its 23 branches across Metro Manila, Cavite, Rizal, medicines. It continues to contribute to the responsible medicine intake, proper storage, achieving their goal of improving the lives of 20 and Batangas. In 2018, APEC Schools has a student growth of the industry and has successfully and possible side effects of medicines. million Filipinos annually. population of 18,120 with 10,328 from the D & E increased from 750 branches in 2017 to 816 In addition to their efforts in giving access to market segments, a 12 percent increase from the branches in 2018 across locations that are health care, Generika continues its program On affordable and quality education, AC 2017 student population of 16,219 wherein 8,191 accessible to low income communities. called Libreng Konsulta (Free Consultations) Education makes access available through come from the same market segments. where free medical consultations are provided its Affordable Private Education Centers to patients on a scheduled basis. (APEC) Schools, continued management of Students enrolled through the Department of University of Nueva Caceres (UNC), and in the Education’s Senior High School (DepEd SHS) In 2017, AC Health invested in MedGrocer, an acquisition of National Teachers College (NTC). Voucher Program increased from 5,700 to 6,228 online pharmacy platform that caters to both retail Moreover, they extend job placement support to students with total subsidies of ₱118 million pesos and corporate clients. Retail clients significantly graduating students through their Professional to ₱129 million pesos from 2017 to 2018. increased from 593 in 2017 to 6,300 in 2018. On Employment Program (PEP). the other hand, corporate clients increased from APEC Schools started the Special Recognition 100 covering 60,000 employees to 450 covering APEC Schools is a chain of affordable private and Scholars program which grants six years of 460,000 employees. quality Junior and Senior High School education financial assistance to qualified students from public schools. The program began with 436 AC Health’s Generika Pharmacy is expanding across the country. students in 2018. GOVERNMENT-SUBSIDIZED SCHOLARSHIPS The medicine sales transactions reached 40 million To increase the employability of the graduates in in 2018, a four percent decrease from previous year the service sector, APEC Schools embedded focused sales count of 41.7 million. However, the average industry-related skills, routines, and training into basket size of their customers increased by five 129 14.5 their curriculum. Students are expected to complete percent resulting from ₱106 in 2017 to ₱112 in 2018. specific milestones across four competencies: It was observed that the customers now tend to MILLION PESOS MILLION PESOS Beginning, Developing, Intermediate, and Proficient. increase the size of their purchases and reduce MOBILIZED BY APEC MOBILIZED BY NATIONAL The students are assessed to ensure they are SCHOOLS FOR 6,228 TEACHERS COLLEGE FOR the frequency of their store visits. proficient and are ready to work upon graduation. AC Health’s MedGrocer extends online services for a more SCHOLARS 1,186 SCHOLARS convenient purchasing of medicines. Out of the total medicine sales in 2018 and 2017, 71 percent or 28.4 million and 79 percent or Joining the AC Health portfolio in 2018 is AIDE, 32.8 million are generic medicines, respectively. a mobile application that allows users to search, 44 choose, and book schedules with medical MILLION PESOS Generika’s house brands, Actimed and Nutrawell, professionals for quality care across the country. MOBILIZED BY UNIVERSITY contributed 26 percent of the total ₱3.8 billion sales AIDE provides options for appointments with OF NUEVA CACERES FOR in 2018 with prices that are 85 percent lower than different medical professionals including doctors, 3,478 SCHOLARS their non-generic counterparts. Actimed is a wide nurses, physical therapists, acupuncturists, range of generic medicines prescription, over-the- veterinarians, caregivers, and midwives. After GRADUATION counter drugs, and vitamins. Whereas Nutrawell completing a reservation, the service will be is a line with a wide selection of vitamins, food rendered at the convenience of the patient. SENIOR HIGH SCHOOL GRADUATES 474 supplements, and personal care products. Currently, AIDE has a total of 798 medical specialists FROM NATIONAL TEACHERS COLLEGE and healthcare professionals from 74 cities and Generika conceptualized the MedPadala electronic municipalities across the Philippines. Other COLLEGE GRADUATES FROM 853 UNIVERSITY OF NUEVA CACERES gift certificate with the intention of assisting services include vaccination, laboratory testing overseas Filipino workers and residents in ensuring and interpretation of results, medicine delivery, COLLEGE GRADUATES FROM that the money they send to their loved ones are and pet grooming. In 2018, AIDE received 8,600 1,110 NATIONAL TEACHERS COLLEGE duly spent for purchase of medicines. MedPadala requests with about 54 percent fulfillment rate. generated ₱885,000 from 3,110 transactions and, FIRST BATCH OF SENIOR HIGH APEC Schools graduated its first batch of senior high school in 2018. ₱975,000 from 2,293 transactions in 2017 and AC Health’s efforts touched the lives of close to 2,012 SCHOOL GRADUATES FROM APEC 2018, respectively. one million Filipinos in 2018 and they remain aligned with their target to provide access to affordable and
82 AYALA CORPORATION 2018 INTEGRATED REPORT 83 (GRI 203-2) (GRI 203-2)
In 2018, APEC Schools graduated 2,012 students Currently, AC Education offers PEP to prepare CENTEX aims to develop their confidence and 195 teachers from eight municipalities namely: as their first batch. There were 296 graduates that graduating students for employment. This is competencies through a robust academic plan, Taytay, Palawan; Odiongan, Romblon; Torrijos, sought employment and were hired within 100 focused on experiential learning wherein the participation in performing arts, and other skill- Marinduque; and Sablayan, Gloria, and San Teodoro days, 146 were employed with an average of more classroom is uniquely designed to simulate a building activities. The CENTEX program sites in Occidental Mindoro. The program has benefited than ₱15,000 monthly salary which is 26.6 percent work environment. The program is recognized by in Tondo, Manila and in Bauan, Batangas are in a total of 12,730 students since it started. higher than the NCR standard minimum wage3. the Commission on Higher Education (CHED) and partnership with the city government of Manila and Majority of the remaining graduates pursued has been embedded in the UNC and NTC curricula. the provincial government of Batangas, respectively. Ayala Foundation also goes beyond traditional college education. Throughout the program, students are required Currently, it has a total student population of means of education and pursues motivating the to communicate in English, develop specific about 1,000. minds of young leaders across the country through Meanwhile, UNC, one of the oldest universities in skills including job application techniques, and their program Ayala Young Leaders Congress the Bicol region, has a nurturing culture which is refine their work habits. In 2018, 336 out of CENTEX Training Institute on the other hand focuses (AYLC). Every year, a batch composed of around reflected on their academic programs that focus PEP’s 366 enrollees were employed within on enhancing the proficiency and critical thinking 70 top students are chosen after a rigorous on a balanced student life. In 2018, the school 90 days of graduation. of public-school teachers. Since 2012, the training selection process who go through an intensive has a student population of 8,206, a two percent institute reached 87 schools in 20 areas across the leadership training. In this program, the students increase from their population of 8,054 in 2017. In October 2018, AC Education signed the merger country and has engaged 865 faculty members. interact with industry leaders and Ayala top with iPeople, a development and investment executives. The participants take part in demanding UNC students enrolled through the DepEd SHS management subsidiary of the House of In partnership with ProFuturo, Ayala Foundation physical challenges, and collaborate in creating voucher program increased from 2,917 to 3,478 Investments. It includes iPeople’s significant also continues to bridge the gap in education by ideas that help in nation building. Since its inception with total subsidies of ₱35 million pesos to subsidiary, the Malayan Education System, Inc. bringing digitalization to schools in marginalized in 1999, the program has 1601 alumni from different ₱44 million pesos in 2017 and 2018, respectively. which operates Mapua University, a leading areas and giving trainings to teachers to enhance parts of the country. As a result, the inspired young engineering and technical universities in the their computer skills. In 2018, 94 schools in the leaders have launched community-based programs The university’s Career Placement Services Office Philippines, that ranked as a QS-3 star and the MIMAROPA4 region were reached by the program to help various groups such as mothers, students, aims to improve the employability of their senior school with the most CHED Centers of Excellence in which brings the cumulative number to 125 schools teachers, among others, across the country. college class by conducting job application Engineering. The merger will also include the since its launch in 2017. ProFuturo trained workshops. Of the 127 graduates who sought subsidiaries of Malayan Colleges in Laguna, and in employment, 69 were employed with an average Mindanao, and the Malayan Science High School monthly salary of ₱18,600, 54 percent higher than in Manila. NCR’s minimum wage. The iPeople merger will bring together the To further scale and positively contribute to the educational institutions of the two entities with education sector, AC Education also acquired NTC campuses in Metro Manila, Calabarzon, Bicol which has 12,029 students from Basic to Higher region, and Mindanao. education in April 2018. The overall efforts of AC Education will make a AC Education is set to spend ₱650 million pesos difference in the lives of about 23,000 students for the improvement of the facilities, programs, from APEC Schools, UNC, and NTC who are in the and curricula. 15 to 24 age demographic. They are on track in the achievement of their 2030 target of ensuring equal access to quality yet affordable junior and senior high school, and tertiary education. The number will increase when the merger is set into motion.
Additional contribution to SDG 4 is Ayala Foundation’s CENTEX, CENTEX Training Institute, ProFuturo, and AYLC programs.
CENTEX provides holistic, quality education AC Education widens it reach with its acquisition of NTC. for bright elementary school children from economically disadvantaged families. The Ayala Young Leaders Congress celebrated its 20th anniversary in 2018.
3 - Minimum wage in the National Capital Region is ₱12,047. 4 - The southwestern Tagalog Region composed of the provinces of Mindoro, Marinduque, Romblon, and Palawan
84 AYALA CORPORATION 2018 INTEGRATED REPORT 85 (GRI 102-7, 102-22, 203-2, 306-1, 405-1) (GRI 203-2, 401-2, 405-1)
With regard to delivery of equitable, safe, connections in 2017, and led to a removal of ~9,100 With this array of results made available to Ayala, and reliable water, Manila Water supplied tons of organic pollutants from the used water in the organization is able to have a macro-economic 1,160 million cubic meters of water through 2018, a 0.2 percent increase from 9,087 in 2017. overview of how it compares across the country more than 1 million billed connections in 2018, The average quality of effluent discharged by Manila and Asian Region in terms of Gross Domestic a 44 percent increase from the 807.2 million Water back to waterways is about seven milligrams Product, salary increase, consumer price index, cubic meters of water supplied in 2017. Further, BOD6 per liter. This is better than DENR’s minimum and more. Overall, it helps in the measurement a cumulative total of ~7,600 kilometers of pipes requirement of 30 milligrams BOD per liter for of the competitiveness of the compensation that were laid as of 2018 across all concessions in the public and recreational water discharge. the company provides. A sampling computation of Philippines, a 23 percent increase from 6,220 the results compared against what the company kilometers of total pipes laid as of 2017. With these efforts, Manila Water is on track provides shows that Ayala provides remuneration of in reaching its target of providing universal more than 10 percent than industry average. and equitable access to equitable, safe, and reliable water. Ayala also ensures that the benefits it provides is 1,160M above than what is required by law. This includes CUBIC METERS OF WATER SUPPLIED PRODUCTIVITY AND COMPETITIVENESS JOURNEY Millenials are given opportunites for growth in the Ayala group. medical and dental packages in support of the At the forefront of Ayala’s businesses are our well-being of our employees. Ayala also offers employees. Treating them as our primary The group acknowledges that the Millennials are a employee stock ownership plan in accordance customers, we put importance on their growth growing part of the working population. Research with existing policies of Ayala Corporation to 1 MILLION+ and well-being from recruitment to retirement. shows that this age group gives importance on managers and staff who are eligible depending BILLED CONNECTIONS Our success as a group is a direct function of the work-life balance, open corporate culture, and on their employment status and standing. The performance of our human capital. Therefore, social consciousness. They are more attuned with company looks at ways to improve benefits we strive to provide meaningful and gainful communications media and digital technologies. as a recruitment and retention strategy. 142,037 employment, open opportunities for learning According to the study of the World Economic SEWER CONNECTIONS IN ITS SERVICE AREAS and development, and ensure that our Forum, 65 percent of children now entering primary Ayala Corporation strives to provide full and workforce receive equal pay for equal value. school will eventually work in job types that do not productive employment by ensuring employment yet exist today. remuneration is within 10 to 20 percent above the TOTAL DIRECT HIRES OF THE AYALA GROUP Moreover, Manila Water continues its Tubig Para Sa industry average. 5 64,373 Barangay program to provide water to low-income 63,119 We are beginning to explore opportunities to give communities at a subsidized rate. A total of 214,164 meaningful employment to this emerging work On the other end of spectrum of SDG 8, 48,693 billed connections were placed since the program force. Our 2018 results show that our new hires BPI champions financial inclusion through began in 1998. who are below 30 and those in the 30 to 50 age innovation in their financing programs and brackets increased by nine percent and 12 percent services. Through one of BPI’s subsidiaries, Direct To enable water supply to its customers, Manila respectively. Majority of these two age groups BanKo Inc., which has a financial solution called Water continues its efforts to reduce non-revenue belong to the range of the Millennial generation. NegosyoKo, microfinance loans are provided to water (NRW) in all its concessions. Enterprise-wide, Self-Employed Micro-Entrepreneurs (SEMEs). the average NRW in 2018 is 9.6 percent, 2016 2017 2018 Recognizing that remuneration is an integral This gives the underserved Filipinos more a 0.3 percent improvement from 2017. concern of an employee, we ensure that the opportunities to secure financing and lessen In 2018, Ayala group’s direct hire population grew compensation and benefits that we provide are their reliance on unaccredited lenders. As part of its concession agreement, Manila Water to a total of 64,373, a two percent increase from of equal pay for work of equal value. Annually, also treats used water. The company recognizes our headcount in 2017. Of this total, 44 percent are Ayala Corporation participates in the Total Annual that households, especially those from marginalized male while 56 percent are female, giving us a 1:1.3 Compensation Survey of Willis Towers Watson for areas, do not have direct connections to treatment ratio. Ayala promotes diversity by hiring across various employee functions, career bands, and facilities. Hence, Manila Water sets up sewer segments and age groups. disciplines that are matched against peers globally. connections in their service areas and provides In doing so, Ayala gains access to industry-specific free scheduled desludging services. In 2018, Manila In addition, Ayala gives equal opportunity for Compensation Reports, General Industry Report Water treated 62.4 million cubic meters of used women to be in senior positions in the group. on HR Policies and Practices, and Benefits Design water, a 10 percent increase from 56.4 million cubic In 2018, 40 percent of senior management and Practices Reports. meters in 2017. This was accomplished through executive positions are filled by women, which more than 142,000 sewer connections in its service is significantly higher than the 16 percent Asia areas, a minimal increase from ~141,200 sewer Pacific benchmark7. BPI strongly supports self-employed micro-entrepreneurs.
5 - In the Philippines a village, suburb, or other demarcated neighborhood, a small territorial and administrative district forming 7 - L’helias and Vasil (2019). Who Runs the World? The Global Status of Women in Leadership. Corporate Knights. the most local level of government https://www.corporateknights.com/channels/leadership/global-status-women-leadership-15521397/ 6 - BOD refers to biological oxygen demand which measures the amount of pollution in terms of organic material in waste water
86 AYALA CORPORATION 2018 INTEGRATED REPORT 87 (GRI 203-1, 203-2) (GRI 203-1, 203-2)
Since its inception in 2016, Direct BanKo has served GLOBE’S INCREASE IN SUBSCRIBERS successfully restored three Light Rail Vehicles more than 40,000 SEMEs, from their 200 branches (LRVs) and rehabilitated 13 existing LRVs which and disbursed a cumulative loan total of ₱4 billion, 74.1 brought the total operating LRVs to 112. These ₱3.3 billion, ₱559 million, and ₱171 million, in 2018, 63.4 improvements contributed to a five percent increase 62.8 2017, and 2016, respectively. It grew seven times in ridership from 157 million in 2017 to 165 million in 2018. in 2018. MICROFINANCE LOANS DISBURSED BY BPI
AS OF 2017
₱730 MILLION 2016 2017 2018 Globe’s GCASH makes transactions faster and easier. AS OF 2018 956 PETABYTES Meanwhile, GCash deploys cashless payments to ₱4 BILLION MOBILE DATA TRAFFIC businesses to help boost retail trade. To date, it has supported 45,000 retail establishments with its QR payment system called Scan To Pay. It also offers the BPI also gives strong support to overseas Filipino LRMC continues to make the LRT-1 more efficient. customers through remittances. In 2018, BPI served 45,000 opportunity to remit money with a few taps on the about 76,000 Overseas Filipino Workers, taking a ESTABLISHMENTS SUPPORTED BY GCASH mobile phone, making it easier for users to transfer Another company under AC Infrastructure is MCX 27 percent share in the remittance market. Specific cash in real time. Tollway, Inc. which operates and maintains the products were launched to further assist in easier four-km, four-lane Muntinlupa-Cavite Expressway 1.6 million customers while providing free internet and faster processing of remittances, with focus on Globe’s efforts will lead to the achievement of that connects major roads in Las Pinas, Muntinlupa, access through GoWifi Auto. As of 2018, over the families back home. their core target of providing affordable access and Cavite to the South Luzon Expressway. This was 11,000 locations were tapped as access points to information and communications technology. developed in 2011 under the government’s Public- for free public WiFi services. With the advancement in technology, BPI also They continue to support businesses by integrating Private-Partnership program. In 2018, MCX served maximizes solutions to increase access through financial technology services into value chains about 11.8 million vehicles and helped travelers in Due to the increase of their customer base, Globe’s its digital channels. The BPI mobile app can be and markets. reducing travel time to about 17.7 million manhours, mobile data traffic reached 956 petabytes in 2018, used for money transfer, bills payment, prepaid while reducing fuel costs to about ₱393 million. The a 59 percent growth from their results the previous credits, and check book ordering. In the BPI Express Going beyond network infrastructure, Ayala average daily traffic increased from 29,000 vehicles year. Supporting this large amount of data was Online banking portal, users can access all the also enables people to be more productive to 32,000 vehicles in 2017 and 2018, respectively. made possible by their network of base stations features of the mobile application and in addition, by improving urban mobility, logistics, and mass and cell sites. Globe continues to provide a robust manage investments, access credit card services, transportation through AC Infrastructure. The network infrastructure for cellular, broadband and and other products. In 2018, a total of 946.8 million Light Rail Manila Corporation (LRMC) operates and mobile data services across the country. transactions were fulfilled through their digital maintains the 20.7 km LRT-1 system. Passengers 165 MILLION LRT-1 RIDERSHIP channels, a 35 percent increase from 2017. can travel across various points in Quezon City, Globe also aids micro, small and medium Caloocan, Manila, Pasay, and Paraaque. enterprises through its product, MyBusiness, which These products and services are in line with integrates digital solutions to business operations BPI’s target of expanding financial access to LRMC implements a strict train traffic management for improved productivity and efficiency. The 11.8 MILLION the unbanked, and meeting the diverse needs to help reduce cycle time, the time it takes for a VEHICLES SERVED BY MCX product provides internet and landline connection, of its customers. train to complete a journey from a terminal station website development and management, asset and back. The LRT-1 cycle time improved by 2.25 A part of the AC Infrastructure ecosystem is tracking, and e-commerce systems. To enable productivity and competitiveness minutes from 102 minutes in 2017 to 99.75 minutes AF Payments, Inc. which has a contactless payment by harnessing technology, Globe, the in 2018. Train interval on the other hand, is the platform called beep™ that can be used in both telecommunications company of Ayala, Globe is also increasing efforts on financial time between the departure and arrival of the next LRT-1, MCX, plus LRT-2 and MRT-1. In 2018, the total continued to increase its mobile coverage technology through Globe Fintech Innovations Inc. train. LRMC was able to maintain the train interval number of beep™ transactions amounted to about to 95 percent of cities and municipalities in the or Mynt with the platforms called Fuse Lending and of about 3.4 minutes for peak hours in 2018, while 202 million and 146 million for stored value and Philippines, serving up to 74.1 million prepaid GCash. In Fuse Lending, individuals may access and improving interval time for off-peak hours to 3.9 single journey tickets transactions, respectively. and postpaid subscribers. Globe increased pay loans through their mobile phones. As of 2018, minutes from 4.3 minutes the previous year. LRMC The beep™ card is also accepted in various retail its market penetration in home broadband to they disbursed loans to a total of 77,000 recipients. also continued to implement their fleet plan and establishments and restaurants like FamilyMart,
88 AYALA CORPORATION 2018 INTEGRATED REPORT 89 (GRI 203-2) (GRI 203-2)
Wendy’s, Binalot, and toll gates in the North Luzon Ayala Land’s strategies in developing communities an attributable capacity of 1,349MW and 86MW in Expressway, and Cavite Expressway. Beginning 2018, is in line with their core and stretch targets of thermal and renewable energy assets, respectively. it can also be used in select Point-to-Point (P2P) enhancing sustainable dwellings and providing Whereas, its renewable energy ventures in bus rides which have resulted in 9.5 million bus fare universal access to green, inclusive, and safe Indonesia has combined attributable capacity transactions paid using this platform. An app was spaces. Ayala Land will be placing more mechanism of 182MW. also launched in the same year to help users closely in the long term to achieve their targets on monitor their transactions and balances. socialized and affordable housing and integrating Considering the need of the Filipinos for affordable SMEs in their value chain. and reliable energy sources, AC Energy, through Ayala Land ensures green spaces are provided in its estates. its thermal assets generated 6,240GWh and For example, Ayala Land enhanced the streetscape RESPONSIBLE GROWTH AND 6,142GWh of electricity in 2018 and 2017, and pedestrian experience in the Makati Central INNOVATION JOURNEY respectively. This significantly contributed to Business District by introducing seven additional AC Energy, the power generation arm of address the country’s energy demand for the urban patios with elevated speed tables for safer Ayala, is one of the fastest growing power past two years. crossing. They also provided seating areas with companies in the Philippines and in the natural tree cover. Moreover, Ayala Land increased Southeast Asian region. Locally, it remains to have The company is continuously investing in renewable its Point-to-Point (P2P) bus routes to 20 from nine energy and had a significant result on this space in 2018. Locally, AC Energy increased the renewable of last year, touching base in 11 Ayala Malls and RENEWABLE ENERGY ATTRIBUTABLE CAPACITY MCX helps travellers reduce travel time and fuel costs. two estates as terminals. This gives convenience energy it generated to 601GWh in 2018 from to passengers travelling to and from Ayala WIND 410GWh in 2017. The 2018 energy generated was Venturing beyond its portfolio of Public-Private- Land properties. significantly improved with the additional reporting Partnerships, AC Infrastructure entered the logistics from Islasol and Sacasol solar farms. These resulted industry in March 2018 through Entrego, which acts Ayala Land continues to provide affordable and in the avoidance of about 342,000 tonnes of CO2e as a fulfillment center for businesses. The company socialized housing through BellaVita, which caters and about 196,000 tonnes of CO2e in 2018 and capitalizes on e-commerce, logistics technology, to starting families, civil servants, private sector 2017, respectively. and its dynamic workforce, resulting in a rapid workers, entrepreneurs, and Overseas Filipino increase of its client base from 1 to 34 clients by workers who seek to own their first homes. BellaVita 29.2MW 35.4MW 56.3MW AC Energy further sets its sights to grow its renewable energy portfolio. In 2018, the company end of the year. offers convenience and safety to its homeowners as NORTH LUZON NORTHWIND SIDRAP WIND its properties are strategically located near public RENEWABLES (ILOCOS) (INDONESIA) gained traction on its offshore renewable energy AC Infrastructure supports economic development, transport hubs and commercial destinations, and (ILOCOS) ventures and made investments in Vietnam and human well-being, and adoption of clean and sound with 24/7 security. As of 2018, BellaVita is present in Australia. The Sidrap Wind Farm in Indonesia also technologies. Moving forward, AC Infrastructure 10 provinces across the country and has launched SOLAR began operations in March 2018. will put more efforts to track their commitment 17,890 units since 2010. on reducing carbon emissions. AC Energy is on track to attain its target of The company also launched its dormitory project, increasing its renewable energy portfolio to On real estate, Ayala Land continues to The Flats, which targets the growing market of BPO 5GW by 2030. create resilient communities, residences, employees and young workers who require afford- 1.6MW 1.8MW 18MW workplaces, hotels and resorts while putting able living arrangements in prime locations. As of AC Industrials is the Ayala group’s emerging ISLASOL SACASOL MONTESOL emphasis on providing green spaces. During project 2018, there are already about 2,200 beds in (NEGROS (NEGROS (NEGROS industrial technology arm, housing IMI and AC development, they conduct due diligence for The Flats located in Makati and Bonifacio Global City. OCCIDENTAL) ORIENTAL) ORIENTAL) Automotive. It is currently building an integrated geohazards in the area. They also allot areas for and synergistic portfolio of operating units green spaces that allow rainwater absorption, to GEOTHERMAL composed of platforms in global manufacturing help prevent flooding, and that promote social AYALA LAND’S AFFORDABLE AND SOCIALIZED DWELLINGS solutions, emerging technologies, and vehicle interaction. To improve biodiversity, they only 126.1MW assembly, distribution, and retail. plant endemic species. As of 2018, they allotted SALAK-DARAJAT GEOTHERMAL approximately 300 hectares of green space 17,890 (INDONESIA) IMI, the manufacturing arm of AC Industrials, in 13 estates. BELLAVITA UNITS delivers emerging technologies for automotive, smart energy, and connectivity solutions in 21 plants The company also gives priority to enhancing 268MW across the globe. In 2018, IMI manufactured mobility, giving special attention to pedestrian 2,228 TOTAL ATTRIBUTABLE CAPACITY 31.4 million units of automotive industry products, connectivity and access to public transit in their BEDS AVAILABLE AT THE FLATS 746 million unit of smart energy solutions, and masterplan and designs.
90 AYALA CORPORATION 2018 INTEGRATED REPORT 91 (GRI 203-2, 301-1, 306-2, 306-4) (GRI 305-1, 305-2, 305-3, 306-4)
56 million units of connectivity technologies. Additionally, the operations of AC Energy’s thermal to DENR-accredited electronics waste recyclers. This corresponds to a total of US$443 million plants, SLTEC and GMCP, yield a sizeable amount of The DENR advocates the responsible disposal GHG EMISSION in manufacturing value and contributes to IMI’s coal ash as by-product. The two plants generated of the electronic waste because they typically Direct (Scope 1) Energy Emissions core target. about 138,000 tons in 2018. To better manage contain hazardous elements like lead, cadmium, Thermal power generation ash disposal, 82 percent was sold to cement and arsenic which contaminate soil and 1.6M tonnes CO2e Generator set manufacturing companies for co-processing underground water sources. Proceeds of into cement clinker. The remaining 18 percent is this project helped rebuild school classrooms Company-owned vehicles disposed of into a DENR-approved disposal pit. in Aklan which were damaged by typhoon Haiyan Indirect (Scope 2) Energy Emissions 0.43M tonnes CO2e in 2013. In 2018, Globe’s Project 1 Phone recycled Electricity consumption of facilities about 288,000 kilograms of electronic waste. On the other hand, AC Automotive retrieves the Other (Scope 3) Indirect Emissions used under warranty automotive spare parts and return them to the distributors. The same procedure On the other hand, IMI promotes resource Outsourced vehicles is observed for automotive parts under insurance management and enforces its Reduce-Reuse- Electricity consumption of tenants 2.6M tonnes CO2e IMI uses advance technology in its production line. coverage. For those that are out of warranty, the Recycle program. IMI is diligently segregating Desludging of septic tanks customers are given the option to leave or take the waste at the source, reusing materials and by- Armored Cars On the demand side, the distribution and retail parts and AC Automotive disposes them through products which have further value, and monitoring group, AC Automotive, will be promoting low formal bidding among accredited scrap traders. chemical disposal. IMI’s Philippine sites diverted of our power generation units, generators, and emission vehicles to the market. The automotive 98.1 percent of its waste from landfills while IMI company owned cars comprise our Scope 1 group will also ensure that each brand offering The Ayala group generated about 51,000 tons Japan reached 100 percent diversion. IMI’s global emissions. Our group-wide Scope 1 emission carries a make which is not fully dependent on a of other non-hazardous waste, a 35 percent sites are in the process of setting up disclosure decreased by about 12 percent from about 1.8 combustion engine powertrain, as defined in increase from 2017. The group continues to divert mechanism for their waste management systems. million tonnes CO2e in 2017 to about 1.6 million their business goals. non-hazardous waste from landfill through recycling IMI’s performance in these areas are aligned tonnes CO2e in 2018. This can be attributed to the and upcycling initiatives. The business units remain with their core target of promoting responsible reduced operations of SLTEC due to the shut down The final components in the responsible growth and conscious that they properly segregate and dispose consumption in contribution to SDG 12. of its second power generation unit beginning the innovation journey are targets of Ayala Corporation of the waste they generate. third quarter of 2018. Its turbine rotor caused high on SDG 12 and SDG 13. Currently, there are group- The Ayala group demonstrates sustainable vibrations after a forced outage due to grid failure. wide initiatives in place and Ayala will continue to The increase on both hazardous and non-hazardous management and efficient use of natural resources scale up and achieve the targets set for 2030. waste is due to the growth of our businesses and through these initiatives. Moving forward, Ayala Meanwhile, our Scope 2 that comes from our increase in reporting coverage. Corporation will lead a holistic process to set an electricity usage in our offices and facilities The Ayala group monitors the hazardous and ambitious material footprint. non-hazardous waste it generates. At the increased by about 25 percent from about 360,000 tonnes CO2e in 2017 to about 430,000 minimum, all Ayala companies engage with Finally, Ayala monitors its carbon footprint tonnes CO2e in 2018. This is due to the additional a third party DENR-accredited service provider using the GHG Protocol corporate reporting reporting of our new acquisitions and improvements on transport, treatment, storage, and disposal of standards which enables the organization to of some of our business units in their disclosure hazardous waste. In 2018, the group generated a see its overall GHG emissions across three scopes system. total of 2,134 tons of hazardous waste, a 19 percent and come up with mitigation strategies. Our direct increase from 2017. carbon footprint that comes from fuel combustion
The group generates non-hazardous wastes such as construction waste, coal ash, used automotive spare parts, residual, recyclable, food, and Globe strengthens its Project 1 Phone initiative. compostable wastes. To involve the public in managing waste, Globe In 2018, Ayala Land consumed 450,000 tons continues to run its Project 1 Phone which focuses of reinforced steel and cement through Makati on recovering and recycling electronic waste Development Corporation. The development particularly mobile phones and other portable projects generated a total of 1.9 million tons of devices. Globe encourages the public to donate construction waste, a five percent decrease from used gadgets, electronics, and other digital their results in 2017. This is primarily because accessories at bins located in their stores and other most of the projects are still in land development select areas. Globe turns over the collected waste Project Kasibulan encourages employees across the Ayala group to volunteer and positively contribute to the environment by planting trees. phase and do not yet require cement and other construction materials. 92 AYALA CORPORATION 2018 INTEGRATED REPORT 93 (GRI 305-5) (GRI 305-5)
Lastly, our emissions under Scope 3 include our or PDD that will give a blueprint to a sustainable 2017. This resulted to a reduction in GHG emission outsourced operations and third-party transactions future for the people of Mindoro. While the PES of 503 tonnes carbon.Equally important is the PROJECT KASIBULAN which decreased by four percent from about 2.7 study in Mindoro is ongoing, Ayala continues Project effort of Manila Water in mounting solar panels million tonnes CO2e in 2017 to about 2.6 million Kasibulan activities in North Luzon Renewables, in on the rooftops of several water and used water tonnes CO2e in 2018 due to lesser procurement of Pagudpud, Ilocos Norte. Employees from across the treatment facilities. In 2018, they generated about coal by SLTEC as a result of its shutdown. NUMBER TOTAL SEEDLINGS APPROX. AREA group are encouraged to volunteer and as of 2018, 177,000kWh of renewable energy that saved them OF VOLUNTEERS PLANTED PLANTED IN HA 186 employees from different Ayala companies about ₱1.4 million and avoided an estimated 126 Ayala Corporation embarked on a group-wide, were able to plant 4,719 seedlings, covering 2.95 tonnes of carbon dioxide emissions. nation-wide forest and biodiversity conservation 2016 hectares. program called “Project Kasibulan” in 2016. 10 234 0.15 To support businesses in responding to climate The island of Mindoro, as the initial site, is 20 500 0.31 Going beyond tree planting, the project accounts change, BPI disbursed about ₱126 billion in considered a global biodiversity hotspot due to 33 800 0.5 for the survival of the seedlings and ensures they total funding for projects identified as directly the presence of many endemic species and is 2017 reach maturity. To date, 96 percent of the seedlings contributing to the global goals through its threatened with high levels of human intervention. 28 750 0.47 planted survived the harsh elements and are now Structured Financial Division (SFD) loans Because a lot of communities rely heavily on 49 1214 0.76 in sapling stages. This rate of seedling survival is and Sustainable Energy Financing (SEF) loans the forest for their resources coupled with land 2018 attributed to the proper planting techniques used since 2008. SFD disburses loans for large renewable conversion for plantations and roads and weak 15 353 0.22 and the positive relationship with the surrounding energy projects and financed a total of ₱1 billion in monitoring strategies, deforestation is one of 31 868 0.54 communities who support the project by caring 2018. On the other hand, SEF provides loans for the the major activities that contribute to forest TOTAL for the seedlings once the volunteers have returned. construction of green buildings, climate proofing, loss and forest degradation. 186 4,719 2.95 and procurement of technologies for energy Another initiative in the same pursuit is Ayala Land’s efficiency. In 2018, SEF gave focus in promoting Biodiversity protection and maintenance of TREES PLANTED progressive program to become carbon neutral by compliance to the mandatory Green Building Code important ecosystem services are critical activities Narra (Pterocarpus indicus) 2022. Since its announcement in 2017, the company and about ₱7.6 billion worth of climate resilience Kalumpit (Terminalia microcarpa) to help prevent the further loss of the island’s Agoho (Casuarina equisetifolia) 96% has protected and enhanced about 560 hectares of loans were disbursed. Meanwhile, ₱1.7 billion and SURVIVAL RATE forests. But these solutions must not put aside the Auri (Acacia auriculiformis) carbon forests that will help mitigate the company’s ₱87 million were disbursed for the installation and OF SEEDLINGS issue on economic needs of communities that drive Rain Tree (Samanea saman) greenhouse gas emissions. Carbon forests are leasing of energy efficient equipment, respectively. deforestation and environmental degradation. An Bitaog (Calophyllum blancoi) patches of land in their own estates that can store Moreover, a total of ₱367 million was loaned for example of this would be in the form of a Payment more carbon than they emit. In 2018, Ayala Land SMEs and mid-market level renewable energy for Ecosystem Services (PES) scheme that can derive was able to store 82,090 tonnes CO2e. projects. Through the loans provided by SFD and economic gains from alternative and biodiversity- Convention on Climate Change, is a PES process SEF, an additional estimated 9.6 million tonnes of friendly processes of using natural resources. that includes areas of avoided deforestation as a carbon dioxide is avoided annually. Payments for Ecosystem Services, which is practiced credible source of emissions reductions units within globally, is one process that translates external the post-Kyoto international climate policy regime. Ayala strengthens resilience and adaptive capacity environmental values and figures that initially may Ayala Corporation’s Project Kasibulan adopts the 560 HA to climate-related hazards and natural disasters PES mechanism as a long-term sustainable program TOTAL CARBON FORESTS PROTECTED have no worth in the economy into credible financial AND ENHANCED BY AYALA LAND by shifting to renewables, supporting sustainable incentives to decrease unsustainable use of natural for carbon offsets and contributes to climate change energy, and through its group-wide initiatives resources. A policy known as Reducing Emissions mitigation which will lead to the island’s increased Another strategy by Ayala Land is to purchase on climate change mitigation and adaptation. from Deforestation and Degradation plus (REDD+), climate resilience and economic growth, which in electricity from renewable sources. As of 2018, 32 The long-term outcomes of these programs will which came from the United Nations Framework turn will create a safe space for operations of the of its malls and offices have sourced clean energy contribute to the abatement of global warming and company, the people of Mindoro, and the unique - mainly geothermal - through its own retail energy biodiversity conservation for the preservation of life. biodiversity in the island. suppliers. Overall, about 328 million kWh of Ayala Land’s electricity consumption are from renewable Project Kasibulan in Mindoro has started to sources which avoided carbon dioxide emission of gather the necessary requirements for the PES 10.1 MILLION about 102,000 tonnes. TONNES CO2E AVOIDED THROUGH GROUP-WIDE mechanism. This includes a full GHG emission CLIMATE CHANGE ACTION INITIATIVES baseline assessment, forest carbon stock inventory Globe takes an effort to improve the cost-efficiency and baseline assessment, socio-economic baseline and lower the carbon footprint of its cell sites The Ayala group is geared towards improving assessment, opportunity cost analysis, tenure by implementing green solutions such as DC lives and will continue to forge ahead in and resource use rights assessment, and financial generator sets and methanol fuel cells. These achieving the 2030 targets set across the and economic assessment. The results of these solutions replaced diesel generators, consumes three journeys, to significantly contribute assessments will complement into a roadmap Ayala aims to help Mindoro through its Project Kasibulan. less fuel and has longer service periods. In 2018, to the UN SDGs. business plan called Project Design Document Globe deployed 6,314 green solutions from 3,350 in
94 AYALA CORPORATION 2018 INTEGRATED REPORT 95 (GRI 201-1, 204-1) (GRI 302-1, 302-3, 308-2, 414-2) Of the total revenue generated, 46 percent, For example, BPI continues to deliver insurance HIGHLIGHTING 13 percent, eight percent, and 10 percent were solutions to protect its clients’ assets from exposure RESULTS FROM OUR distributed to suppliers to cover operating costs, to climate-related risk. Total amount insured for 360O SUSTAINABILITY to providers of capital, to government, and to catastrophes or natural hazards decreased by employees, respectively, while the remaining 11 percent from ₱3.5 trillion in 2017 to ₱3.1 trillion REPORTING FRAMEWORK 23 percent was retained. Of the payments to and in 2018. suppliers, about 61 percent were spent on local As a responsible business, we look at our vendors. We also invested in communities in the To further contribute in the mitigation of climate wider economic, environmental, social, and amount of ₱227 million. The total value distributed change, Ayala recognizes its role in environmental governance impact with the guidance of our 360° to key stakeholders increased by six percent from stewardship. We monitor our group-wide Sustainability Reporting Framework and by the Manila Water conducts pipe laying activities ₱378 billion in 2017 to ₱399 billion in 2018. to better serve its customers. consumption and use of natural resources to 10 Principles of United Nations Global Compact manage our environmental impact. (UNGC). Please refer to page 77 for more At the parent company level, we have generated In dealing with suppliers, Ayala exercises due discussion on this framework. a total economic value of ₱293 billion in 2018, diligence to ensure that our supply chain is free Energy in the form of fuel and electricity is a a 13 percent increase from ₱259.7 billion in 2017 from forced labor, child labor, and other unethical key component of our business operations. Ayala enables economic growth through the which represents the equity earnings contributions practices. Our business units have their respective Our group-wide fuel consumption decreased continuous flow of our financial value from our from our companies. supply chain policies. Suppliers undergo an minimally from 70 million in 2017 to 69 million businesses to our key stakeholders. In 2018, the accreditation process to provide assurance on gigajoules in 2018, which is attributable to the economic value generated by the Ayala group In parallel, Ayala Corporation distributed their legitimacy, technical competence, financial turbine technical issues that caused the shutdown increased by 12 percent from ₱462.7 billion in 2017 ₱300 billion or about 100 percent of its revenue capability, and service quality. IMI, Manila Water, and of SLTEC’s second power generation unit beginning to ₱516 billion in 2018. This growth was primarily in 2018, a 15 percent increase from ₱260 million Ayala Land include social and environmental factors the third quarter of the year. Please refer to page 95 driven by the strong performance of Ayala Land, in 2017. in their accreditation process. for other information. Globe, and IMI. For example, IMI ensures that its 3TG8 metal raw GROUP-WIDE ECONOMIC VALUE GENERATION PARENT COMPANY ECONOMIC VALUE The group-wide fuel intensity decreased by IN BILLION PESOS GENERATION IN BILLION PESOS materials are not sourced from smelters related to 14 percent from 180 to 155 gigajoules per million rebel groups in Congo and adjoining countries where pesos revenue. A lower intensity means less fuel 516 293 human rights are abused. IMI collects information 463 260 is consumed per revenue earned by the group, 402 about its smelters in accordance with the conflict 218 and this is driven by Globe’s green solutions. minerals reporting requirements of the Responsible Business Alliance, a global industrial coalition of electronics companies which promotes sustainable GROUP-WIDE ENERGY CONSUMPTION FROM 2016 2017 2018 2016 2017 2018 material sourcing. Moreover, IMI discloses this FUEL COMBUSTION IN MILLION GIGAJOULES information to their customers for compliance and 70 69 GROUP-WIDE ECONOMIC VALUE DISTRIBUTION PARENT COMPANY ECONOMIC VALUE transparency. IMI conducts on-site audits of their DISTRIBUTION IN BILLION PESOS key suppliers and in 2018, the company assessed 63 five Philippine-based and one China-based suppliers with no major non-compliance findings. In 2019, IMI targets to audit nine major suppliers as they continue Gasoline 48% 50% 46% to adhere to responsible procurement standards. Diesel 61% 65% 65% Meanwhile, the number of our indirect hires across our supply chain increased by two percent, from Sub-bituminous coal 10% 10% approximately 67,000 in 2017 to about 69,000 10% Total Fuel Intensity in 2018. (GJ/millon pesos revenue) 14% 13% 13% 8% 0.04% 8% 8% 0.06% 0.04% 0.04% 8% 9% 9% 8% 8% 8% Also, we are cognizant that our economic advances 0.2% 0.1% 0.2% 23% 20% will be reversed if we fail to address climate-related 20% 19% 1.7% 0.2% 19% 2% 21% challenges today. We continue to highlight the role 2016 2017 2018 2016 2017 2018 that businesses play to help prevent global warming LEGEND and develop business solutions to mitigate its 2016 2017 2018 Payments to Suppliers Payments to Providers of Capital Payments to Communities harmful effects. Payments to Employees Payments to Government Economic Value Retained 8 - 3TG metals refers to Tin, Tungsten, Tantalum, and Gold
96 AYALA CORPORATION 2018 INTEGRATED REPORT 97 (GRI 201-2, 302-4, 303-1, 303-3) (GRI 303-1, 303-2, 304-1, 304-2, 304-3, 304-4) Across our group, we observe simple energy-saving Meanwhile, our total electricity consumption Further, Manila Water recognizes the importance of Land targets to host 84 percent native trees in their actions such as setting of timers, and regular increased by seven percent from 1.3 billion in 2017 watersheds with 89 percent of its raw water coming estates that are under planning and construction. to 1.4 billion kilowatt-hours in 2018, due to the maintenance of air-conditioners. These initiatives from surface water sources such as river run-offs helped us lower our electricity intensity in 2018 by increase in Ayala Land’s scope from 425 to 546 and wetlands. In 2018, Manila Water abstracted Ayala Land is also intent in preserving Philippine six percent from 2.9 to 2.7MWh per million peso properties and projects, and additional reporting about 865 million cubic meters of water from flora and fauna. In Lio, El Nido and Anvaya, Bataan, revenue. This means that we used less electricity from IMI’s Serbia and Japan sites. natural sources, a three percent increase from 52 IUCN9 red list species were identified through for every peso we earned. 857 million in the previous year. Hence, Manila Ayala Land’s biodiversity studies. Among these GROUP-WIDE ELECTRICITY CONSUMPTION IN MILLION KWH Water continuously implements watershed include the critically endangered Hawk’s Bill Turtle, Our group-wide water consumption increased by management activities to improve the quality of raw the endangered Balabac Mouse Deer, and the 21 percent from 14.8 million in 2017 to 17.9 million 1.4 water they source. Since 2006, the company helps endemic bird species Red Headed Flame Back. cubic meters in 2018. This is primarily driven by the 1.3 in the protection, rehabilitation, and enhancement AC Energy also conducted biodiversity studies HCX increase in MDC’s construction projects from 174 to Affinity X of watersheds critical to MWSS East Service Area. within its wind farms namely: North Luzon 1.1 248 which requires concrete batching plants to use Further, Manila Water provides funding to support Renewables (NLR) in Caparispisan, Pagudpud, AC Health a substantial amount of water. AC Energy the protection of 6,600 hectares of Ipo Watershed and Northwind in Bangui, both in Ilocos Norte. AC Education and rehabilitation of 2,660 hectares of the The water intensity increased by six percent from AC Automotive La Mesa Watershed. NLR’s study recorded 69 species of birds, 33 of 33.5 in 2017 to 35.5 cubic meters per million pesos BPI which are endemic to the Philippines, and four revenue in 2018. This suggests that group consumed AC Infra Manila Water also helps in enriching open canopy species were classified as vulnerable. They also more water for every peso of revenue made. IMI Phils forests in La Mesa by planting 40,000 additional identified 17 tree species, four of which are tagged IMI Global GROUP-WIDE WATER CONSUMPTION broad-leaf forest tree seedlings in 100 hectares of as threatened. Ten species of bats were found to Manila Water IN MILLION CUBIC METERS land in 2018. They also continue to maintain 340 exist within the windfarm with two of the species Ayala Land hectares of areas planted on in 2016 and 2017. being endemic to the country. Additionally, 17.9 Globe The company also pursued planting 500 trees there are species of rodents and snakes in the Electricity Intensity in Nabaoy Watershed, which lies in proximity to area. They also identified the presence of a near- in MWh per MPhp 14.8 AC Automotive Boracay Water service area. One of their units, threatened monkey species, the Philippine long- 2016 2017 2018 revenue AC Education Clark Water, signed a Memorandum of Agreement AC Infra tailed macaque. These findings show that NLR is for Adopt-a-Watershed to plant 400 bamboo 11.4 AC Health an important wildlife habitat in the Northern Luzon Our business units implement various energy-saving shoots in two hectares of land to reduce erosion AC Energy region. Given the results of these studies, NLR initiatives in their operations. Manila Water saved along the riverbeds. BPI is set to implement a program for the conservation 2.4 million kWh of electricity through its Water Globe MANILA WATER’S WATERSHED MANAGEMENT of the species. Supply Network Efficiency Project. This project IMI Global branches out into two sub-projects: The Demand IMI Phils Based Network Management which ensures that Ayala Land 40,000 water supply pumps provide the right pressure at TREES PLANTED IN LA MESA WATERSHED Water Intensity the right time, and the Lights-Out program, which (cubic meters/ promotes high reliability and improved efficiency million pesos revenue) 2016 2017 2018 of operations through fully-automated unmanned 500 pumping stations. TREES PLANTED IN NABAOY WATERSHED Similar to electricity, we implement various water To continue, LRMC implements energy-saving conservation practices at a group-wide level. Ayala Ayala also recognizes that the growth of our initiatives in their train depots and stations, Land conserves water by using automatic irrigation businesses has certain effects to wildlife. To systems and efficient fixtures. Additionally, LRMC including gradual replacement of fluorescent lamps measure our impact, some of our business units The Ayala group protects threatened species in its domains. into LED and split-type air conditioning units to repaired leakages in its train washing plants, conducted biodiversity studies and continue to inverter-type ones. installed smart washers for efficient water use, monitor the effects to trees and animals. Ayala Land Similarly, Northwind’s biodiversity study revealed and started collecting rainwater for cleaning. conducted an inventory of the tree species in 12 of 60 species of birds, 12 of which are endemic, plus Globe also has an Energy Management Program on its 26 estates, where about 68,900 trees are native. three species of turtle. The study also looked at their seven highest energy consuming facilities. This IMI’s water conservation practices start with the Ayala Land also noted that estates in commercial turbine-related fatalities of bats and birds, yielding includes setting of targets, identifying opportunities regular maintenance of its deionized water system, business districts have the lowest number of native an average mortality rate of 5.59 per day. Northwind and action plans, and implementing the said action treatment of excess water for reuse, and harvesting trees, while emerging estates already contain about is currently exploring possibilities to reduce bat plans, along with continuous monitoring and review rainwater for domestic use. 74 percent native trees and moving forward, Ayala and bird mortality. of consumption. 9 - International Union for Conservation of Nature
98 AYALA CORPORATION 2018 INTEGRATED REPORT 99 (GRI 304-4, 413-1) (GRI 404-1, 404-2, 403-2)
GROUP WIDE TRAINING HOURS SPECIES RECORDED BY THE TEACHING SAFETY TO THE YOUNG 1.8 NORTH LUZON RENEWABLES To extend learnings on safety to the wider 1.7 Ayala Corporation community, Volkswagen pursues child safety Ayala Foundation through its Junior Driving Course and Steps to HCX 69 Safety Program. The Junior Driving course is a AC Health SPECIES OF BIRDS learning program designed for children age four AC Energy AC Infra 33 of which can only be found in the Philippines to eight where professional driving instructors give 4 species are classified as vulnerable by IUCN: Manila Water lessons on road safety and correct passenger and AC Automotive North Philippine Dwarf-kingfisher (Ceyx melanurus) pedestrian behavior. In parallel, the Steps to Safety AffinityX Philippine Duck (Anas luzonica) program focuses on proper pedestrian behavior 0.8 AC Education Philippine Collared-Dove (Streptopelia dusumieri) Ayala Land Java Sparrow (Lonchura oryzivora) learning using a virtual reality game application that simulates walking through a busy road Globe BPI network. In 2018, there were 1,056 children and IMI Phils 17 650 parents who participated in the said events. IMI Global SPECIES OF TREES Livelihood programs are provided to support partner communities. Agoho (Casuarina equisetfolia) has the highest density 2016 2017 2018 4 species are classified as vulnerable by IUCN: AC Health launched the Lifesaving Moms project, Antipolo (Artocarpus blancoi) which taught mothers basic disaster preparedness Catmon (Dilinea philippinensis) and trained them on cardio pulmonary Narra (Pterocarpus indicus) 31.5 Molave (Vitex parviflora) resuscitation. Over a thousand participants joined the event which was held in four communities in AVERAGE TRAINING HOURS PER EMPLOYEE Diliman and Fairview, Quezon City and in San Pedro 10 and Bian, Laguna. SPECIES OF BATS Ayala also supports employees in their pursuit of 2 species are endemic in the Philippines post-graduate degrees by providing financial loans. We also provide financial allocations for review Greater musky fruit bat (Ptenochirus jagori) classes and certification programs that are needed Philippine forest horseshoe bat (Rhinolopus inopus) by the employees for their designated role. 5 4 At Ayala, we are changing the way we learn. We SPECIES OF SPECIES OF Ayala gives prime importance to employee learning recently launched an innovative learning experience RODENTS SNAKES and development, in addition to providing equal platform that will democratize learning for pay for equal work of value as discussed in pages employees within the Ayala group. With this online 1 1 86 to 87. We provide opportunities for internal and learning tool, Ayala employees can benefit from SPECIES SPECIES Partner communities are trained of first aid and safety. external trainings, conventions, seminars, specific topics of interest or need, anywhere, and at their OF CATS OF MONKEY industry trainings, intra-departmental activities, own pace. The platform also facilitates the sharing AC Energy’s NLR helped its neighbor communities and group-wide learning events. of industry and functional expertise across the during the typhoon season through its disaster Ayala group, with the help of internal subject matter In the Ayala group, we consider communities as relief effort. NLR donated assorted relief goods, In 2018, the Ayala group provided a total of more experts and learning champions who partners and we engage them through several rice, medicines and hygiene kits to communities than 1.8 million training hours, an eight percent create and share content and modules online. corporate social responsibility efforts in support affected by the Habagat monsoon rains in August increase from the 1.7 million total training hours of Learning and development is now shared across of livelihood, education, health, and disaster relief. 2018. About a month after, NLR also served the previous year. Consequently, the Ayala group the conglomerate. Hence, employees can learn as a designated evacuation center for coastal average training hours per employee improved by from different industry experts, and interact IMI Philippines conducts various livelihood skills communities of Barangay Caparispisan during the two percent from 30.8 to 31.5 average training hours with others for a richer learning experience training programs for communities within Laguna. Typhoon Mankhut. NLR delivered 20,000 liters of per employee. and networking opportunities. In 2018, IMI trained more than 100 participants on diesel to the Pagudpud local government to assist in flower arrangement techniques, candle-making, relief, recovery, and repair efforts after the storm. rugs and potholder weaving, and perfume making.
100 AYALA CORPORATION 2018 INTEGRATED REPORT 101 (GRI 401-2, 403-2, 407-1, 410-1) (GRI 401-1, 403-2, 406-1, 408-1, 409-1)
We also assessed our performance as an employer To ensure the health and well-being of our In Ayala Corporation, the Incident Response Team, was compensated by the four percent increase in by keeping our employees sustainably engaged. employees, we provide medical and dental care composed of employees was organized, and was hiring rate as presented on page 86. We measure this through a third-party survey that packages as part of their benefits. The Ayala group trained on safety procedures was organized. we administer every two years. The previous survey also conducts an annual vaccination program, New hires get a basic safety discussion and On involuntary turnover, Ayala extends conducted in 2017 in partnership with Willis Towers offering quality vaccines at affordable prices for a personalized Go-bag upon onboarding. opportunities to retirees by engaging them as Watson yielded positive results with 96 percent employees and their households. We also track consultants for various initiatives like mentoring participation rate and an overall sustainable the instances of illnesses and make necessary young leaders, being resource persons for learning engagement score of 88 percent which is a point upgrades or changes to create a safer and healthier programs, among others. When applicable, their above the Philippine norm and two points above working environment. We also promote wellness medical insurance benefit is extended when they the global high performing norm. More discussion by providing programs such as blood-donation formally reach the set retirement age. on this can be found in our 2017 Integrated Report. drives and health and safety lectures. Another round of engagement survey will be We also strictly monitor incidents on forced labor, conducted in 2019. As part of our commitment to keep our employees child labor, anti-corruption, equal opportunity, and safe, Ayala ensures that well-trained security anti-discrimination across the group. In 2018, no The high results we garnered in the previous survey personnel are assigned in our vicinities. Moreover, labor cases were reported for the group. For our provided us an insight on areas of empowerment, our work areas follow occupational safety standards policies, please visit www.ayala.com.ph. operating efficiency, stress, balance, and workload. and are regularly monitored to control hazards and Despite our high results, we acknowledge that there prevent incidents. Our labor intensive business units The use of Go-bags are practiced by employees even during drills. is still room for improvement and we continue to further monitor their safe man hours and incidents. UPHOLDING CHILDREN’S RIGHTS develop programs to further engage our employees. As of 2018, safe man hours reached a total of about Beyond physical safety, we also give high regard IN THE WORKPLACE In 2018, a series of follow-through focus group 257 million. to workplace ethics and uphold a culture of Looking beyond the current workforce, Ayala recognizes the importance of protecting the rights of children and discussions were conducted to further understand professionalism within our ranks. We acknowledge providing them opportunities to be responsible future how the organization can improve. Globe leveled up its safety measures by developing the right of our employees to engage in collective citizens. Our wide reach as a conglomerate gives us its own mobile app called GEAR or Globe Emergency bargaining agreements which provide a venue for the potential to have positive impact on children to We provide opportunities for employees to and Accident Reporting for its internal use. This employee members and management to have a play a vital role in the future of the nation. We started take part in leisure and sports activities and to automates the reporting for property damages, sound conversation regarding issues and concerns. the conversation in 2018 through a week-long seminar exercise work-life balance. The group holds an vehicle accidents, and workplace incidents. In 2018, business units with CBA members held conducted by Price Waterhouse Coopers and UNICEF. annual sports competition called JZA Cup and Ayala Corporation is continuously improving its productive discussions with CBA officers. Moreover, This event was attended by leaders from different encourages employees to be part of various teams own app for employee monitoring in times of certain business units conduct town halls to business units across the group. Moreover, Ayala to compete in year-long tournaments. Every four disaster and emergency situations, called the Ayala further discuss relevant items that may impact achieved a higher than average score in the Corporate years, the Ayala group holds the Ayala Olympics Sign-in System for Immediate Support and Tracking our employees. Sector & Children’s Rights Benchmark by the Global Child where it gathers its workforce for a day of friendly or ASSIST. The app features geotagging capability to Forum. Ayala was measured across three impact areas: competition. know the status of all registered personnel across Related to this, Ayala continues to strengthen Workplace, Marketplace, and Community/Environment wherein scores for each area showed that the company the Ayala group. Users also receive alerts and its grievance mechanism, ensuring that it is received higher results compared to the average of all important advisories via SMS and app notification. aligned with the Labor Code requirements and is companies measured. It also features pre-determined safe zones all over duly followed when the need arises. The defined the country, and emergency hotlines, and contains grievance process includes discussions between a function to report and read incidents. the person raising a complaint and representatives of the company until disputes are settled and As Ayala ensures a safe and conducive environment concerns are addressed. for our workforce, we also put value on establishing a culture of preparedness. This is vital with the Talent turnover was up slightly by three percent in Philippines being in the Pacific Ring of Fire, and 2018. Movements were driven by migration, career Pacific Typhoon Belt as discussed under Business advancement, and further studies. Ayala addresses Risk Resiliency on pages 64 to 65. Ayala conducts this concern through a proactive approach and multiple drills to practice the employees on by offering career opportunities through mobility All these strategies and initiatives are part how to act during times of disasters. Ayala also programs within the group. of the paradigm shift we embrace as we are holds pocket sessions, full lectures, summits, driven by our purpose of addressing societal and symposiums on disaster risk reduction and Ayala also provides opportunities for innovation in challenges, creating shared value, and most Ayala citizens are given avenues for sports through the management. These sessions aim to strengthen employee engagement, learning and development, of all, improving lives. JZA Cup and Ayala Olympics. the role and awareness of the private sector in and recruitment. Nevertheless, the attrition rate disaster preparedness.
102 AYALA CORPORATION 2018 INTEGRATED REPORT 103 BUSINESS REVIEW
104 AYALA CORPORATION 2018 INTEGRATED REPORT 105 Ayala Land will continue to execute on its strategies our stakeholders. Strong demand from both local and as it looks ahead to 2019, endeavoring to reach a overseas Filipinos fueled a 16 percent increase in sales
AYALA LAND wider market and provide growth not only for its reservations in 2018, reaching ₱141.9 billion. LAND AYALA shareholders but also for the communities it serves. “We marked the 30th year of Ayala Land by doing what we do best: engaging our stakeholders in co-creating Residential sustainable communities that enrich the lives of more people.” Ayala Land will grow its footprint nationwide by Driven by new bookings and project completions, continuing to build more estates in identified growth revenues from the sale of Ayala Land residential lots Bernard Vincent O. Dy, President and CEO, Ayala Land centers across the country. It will continue to launch and units and from MCT’s operations increased products attuned to market demand and aspire to 18 percent to reach ₱94.6 billion. continually achieve a healthy mix between horizontal and vertical developments while maintaining our Office for Sale margins within acceptable thresholds. Lastly, it Higher bookings from One Vertis Plaza and The Stiles will continue to build its leasable assets in order to East Enterprise Plaza in Circuit Makati as well as higher increase its recurring income and achieve a more completion progress of Park Triangle Corporate Plaza balanced portfolio. in BGC and Alveo Financial Tower in Makati CBD lifted the sale of office spaces in 2018 by 16 percent to BUSINESS REVIEW ₱11 billion. The year 2018 saw another robust growth for Ayala Land, with revenues reaching ₱163.75 billion In 2018, we also launched two new office-for sale- and net income of ₱29.24 billion, growing 17 percent projects, Ayala Land Premier’s One Vertis Plaza and 16 percent, respectively. located in Vertis North Quezon City and Alveo’s Tryne Enterprise Plaza in Arca South, Taguig. ESTATE DEVELOPMENT In 2018, we launched Parklinks, a 35-hectare Commercial and Industrial Lots estate along the Pasig-Quezon City stretch of Revenues from the sale of commercial and industrial Circumferential Road 5, also known as Carlos P. lots grew 10 percent to ₱7.7 billion, driven by Garcia Avenue. It is the greenest urban estate in east commercial lot sales in the Visayas-Mindanao estates Ayala Land pays special attention to improving the overall experience of its residents and locators, Metro Manila, with 50 percent of the development and in Evo City, Cavite, as well as the industrial lot ensuring pedestrian mobility and transit connectivity as well as sufficient green space to provide areas for leisure, dedicated to green and open spaces. The new estate sales in Alviera, Pampanga and in Cavite Technopark. environmental sustainability, as well as disaster resilience. will provide residential towers, offices, and a lifestyle mall with a sports complex on the uppermost level. COMMERCIAL LEASING WHO WE ARE It pioneers standards and practices in all its Developed in partnership with Eton Properties Our malls, offices, and hotels and resorts bring more Ayala Land is the largest property developer in the developments that reflect the value the company Philippines of the LT Group, Parklinks is the biggest diverse leasing options to our clients. Total revenues Philippines, with a solid track record of developing places on sustainability. As a responsible corporate mixed-use development in the C-5 area. from commercial leasing rose 17 percent in 2018, large-scale, integrated, mixed-use, sustainable citizen, Ayala Land acts with integrity, foresight, and amounting to ₱34.9 billion. estates that are now thriving economic centers in prudence. In November of 2018, we launched Habini Bay in their respective regions. Misamis Oriental. Envisioned to be a center of Malls Focused on its vision of “enhancing land and enriching trade and commerce in Northern Mindanao, Habini Greenbelt and Glorietta malls in Makati City and Following the success of the Makati Central Business lives for more people,” it empowers its employees to Bay will be Ayala Land’s gateway development to the improved performance of newly opened malls District, Ayala Alabang, Cebu Park District, Bonifacio deliver quality products and services and build spur progress and growth in the region. Offering a in Quezon City such as UP Town Center, Ayala Malls Global City, and Nuvali, it continues to increase its long-term value for our shareholders. magnificent view of Macajalar Bay, it will have an Cloverleaf, and Vertis North as well as in Pasig City, footprint by building estates that reach and benefit industrial park as its main component to provide namely Ayala Malls Feliz and The 30th boosted the OUTLOOK more people. employment to the region, commercial lots for segment’s revenues by 13 percent to ₱19.9 billion from Buoyed by a positive macroeconomic outlook that will businesses to thrive, residential developments, ₱17.7 billion the previous year. benefit the whole property development sector, With 11,624 hectares of landbank, 26 estates, and a and the Don Bosco Technical College to support Ayala Land remains optimistic about achieving presence in 57 growth centers across the country, education in the region. Habini Bay will also be Offices its 2020-40 bottomline target. Furthermore, it Ayala Land offers a balanced and complementary the new location of the Laguindingan municipal Ayala Land Offices generated revenues of ₱8.6 billion, is encouraged by the progress of its property mix of residential developments, shopping centers, government. 29 percent higher than the previous year’s offices, hotels and resorts, and other businesses. development and commercial leasing businesses. ₱6.7 billion on account of new office buildings and Ayala Land recognizes the continued strength of its Construction and property management services PROPERTY DEVELOPMENT rental escalations. Occupancy rates remain healthy property development business, which it believes will are led by its subsidiaries, Makati Development Our property development business has steadily with 96 percent occupancy at stable offices and continue to be the key growth driver of its earnings. Corporation and Ayala Property Management matched the various lifestyle and business needs of 84 percent at new buildings. Corporation, respectively.
106 AYALA CORPORATION 2018 INTEGRATED REPORT 107 Hotels and Resorts Cavite Technopark, the Tutuban complex in Manila, and Full-year operations of Seda Vertis North, Seda the Lepanto Ceramics facility in Laguna. OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE Capitol Central Bacolod, and the recently renovated Apulit Island Resort in El Nido, Palawan coupled with Services NATURAL ESTATE DEVELOPMENT ENVIRONMENT the improved performance of our bed and breakfast The company’s upward trajectory is supported by our Its landbank is strategically located Ayala Land develops estates that Ayala Land upholds Philippine hotels raised revenues from our hotels and resorts service businesses, composed of Makati Development in key growth centers for immediate host its property development and biodiversity and ecosystems within and by 14 percent, to reach ₱6.4 billion from previous Corporation, Ayala Property Management Corporation; and long-term development. commercial leasing products. adjacent to our landbank. • 11,624 hectares landbank year’s ₱5.6 billion. power services companies such as Direct Power INTELLECTUAL PROPERTY DEVELOPMENT • 560 hectares carbon forests Services, Ecozone Power Management, and Philippine Ayala Land’s unique master planning It offers and builds residential, office • 52 IUCN species protected OTHER LEASING FORMATS Integrated Energy Solutions; and airline services for process integrates product lines for sale, and commercial products The Flats our hotels and resorts, AirSWIFT. Total revenues of to create sustainable and vibrant that address various market segments COMMUNITIES communities and foster urban represented through five brands: It provides spaces that are site resilient, Ayala Land’s first co-living development, this segment rose five percent to ₱76.7 billion from development. Ayala Land Premier, Alveo, Avida, pedestrian-friendly, public transport- The Flats Amorsolo, opened its doors to tenants ₱72.8 billion in the previous year. Amaia, and BellaVita. connected, and eco-efficient, uplifting in September 2018. It offers a total of 196 multiple MANUFACTURED living standards for Filipinos. occupancy rooms and communal spaces where It has a wide range of products that COMMERCIAL LEASING • 300.95 hectares of permeable tenants can interact, relax, and be more productive Makati Development Corporation caters to all markets and segments of It develops and operates malls, offices, green space the property sector. and hotels and resorts across the • 2 estates added in 2018 with free WiFi access, an outdoor seating area, and Ayala Land’s construction arm, Makati Development Philippines represented by Ayala Malls, • 26 total estates a roof deck lounge. Corporation, generated record-high revenues of SOCIAL Ayala Land Offices, branded hotel • 20 P2P transport routes in ₱71 billion, a 4.6 percent growth from the previous It ensures the quality of its products formats, SEDA hotels, and El Nido, Lio, Ayala developments Clock In year’s ₱67 billion, due to a healthy project portfolio and and services and upholds strict and Sicogon Resorts. sustainability and corporate PROPERTY BUYERS, RESIDENTS, Clock In is our product offering in the co-working new awards in 2018. Its consolidated net income after governance practices for its CONSTRUCTION AND PROPERTY SHOPPERS, MALL LOCATORS, OFFICE and serviced offices category. In 2018, it launched tax reached ₱3.9 billion. It managed 434 projects during customers and stakeholders. MANAGEMENT TENANTS, TOURISTS, AND GENERAL three new sites in Vertis North Quezon City, the year, with 73 in reconstruction, 221 in construction, Ayala Land develops its projects through PUBLIC 30th Corporate Center in Pasig, and Ayala North and 140 in post-construction. HUMAN its own construction company, Makati It provides homes and venues for A decentralized structure empowers Development Corporation, and manages business and leisure that support the Exchange in Makati. These sites will be fully its people, and provides the flexibility completed properties through its own community and spur economic growth. operational by 2019. Ayala Property Management Company to execute its strategy in a fast and property management company, Ayala • 18,382 completed and turned-over By end-2018, APMC took on 53 additional projects, efficient manner. Property Management Corporation, to residential units Standard Factory Buildings resulting in a total of 242 accounts consisting of 362 ensure quality throughout the entire • 3 malls opened in 2018, We also started to offer standard factory buildings buildings and projects, including 22 estates. FINANCIAL project life. adding 149,000 sqm GLA Ayala Land has a strong balance • 4 offices opened, adding and warehouses inside industrials parks, to capture sheet to support growth plans and a OTHER BUSINESSES 91,000 sqm GLA the growing opportunities in the manufacturing and AirSWIFT prudent fiscal policy to maintain the It holds investments in selected • 390 hotels and resorts keys added logistics industries. As of end-2018, we have 137,000 In 2018, AirSWIFT ferried a total of 270,000 passengers, strength of its financial position. companies that complements core square meters of SFB and warehouse GLA across growing 50 percent year-on-year since 2016. Total businesses like Cebu Holdings, Ortigas EMPLOYEES, CONSTRUCTION and Company, Prime Orion Philippines, WORKERS, SUPPLIERS, SERVICE various locations such as the Laguna Technopark, revenues reached ₱1.4 billion, up 45 percent from 2017. MCT Bhd, and other ventures in PROVIDERS, AND CONSULTANTS healthcare and retail. The company contributes to local employment, skills development, STRATEGY and career growth. • 90 percent OCS Score in 2017 • 5,358 total workforce STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES • 54,369 total support staff • 134,638 total training hours Increase Expand the GLA of • Malls: Opened three new malls and added 142,000 sqm Deliver on target pipeline recurring income shopping centers of GLA for a total of 1.90 million sqm by completing GLA under INVESTORS, ANALYSTS, CREDITORS contribution and offices and • Offices: opened four new offices and added 91,000 sqm construction. It provides consistent growth in to achieve a increase hotel and of GLA for a total of 1.11 million sqm shareholder returns, ensures long-term more balanced resort rooms. • Hotels and resorts: opened 390 new rooms value for investors, and fulfills credit portfolio for a total of 2,973* rooms obligations. *Includes 301 reopened rooms of Seda Ayala Center Cebu • 16 percent net income growth • 16.5 percent ROE Launch an optimal Balance amount Launched 48 residential and office for sale projects in Launch products attuned • 0.72 net D/E ratio mix of horizontal of launches 2018 amounting to ₱139 billion worth of products to market demand, and • 4.8 percent average cost of debt and vertical depending on aspire to continually projects for sale market demand achieve a healthy mix and price products between horizontal and competitively to vertical developments while ensure product maintaining margins within margins acceptable thresholds
108 AYALA CORPORATION 2018 INTEGRATED REPORT 109 least 6.5 percent in 2019 given the following drivers: additional pressure from global trade disputes and recovery of household consumption triggered financial market volatility in developed economies. BANK OF THE by lower inflation, sustained improvement in investment spending, and additional boost provided BUSINESS REVIEW by election spending. In 2018, BPI realized net profits of ₱23.1 billion, PHILIPPINE ₱661 million, or three percent higher than last year. The National Government has carried out efforts This increase was achieved through a ₱7.5 billion to address food supply constraints, allowing food increase in total revenues, partly reduced by ISLANDS prices to stabilize starting in late 2018. Meanwhile, increases in operating expenses and loss provisions the BSP raised its policy rate by 175 basis ponts in of ₱5.1 billion and ₱1.1 billion, respectively. The “The combination of well-timed equity and debt capital raisings and strong core business results will allow us BANK OF THE PHILIPPINE ISLANDS bank’s comprehensive income ended at ₱21.9 billion, to digitalize the bank with the objective of being a leader in financial inclusion.” 2018 to manage liquidity and tame inflation. As a result of these measures together with the recent 2.4 percent lower than the same period last year, on account of the lower market valuation of the bank’s Cezar P. Consing, President and CEO, Bank of the Philippine Islands decline in global oil prices, inflation is expected to decelerate and return to BSP’s 2-4 percent target in investment securities. 2019. Household consumption may recover under this scenario. In the execution of its key growth strategies, the bank maintained its strength in the corporate Given the expectations that economic growth will segment and accelerated its penetration in the remain strong and inflation will slow down in 2019, high-growth, high-margin business areas of small to the BSP may have little reason to adjust its policy medium enterprises, consumer, and microfinance. rate throughout 2019. Instead, the BSP will likely This resulted in total revenues of ₱78.5 billion, a prioritize the reduction of the reserve requirement 10.6 percent increase from last year, as propelled ratio on the deposits of universal and commercial by the improvement in the bank’s core banks as part of its financial reforms. The additional intermediation business. liquidity released by the RRR cut may lead to a moderate decline in benchmark interest rates which Net interest income grew 16.2 percent to will support lending and economic activities, but ₱55.8 billion from the previous year’s ₱48 billion, the may be offset by upward pressure coming from the result of a nine percent expansion in average asset borrowing activities of the government. base and a 21-basis point increase in net interest margin. The bank was able to capture favorable In recent years, investment spending has loan repricing, set against the rising interest rate improved significantly with the country’s capital environment of 2018. formation-to-GDP ratio (27 percent) now at par with the regional average. Combined capital expenditures BPI also continued to optimize gains from its by the government and private sector continued non-trading income, shifting from the one-off BPI continues to ramp up BanKo, its microfinance arm that makes accessible loans to self-employed micro-entrepreneurs. to surge in 2018 given the need to expand the trading gains recorded in previous years. Its economy’s productive capacity in order to meet transaction-based service charges, credit card rising consumer demand. Government spending and rental businesses were the top drivers of this WHO WE ARE 1,056 branches and branch-lite units as well as in infrastructure increased by 40 percent in 2018 year’s higher fee income. However, lower trust and The Bank of the Philippine Islands is one of the top 3,034 ATMs and Cash Accept Machines nationwide. as part of the government’s commitment to boost investment management fees, corporate finance banks in the Philippines, providing a wide range Its physical distribution network is complemented growth through the “Build, Build, Build” program. fees, and securities trading income tempered the of financial products and services to meet the by upgrading its digital platforms, BPI Online Even though borrowing costs are now higher overall non-interest income results, ending at diverse needs of its 7.9 million customers. accessed through www.bpi.com.ph and BPI Mobile because of the rate hikes by BSP in 2018, capital ₱22.7 billion. for retail customers, and BizLink, its electronic spending is still expected to grow substantially BPI nurtures the trust it has gained from its cash management platform for businesses. BPI has in 2019 as pressure from consumer demand may In January 2018, the bank adopted the expected customers through products and services tailored to banking locations and representative offices in reinforce the need to increase productivity through credit loss models required under the Philippine the needs of a broad base of retail and corporate Hong Kong and London, and maintains over 130 investment in fixed assets. Financial Reporting Standards (PFRS 9) as the basis clients, including self-employed microentrepreneurs, remittance tie-ups and correspondent banking for the provisioning for loan losses. Reporting under overseas Filipinos and their beneficiaries, small and relationships with over 50 partner banks and A manageable widening of the trade deficit as a this new regulation, the bank’s impairment losses medium enterprises, domestic conglomerates, and financial institutions globally. result of capital spending is expected to translate to increased ₱1.1 billion, or 29.7 percent, to ₱4.9 billion. multinational corporations. The bank serves its a modest depreciation of the Philippine peso with clients through one of the most extensive physical MARKET OUTLOOK and digital distribution network in the industry with The Philippine economy is expected to grow by at
110 AYALA CORPORATION 2018 INTEGRATED REPORT 111 Considering continuous investments to transition to focus on servicing the unique financial needs funding profile for BPI, and the proceeds of which the bank’s capital adequacy ratio and common into a strong digitalized bank and a widening of the bank’s SME clients, and (3) the growth in will support the bank’s near to medium-term growth equity tier 1 ratio to 16.1 percent, and 15.2 percent, financial inclusion scope, the cost-to-income ratio microfinance loans, boasting a portfolio of objectives and expansion plans. respectively, levels well above regulatory limits. increased to 55.5 percent, slightly higher than the ₱2.1 billion to the self-employed micro BPI’s market capitalization remained one of the previous year’s 54.3 percent. entrepreneurs segment. Reflecting the impact of the dilution from the SRO, largest in the industry, at ₱423.2 billion. As of the bank posted a return on equity of 10.2 percent December 31, 2018, the bank’s share price closed at Operating expenses ended at ₱43.6 billion, up In terms of asset quality, BPI also adopted BSP and return on assets of 1.2 percent, lower than ₱94.00, representing a 1.7x multiple to book value. 13.2 percent from last year. Compensation and Circular No. 941 which amended regulations on the previous year’s 12.7 percent and 1.3 percent, fringe benefits increased ₱1.4 billion or 10.2 percent, past due and non-performing loans. Under this respectively. The bank paid regular cash dividends of ₱1.80 per due to increased headcount. Other operating new reporting classification, the bank ended the share. As of the end of 2018, book value per share expenses was likewise higher by ₱1.8 billion or year with an NPL ratio of 1.85 percent and NPL BPI’s capital funds increased 37.5 percent to was ₱55.20, and earnings per share was ₱5.35. 13.9 percent, on higher volume-driven transaction reserve cover of 88.3 percent. The bank’s total ₱248.5 billion from 2017’s ₱180.7 billion. This costs, regulatory costs, marketing costs, loss coverage, including allowances for contingent was due to this year’s SRO, which also boosted management and other professional fees. liabilities, stood at 91.3 percent. Occupancy and equipment-related expenses also increased 15.9 percent, driven mainly by significant Total deposits ended flat to last year at ₱1.6 trillion. OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE spending on technology and increased rent, Current and savings (CASA) deposits grew depreciation, and amortization for the microfinance ₱27.1 billion or 2.4 percent, while time deposits branch network. decreased ₱3.5 billion, or 0.8 percent. The bank’s FINANCIAL CAPITAL RAISING, ADVISORY, EMPLOYEES The bank maintains a strong balance AND FINANCING BPI invests in its employees, provides CASA ratio stood at 71.9 percent while the sheet, and continues to grow and BPI addresses capital needs across all a workplace that fosters learning and The bank’s securities holdings totaled ₱337.5 billion, loan-to-deposit ratio was at 85.4 percent. optimize its deposit franchise and client segments by providing various development, career advancement, up 10.2 percent year-on-year. About 85 percent of loan book. forms of financing—from working and sustainable engagement. the securities portfolio was in Hold-to-Collect, and In 2018, BPI tapped the equity and debt capital capital loans, capital expenditure loan, Engaged employees give clients MANUFACTURED AND acquisition financing, supply chain and better service. thus less exposed to market volatility. markets with landmark issuances, starting with the trade financing, project finance, small ₱50 billion stock rights offering in May 2018. This INTELLECTUAL BPI has a reliable, secure, and business loans, and microfinance. It CLIENTS AND COMMUNITIES Loans, net of allowance for loan losses, amounted was followed by the issuance of US$600 million in expanding network of delivery also provides financial advisory and BPI reached underserved segments to ₱1.4 trillion, 12.7 percent higher than a year ago. senior unsecured bonds in August 2018, and the infrastructure in both traditional and helps clients raise debt and equity from and helped them grow and protect The bank made headway in the loans space via (1) issuance of ₱25 billion in peso fixed rate bonds digital platforms. the capital market. their assets. improved turnaround times for key products and in December 2018. All told, these strengthened HUMAN GROWING ASSETS ENTERPRISE GROWTH services, (2) launch of the Business Banking segment the bank’s capital position, led to a more diverse BPI is driven by energized, enabled, The bank grows its assets through its The bank helped enterprises raise and engaged employees with diverse treasury portfolio management and capital through loans syndication talents. participation in Philippine trading and debt and equity issuances. markets. It also grows its clients’ assets STRATEGY SOCIAL AND RELATIONSHIP through deposit and investment IMPLEMENTED SUSTAINABLE BPI is a beacon of stability and in fixed income securities, equity DEVELOPMENT PROJECTS credibility upon which trust is built securities, unit investment trust fund, It also financed investments that STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES and sustained among and mutual funds. directly contribute to sustainable its clients and global banking development. partners. INSURING LIFE AND ASSETS Achieve asset growth in Continued focus on SME Loans: ₱70 billion SME Loans: > = +20 percent The bank helps protect the value of GOVERNMENT AND REGULATORS high-margin businesses SME, consumer, Consumer Loans: ₱250 billion Consumer Loans: +15-19 percent NATURAL its clients’ assets through its life and BPI contributed to government in and microfinance lending Microfinance Loans: ₱2 billion Microfinance Loans: +50 percent BPI’s environmental management nonlife insurance products. capital raising through securities systems ensure that it uses resources distribution, in facilitating inflow of efficiently and minimizes its impact OTHER FINANCIAL SERVICES overseas remittances, and ensuring Grow Current and Grow deposits and Deposit growth rate: +1.5 percent Deposit growth rate: +10 percent on the environment. BPI provides its clients efficient means compliance with regulations, Savings Accounts improve CASA ratio CASA ratio: 71.9 percent CASA ratio: > = 70 percent to make financial transactions through transparency, and prudent risk card payments, remittance services, management. and cash management facilities. INVESTORS AND SHAREHOLDERS Moderate branch Strategically expand New bank branches: 17 New bank branches: 10-15 With engaged employees, satisfied expansion branch network New BanKo branches: 97 New BanKo branches: 100 clients, and good government relations, the bank optimizes its financial performance and value Increase digital platform Increase users of online Online/Mobile Banking: Online/Mobile Banking: +25 percent creation, ensuring delivery of users banking platforms for 1.8 million users Bizlink: +10 percent superior shareholder returns in retail and business clients Bizlink: 21,900 corporate clients a manner that is transparent and equitable.
112 AYALA CORPORATION 2018 INTEGRATED REPORT 113 114 a micro-lending company thatextends smallloans to Filipinos. Globe’s fintech platform Myntoperates GCash,theleading mobile wallet inthePhilippines,andFuse, TELECOM GLOBE enterprise clients.Itoperates oneofthelargest, medium-sized businesses, aswellcorporate and than 77.1 customers, millionindividual small- and business partners nationwide, Globe serves more millionretailers,1.2 distributors, suppliers and Supported by over 7,700 employees, andover the Filipinodigitallifestyle. offerings andmultimediaapplications thatenrich growing preference ofcustomers forcontent-rich enhance itsproducts. Thisisinrecognition ofthe with leading content andinternet companiesto mobile dataservices,andhasforged partnerships the Philippines.Itprovides cellular, broadband and Globe Telecom isthenumberonemobile company in WHO WEARE Ernest L. Cu,President andCEO,Ernest L. Globe Telecom world internetconnectivityandmakingthePhilippines anadmired nation.” to thegovernmentasweempowernationdigitally. More thanever, weremain committedindeliveringfirst new financialandoperating benchmarks. We successfullymetourminimumbroadband coverage commitment “Despite thedynamicindustryandregulatory Globereinforced environment, setting itsleadershipinmobile,
AYALA CORPORATION Pacific, Middle East, andAfrica alongPacific, Middle withstrategic East, 800 millioncustomers from 34 countriesinAsia alliance ofpremier mobile operators servingover Globe isamemberofBridge Alliance,astrong technical operations, andmarketing, amongothers. sharing ofbestpractices intheareas ofpurchasing, has created varioussynergies andhasenabled the from providing thispartnership financialsupport, their respective countries andintheregion. Aside leadersCorporation andSingtel, bothindustry in The company’s principal shareholders are Ayala create anationthatisadmired allover theworld. first-world internet connectivity, Globe canhelp fixed line,andbroadband networks. Through most technologically advancedandrobust mobile, prepaid load,includingthosewithdenominationsbelow300pesos. year expiration periodforprepaid Then loadworth 300pesosandabove. inJuly5,2018,Globeexpandedthe implementationtoallGlobe one-year effective January6,2018,Globeimplementedaone expiration periodregardless In compliancetothisnewregulation, of amount. Technology (DICT), andDepartment ofTrade andIndustry (DTI) Joint Memorandum Circular No. 05-12-2017 allprepaid loadwillnowcarrya businesses grow, generate more revenue, and telco partners, to provide solutions to help clients are looking to serviceproviders, including Beyond connectivity, corporate andenterprise financially unserved andunderserved Filipinos. via mobile technology servicesto serve millionsof looking to disruptmainstream financialservices Filipinos remain unbanked, fintech companiesare alternative serviceproviders. Sinceamajorityof of mobile usehascreated anopportunityfor encroaching oncable service.Theprevalence TV and paidvideostreaming serviceswhichare taking advantage offree multi-mediacontent and networkgaming. More customers are now multimedia content suchashighdefinitionvideos enabling theconsumptionofbandwidth-intensive home, smarttelevisions and gaming consoles are use navigation appsusingtheirsmartphones.At transport networkvehicle services,order food,or Filipinos are nowusingtheinternet to avail of playing games alsorank highly. Inaddition,more activity forFilipinosonline,watching videosand While visitingsocialmediasites remains thetop shared withothers. to create andcurate content thatcaneasily be result, today’s customer canalsobecreators -able increasingly enrichedby digitalinteractions. Asa more affordable, everyday experiences are Filipinos. Moreover, withdigitaldevices becoming continues to increase, drivingheavy useamong and postpaiddataplans,demandfor growing. Withtheprevalence ofaffordable prepaid stands at124percent, andinternet penetration is mobile anddigitaltechnologies. Mobile penetration The Philippineshasalways rated highinadoptionof MARKET OUTLOOK worldwide. 768 roaming partners in237callingdestinations partners inEurope andtheAmericas.Globe has 2 1 before impactofthesestandards, whichare comparable withlastyear. Revenues from Contracts withCustomers(PFRS 15)andFinancialInstruments:Recognition andMeasurement (PFRS 9). Pre-PFRS financialsare Customers, andPFRSFinancialInstruments:Recognition 9, andMeasurement in2018.Post-PFRS considered thenewaccountingstandard on Globe adoptedtwonewaccountingstandards, namelyPhilippine FinancialReporting Standard (PFRS) 15,Revenue from Contracts with Under thenewpronouncement basedontheNational Telecommunications Commission (NTC), DepartmentofInformationand Communications
2018 INTEGRATED REPORT Including theimpactofPFRS15 mobile homebroadband, data, andcorporate data. growth across allbusinesssegments, consistingof year ago, driven by thesustaineddatarevenue revenues billion, up10percent of₱140.2 from a Globe closed 2018withconsolidated service BUSINESS REVIEW governing prepaid load expiry. on mobile numberportability, andanewrule to thelowering ofinterconnection rates, newlaws and aligntheseto international norms.Thishasled government isreviewing existing laws andpolicies network rollouts. Lastly, ontheregulatory front, the new third player andothersmaller players intheir independent tower company, to potentially aidthe the country, Globe hasestablishedGTowers, an government’s initiative to improve connectivityin Related to theincumbentplayers supportofthe by 2021. disclosed thatitwilllaunch commercial operations a newmobile player, theMislatel Consortium,which Filipinos, announcedlastNovember theselection of to improve telecommunications servicesforall On theregulatory front, thegovernment, initsbid corporate assets. safeguard vitalbusinessinformationand regardless ofamount. extends prepaid load impact oftheregulatory requirement which which hasbecomethenewbaselinegiven the base totaled 74.1 2018, millionasofend-December embraced thedigitallifestyle. Mobile subscriber mobile datarevenue growth asmore customers to ₱106.9 billionin2018onthebackofcontinued Mobile revenues grew ninepercent year-on-year billion. ₱132.9 service revenues fortheperiodstood at 2 validityto oneyear 1 , total consolidated 115
GLOBE TELECOM From a product perspective, mobile data Globe’s home broadband business ended the year Revenues from corporate data business expanded Globe spent about US$821 million in capital continued to be the top contributor to Globe’s with ₱18.5 billion in revenues, jumping 19 percent 15 percent to ₱11.8 billion, driven by the strong expenditure in 2018 to address the robust data traffic mobile business, accounting for 51 percent of gross from a year ago. This was mainly driven by the demand for domestic and international leased line growth and support its increasing customer base mobile service revenues during the year. sustained expansion of its customer base, boosted services, sustained circuit base expansion, and the with the ramped-up LTE rollout. About 77 percent Full-year mobile data revenues surged 28 percent by the rising demand for faster internet connectivity, increasing demand for cloud-based services, and of the total capex was for data-related services, to ₱55.3 billion year-on-year. This was propelled which has risen to 1.6 million subscribers from managed/modern business solutions. Post-PFRS 15 all geared to meet the customer demand for more by the sustained higher prepaid top-ups, with more 1.3 million a year ago. The revenue growth and adjustments, corporate data revenues during the bandwidth-intensive content. consumer spending on mobile data, thus driving customer uptake was boosted by Home broadband’s year ended lower by ₱20 million versus the pre-PFRS the mobile data traffic growth from 600 petabytes compelling new bundles and packages coupled revenues. Globe paid out ₱12.1 billion in common cash to 956 petabytes year-on-year. Meanwhile, mobile with the growing popularity of the Home Prepaid dividends in 2018, representing 89 percent of 2017 voice and SMS revenues declined six percent to Wi-Fi product. Post-PFRS 15 adjustments, home On a post-PFRS basis, EBITDA registered at core net income. This was in line with Globe’s ₱30.3 billion and eight percent to ₱21.3 billion, broadband revenues reached ₱18.6 billion in 2018. ₱65.1 billion, with an EBITDA margin of 49 percent. dividend policy of distributing 75 percent to respectively. Net income for the period amounted to ₱18.6 billion. 90 percent of prior year’s core net income. In November 2018, its Board of Directors approved Globe’s balance sheet and cash flows remain to change the dividend policy to 60 percent to STRATEGY strong with ample liquidity and gearing below bank 75 percent of prior year’s core net income, to be covenants. Globe ended the year with gross debt to applied in the 2019 dividend declaration. equity ratio of 2.03:1 from 1.98:1 in 2017, while net STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES debt to equity ratio was at 1.71:1 as of end-December 2018 from 1.81:1 last year. Build The To be an admired nation by • Invested US$821 million CAPEX to address • Bring internet services to Network providing mobile services robust data traffic growth and support more Filipino households Of Choice to about 95 percent of cities increasing customer base with the ramped-up through wireless home and municipalities in the LTE rollout broadband and constantly OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE Philippines by end of 2018. • 1,500 locations with free public improve overall network WiFi services nationwide experience • 956 petabytes in mobile data traffic • Launch of 5G offer FINANCIAL BUILD THE NETWORK OF CHOICE SHAREHOLDERS • Successfully met our minimum NTC for the home Driven by continued mobile data To be an admired nation by providing We commit to a sustainable, broadband coverage commitment revenue growth, strong consolidated leading-edge network technology and consistent and competitive dividend service revenues and earnings; mobile coverage to about 95 percent distribution. Obsess About To be the leader of • Connected 1.6 million homes by end-2018 • Continue to forge continued investment in network of cities and municipalities in the The Customers the Filipino digital • 74.1 mobile subscribers as of end-2018 partnerships and create expansion to monetize rising data Philippines by end of 2018. EMPLOYEES lifestyle by providing • Increasing popularity of Home Prepaid Wi-Fi innovative content-driven traffic. We empower our employees to world-class technologies for • 38.3 Net Promoter Score experiences for customers FOCUS ON THE CUSTOMER champion our purpose to create a entertainment, education, as of end of 2018 • Constantly improve how MANUFACTURED To be the leader of the Filipino digital Globe of Good. engagement and rewards we communicate to our Fast-tracking telco infrastructure lifestyle by providing world-class designed to address customers through digital build and diversifying systems technologies for entertainment, CUSTOMERS customers needs. sales and care channels to enable customers’ multiple education, engagement and rewards We enable our customers with the touchpoints and superior experience. designed to address customers’ needs. power of choice as they embrace a digital lifestyle and we enable micro, Digitally To empower the local • Enabled micro, small, medium To empower the local INTELLECTUAL DIGITALLY TRANSFORM BUSINESSES small, medium and large enterprises Transform economy in its digital and large enterprises with relevant economy in its digital Engaging with local and global To empower the local economy in with relevant business solutions. Businesses transformation by helping business solutions transformation by helping partners to provide best-in-class its digital transformation by helping business flourish through • GCash has 15 million registered users, and business flourish through network service, IT enablement and business flourish through the right BUSINESS PARTNERS the right technology, 50,000 merchants accepting QR the right technology, content offers. technology, infrastructure, solutions AND SUPPLIERS infrastructure, solutions, payments infrastructure, solutions and and know-how. We provide opportunities to our and know-how. know-how HUMAN suppliers and business partners Developing a people-centered PUT PEOPLE FIRST within our supply chain. Put People To create a high- • 7,716 regular employees To create a high-performing organization. To create a high-performing First performing organization (54 percent male and 46 percent female) organization through a organization through a purpose- through a purpose-driven • 91 percent engagement score purpose-driven workforce with SOCIAL AND RELATIONSHIP driven workforce with a culture of workforce with a culture of • Employee volunteers comprised a culture of empowerment, Putting customer-centricity and empowerment, collaboration, and empowerment, collaboration, 52.8 percent of total employee base collaboration, and innovation nation-building at the core of innovation. and innovation business decisions.
116 AYALA CORPORATION 2018 INTEGRATED REPORT 117 Manila Water recognizes that these realities pose index adjustment effective January 1, 2018. The year significant risks to the company’s sustainability also marked the successful completion of the fifth thrusts and has taken steps to proactively address Rate Rebasing exercise between the company and MANILA these issues. The company creates shared the Metropolitan Waterworks and Sewerage System value through efficiencies and innovation in last September 27. The approval of the five-year its operations. These initiatives embody business plan will result in the development and WATER Manila Water’s commitment to the United Nations execution of several key water source projects MANILA WATER Sustainable Development Goals on Clean Water identified by the MWSS to meet the mid-term “We will remain focused on fulfilling our mission: to provide an exceptional customer experience in the and Sanitation. water supply requirements of the concession provision of sustainable solutions vital to health and life. To do so, we must become more resilient in the face area. Together with the business plan, a new set of challenges, drawing strength from our core which is our culture and people.” In line with this commitment, Manila Water of tariffs was also approved and became effective acknowledges the need to improve access to on October 16, 2018. To mitigate the impact of the Ferdinand M. dela Cruz, President and CEO, Manila Water water and sanitation services beyond Metro tariff increase, the Manila Concession will stagger its Manila. In the Philippines, only 85.8 percent of implementation over a five-year period from 2018 to the rural population uses at least basic drinking 2022. Contingent to final approval of the mid-term water services as compared to 96.4 percent in the water source, the total increase across the approved urban areas. This is also evident in access to basic period is between ₱6.22 to ₱6.50 per cubic meter. sanitation services, with only 71.9 percent of the rural population having access compared to In the Manila Concession, the primary water source 78.9 percent in urban areas. The same disparity is is the Umiray-Angat-Ipo-La Mesa water resource also evident in most of the ASEAN nations; even system, and it will have additional water supply more acute in the cases of Indonesia, Vietnam, by abstracting 100 million liters per day of raw Cambodia and Myanmar. water from Laguna Lake through the Rizal Province Water Supply Improvement Project (“Cardona Water Treatment Plant”). Ninety-five percent of the Against this backdrop of environmental, social first phase of the Cardona Water Treatment Plant and institutional challenges, Manila Water was completed in 2018. The project is expected to remains focused on fulfilling its mission and start its water delivery in the first quarter of 2019, pursuing growth opportunities in the water benefitting approximately 800,000 people in three and environmental services space. To achieve key municipalities in the province of Rizal, namely these objectives, the company has defined its Taytay, Angono, and Binangonan. As part of the Ripple Strategy – a path to sustainable growth business contingency plan in periods of low water In 2018, Manila Water secured 13 new businesses covering water concession, bulk water, and septage management contracts, including two overseas investments. in the Manila Concession; expanding outward supply, the company will reactivate decommissioned domestically, in the region, and on to the rest of the deep wells that can provide additional 100 mld. WHO WE ARE region. Lastly, Manila Water Total Solutions serves world. From being a leading domestic water service Given the critical need for additional water sources Manila Water is an operator and business builder as an incubator of new business opportunities provider, Manila Water aspires to be an inclusive, to help achieve water security, Manila Water has of water, used water, and related assets across the across the water value chain, driven by design and sustainable, multinational, multi-service water and conducted feasibility studies for the development Philippines and in Southeast Asia. The company technological innovation. environmental company. of medium-term water sources to support the water has over two decades of experience and expertise security masterplan of the Manila Concession. BUSINESS REVIEW which is channeled to provide access to water MARKET OUTLOOK MWSS also plans to construct additional dams for Manila Water posted a consolidated net income and sanitation services in a way that considers Water is critical to sustainable development—and its concessionaires in the coming years to meet growth of six percent, reaching ₱6.5 billion in key impacts on the environment and advocates it is one of the basic resources which needs the water requirements of increasing number of 2018. Meanwhile, its consolidated revenues grew responsible practices at every stage of its to be protected in this age of climate change. customers. by seven percent to nearly ₱20 billion in 2018 operations. Communities today continue to increase in population and density, with more regions driven largely by the Manila Concession, with Manila Water Philippine Ventures higher revenue levels likewise posted by domestic Manila Water’s portfolio includes the Manila transforming into highly urbanized areas. On As more parts of the Philippines transform into subsidiaries Estate Water and Laguna Water. Concession which is the original concession the pressures of market uncertainties, growing bustling urban centers, essential services like water business, providing water and used water services competition for existing water sources and tougher and sanitation develop local economies and improve to over six million people in the eastern part of regulation – and the importance of inclusive Manila Concession quality of living. More than a vehicle for expansion Metro Manila. Manila Water’s vehicle for domestic access to clean water and adequate sanitation Manila Concession’s revenues grew by eight percent in the Philippines, MWPV is leveraging upon its businesses outside the East Zone is Manila Water services becomes more evident. These growing to ₱16,234 million, driven by three percent growth track record for managing public services in its new Philippine Ventures, with operations in key cities concerns, specifically on maintaining this delicate in billed volume to 503.3 million cubic meters. This acquisitions and partnerships across the country, across the country. Internationally, Manila Water balance between water security and environmental was brought about by the three percent increase in enabling these areas to flourish into sustainable, Asia Pacific was established to take advantage of sustainability, will have long-term effects on the billed connections to 986,756, and an improvement dynamic regions. new opportunities and partnerships in the ASEAN quality of life of millions of people. in the average effective tariff primarily due to the implementation of the 2.8 percent consumer price 118 AYALA CORPORATION 2018 INTEGRATED REPORT 119 On a consolidated Manila Water Philippine Ventures MWPV cemented its presence in the country through level, despite the decline in billed volume of the 11 new projects closed in 2018 amounting to roughly OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE operating subsidiaries, its revenues grew steadily ₱7.5 billion in capital expenditures. The coverage at seven percent to ₱3.4 billion in 2018 due to areas of the projects are in the following provinces: FINANCIAL WATER UTILITY OPERATION INVESTORS AND SHAREHOLDERS increase in average effective tariff of Boracay Water Calbayog, Samar; San Jose, Nueva Ecija; Lambunao Manila Water has a strong financial Through PPPs, joint venture projects Profitability and growth through and Laguna Water by seven percent and 13 percent, and Calinog, Iloilo; Ilagan, Isabela; San Fabian, position and has the ability to with water districts and agreements water and environmental respectively; as well as ₱136 million contribution Pangasinan; Tanauan, Batangas; Bulakan, Bulacan; mobilize capital through financing to with estate and property developers, it investments. from new entities such as Obando Water, Bulacan Pagsanjan, Laguna; Sta. Barbara, Pangasinan; and support its expanding business. provides water and used water services • Consolidated revenue of to more than 25.86 million customers in ₱19.84 billion Water, Aqua Centro, and Calasiao Water. Balagtas, Bulacan. MANUFACTURED the Philippines, Vietnam and Thailand • Consolidated net income of It has well-maintained dams, and continues to expand locally and ₱6.52 billion Clark Water posted gains in new connections to Manila Water Asia Pacific impounding reservoirs, deepwells, regionally. It ensures equitable and • ₱9.98 billion in consolidated 2,061 amid a three percent drop in billed volume to Trailblazing in ASEAN markets is MWAP’s strategy water treatment facilities, pumping reliable supply of clean and safe water. capital expenditures disbursed 14.1 mcm with slowdown of key accounts. Its capex towards diversification of the business outside stations and reservoirs, water and Used water and septage are treated sewer distribution networks, and to meet effluent standards before CUSTOMERS, COMMUNITIES, slowed down to ₱53 million due to its pending Rate Philippine boundaries, while bringing its expertise used water treatment facilities. discharging back to water bodies. AND BUSINESSES Rebasing. Meanwhile, due to a four percent increase in environmental responsibility to its partners Access to clean and affordable in new connections, reduced non-revenue water and affiliates. On a consolidated MWAP level, its HUMAN TOTAL SOLUTIONS water and sanitation services to 16.7 percent and the full rollout of its sanitation equity share in net income of associates rose by The company delivers its products It develops innovative products and safeguarding community health, and and services through its 2,118 services to address the needs of enabling productivity and growth for service, Laguna Water improves its profitability 53 percent to ₱699 million from the combined competent employees. It also customers. These include pipelaying, individuals and enterprises. potential for 2019. However, it was challenged income of Thu Duc, Kenh Dong and Saigon Water, partnered with 401 material Integrated Used Water Solutions, • 1,160.33 million cubic meters of by a capex slowdown to ₱561 million together with the additional contribution coming suppliers, 113 contractors, 77 Waste-to-Energy, and Healthy Family water supplied to customers due to permitting delays. Further, Boracay from new acquisitions – East Water in Thailand consulting firms, and 58 service Purified Water. • 5,445,227 five-gallon bottles of providers. purified water sold island’s closure affected Boracay Island Water and PT Sarana Tirta Ungaran in Indonesia. MWAP’s NRW REDUCTION • 2,494,379 500-ml bottles of Company’s 2018 billed volume by 29 percent consolidated net income ended at ₱278 million, NATURAL It improves water distribution efficiency purified water sold dropping to 3.9 mcm. Its capex focused on 16 percent lower than the previous year. Manila Water responsibly abstracts through a non-revenue water reduction • 62.35 million cubic meters of deteriorated non-revenue water due to clearing raw water from rivers, dams, and program. It also partners with water used water treated activities during the closure, thus improving to The year 2018 marked MWAP’s first strategic entry aquifers. It efficiently uses fuel, service providers in the Philippines electricity, and chemicals to optimize and abroad to reduce NRW through Closed 11 deals in various water 13.8 percent during the period. Estate Water posted into Thailand, bolstering MWAP’s ongoing expansion the use of these resources. leak repair, and pipes and meter districts and municipalities in billed volume growth of 25 percent to 5.7 mcm from into Southeast Asia. The company acquired an replacement. the Philippines and two deals in the previous year. Its capex slowed down by three 18.72 percent stake in Thailand’s Eastern Water SOCIAL AND RELATIONSHIP Southeast Asia to provide water and percent to ₱490 million due to execution challenges. Resources Development and Management Public It nurtures good relationships BULK WATER SUPPLY used water services. while creating shared value for Manila Water provides bulk water to Its takeover of 60 new gated communities (over Company Limited, a publicly-listed water supply and stakeholders. Metropolitan Cebu Water District in EMPLOYEES 10,000 connections) in 2018 boosts 2019 billed distribution company. Expansion continued with the the Philippines and Saigon Water in Opportunities for career growth volume potential. acquisition of a 20 percent stake in Indonesian bulk Vietnam. It has an on-going bulk water and development. water supplier PT Sarana Tirta Ungaran which serves project in Tagum City, Philippines. • Above average engaged employees PDAM Kabupaten Semaran and industrial customers (compared to Philippine norm) ENGINEERING, PROCUREMENT, • Average of 21 training hours per in Bawen, Ungaran – area of Semerang Regency. CONSTRUCTION MANAGEMENT AND employee TECHNICAL CONSULTANCY STRATEGY Manila Water International Solutions ENVIRONMENT was reorganized in 2018 to provide Protection of watersheds STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES engineering, procurement, construction and water sources management and technical consultancy Restoration of quality Advocate for Ensure the completion of the Construction of the 100 mld Operationalize by 1Q2019 the in the water and used water sectors. of water bodies. water security water system projects and capacity Cardona Water Cardona Water Treatment Plant • Protection of 9,259 hectares and sustainability interim water sources; support Treatment Plant in its final stages with an initial capacity of 50 mld, of watersheds the MWSS in the development and expected to deliver its first serving the municipalities of • Planted 41,500 tree seedlings in and completion of medium- water in 1Q2019 Binangonan and Angono La Mesa Watershed, Nabaoy term/long-term water sources Watershed and Laguna • Diverted 9,101 tons of BOD organic pollution load from water bodies Expand the capacity Ensure completion of Used Water Treated 62.4 mcm of Increase utilization of Used • 57,338 tons of carbon dioxide and coverage system and sanitation projects; Used Water enterprise-wide Water Treatment plants avoided due to used water of Used Water (11 percent increase against 2017) through expansion of Used treatment services across Utilization of existing used Water network coverage to the Enterprise water treatment plants more communities
Expansion of Enable new business Acquired 18.72 percent stake Close new projects in business footprint in development to focus on in East Water, Thailand; ASEAN and adjacent ASEAN and beyond business expansion through Acquired 20 percent stake in PT regions where feasible. strategic mergers and acquisitions Sarana Tirta Ungaran, Indonesia
120 AYALA CORPORATION 2018 INTEGRATED REPORT 121 122 AC Energy isfocusingonrenewables withatarget to reach 5GW ofcapacityfrom renewable sources by 2025. ENERGY AC John EricT. Francia, President andCEO, AC Energy aims toscaleuprenewables toover5000MWby2025asweexpandacross theregion.” “In 2018,AC Energy doubleditsrenewables capacityto500MWasitentered AC theVietnammarket. Energy The AsiaPacific region continuesto exhibit robust MARKET OUTLOOK sources. energy, ofwhich 48percent from was renewable company generated hours ofattributable 2,800GW to 500MWasitentered theVietnammarket. The In 2018,AC Energy doubled itsrenewables capacity renewables by 2025. aims to exceed 5GW ofattributable capacityin partnerships andgreenfield initiatives. AC Energy rapidly around theregion through strategic From astrong local base,AC Energy isexpanding and underconstruction. Indonesia andVietnamwith16assetsinoperations attributable energy portfolio inthePhilippines, AC Energy successfully developed over 1.8 GW of WHO WEARE
AYALA CORPORATION This market is decommissioningitscoal plants on itspathway toward acleaner energy future. Therefore, fuelmixandpolicytools needto change because an“all oftheabove solution” nolonger fits. For Australia, itisatdaybreak oftransformation and windprojects are underway. market hasresponded positively andseveral solar as anincentive forthistechnology option.The and ishighly supportive to the feed-in-tariff system its government iscommitted to scale uprenewables to ramp upnewpowerinvestments inthismarket, reserve capacityisinterminably declining. Inorder its powerdemandhasbeenrisingsteadily while its urbanization. Itisinthatcriticalcrossroads wherein to and itsrapidsituation due industrialization Vietnam, inparticular, isfacingundersupply increasingly playing alarger role. growth inthepowersector, andrenewables is a jointventure betweenAC Energy and theBIM The 330MWpNinhThuansolar farminVietnam, Australia askey markets initsexpansion strategy. and identified thePhilippines,Vietnam, Indonesia, developers andoperating companies.AC Energy has the region through strategic partnerships with In 2018,AC Energy expanded itsfootprintin capabilities. energy company withdevelopment andoperations Energy hassuccessfully shifted to afull-fledged at least 50percent oftotal AC energy output, withrenewablescapacity by 2025, contributing To reach itsgoal of5GW ofrenewable energy Development Platforms provided aboost. The full-year contributionofSDGeothermalalso Sidrap windfarminSouthSulawesi, Indonesia. of itsfirst greenfield offshore project, the75MW in GNPower Mariveles andthefresh contribution to thestrong performanceandhigherequitystake companies surged 37 percent to ₱3.6 billiondue Equity innetearnings from AC Energy’s investee renewable platforms. equity innetincomeacross bothitsthermaland 16 percent to ₱4.1 billiononthebackofhigher AC Energy’s consolidated netearnings expanded BUSINESS REVIEW renewables by 2030. goal ofgenerating 30percent ofenergy output from renewables andhelpthegovernment achieve its the grid.Thisiscriticalto enable thescalingupof also underway to addcapacityandstrengthen Portfolio Standards. Transmission upgrades are to comply withtheprescription oftheRenewable – including multiple gigawatts ofREinstallations that time,itwillbeinneedofnewcapacityadditions andaroundsupply-demand equilibriumin2022, The Philippinesitselfisprojected to bereaching of itsenergy sector. prospective stream ofinvestments into thissegment into thepowergridalsoprovides stimulus to government’s pushfortheintegration ofrenewables capacity factor onREinstallations.TheAustralian plus ithasthegeographical advantages forhigh it cancountonitsabundantrenewable sources capacities –whichisawell-suited optionbecause and replacing themwithrenewable energy (RE) 2018 INTEGRATED REPORT Bonds in Southeast Asia. AC Energy’s Asia. Bonds inSoutheast Green thefirstand was publicly syndicated US dollar Green Bonds Standard from the Climate BondsInitiative The bondsreceived certificationundertheClimate issuance ofUS$410 millioninGreen Bondissuance. Energy madeitsdebutinthecapitalmarket withthe To supportexpansion ofitsrenewable portfolio, AC including 700MWAsia, inVietnam. around ofwindprojects 1,500MW across Southeast develop, own,and operate construct, apipelineof projects. AC Energy andTheBlue Circle willjointly ownership aswellco-investment rightsinits in November, acquiringapproximately 25percent with Singapore-based developer TheBlue Circle renewables, AC Energy announceditspartnership Strengthening itscommitment to ramp upits located inNSW, Tasmania, andVictoria. development portfolio ofanother3,000MW in NewSouthWales. Inaddition,ithasafurther 700MW NewEnglandSolarFarm located Uralla near Plain projects inNorthWest Tasmania andthe is developing the1,000MW Robbins IslandandJims opportunity forlarge-scale renewables. Theplatform decommissioning itscoalassets,AC Energy seesthe business. WithAustralia’s energy sector gradually a 50percent ownership inUPC’s Australian UPC Renewables. Itinvested US$30 millionfor with international renewable energy developer renewables market through ajointventure region. InMay, AC Energy entered theAustralian partnerships to establishsimilar platforms inthe platform Bronzeoak in2017, itcontinuesto forge Following itsacquisition oflocal development with AMIRenewables. Binh Province to jointly develop awindpowerproject ofunderstandingmemorandum inJunewithQuang venturing into windprojects inVietnam.Itsigneda respectively. Inadditionto solar, AC Energy isalso commissioned by early Aprilandmid-March 2019, AMI Renewables Energy, are alsoexpected to be whichisinpartnershipHoa andDakLak, with solar farmslocated intheprovinces ofKhanh in Vietnamthelastquarter of2018.The80MWp AC Energy broke ground onitssecondsolarplatform generation andjobcreation. benefitingNinhThuanprovinceAsia, withincome be oneofthelargest solarfarmsinSoutheast second quarter of2019.Oncecompleted, itwill operations expected to commenceearly inthe Group, isprogressing asplannedwithcommercial 123
AC ENERGY Bond Framework sets out well-defined guidelines In 2018, AC Energy generated 2,800GWh of for use of proceeds for renewable energy projects, attributable energy, of which 48 percent was from OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE with comprehensive monitoring and reporting renewable sources. It also continues to grow its retail commitments. business, with over 100MW of customer FINANCIAL DEVELOPMENT PLATFORM INVESTORS AND SHAREHOLDERS contracts signed. AC Energy has a strong balance AC Energy continued to expand AC Energy’s net earnings expanded Operating assets sheet, backed by significant capital its international footprint through 16 percent to ₱4.1 billion in 2018, AC Energy’s onshore wind platforms, North Luzon allocation from its parent company, strategic partnerships with largely driven by its domestic thermal Sustainability Ayala, to support its fast-paced growth developers and operating companies. and renewable assets as well as Renewables and NorthWind Power, contributed As AC Energy continues to build a balanced portfolio and regional expansion. AC Energy AC Energy has identified the higher contribution from its Indonesia to the higher equity earnings given a better wind of assets, it recognizes the importance of working is transitioning into a regional player Philippines, Vietnam, Indonesia, investments. Equity earnings from AC regime in 2018. with communities to create development programs with investment, development and and Australia as key markets in its Energy’s investee companies reached that benefit its stakeholders. Its programs cover the operations capabilities. The company expansion strategy. ₱3.6 billion, 37 percent higher from the also capitalizes on project financing by previous year. In September, AC Energy announced the partial key areas of environment, livelihood, health and lenders and banks. COMMERCIAL GENERATION sell-down to AboitizPower of its thermal platform, sanitation, and education. AC Energy produces energy from CUSTOMERS which includes the GNPower Mariveles and GNPower To exceed 5GW attributable capacity both renewable and thermal It contributes to the country’s energy Dinginin assets in Bataan. The deal, valued at AC Energy’s flagship program is a conservation estate target, asset recycling is important sources within the Philippines and requirements through affordable US$579.2 million, represents approximately for AC Energy. Achieving the target in Southeast Asia. In the Philippines, electricity. In 2018, AC Energy generated in Pagudpud, Ilocos Norte, which aims to preserve AC Energy generates power and a total net of 6,841.2GWh, higher by 35 percent of AC Energy’s attributable thermal and enhance the ecological character of the area will require as much as US$2 billion in equity, some of which will come transmits to the National Grid four percent from the previous year. capacity. This is part of its strategy to actively through initiatives that include reforestation and from the sell-down of AC Energy’s Corporation for distribution. AC recycle capital to enable the expansion of agro-forestry. As part of this program, AC Energy and thermal power plant stakes at the Energy’s Indonesia assets (Sidrap THE ENVIRONMENT AC Energy’s domestic and offshore renewable North Luzon Renewables, the operating company opportune time. Wind Farm in South Sulawesi, and AC Energy generated 2,800GW hours of Salak and Darajat Geothermal Plants attributable energy, of which 48 percent energy businesses. of an 81MW wind farm in Pagudpud, Ilocos Norte, NATURAL in West Java, Indonesia) generate was from renewable sources. To support launched a five-year agro-forestry program in 2018 Its business, which utilizes wind, solar power and transmit to Perusahaan its strategy to scale up its renewable Construction of GNPower Kauswagan is nearing with a series of lectures and workshops with farmers and thermal energy sources, operates Listrik Negara, the government- portfolio, AC Energy raised US$300 million completion and is expected to be in full commercial that reside within the boundaries of the wind farm. in a responsible manner to minimize its owned and sole energy distributor in green bond in January 2019, the first impact on the environment. in Indonesia. publicly syndicated US dollar Green Bonds operation by 2019 to provide baseload supply to in Southeast Asia to be certified by the support the growing power demand of the Mindanao AC Energy has also partnered with host communities HUMAN RETAIL ELECTRICITY Climate Bonds Initiative. grid. The 4x135MW Kauswagan plant is strategically on a solid waste management program which AC Energy is driven by competent and AC Energy has committed itself to located in Lanao del Norte as an effective gateway to includes a materials recovery facility in NorthWind motivated employees equipped with become a key player in the retail AC Energy strives to achieve a balanced electricity supply market by offering portfolio by partially selling down its the Mindanao-Visayas transmission interconnection. and Montesol. diversified skills that it continually supports for their professional innovative products to end-users in thermal assets, and is committed to development and for them to the contestable customer market. increasing its renewable energy portfolio cope with the fast-evolving Through AC Energy, these customers to 5GW. STRATEGY business environment. now have the opportunity to take control of their electricity bills and EMPLOYEES The successful integration of choose energy suppliers that provide AC Energy gives meaningful jobs to STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES BronzeOak and AC Energy brought the lowest rates and best customer its employees, contributing to their opportunities for sharing of expertise service. The company helps clients professional development and career analyze how to maximize savings and growth. Through its employees’ favorable Scale up to over Scale up to over The Sidrap wind farm, the first utility-scale wind Expand in high growth regional in project development. increase business profitability. ratings, the company achieved an 1GW for each 1GW for each facility in Indonesia, started commercial operations markets: employee engagement score of 96 percent priority market priority market in February 2018 1. Philippines, Vietnam & Australia MANUFACTURED in the biennial Employee Engagement 2. New scalebale markets - frontier AC Energy uses wind turbines, Survey of the Ayala group in 2017. Its Successfully entered Vietnam and developed markets where partners have solar panels, and boilers which are results are higher than the Philippine 410MW of solar; Invested in two development existing exposure regularly maintained for efficient national norm. platforms in SE Asia and Australia” operations. The company also engages Engineering, Procurement, and Construction contractors for the COMMUNITIES Leverage Leverage Invested in development platforms with AMI construction of its power plants. AC Energy’s community programs are both internal both internal Renewables of Vietnam, UPC Renewables Australia classified under the key result areas development development and The Blue Circle of Singapore SOCIAL AND RELATIONSHIP of environment, livelihood, health and capabilities capabilities Linkages with different local and sanitation, and education. Its flagship and strategic and strategic regional stakeholders allow AC program is a conservation estate in Bangui partners partners Energy to expand its operations in and Pagudpud, Ilocos Norte, which aims the Southeast Asian region. The to preserve and enhance the ecological character of the area in partnership with Active recycling of Employ active Entered into a share purchase agreement for the Reinvest capital to enable the company continues to maintain good the adjacent community. capital capital recycling partial divestment of AA Thermal, AC Energy’s expansion of domestic and relationships with the communities initiatives to thermal platform in the Philippines international renewable energy where it operates. sustain growth businesses
124 AYALA CORPORATION 2018 INTEGRATED REPORT 125 126 proprietary enablingtechnologies, andhighvalue products forendmarkets. AC continuesto Industrials build itsportfolio andnowhousesplatforms inglobal manufacturing, INDUSTRIALS AC vehicle distribution anddealership group. AC Automotive, thecountry’s largest multi-brand and technology solutions partner, and pioneers andnowaglobally leading manufacturing Philippines’ electronics manufacturingservices Integrated Micro-Electronics Inc.,oneofthe The company isfoundedonthestrengths of and vehicle assembly, distribution,andretail. manufacturing solutions, emerging technologies, operating unitscomposed ofplatforms inglobal manages anintegrated andsynergistic portfolio of technologies invests inand arm.AC Industrials Holdings istheAyala group’s fast-growing industrial TechnologyEstablished in2016, AC Industrial WHO WEARE Arthur R.Tan, President andCEO, AC Industrials a globallyrelevant playerinthesesectors.” properties crucialtotheevolvingmobility, connectivity, andsmartenergy markets, positioningustogrow into growth withintheirdefinedmarkets. Inparallel, wehavealsoacquired several technologiesandintellectual world’s weensure majormarkets. that ourcurrent First, operating businessesare focusedandprimedforfuture “We continuetoexecute onourlong-termstrategy withageographical footprintthatnowtouchesallofthe AYALA CORPORATION and inAyala’s highlighted homemarket. Thiswas by significantuncertaintyin2018,bothglobally technology marked spectrum was The industrial MARKET OUTLOOK demand from endusers. landscapes,andincreasingchanging industry brought aboutby disruptive technological shifts, technologies spacesby capitalizingonopportunities presence intheglobal anddomesticindustrial Through Ayala AC Industrials, targets boostingits Europe,America, andAsia. world, withthecapacityto tapmarkets inNorth operatesAC Industrials in11countries around the First, itacquiredFirst, acontrolling stake inMerlin technologies, andvehicle distributionandretail. verticals ofglobal manufacturing, enabling several newbusinessunitsacross itsthree During theyear, operationalized AC Industrials energy sectors. worldwide mobility, connectivity, andsmart toward itsvisionofbeingarelevant player inthe unit continuedto make significantadvancements backdrop, theAyala group’s mostglobal business percentof 53 versus 2017. Notwithstandingthis to post₱578 millioninnetincome, acontraction withstood theseheadwinds In 2018,AC Industrials BUSINESS REVIEW to manage –orbetter, fully leverage –theirimpact. leading domesticplayers willhave to beprepared countries suchasthePhilippines,andotherwise reach themassmarket level even inemerging energy. Theseglobal transformations will eventually creation suchassmart inadjacentindustries create adjoiningopportunities fordisruptive value complex mobility’s segment, evolution issetto the next 10to 15years. Furthermore, asahighly the sources ofprofitability over intheindustry electrification, andsharingwillprofoundly shift The convergence ofautonomy, connectivity, of themobilityspaceremains infullforce. at least into 2019,thelonger-term disruption While are theseheadwinds expected to persist aggressive pricingstrategies to adjust. previous year andmarket players implemented spectrum asbuyers accelerated purchases to the system. tempered was Demand across theindustry excise taxregime delivered asignificantjoltto the the priorseven years. Theimplementation ofanew at acompoundedannualrate of16percent over market declined15percent in2018after growing On thePhilippinefront, thelocal automotive manufacturing supply chain. further uncertaintyinto thealready volatile global These forces, amongmany others, introduced and servicesincreasingly indispensable today. raw orprocessed materials required inthedevices needs resulted inanexploding demandforthe universal surge indigitalizationandconnectivity world’s twolargest economies.Meanwhile, the who operate within,across from, andbetweenthe resulted insizable consequencesforbusinesses by theUnited States-China which trade conflict, 2018 INTEGRATED REPORT decline to postnetrevenues andnetincomeof intensifying competitionandtheoverall market’s Domestically, AC Automotive weathered both 2018. in October AC Motors portfolio. AC nowcounts Kiaasitsnewestbrand under the Industrials of its21 IMI punctuated thisexpansion withtheinauguration grew 16percent from theprevious year. while theat-scale manufacturingservicebusinesses collectively recorded 61percent revenue growth US$1.35 billion.ItssubsidiariesViaandSTI posted a24percent increase inrevenues to theyear,services firmintheworld during ranked the18thlargest electronics manufacturing millionin2018.Nevertheless,US$25.8 IMI,which investments. Absentone-offs,IMIrecorded profits of by impairmentprovisions onsomeoffshore related to theSTIacquisition,butpartially offset entity andreversal ofcontingent consideration items suchasnetgains from thesaleofaChina 34 percent versus 2017boosted by non-operating IMI reported million,up anetincomeofUS$45.5 especially impacted by macroeconomic headwinds. The group’s larger andmore mature businesseswere Filipino automotive market –already underway. – aglobally leading brand well-recognized by the Motors brands, withoperationalization ofthelatter distributorship rightsto theSAICMaxus andKia Finally, closed theyear by AC securing Industrials of offerings inthisspaceformultiple markets. touch sensors, strengthening thegroup’s portfolio and manufacture next-generation metalmesh venture withJapan’s Toppan Printingto develop Second, itsVIAOptronics entered into ajoint transportation, roofing, andportables environments. potentially innovative applicationsinthedemanding with pioneeringphotovoltaic technology, enabling Solar Technologies, aSiliconValley-based startup st manufacturing site in Nis, Serbia, manufacturingsite inNis,Serbia, 127
AC INDUSTRIALS ₱21.8 billion and ₱164 million, respectively. The group attained an industry-wide market share of OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE over four percent on the back of 16,199 automobiles distributed and sold across its Honda, Isuzu, and FINANCIAL PORTFOLIO MANAGEMENT INVESTORS AND SHAREHOLDERS Volkswagen brands. The Honda and Isuzu dealership A healthy balance sheet with a capital It actively grows its portfolio, and It provides growing shareholder groups retained overarching leadership within their base that can be readily deployed to constantly searches for synergy returns that are diversified by the respective brands, holding network shares of address growth opportunities and opportunities among the group. From sectoral and geographic scope of its respond to customer needs. a management perspective, it provides portfolio. 38 percent and 35 percent, respectively. In parallel, a broad range of corporate functions Volkswagen refreshed its product lineup with five MANUFACTURED such as strategic planning, governance, • 2018 group net income all-new models carrying specifications and price Facilities located around the world resource allocation, and financial of ₱578 million points tailored to better compete in the Philippine allow us to create and distribute management. • 2018 IMI revenues of US$1.35 billion, products, services, and solutions net income of US$46 million market. Finally, the KTM business continued its AC Industrials continues to pursue its long-term strategy of to its customers. AC Industrials has GLOBAL MANUFACTURING SERVICES • 2018 AC Auto revenues of building an integrated and synergistic portfolio of mobility- steady growth trajectory, distributing over 2,300 28 plants around the world with It delivers full manufacturing solutions ₱22 billion, net income of driver businesses. motorcycles across the country and manufacturing 130+ surface-mount technology for its customers and partners, and for ₱164 million over 6,400 units in its factory’s first full year. production lines and 287,000 sqm of its own portfolio of companies. Both units also prioritized the buildup of their manufacturing space. AC Industrials EMPLOYEES respective revenue pipelines, positioning them for directly holds a majority stake in the EMERGING TECHNOLOGIES Its global employee base is able to Even as AC Industrials and its foundational increased stability and growth heading into 2019. KTM motorcycle production plant DEVELOPMENT build meaningful, long-term careers businesses navigated the macro-driven complexities in Laguna, Philippines, as well as a It constantly seeks out, acquires, and that allow them to support their nationwide network of 92 automotive commercializes key technologies that families. of 2018, the group also continued to incubate AC Industrials continues to pursue its long-term its new, enabling technologies-focused units. dealerships covering five vehicle enhance and protect its competitive strategy of building an integrated and synergistic brands. position. PARTNERS Post acquisition, Merlin Solar began readying its portfolio of mobility-driven businesses. With the Its long-term strategic partners are proprietary technology for commercial applications rapidly transforming mobility industry as its strategic INTELLECTUAL VEHICLE DISTRIBUTION AND RETAIL treated fairly, and these ventures in the transport, roofing, and portables segments. center, the group is also consequently It dispatches an emerging suite It partners with multiple OEM brands to generate growing, consistent returns MT Technologies, in its first full year under of proprietary technologies and competitively source and distribute a that equitably accrue to all sides. well-positioned to expand selectively into adjacent intellectual property for the benefit of broad, complementary, and integrated AC Industrials, focused on internal restructuring and equally evolving sectors. Looking ahead, customers and partners. selection of vehicles for its customers. CUSTOMERS and boosting its overall suite of capabilities, in line AC Industrials will increasingly focus on enabling It offers products, services, with priming itself for greater competitiveness in the synergies and scale as its larger businesses reinvent HUMAN solutions, and ownership global Tier 1 automotive manufacturing spectrum. It has a strong base of over 19,200 experiences that exceed customer themselves and its newer businesses expand. employees and executives that deliver requirements and global quality operational excellence, customer standards. STRATEGY satisfaction, and value-adding technical expertise. • 31 million units of products for automotive industry STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES SOCIAL AND RELATIONSHIP • 746 million units of products for It treats partners and customers smart energy applications Large businesses Strengthen and • IMI grew revenues to US$1.35 billion, • Support expansion of IMI via fairly, and view them as long-term • 56 million units of products for support growth of another all-time high internal and external initiatives relationships that stand the test of connectivity applications IMI and our Honda • Honda and Isuzu network share declined • Drive optimization & time. Its operations adhere to Ayala’s • 21,278 vehicles distributed and and Isuzu businesses slightly to 38 percent and 35 percent transformation of Honda standards of sustainability and good sold, with majority share within the respectively, but maintained lead amid and Isuzu, along with overall governance. brands it distributes overall market decline automotive group GOVERNMENT AND POLICYMAKERS Emerging Scale existing • Deployed over ₱1.6 billion in capital for • Continue to build revenue It champions the development businesses businesses acquired acquisition and operations of pipelines for MT and Merlin Solar; of quality manufacturing in the in recent years; MT Technologies and Merlin Solar stabilize and establish internal markets it operates in, in support continue to add • VIA optronics established VTS joint venture, organization and structures of government thrusts to promote key pieces that acquiring metal mesh sensor technology • Reestablish Kia in the Philippines the sector as a pillar of national pioneer or deepen • Secured rights to distribute the SAIC Maxus and launch the SAIC Maxus brand development. It lives this out by AC Industrials’ and Kia brands • Open new export markets for KTM prioritizing, investing and locating in presence in priority • Launched five all-new models for Volkswagen its home country of the Philippines, sectors • Solidified both export and domestic markets utilizing key frameworks and for KTM; producing over 6,400 units out of programs like the Motor Vehicle Laguna factory Development Program, the latest Investment Priorities Plan, and the Philippine Economic Zone Authority.
128 AYALA CORPORATION 2018 INTEGRATED REPORT 129 130 to upgrade thesystem, resulting inamore comfortable andreliable ridingexperience. Since assumingoperations ManilaCorporation andmaintenanceLightRail hasinvested functions ofLRT1 over in2015, ₱10billion INFRASTRUCTURE AC rapidly growing digital economy. it intends to expand inthecomingyears to supporta solutions spacewithitsinvestment inEntrego, which AC Infra ventured into thelogistics andfulfillment in Metro Manilaandnearby provinces. In2018, commuting andmotoring publicwholive andwork respective government concessionandserve the cashless payment solutions alloperate underits Our portfolio ofprojects intherail, toll road, and people, goods, andservices. sustainable modesoftransportation to move urgent reliable, needforefficient, and safe, soft infrastructure solutions to meetthecountry’s large-scale infrastructure andintechnology-based AC Infra invests indeveloping bothtraditional WHO WEARE Jose Rene Gregory D. Almendras, President andCEO, AC Infrastructure across thearchipelago.” continuing todevelopprojects thatwilladdress current andfuture challengesinmovingpeopleandgoods “AC Infra islookingtomeettheinfrastructure needstosupportanincreasingly digitaleconomy, while AYALA CORPORATION Philippines loses approximately billiondaily due ₱3.5 Cooperation Agency (JICA), itisestimated thatthe for Mega Manilareleased by theJapanInternational In the2017Transport Infrastructure Roadmap Study the ASEANregion. and to improve itscompetitiveness globally and in enable thePhilippinesto furtheritseconomicgains Inclusive infrastructure remains anurgent needto MARKET OUTLOOK managing large-scale projects. record ofexcellence indeveloping andsustainably AC Infra builds onAyala’s reputation andtrack wholly-owned subsidiaryofAyala Corporation, and maintenance isourkey advantage. Asa its development, implementation, operations Our abilityto steward andlead projects from provides value-added servicesthrough reporting visibility throughout the delivery process. Entrego real-time providing tracking ofshipment, clients its clients.Itstechnology backbone enables for courierexpress parcel delivery requirements of providing customized end-to-end solutions initially B-to-C andB-to-B logistics andfulfilmentneedsby Entrego enables businessesto manage their people, goods, andservices across thecountry. part ofitsbroader thrustto enhancethemobilityof in thecountry. AC Infra’s investment inthissector is one ofthefastest largest e-commerce companies following theAyala group’s acquisitionofZalora, of Zalora Philippines’in-houselogistics platform Entregoan affiliate ofZALORA. acarve-out was GmbH&Co.,Brillant 1257 Vierte Verwaltungs Kg, in Entrego, a60-40 jointventure, respectively, with opportunities ine-commerce through itsinvestment to capturesolutions industry the growing AC Infra entered thelogistics andfulfilment Entrego Fulfilment Solutions models andaccelerate itsgrowth. needed to supportnewandinnovative business beyond thepublicsector. Infrastructure islikewise traditional definitionasitlooks foropportunities AC Infra’s viewofinfrastructure goes beyond the improve onitsserviceandperformance. its current portfolio ofoperating projects further aggressive infrastructure push,while ensuringthat propose newprojects to supportthegovernment’s AC Infra continuesto seekopportunitiesand BUSINESS REVIEW platform to move goods across thearchipelago. highly-efficient, reliable, seamless, andaffordable the growth ofmany SMEs,are anchored onhaving a priority. Emerging opportunitiesforAyala, aswell improve transportation andlogistics remain atop suburban areas, theneedto invest insolutions to infrastructure andconnectivityinurban toWith billionsofpesoslost poor day each due butalsoamongthemostcongested.2035, of thelargest mega citiesintheworld by theyear also predicts thatMega Manilawillbecomeone to thetraffic situationinMetro Thestudy Manila. 2018 INTEGRATED REPORT beep™ card rolled-out was inCebuwithitspartner, of transportation partners outside Metro The Manila. The beep™payment platform expanded itsnetwork and e-tricyle operators with50unitsasofend2018. 15 busoperators with279 units,andthree e-jeepney Metro Manilarail lines(LRT 1, LRT 2andMRT 3), transportation services, whichconsistofallthree card daily invariousbeep-enabled massandpublic An average of600,000 commuters usethebeep™ AF Payments, Inc. grow steadily inthecomingyears. projected growth invehicular traffic andisexpected higher year-on-year. Thisincrease inlinewiththe was vehicles, 11percentExpressway 32,300 for2018was Average annual daily traffic attheMuntinlupa-Cavite MCXi highest inthehistory ofLRT 1. 9,2018with613,127December passengers—the LRMC recorded itshighestsingle-day ridership on a five percent increase from 2017’s daily average. ridership grew to 458,000 passengers perday in2018, time improved by three percent in2018.Average daily Withmore2015. trains and more trips,peak-hour cycle as ofend-2018 from aninitial77unitsinSeptember VehiclesThe numberofLightRail increased to 112units more comfortable andreliable ridingexperience. ₱10 billionto upgrade the LRT 1system resulting ina Manila Corporation Light Rail has investedin 2015, over Since assumingoperations andmaintenance functions ManilaCorporationLight Rail which isexpected to beoperational by 2020. a multi-usefulfilmentfacilitysouthofMetro Manila, logistics andwarehousing. Ithasbegun plansto build domestic freight forwarding aswellcontract In 2019,Entrego willopenitsserviceofferings in planned growth andexpansion. to ₱580millionover thenext fewyears to supportits 95 percent ofthecountry. AC Infra hascommitted up expand itspresence hubscovering nationwidewith54 started operations in2018.Thishasallowed Entrego to AC Infra hasinvested ₱250millionsinceEntrego making valuable businessandoperational decisions. and performanceanalytics thataiditsclientsin 131
AC INFRASTRUCTURE Topline Marina, a commuter ferry servicing the NAIA Rehabilitation National Identification Infrastructure infrastructure to equip the country and its citizens for Cebu-Mactan channel; and in Mindanao with The Department of Transportation and the Manila A consortium composed of AC Infra, the future and to enable all Filipinos to participate in General Santos-based Husky Buses for its 29 buses International Airport Authority have granted to the Unisys Philippines Ltd., and Aboitiz InfraCapital the digital economy. The proposed system shall be the travelling the General Santos–Cotabato route. “NAIA Consortium” the Original Proponent Status submitted an unsolicited proposal to the Philippine foundation for a robust, secure and efficient ecosystem for its proposal to rehabilitate, upgrade, expand, Statistics Authority in August 2018 to help to enable Filipino citizens to easily access government Partnerships with Chinabank, coins.ph app, and the operate, and maintain the Ninoy Aquino International government accelerate the implementation and financial services within the digital economy, while introduction of stand-alone loading kiosks provided Airport for 15 years. The consortium aims to expand of the National ID law. preventing fraud. more convenient loading options for beepTM card NAIA’s capacity to close current gaps and to meet users, bringing the total network of beep’s top-up the anticipated growth in passenger traffic from the The consortium seeks to provide the PSA with locations to almost 350 physical locations on top of Philippines and the Asia-Pacific region. a future-proof, digital national identification its app-based and over-the-air loading facilities. The ₱102 billion proposal involves upgrading, Proposals Submitted to the expanding, and interconnecting the existing terminals OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE Philippine Government of NAIA, upgrading airside facilities for efficient AC Infra, through consortiums it is part of, continues airline operations, developing commercial facilities to FINANCIAL PROJECT DEVELOPMENT CUSTOMERS to pursue strategic opportunities to work with enhance the passenger experience, and elevating the A strong balance sheet and strategic AC Infra pursues investment Travel time is reduced for motorists and government on projects that address critical status of NAIA as the country’s premier international capex investments funded by Ayala opportunities that address train passengers. In 2018, MCX served infrastructure gaps in the Philippines. gateway. infrastructure needs of the public and an average of 32,992 motorists daily, MANUFACTURED private sectors. Together with highly saving 8-10 minutes of their travel time Continued improvement in the competent partners, it stewards STRATEGY operating efficiencies of LRT-1, MCX, the project development process to LRT 1’s average daily ridership increased and beepTM develop innovative and sustainable to 458,000 in 2018 compared to infrastructure solutions. 435,000 in 2017 due to extended STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES INTELLECTUAL operating hours and improved Experience and track record in putting IMPLEMENTATION AND START-UP headways together PPP project proposals for toll It has assembled a competent team Ensure high levels Ensure high levels MCX Tollway, Inc. • Annual average road, rail, and airport infrastructure that will steward the implementation of Expanded non-rail network as of end of efficiency of efficiency for • Average annual daily traffic at 32,992 vehicles, daily traffic to reach projects and execute plans in a timely, 2018: 15 bus operators with 279 units; for operating operating companies a 19.5 percent increase from 2017 AADT 35,000 HUMAN cost-efficient, and socially sustainable three jeepney and e-tricyle operators companies under under government A team with a diverse and manner. The company employs best with 50 units; entry into Visayas and government concessions Light Rail Manila Corporation • Replacement of complementary set of skills that can practices to meet industry standards Mindanao concessions Deliver consistent • Number of functioning Light Rail Vehicles (LRVs) system-wide CCTVs steward projects from inception to and ensures compliance with all level of service and increased to 112 as of end 2018 from an initial 77 • Commence upgrade of development to operations regulatory processes. Entrego reached more than 28,000 continue to exceed • Improved peak-hour cycle time by three percent radio system barangays across the country key performance • Improve passenger in 2018 SOCIAL AND RELATIONSHIP BUSINESS OPERATIONS indicators for experience and feedback • 458,000 average daily ridership for 2018 Wide spectrum of local and foreign It consistently meets the Key GRANTORS AND GOVERNMENT operating toll, compared to 435,000 in 2017 project partners with complementary Performance Indicators in its concession Infrastructure targets and needs of rail, and payment knowledge and expertise. Supportive agreements through teams that deliver the country are supported through companies AF Payments Inc. • Expand to 1000 partnerships with public sector smooth and efficient operations. Staff the projects developed. Continued
• Expanded network as of end 2018: 15 bus operators beep-enabled bus and stakeholders. have improved capabilities to ensure improvements in operations and with 279 units; 3 jeepney and e-tricyle operators jeepney units by proper maintenance to minimize maintenance are translated into with 50 units end-2019 disruptions, while management benefits in the form of better public • Expanded into Visayas and Mindanao continually seeks improvement across image and service to citizens all operations. EMPLOYEES Propose strategic Selectively pursue Secured Original Proponent Status for the NAIA Secure NEDA Board Employees under the previous projects to government projects to rehabilitation project approval and undertake administration were transitioned from government address the country’s Swiss Challenge contractual to regular employees, giving urgent infrastructure Submitted unsolicited proposal for the national ID them job security. The employees, needs system to the Philippine Statistics Authority under various programs, continue to increase their capabilities and improve Expand portfolio of Identify opportunities Set-up organization and commenced commercial Launch Entrego’s C2C their skills “soft infrastructure” and develop a pipeline operations for Entrego platform business of “soft infrastructure” projects to support Expand client base for the growth of new and freight forwarding disruptive business models
132 AYALA CORPORATION 2018 INTEGRATED REPORT 133 134 FamilyDOC isnowthelargest chainofprimarycare clinicsinthecountry, withatotalclinicsattheendof2018. of54 HEALTH AC Paolo MaximoF. Borromeo, President andCEO, AC Health more Filipinos.” continuing ourexpansioninretail healthandinvestinginnewinnovativemodelsthatofferbetterhealthcare for “At AC weare drivenbyourvisionandadvocacyofimproving healthcare Health, forall.We are excited about chain ofretail primarycare clinics. medicines andFamilyDOC, thecountry’s largest Drugstore, thepioneer intheretail saleofgeneric AC Health’s retail portfolio health includes Generika services across thecontinuumofcare. healthcare ecosystem, providing products and quality healthcare. Itsvisionisto build anintegrated the unmetneedforaccessible, affordable, and healthcare experience. AC aimsto Health address develop anintegrated ecosystem foraseamless and connectsvarioushealthcare businessesto healthcare business.AC builds, Health invests, AC istheportfolio Health company ofAyala forits WHO WEARE AYALA CORPORATION Marikina, Caloocan,Marikina, andValenzuela. of Paraaque, LasPias,Pasig, Taguig, Quezon City, Area, including Cavite andLaguna, andinthecities clinics,located54 intheGreater Metro Manila 816 branches nationwide,while FamilyDOC had At theendof2018,GenerikaDrugstore hadover platform.health FDA-licensed ePharmacy, adigitalhome andAIDE, technologyhealth startups, such asMedGrocer, an solutions platform, Vigos Care. Vigos alsoinvests in called Vigos EMRandacorporate mobile health developed anelectronic medicalrecord system in varioushealthtech products andservices.Vigos Vigos Technologies, Health whichbuilds andinvests AC launched Health itsowntechnology arm, players. Thelocal landscapecontinuesto be space, withinterest from bothlocal andforeign There continuesto bemuchactivityinthehospital growth, outpacingtheindustry. where Generikacontinuesto demonstrate strong continued growth ofthegenerics medicinespace, all pharmacies.Thisisexpected to bolster the of generic equivalents for essentialmedicinesin to include medicines,andmandates availability The UHCActalsoexpands benefits PhilHealth chain inthecountry. its reach andscale asthe largest retail primarycare first accredited primarycare providers, considering FamilyDOC iswell-positioned to becomeoneofthe inbuilding healthcarein theindustry facilities. system. Recognizing this,there isarenewed interest networks thataugment thepublichealthcare role inUHC,specifically increating servicedelivery private sector hastheopportunityto play astrong increase primarycare coverage forFilipinos.The play anintegral role. TheUHCexplicitly aimsto primarycareUnder theUHCAct, facilitieswill February 2019. Both were eventually signedinto law in Healthcare BillandtheCancerControl (UHC) Bill. bills gained traction, including theUniversal healthcare industry, asseveral landmarkhealthcare eventfulThe year2018was forthePhilippine MARKET OUTLOOK accessible healthcare. patients andcustomers forquality, affordable, and technology solutions, to address theneedsofits services, andbusinessmodels,including health broader Ayala group. Itutilizes innovative products, among itshealthcare companies,andacross the on ensuringintegration andcreating synergies last-mile accessto consumers. Itisalsofocused retail thatenables itto provide footprint, health AC Health’s competitive advantage isinitsstrong and theacademe. industry, including theprivate sector, thegovernment, collaboration withdifferent sectors ofthehealthcare build strong businesspartnerships, andto workin As aportfolio company, AC Health’s goal isto 2018 INTEGRATED REPORT 3-in-1 formatcombining aclinic,diagnosticfacility, Quezon City, andLaguna. Apartfrom itsoriginal opened inCaloocan, Valenzuela, Marikina, and southernGreater Metro withclinics Manila, end of2018.Ithasexpanded to central, northern clinics inthecountry, withatotal clinicsatthe of54 FamilyDOC isnowthe largest chainofprimarycare under itsActimedandNutrawell housebrand lines. portfolio ofmedicines,introducing newmedicines store expansion, Generikaalsoaimsto broaden its after opening96newstores in2018.Apartfrom in 2018,grew itsnetworkto 816stores nationwide, Generika Drugstore, whichcelebrated its15thyear healthcare ecosystem. of improving healthcare forallthrough its differentiated withitsadvocacy itselfintheindustry into hospitalsandspecialtycare. Ithasalso technology,health withfuture plannedinvestments through itsrapid expansion inretail and health a key player inthePhilippinehealthcare industry, AC continuesto Health establishitspresence as BUSINESS REVIEW quality, affordable, andaccessible healthcare. growth, andweanticipate continueddemandfor Overall, healthcare continuesto beanarea of companies utilizingdataanalytics. will continueto disrupttheindustry, withmore Meanwhile, technology health products andservices for qualityyet affordable optionsforhealthcare. following amongthemiddle classwhoare looking Generika andFamilyDOC, continueto gain astrong on value-based models.Affordable modelssuchas value-for-money, thus,businessesare keen to focus Globally andlocally, people are seeking quality andaffordability. to lackoffacilities,andissueson and diagnosisdue where there ishuge gap inscreening, treatment, set upspecialtycenters, particularly inoncology, general hospitals,there isalsoanopportunityto well into itsretail ecosystem. health Apartfrom that share AC Health’s vision,andwould integrate The challenge willbeinfindinghospitalpartners fragmented, withfewhospitalnetworks ofscale. 135
AC HEALTH and a pharmacy, it now offers specialized Vigos aims to offer its VigosEMR and VigosCare health diagnostics such as 2D echo and obstetric and app to more healthcare providers and corporate OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE gynecological sonography, in response to the needs clients. It also continues to seek out high potential of its patients. Since its establishment in December health technology startups that could be integrated FINANCIAL ASSET PERFORMANCE BUSINESS PARTNERS 2015, FamilyDOC has served over 240,000 unique into the AC Health ecosystem. Strategic capital allocation from the AC Health aims to expand its network Through AC Health’s integrated patients. It now employs over a hundred doctors, parent company, Ayala, to support its of Generika drugstores, and FamilyDOC and innovative network, partners who are undergoing an accredited in-house Family In 2019, AC Health will continue to focus on expanding expansion plan and 2020 vision. clinics. It is also developing its own can leverage shared resources and health technology solutions through its collectively make quality healthcare Medicine Residency Program, which is the largest its retail health footprint. It aims to expand its MANUFACTURED technology arm, Vigos. Vigos develops more accessible to more patients. in the country. In addition, it has almost 300 allied pharmacy network nationwide organically, through Continued expansion of its network digital solutions, such as an Electronic Partners benefit from an exchange of health professionals in the FamilyDOC system. Generika, and inorganically, through investments of Generika pharmacies, with 816 Medical Record and clinic information knowledge, people, and technology into other regional pharmacy chains. In primary care, branches nationwide, and growth of system (Vigos EMR), and a corporate across the ecosystem. FamilyDOC to 54 clinics, by end of health management platform, (Vigos In 2018, AC Health established its in-house FamilyDOC aims to expand to 80 clinics in the Greater 2018. Care). Vigos also invests in startup tech HEALTHCARE INDUSTRY technology arm, Vigos Health Technologies. Vigos Metro Manila Area, including opening new store companies, such as MedGrocer, an AC Health promotes a multi-sectoral now houses technology product development and formats in central Manila. Furthermore, INTELLECTUAL FDA licensed e-pharmacy, and AIDE, and collaborative approach to AC Health’s start-up tech company investments. AC Health is exploring innovative specialty care center Various intellectual capitals grouped in a home health platform. AC Health is addressing healthcare challenges so Vigos piloted Vigos Care, a corporate mobile health formats, specifically in oncology. It is also looking to three categories: also investing in specialty centers and that the shared vision of improving 1. Products and services: Certificates hospitals. everyone’s health will be more solutions platform that enables management of expand into general hospitals in order to complete of Product Registration for attainable. Through its subsidiaries, personal and corporate health records. Vigos also the continuum of care from its retail health network to medicines, and medical service PORTFOLIO BUILDING AND BUSINESS AC Health provides opportunities for invested in Tikehau, a Singapore-based health fund, more specialized tertiary care. and training protocols DEVELOPMENT healthcare professionals. and in AIDE, a digital home health platform. 2. Brands: AC Health, FamilyDOC, AC Health’s goal is to build an integrated and Generika healthcare ecosystem across the CUSTOMERS AND PATIENTS 3. Technology and analytics: continuum of care. Generika Drugstore has been providing ePharmacy (MedGrocer), Electronic greater access to affordable, quality STRATEGY Medical Record and clinic SYNERGIES generic medicines to more Filipinos. information system (Vigos EMR), AC Health drives synergies within its Aside from providing affordable, quality corporate health management healthcare businesses, and across the generic medicines, which delivers up STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES platform (Vigos Care), and home Ayala group to improve efficiency, and to 85 percent savings as compared to health platform (AIDE) ensure integration. branded counterparts, Generika is also Expand Retail Expand pharmacy network to Generika ended 2018 with 66 net • Over 900 stores by end 2019 active in promoting health and wellness Pharmacy over 1,000 stores nationwide by new stores, total of 816 stores • Expand Actimed and HUMAN Priorities: Invest and integrate key at the community level and offers Network 2020 Nutrawell house brand Pool of medical, non-medical, and pillars such as pharmacies, clinics, additional in-store services like free medicine lines health IT professionals, which includes hospitals, specialty centers, and health blood pressure check, a medicine guide, • Invest in strong regional retail 20 employees from AC Health, technology, with a strong emphasis on and scheduled free consultations. pharmacy players 1026 employees from Generika, building a retail health network. 890 employees from FamilyDOC, 57 FamilyDOC has served a total of over Build FamilyDOC Build the largest network Total of 54 clinics • Total of 80 clinics employees from MedGrocer, and 28 240,000 unique patients as of Clinic Network of retail primary care • Explore new clinic employees from AIDE. end-2018. It is also active in advocating clinics formats in Metro Manila primary care and preventive health SOCIAL AND RELATIONSHIP and wellness through its community Affiliation with Ayala brand, events, such as the Kalusugan Caravan. franchisees, business partners, and FamilyDOC also offers services targeted external partners, which include the to specific patients, including those government and regulatory agencies who have chronic diseases, such as Invest in Health Invest in healthcare technology • Launched Vigos Health • Launch Vigos products at (i.e., the Department of Health and the Diabetes. It also sells Unli Konsulta Technology solutions to improve efficiency, Technologies under AC Health Ayala Group Food and Drugs Administration), and Card, an institutional product aimed Solutions integration, and reach • Invested in Tikehau Fund • Expand portfolio of healthcare professionals. at providing healthcare access to Build portfolio of in-house health and AIDE App ✓ health technology cooperatives, and small and medium technology solutions • Launched Vigos Care App solutions enterprises. Invest in high potential health ✓ technology Meanwhile, MedGrocer was able to serve 6,300 unique patients through its Build Healthcare Build a healthcare • Built relationships with like- • Expand pharmacy medicine delivery service, and 460,000 Portfolio ecosystem across the minded partners in the pharmacy, portfolio employees through its corporate clinic continuum of care hospitals, and specialty space • Invest in hospitals and management platform. Vigos’ newest specialty care investment, AIDE, was able to provide quality home healthcare services to its over 250,000 subscribers.
136 AYALA CORPORATION 2018 INTEGRATED REPORT 137 AC MARKET OUTLOOK UP, UST), 53 percent of students intending to pursue The Philippine education industry continues to tertiary education passed their selective college AC EDUCATION AC EDUCATION be highly regulated and fragmented. According entrance tests. On the other hand, of those students to the Commission on Higher Education, in who opted to pursue work immediately after senior “AC Education remains committed to reinventing education to significantly improve access to compelling career school-year 2017-2018, there were 2,353 higher high school, 92 percent received job offers within opportunities. Student outcomes and employability continue to be our top priorities as we scale up, education institutions in operation serving almost 120 days at an average monthly salary of over both organically and through M&A.” three million students, with 71 percent of the HEIs ₱15,500 which is competitive with the starting salary privately owned, serving almost 1.6 million students. of college graduates. Alfredo I. Ayala, President and CEO, AC Education The past year marked two positive developments UNC grew its enrollment by six percent to for the sector. Firstly, it was the year when senior approximately 8,500 student enrollees in school high schools graduated their first batch of grade 12 year 2018-19 despite the lack of sophomore and students and subsequently, all tertiary education junior students due to the K-12 transition. UNC institutions welcomed their first freshman cohort offers K-12 and university education, with the latter since 2015. offering degrees in arts and sciences, business and accountancy, computer studies, criminology, Secondly, the government allotted ₱16 billion for education, engineering and architecture, graduate the Tertiary Education Subsidy to help about studies, law, and nursing. 300,000 students. In December 2018, CHED, the Unified Student Financial Assistance System for Student outcomes remain to be the core of UNC Tertiary Education, and leaders of private tertiary education. In 2018, the university’s graduates education institutions, signed a Memorandum performed well in the board exams, particularly in of Agreement to implement the subsidy. This is engineering and architecture, where UNC continued a welcome development, as it provides a yearly to be one of the top performing schools in Bicol. subsidy of ₱40,000 to ₱60,000 that may be used by students to cover costs for tuition and school The Professional Employment Program, a program fees, supplies, lodging, and other related expenses designed to place graduating students in a working at private schools. professional environment to enhance their potential for immediate employment, continues to help UNC BUSINESS REVIEW students achieve starting salaries significantly higher APEC Schools continues to grow its presence in than the norm. Seventy-five percent of those who AC Education’s Professional Employment Program is designed to immerse graduating students in a professional working environment to increase their chances of immediate employment. Metro Manila, Rizal, Cavite, and Batangas. Its finished PEP found work within 90 days and achieved student population grew 12 percent to over 18,000 a salary of more than ₱16,700, which is considerably students in 2018. It also graduated its first grade 12 higher than the average wage in Bicol. WHO WE ARE and over 18,000 students. APEC offers Junior High cohort of 1,999 students in June. Affordable and AC Education is the holding company for Ayala’s School and Senior High School with an innovative quality remain to be the key thrusts of APEC. In AC Education also continues to expand its reach and investments in education. Our vision is to empower and progressive approach to both learning and senior high school, for example, out of pocket platform through mergers and acquisitions. In April Filipino families by delivering affordable, quality employability, at an affordable price point. costs remained accessible at ₱10,000 per year, on 2018, AC Education finalized its acquisition of the education that enables significantly improved top of the government voucher. For this amount, National Teachers College. employability for our high school and college In 2015, AC Education invested in University of Nueva each student experiences APEC’s innovative and graduates. We achieve this through proprietary Caceres, which provides basic and higher education progressive learning curriculum, which includes In addition, in October 2018, Ayala and House of student value-add programs, systematic teacher to approximately 8,500 students at its campus in English immersion, IT literacy, and employability Investments approved the merger of AC Education training, professional management operations, and Naga City, Camarines Sur. Founded 70 years ago, skills. Of APEC’s approximately 800 students who and iPeople, the holding company of the Yuchengco strong industry partnerships. UNC is the oldest university in the Bicol region. applied to schools with selective college entrance Group’s education assets. The merger will create one tests (e.g., Ateneo, FEU Tech, La Salle, PLM, PUP, of the leading education groups in the country, The Affordable Private Education Center Schools or In 2018, the National Teachers College became part APEC Schools began in 2013 with one school site and of AC Education. Founded 90 years ago, NTC is the 130 students. Since then, it has scaled up to become pioneering private institution for teacher education 1Source: https://ched.gov.ph/2018-higher-education-facts-and-figures/ the largest chain of stand-alone affordable, private in the country. It has approximately 12,000 students 2Source: https://news.mb.com.ph/2018/12/20/ched-signs-agreement-with-schools-on-tertiary-education-subsidy/ 3For first-time board exam takers high schools with 23 branches across Mega Manila in basic and higher education, combined.
138 AYALA CORPORATION 2018 INTEGRATED REPORT 139 with approximately 60,000 students. The merger universities, a world-ranked QS-3 star university and will bring together the seven educational institutions the school with the most CHED Centers of Excellence OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE of iPeople and AC Education, including APEC, in Engineering). The merger has received clearance UNC, NTC, and Malayan Education System Inc., from the Philippine Competition Commission and FINANCIAL MARKETING, SALES AND EXPANSION STUDENTS AND PARENTS under one roof (including Mapua University, one is awaiting approval of the Securities and Exchange Capital from Ayala and its partners to Increase student population by: Students from low to middle income of the country’s leading engineering and technical Commission. support increase in capacity, transform • Delivering quality outcomes: board segments are given the opportunity to facilities, integrate technology, and and college entrance examination access quality private education with strengthen human capital scores, graduate speed of hire and good linkages to potential employment, starting salaries, compelling careers, through affordable pricing and open STRATEGY MANUFACTURED academic and leadership awards, admission Facilities, technologies and classrooms efficacy in English and Math, industry- • APEC had about 18,000 high school that are aligned with the vision aligned skills and values students and approximately 2,000 STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES of providing quality, affordable • Improving student retention through graduates, for its first cohort of senior education. remediation program, student high school students APEC: 23 sites across Mega Manila financial aid, catch basin programs, • UNC had about 8,200 students from Enrollment Increase student population • APEC: over 18,000 students, Continued growth in UNC: Five-hectare campus in Naga and engagement basic to higher education; it had over through strong academic and up 12 percent enrollment City, Camarines Sur • Leveraging strong brands in 750 graduates in college employment outcomes and by NTC: One-hectare campus in Manila Mega Manila and Bicol • NTC, which was acquired by AC forging partnerships • UNC: ~8,500 students, • Partnering with like-minded, Education in April 2018, surpassed up six percent INTELLECTUAL established institutions enrollment records by having more Curriculum that is progressive, than 12,000 students • NTC: ~12,000 students, constructivist, learner-centered, CONTENT AND CURRICULUM up 21 percent collaborative, outcomes-based, DEVELOPMENT TEACHERS AND EMPLOYEES integrated with technology, with Brand promise: aligned curriculum Continuous learning and development Employability Improve employability of • APEC: 92 percent of those All Institutions: Maintain/ strong English emphasis and that is progressive, learner-centered, are fundamental programs given to graduates through the looking for employment have improve employability results employability, and aligned with outcomes-based, integrated with teachers and employees through employer partner network job offers within 120 days (speed to employment and regulatory requirements technology and aligned with both coaching, mentoring, and technical • UNC PEP: 75 percent are starting salaries) regulatory and industry requirements training including continuing employed within 90 days In-house developed programs for professional development, as well NTC: determine baseline student development Integrates Experiential Education for as opportunities to pursue graduate employability scores + Employment (E3) Model studies implement student value adds HUMAN Faculty and staff who are competent, CAREER PLACEMENT SERVICES COMPANIES Academic efficacy Improve learning outcomes • APEC: Improvement • APEC: Continuous improvement nurturing, forward-thinking, constantly Forging meaningful employer Enables various organizations to tap a as measured by performance in English (6.43 percent) and in English and Math scores; learning, engaged, and motivated partnerships, including employer rich pool of human capital talent who in standard diagnostic, Math (11.65 percent) scores. higher passing rate in selective inputs into curriculum, internships and are skilled, trained, and with job-ready entrance, and licensure 53 percent passing rate in schools SOCIAL AND RELATIONSHIP immersions habits and values exams selective schools Strengthened relationships and • UNC: Continue track record of reputation with students, alumni Intensive engagement: career • UNC: Consistently surpassed surpassing national overall and their families, partner schools, education through career portal & national board passing rates In board passing rates. employees, neighboring communities, social media, job fairs, career talks and five out of its six colleges partner schools, private school job immersion, coaching on interview • NTC: Introduce student associations, regulators, accreditors and college application, employment value-adds to improve outcomes and other stakeholders monitoring
TALENT DEVELOPMENT Faculty retooling aligned with new curriculum
Continuing Leadership Development Program as well as differentiated, needs-based employee training, extensive pre-service training, coaching and mentoring
Leveraging Ayala group learning and development: innovation, risk management, sustainability, disaster risk management
Partnering with San Beda College for Master of Laws (LLM) program
140 AYALA CORPORATION 2018 INTEGRATED REPORT 141 142 Zalora isbridgingtheonlineto offlineexperience by leveraging synergies withAyala Malls. VENTURES AC in theUS Withtheestablishmentof and Asia. been usingAG Holdings to invest inreal estate AG Holdings. Over thepastseveral years, Ayala has AC Ventures makes offshore investments through businesses andexplore newbusinessverticals. business modelsasitendeavors to grow itsexisting intends to embrace disruptive technologies and innovative businesses.Through AC Ventures, Ayala by investing innewsectors, emerging trends and Ayala’s existing businessunitsandapathfinder adjacent businessesthatare complementary to AC Ventures aimsto beanenabler by investing in bring together itspockets ofstrategic investments. itformedAC Venturesand industries, in2017to As Ayala continuesto explore newopportunities WHO WEARE Jose Teodoro Limcaoco, President L. andCEO, AC Ventures technologies thatwillcomplementAyala’s variedbusinessinterests.” showing impressive growth andfinancialtraction andweplantoscaleupourinvestmentactivitiesseek commitments toventures focusedonthegrowing ASEAN technologysector. Anumberofourinvestmentsare ande-commerce artificialintelligence, companiesaswell “We madefollow-on investmentsinourfintech, AYALA CORPORATION opportunities to provide better products and transformation, openingupnewbusiness The world isexperiencing tremendous digital MARKET OUTLOOK Ant Financial. stake afintech venture inMynt, withGlobe and lifestyle e-commerce platform, anda10percent Philippines, thecountry’s largest fashionand It currently hasa43.9percent stake inZalora strategic investments inlocal opportunities. On theotherhand,AC Ventures alsomakes direct international investments. evolved into beingthevehicle forAC Ventures’ AC Ventures, themandate ofAG Holdings has like Globe through continue itssubsidiaryMynt, in five users inthePhilippines. Thus,companies payment services,withadoptionaslow asone internet users Asia hasadopted inSoutheast digital Google Survey suggests thatless thanoneintwo adoption ofdigitalpayment solutions. Arecent affordability ofinternet accessandtheinsufficient to befacedwithchallenges suchasspeedand users thePhilippinescontinues Asia, inSoutheast the secondlargest internet userbaseof75 million remains to beinitsinfancystage. having Despite (US$5 billionin2018,30percent CAGR 2015-2018) The internet economy inthePhilippines connect to theInternet viatheirsmartphones. is expected to grow furtherasmore consumers Singapore, Thailand,andVietnam.Thisnumber countries, namely Malaysia, Indonesia, Philippines, has 350millioninternet users across itssixlargest andonlinetravelmedia, sectors. Theregion already growth inthee-commerce, ridehailing, online US$240 billionby 2025amidhigher-than-expected economy isexpected to triple insize to reach sovereign fundTemasek, Asia’s Southeast digital According to a2018studyby Google andSingapore relevant disruptive businesses. technologies andbusinessmodelsinvest in future-proof Ayala by peekinginto new where Ayala operates. AC Ventures aimsto could including those disruptexisting industries, things are someofthetechnology trends that intelligence, edge computingandinternet of to abroader artificial consumermarket. Bigdata, services thatwould besimpler andmore accessible Source: e-Conomy SEA2018,GoogleandTemasek SEA e-COMMERCE MARKETSIZE(GMV, $B) 1.7B I 94 ndonesi % 12.2 41 % B 53B a 1. 0B Mal 27% 2. 21 ay 0B % sia 7B 2015 0. Philippines 5B 42% 2018 INTEGRATED REPORT 34% 1.5B 10B 2018 1. this, ZALORA continuesto maintainitscustomer 35 percent, breaching Alongside the₱2billionmark. momentum asnetmerchandise value grew ZALORA capped2018withastrong growth Zalora across theUS westcoast. with 18,750 apartmentunitsundermanagement Regis Group, areal estate management company sector through investments madewiththeSares continues to have exposure intheUS real estate AG Holdings’ NorthAmericansubsidiary,AINA, brick-and-mortar businessesinChina. managed by Alibabafocusedoninvesting inretail and theNewRetail Strategic OpportunitiesFund venture capitalfundfocusedonnewtechnologies; Maloekoein Asia; Ventures, anIndonesian-based Arbor II,afintech fundfocusedonopportunities addition to AG Holdings’ existing investments in an ASEAN-focused Private Equity Fund. Thisisin a partnership agreement withIKHLASCapital, and newmarkets. In2018, AG Holdings executed windows to disruptive technologies, evolving trends, invested invariousfundsthatwould serve as In additionto itsreal estate portfolio, AG Holdings realized valuation million. gains ofUS$13.3 In 2018,AG Holdings’ investment inARCH Funds AG Holdings particularly inemerging trends andtechnologies. complementary to Ayala’s existing businesses, investments inadjacentbusinessesthatare During theyear, AC Ventures overweighted its BUSINESS REVIEW among users. payment solutions andincentivize adoption to invest infintech platforms to improve digital 0B Singapo 22% 2025 1.8B 18 % re 5B CAGR 0. 9B 49 T hailand % 3. 30% 0B 13 B 0. 4B 87 Vietnam % 2.8B 43% 15 B 143
AC VENTURES centric approach by bridging the online to offline experience through strengthened synergies with OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE Ayala Malls, by continuously increasing the breadth of the offerings from both a product and brand FINANCIAL PATHFINDER AYALA GROUP standpoint, and by sustained customer engagement It infuses capital as needed to support It explores new trends, businesses, Explore innovative trends and business through partnerships. In parallel, the company has its various ventures, and when forges strategic relationships and models that could improve been relentlessly pursuing operational efficiency strategic opportunities arise invests in businesses that provide cost-efficiency, customer engagement, innovative and disruptive solutions data-driven insights with the spin-off of its last mile logistics business to MANUFACTURED in evolving markets outside its what is now known as Entrego. Its e-commerce business uses cornerstones. Through the financial and Introduce business model innovations fulfillment infrastructure (i.e., intellectual capital it provides, it aims to and sustainable products and services Mynt warehousing facilities) in its scale up the impact of these businesses. for the Ayala group’s various businesses operations. Meanwhile, its fintech With the continued rapid adoption of smartphones business uses payment infrastructure. ENABLER Invest in new ventures and business and growing lifestyle embedded in technology, Mynt In Asia and the US, it has direct With its investments, it introduces partnerships that can complement saw its active customer base grow threefold in 2018 investments in real estate projects. innovative technologies and practices existing businesses driven by aggressive acquisition via digital social into the value chains of companies INTELLECTUAL across the Ayala group. The disruptive CUSTOMERS media platforms, widened network of partners and Strong retail brands, e.g., GCash Provide convenient access to products merchants – both offline and online – and enhanced business models of companies it invests and Zalora, and proprietary software in can provide insights and alternative and services through the use of value proposition across all customers. Through its Mynt sees more users are gravitating towards mobile systems enhance its position in technology (Zalora and Mynt) payment for their financial interactions. solutions to Ayala’s traditional brick and operating subsidiaries, GCash and Fuse, reveals that business. An innovative mindset allows mortar operations. more users are gravitating towards mobile payment it to spot disruptive opportunities, and now also transfer funds from their mobile wallet to its knowledge of the market allows for their financial interactions. over 30 banks free of charge through partnership management of investments with Instapay. Inspired by innovation, Mynt is In the effort to advance financial inclusion for all, continuously exploring ways to provide financial HUMAN the GCash app launched its new features GCredit solutions that are accessible and relevant to every It has a diverse pool of talent who and GInvest, enabling users to have personal credit seek out innovative ways of building Filipino consumer. businesses. lines and investments as low as ₱50. Users can Zalora: ~300 employees Mynt: ~400 employees
STRATEGY SOCIAL AND RELATIONSHIP Strong partnerships with global and local companies, including retailers STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES and suppliers, investors, and other professional networks also serve as Enable new Invest in adjacent Increased equity stake in Wave Computing Continue to look out for disruptive vehicles for growth. Its affiliation with opportunities for the businesses and made strategic investments in ANT trends, explore new investment the Ayala brand bolsters its credibility Ayala group complementary to Financial’s Series C funding round, Arch opportunities globally, and forge the Ayala group Capital fund IV and Sares Regis Group’s new strategic relationships Multifamily Fund IV
Strengthen AG Manage offshore Existing investments generated value and Strengthen existing relationships Holdings’ offshore investments to returns, while the company made new with partners and continue investments maximize gains for investments in funds and companies with looking for pockets of Ayala disruptive strategies opportunities within the real estate sector
144 AYALA CORPORATION 2018 INTEGRATED REPORT 145 146 The lessons ofnationalheroes were madeaccessible through theDiorama VRvideosattheAyala Museum. FOUNDATION AYALA for inclusion inbridgingbusinessneeds and Founded in1961, Ayala Foundation actsasacatalyst country andtheworld. beneficiaries are present inotherpartsofthe in 37 provinces andMetro butitsprogram Manila, City. In2018,itsprograms are directly implemented regional officesinCebuCityandCagayan deOro Its headquarters are located inMakatiCity, with development. and rehabilitation, andotherprojects forcommunity projects, including initiatives recovery indisaster arts andculture, andperiodically manages special leadership, suitable andsustainable livelihood, and and sustainsprograms community ineducation, of theAyala group. Itdevelops, implements, Ayala Foundation isthesocialdevelopment arm WHO WEARE Ruel T. Maranan, President, Ayala Foundation conglomerate tobetterserveourcommunitiesandultimatelythecountry.” focus,andinnovateincreating impactandvalueinpartnershipwiththe as wecontinuedtoalign, “In 2018,Ayala Foundation pushedfor“compassion inaction” through improved peopleandprocesses, AYALA CORPORATION Founded as FilipinasFoundation in1961, Ayala MARKET OUTLOOK grants anddonations. of Internal Revenue acertificate oftaxexemption for andhassecuredand Development, from theBureau accredited ofSocialWelfare withtheDepartment underprivileged Filipinos.Ayala Foundation isalso management andaccountabilityinserviceto meet establishedminimumcriteria forfinancial body whichcertifiesnonprofit organizations that Council forNGOCertification,aself-regulating and accountability. Itiscertifiedby thePhilippine It adheres to thehighest standards oftransparency and progress. by creating andproviding opportunitiesforgrowth for communitydevelopment, ithelpsimprove lives community aspirations. Byservingasanadvocate for Social Impact, which harnessesthediversefor SocialImpact, This initiative led to thelaunch ofAyala Community teachers,1,300 and39,000 students. This reached 130publicelementary schools, from 64businessunitsandpartnerorganizations. #BrigadangAyala volunteers mobilized nearly 5,569 group-wide corporate socialresponsibility initiative impact onitssocialdevelopment initiatives. The across thevariousbusinessesto create greater The Ayala group continues to deploy synergies and culture. programs insocialdevelopment aswellinarts agents ofinclusivity andinspiration through communities, itstrengthened itspresence as framework. Asthetrusted partnerinempowering development, introducing our#BetterTogether become anacknowledged expert incommunity Ayala Foundation continueditsjourney to on thelives ofthepeople itserves. focus oncenterpiece programs to make animpact its initiatives withtheneedsofitsstakeholders and of companies,Ayala Foundation continuesto align As thesocialdevelopment armoftheAyala group financial disclosure. particularly inmatters ofcorporate governance and greater transparency andaccountability, other resources. Thisiswhy CSOsemphasize especially whenitcomesto theuseoffundsand The nonprofit sector isconstantly underscrutiny, certification process ofthePCNC. 300 oftheseorganizations have passedthe country today. However, only between200and registered nongovernmental organizations inthe Based onrecent estimates, there are about60,000 participation amongthepoorandunderserved. well asadvocating greater socialandeconomic improvements inthedelivery ofsocialservices,as CSOs are cited fortheirrole inchampioning well-developed andinstitutionalized intheworld. frequently beencited asoneofthemost The civilsocietysector inthePhilippineshas and othercorporate socialresponsibility activities. with businessesto undertake communityoutreach foundations are numerous, andworkhand-in-hand foundations inthecountry. Today, corporate Foundation amongthefirst was corporate 2018 INTEGRATED REPORT Power Cultural Activationcategory. AwardsDestinations asthebestunderSoft recognized by theprestigious LivingCultural on Philippinejails“Bursting was attheSeams” Aguinaldo. Inaddition,Ayala Foundation’s exhibit Dr. Andres JoseRizal, Bonifacio, andEmilio VR videosoftheAyala Museum,whichfeatured heroes were madeaccessible through theDiorama In artsandculture, thepriceless lessons ofnational Club ofManila. Tondo, Manilainpartnership project with theRotary which serves out-of-school youth, piloted was in in Anilao, Iloilo, andButuanCity. Sari-Saring Aralan, Iloilo,and Estancia, andlaunched newpartnerships BuligBisaya inCarlesin ARMM,andtheLeadCom the successfulBangsamoro Young Leaders Program through Leadership Communities.We wrapped up Our communityofyoung leaders continuedto grow the improvement inthecountry. ofeducation harnessing thepoweroftechnology to contribute to Teachers’ Edition, thisserved asaninitialstep in from 10sites nationwide.DubbedInspire Every Day: and mathematicstraining forover 1,000 teachers innovative science,technology, engineering, arts, CENTEX andAyala Museumlivestreamed an Technology beinganimportantdriver foreducation, content throughengaging educational technology. providing atleast 12,730 studentsaccessto Mindoro, Romblon, andPalawan), Marinduque, in theMimaropa Region (OrientalandOccidental year andissetto expand to 94elementary schools program,education itreached 31schoolsinitsfirst in variouscommunities.Through theProFuturo Ayala Foundation continuedto expand itsfootprint problems. communities foropportunitiesto address social of thegroup andengages Ayala businessesand strengths, resources, capabilities,andtalents Corporate Support Special Projects Arts andCulture Livelihood Suitable andSustainable Community Leadership Education (IN MILLIONPESOS) PROGRAM SPENDING2018(AUDITED) 124.6 310.7 48.3 24.2 22.5 43.7 47.3 100 percent 40 percent 14 percent 16 percent 15 percent 8 percent 7 percent 147
AYALA FOUNDATION STRATEGY OUR CAPITALS HOW WE CREATE VALUE THE VALUE WE CREATE
STRATEGY DESCRIPTION 2018 PERFORMANCE 2019 PRIORITIES FINANCIAL SUSTAINABLE LIVELIHOOD COMMUNITIES Ayala Foundation has an adequate Organizing community enterprises, and Livelihood projects implemented across endowment fund, building on strong providing access to capacity, capital, the country helped the communities Strengthen alignment Building and Continue strong Built on success of previous initiatives involving partnerships with private and public technology and market link to low improve economic productivity and with the Ayala group nurturing alignment with the Ayala group, while also establishing new ones donors to sustain flagship projects and income families cultural preservation. relationships with the Ayala group, • Launched the Ayala Community for Social new programs and initiatives. the Ayala group particularly Ayala Impact in partnership with AC Synergy as an Through Ayala Museum and Filipinas through program CSI’s footprint in ARTS AND CULTURE initiative to synergize CSR and development MANUFACTURED Heritage Library, the foundation also partnerships volunteerism and Making Philippine history, culture, initiatives across the group Ayala Museum and Filipinas Heritage helped widen cultural appreciation, CSR across the group and art accessible and inspirational • Mobilized 5,699 volunteers from across the Library have a significant art and both locally and internationally. group and beyond for Brigadang Ayala 2018 through art exhibitions, library and library collections; permanent, information services, public programs, • Implemented various partnership projects changing, travelling, online YOUNG LEADERS with other Ayala business units and increasing brand and advocacy exhibitions; and public programs on awareness and reach through traveling It supported the development of the rich history and artistic heritage of exhibitions young leaders and contributed to their Focus on stronger Implementing Strengthened the presence of key programs Further strengthen the nation, cultivating pride in being capacity building. These young leaders community engagement development across the country community reach Filipino. were able to ideate and implement programs that are • Completed the Bangsamoro Young Leaders of key programs in COMMUNITY LEADERSHIP community-based projects that improve relevant to the needs Program and launched Leadership education, community INTELLECTUAL Investing in potential leaders of the livelihood and support community of communities Communities in three new sites leadership, suitable The foundation possesses expertise in country and communities through youth development. • Trained over 1,000 teachers from 10 sites for and sustainable community development, education, leadership training and supporting the Inspire Every Day Teachers’ Edition livelihood, and arts community leadership, research and community projects. TEACHERS AND STUDENTS • Brought the ProFuturo education program to and culture publication, art curation, library and Ayala Foundation increases the an initial 31 public schools, benefiting at least information services, preservation EDUCATION PROGRAMS proficiency of our teachers through 12,730 students and dissemination of documentary Providing access to high quality coaching and mentoring, benefiting heritage on the Philippines, and education for the poor through teacher 34,600 students in 87 public impact assessment using social return training in pedagogy, classroom schools. The foundation equipped Make an impact on the Implementing • Became the first Philippine cultural institution Continue on investment as a framework. management, and critical thinking; schools with ICT facilities to improve country’s development programs and to win an international Leading Cultural conversations on scholarships; center-based modeling of learning of 12,730 students from 31 goals and in promoting special projects that Destinations Award for the exhibit love of country and HUMAN strategies; and ICT interventions public schools. It also supported national pride are aligned with the “Bursting at the Seams” participation in nation- Its pool of committed talents has 558 scholars. Supported the early nation’s development • Increased appreciation for Philippine history building through our the capacity to link the shared value EMPLOYEE ENGAGEMENT childhood formation of 58 economically goals, as well as through the Diorama VR videos programs created by Ayala business units to the Providing opportunities for the Ayala disadvantaged children through giving promote Filipino • Launched a campaign to promote love of needs of people with less capacity and group to exercise corporate citizenship child care help and values formation culture and identity country by distributing Philippine flags for access to resources. and help the foundation’s partner sessions. public schools nationwide schools and communities through SOCIAL AND RELATIONSHIP Brigadang Ayala, and Farmer for a Day EMPLOYEES Improve the efficiency Investing in the • Secured accreditations and certifications from Strengthen Ayala Ayala Foundation nurtures strong Employees from across the Ayala group of internal processes training and BIR (certificate of tax exemption) and DSWD Foundation citizens partnerships with local government are given opportunities for volunteerism and build a strong talent development of (for programs) for improved delivery of service as advocates agencies, non-government in communities that it serves. pool Ayala Foundation • Implemented a strategic employee of community organizations, and community talents, supported engagement program, covering training, development, in groups, in line with its work on social by stronger and more continued learning, and other activities support of expanded development. efficient internal • Digitalize numerous process to programs processes improve efficiency NATURAL The Calauan property is utilized by Measure impact Accounting for • Applied SROI principles in measuring our Integrate SROI farmers to produce ornamental plants of initiatives using the impact of our various program’s impacts measurement into for the requirements of MDC Greens, the social return of various initiatives by program planning and and vegetable to increase income investment framework measuring the extra- implementation, while streams. financial (social, also introducing it to environmental) the Ayala group benefits of our initiatives
148 AYALA CORPORATION 2018 INTEGRATED REPORT 149 CORPORATE GOVERNANCE
150 AYALA CORPORATION 2018 INTEGRATED REPORT 151 Ayala is constantly reviewing, evaluating and Company”. Its Chairman and Chief Executive improving its governance structures, systems, Officer, Jaime Augusto Zobel de Ayala, ranked GOVERNANCE: and procedures, to be able to meet the changing third for “Best CEO”. Under two new categories, expectations of regulators, investors and other Ayala ranked first for “Best Corporate Governance stakeholders. Setting up proper and adequate and Best ESG SRI Metrics”. ADAPTING TO THE controls while complying with regulatory requirements and international standards allow us Similarly, on October 26, 2018, the Management to create a sustainable enterprise for the long term. Association of the Philippines (MAP) conferred EVOLVING NEEDS OF the distinction of Management Man of the Year Ayala is in full compliance with the Code 2018 to Fernando Zobel de Ayala, President and of Corporate Governance for Publicly-Listed Chief Operating Officer of Ayala. This award is Companies set forth by the Securities and bestowed on individuals from the business or THE STAKEHOLDERS Exchange Commission (SEC), supported by an government sectors who have attained distinction in “It’s absolutely indispensable for companies to be nimble and adapt to all these technological shifts. attestation from the company’s Chief Executive the practice of management and have made valuable These paradigm shifts have to take place not just at the management level – all of us who also sit on Officer, Chief Compliance Officer, and Chief Audit contributions to the country’s economic progress Boards and provide governance have to find a way of engaging that sort of thinking into the way we Executive in 2018. and in reshaping national values. MAP recognized his define our businesses.” efforts for “helping steer the Ayala Group to being Ayala’s corporate governance practices have consistently ranked by the global investor community Jaime Augusto Zobel de Ayala at the Ayala Group 5th Corporate Governance and Risk Management Summit been consistently recognized in various awards, as among the best in the Philippines for management polls, and publications in the Philippines and in excellence, corporate governance, sustainability, and the ASEAN region. people management” and his invaluable contribution Ayala believes good corporate governance The company’s Corporate Governance System to re-shaping national values through his track is an important pillar of its operations and takes into consideration the organizational In 2018, Institutional Investor, a leading New York- record of integrity, professional competence, is vital to the achievement of its strategic structure as a whole; led by an effective Board based business-to-business publisher focused on and strong leadership. goals. Ayala is fully committed to upholding and Board Committees; supported by empowered international finance, has released the results of the principles of good governance, including and accountable Management and Management its 2018 All-Asia Executive Team survey: The efforts of Ayala and its subsidiaries in adhering transparency, integrity, accountability, fairness Committees; guided by strong core values across to good governance were also recognized under the and professionalism in all its activities. all levels; with sound policies and effective controls. • Under industrial companies, Ayala ASEAN Corporate Governance Scorecard (ACGS): ranked second best in Asia for corporate governance and third best for metrics on • On July 31, 2018, eight PLCs in the Ayala group KEY COMPONENTS OF AYALA’S GOVERNANCE SYSTEM (GRI 102-18) environment, social, and governance (ESG) were named among the Top Performing Companies and socially responsible investing (SRI). under the 2017 ASEAN Corporate Governance BOARD OF DIRECTORS CORPORATE SECRETARY • Under emerging markets, Ayala was among the Scorecard held at the Tower Club. Ayala along “Most Honored Companies” after securing top- with Ayala Land, Globe and Manila Water scored three appearances in at least two of the four main 100 points and above, while BPI, Ayala Land CEO BOARD COMMITTEES categories and ranked second for “Best IR subsidiaries Cebu Holdings, Inc. and Cebu
Risk Corporate Inspectors Management Personnel PRESIDENT AND COO Governance of Proxies Audit and Related and Executive Finance and and Party Compensation Nomination Transactions Ballots MANAGEMENT COMMITTEES • Ayala Group • Investment • Ayala Corporation SUPPORT FUNCTIONS Human Resources MANAGEMENT TEAMS Compliance Finance Internal Risk Management Human • Corporate Strategy and Office Audit and Sustainability Resources Internal Development Strategic Planning of the Data Audit • Finance Protection • Corporate Resources Officer • Public Affairs • Corporate Governance Office of the Corporate Secretary and Office of the Chief Legal Officer Eight PLCs in the Ayala group were named among the top performing companies under the 2017 ACGS. Also, Ayala ranked in the top Five in the Holding Firm sector category.
152 AYALA CORPORATION 2018 INTEGRATED REPORT 153 management as it addresses issues, new challenges through providing clear advice on strategy to steer and market opportunities facing the company. the transformation of the business. In the absence There is also an appropriate mix of non-executive, of the Chairman, the Vice Chairman shall succeed independent and executive directors. the duties of the Chairman.
• Ayala’s Board of Directors is composed of seven The responsibilities of the Chairman and the Board directors from a wide variety of backgrounds, have been increasing due to the changing and all of whom possess expertise in a range of evolving expectations in exercising good corporate disciplines: economics, finance, accounting, governance practices, implementing effective business, contract, commercial, and risk management, and complying to relevant international law, including engagements in laws and regulations by the various stakeholders social and environmental activities. of the company. • Each director is elected by the shareholders Ayala Corporate Secretary Atty. Solomon M. Hermosura recieved the ASEAN Corporate Governance Awards for Ayala at the 2nd ASEAN Corporate Governance Awards Ceremony held at the Kuala Lumpur Convention Centre. Three of the Ayala Companies; annually and serve for a term of one year. LEAD INDEPENDENT DIRECTOR Ayala Land, Globe and Manila Water also ranked in the Top 50 ASEAN PLCs. • 71 percent of the Board is composed of non- As mandated by the Revised Corporate executive and independent directors. Governance Manual of the company, a Lead Property Ventures and Development Corp., and Ayala’s Board of Directors leads the company’s • None of the independent directors own more Independent Director shall be appointed if IMI scoring not less than 80 points. Ayala also governance system by providing active management than two percent of the outstanding capital stock. the Chairman of the Board is identified as not ranked in the Top Five in the Holding Firm sector oversight, encouraging a culture of trust, openness, • The profile of each director can be found in the independent from Management, such as when category. and constructive dissent, and ensuring individual Board of Directors section of this report on pages the positions of the Chairman of the Board and • On November 21, 2018, four of the nine Philippine accountability. It oversees the business affairs and 30 to 34. the CEO are held by one person. companies, namely, Ayala, Ayala Land, Globe and is accountable to the shareholders for the long-term Manila Water, ranked among the Top 50 ASEAN performance of the company. It meets regularly and We ensure an independent minority On April 21, 2017, Xavier P. Loinaz was appointed PLCs and were feted at the 2nd ASEAN Corporate allots time to discuss strategic issues with the Ayala representation in the Board and the exercise by Lead Independent Director by the Board at its Governance Awards held at the Kuala Lumpur Group Management Committee to gain insights into minority shareholders of their rights, including organizational meeting. Convention Centre, Malaysia. each specific business area. the right to cumulative voting in the election of directors and appraisal right. Role of the Lead Independent Director Maintaining good governance creates a strong Annually, the Board leads the review of the The Lead Independent Director’s role, among foundation for our operations and allows us to company’s vision and mission, revisits and approves CHAIRMAN AND VICE CHAIRMAN (GRI 102-23) others, is to act as an intermediate between the retain the trust and confidence including protecting the group’s corporate strategy and performance The Chairman of the Board is Jaime Augusto Zobel Chairman of the Board and the other Directors, the interest of our partners and stakeholders. objectives, and monitors its implementation. de Ayala, who assumed the position in 2006. when needed; to convene and lead the periodic We continuously set higher standards for ourselves For the year, the Board reviewed and affirmed Fernando Zobel de Ayala has held the position of meetings of the non-executive and the independent by reinforcing a strong sense of commitment the appropriateness of Ayala’s vision and Co-Vice Chairman since 1994, and has been the sole directors (NEID) with the external auditor and heads across all levels of our organization and upholding mission statement. Vice Chairman since 2006. of internal audit, compliance and risk management, a corporate tradition with a solid set of core values as needed; and contribute to the performance in all that we do. The Board also reviews and ensures the adequacy The positions of Chairman of the Board and CEO are evaluation of the Chairman of the Board. of the company’s internal control mechanisms and held by the same person. The company’s corporate risk management process for good governance, and governance principles, which include clear and NON-EXECUTIVE AND BOARD STRUCTURE the proper implementation of the Code of Conduct well-understood roles and responsibilities, as INDEPENDENT DIRECTORS AND PROCESS and Ethics. The Board reviews and affirms the true well as a culture of open communication with the The Board is currently composed of seven and fair representation of the annual financial CEO and senior management, enables the Board members, including one lead independent KEY ROLES AND RESPONSIBILITIES statements, as it did for the financial statements to maintain independent reviews and quality director, two independent directors, and two As mandated by its Charter, the Board’s roles and for fiscal year 2018. discussions at meetings. non-executive directors who make up more responsibilities include establishing the vision, as than 70 percent of the Board’s membership. well as the strategies, key company policies, and BOARD COMPOSITION Role of the Chairman and Vice Chairman mechanisms to monitor, evaluate and improve The structure, size, and composition of the Board The Chairman leads and drives the effectiveness of Aside from their fees and shareholdings, management’s performance. The Board always takes are regularly reviewed and monitored by the the Board, both inside and outside the boardroom independent directors have no interest or into consideration the best interest of the company, Corporate Governance and Nomination Committee. by promoting active engagement and open relationship with the company that may hinder their its shareholders, and other stakeholders when it discussion among the directors. The Chairman independence from the company or management, exercises its powers and duties. There is enough diversity in thinking across our also provides guidance to the senior management or that could reasonably be perceived to interfere board of directors, characterized by a combination of knowledge, experience, and expertise to guide 154 AYALA CORPORATION 2018 INTEGRATED REPORT 155 with their exercise of independent judgment in To adequately plan the activities, at the start of towards further strengthening the company’s CORPORATE SECRETARY carrying out their responsibilities as directors. the year, the calendar of activities for the Board corporate governance standards. Once every three As the Corporate Secretary, Atty. Solomon M. and Committees are established and approved. years, an independent consultant will be appointed Hermosura supports the Board in the fulfillment Ayala has set a term limit of nine years for its This is monitored by the Corporate Secretary to to assist in the evaluation process of the Board. of its responsibilities. Part of his responsibilities independent directors in accordance with the rules ensure that the materials are adequate and made include assisting the Chairman in preparing the set by the SEC. As of 2018, none of the independent available at least five working days in advance of the In 2018, the self-assessment questionnaire was Board meeting agenda, maintaining Board minutes directors have served the company for more than scheduled meeting to allow the Board with enough reviewed and revised to adopt best practices from and records, facilitating the training of directors, nine years, reckoning from 2012, in compliance time to prepare and make informed decisions. the Institute of Corporate Directors (ICD) and align and providing directors with updates on relevant with SEC Memorandum Circular No. 9, series of The Board agenda includes company’s and group’s with the requirements of the ASEAN Corporate statutory and regulatory changes. The appointment 2011. Moreover, none of the directors or senior operations and financial performance; reports on Governance Scorecard (ACGS). and removal of the Corporate Secretary is subject management have worked for Ayala’s external emerging risks and discussion on key risks covering to the approval of the Board. auditing firm within the three years immediately business resiliency, information security and cyber Each of the directors was requested to complete preceding the date of their election or appointment. among others; updates on social and sustainability, a self-assessment form which includes criteria He is legally trained, knowledgeable on legal and UN Sustainable Development Goals, business, such as: (1) structure of the Board, (2) shareholder regulatory requirements and has kept abreast on In 2018, the non-executive and the technological developments and the regulatory benefits, (3) fulfillment of the Board’s key relevant developments by taking on a part time independent directors had two meetings held on environment; and reports of the different Board responsibilities, (4) oversight function, (5) role in teaching graduating law students, attending March 9, 2018 and December 6, 2018 without the Committees. These reports provide the Board with effectiveness of the Board’s processes and executive development programs and participating presence of the executive directors. The meeting critical information on key issues, current trends, meetings, (6) quality of the Board-Management as a speaker in various public fora. was chaired by the Lead Independent Director, challenges and opportunities in the business and relationship, (7) corporate ethics, and (8) Xavier P. Loinaz. Discussions during the meeting developments that may have a significant impact performance evaluation. The results of the self- TRAINING OF DIRECTORS (GRI 102-27) revolved around engagement of a third party to on the Ayala group of companies. assessment survey, including the comments of the Ayala understands the importance of providing process reports from whistleblowers, managing directors, were compiled by the Chief Compliance relevant trainings to its directors and has set government relations, unpaid receivables from The details on the emerging risks are shown in Officer and reported during the June 22, 2018 Board aside an annual budget to allow them to attend the government sector, increasing dangers of section “Risks and Opportunities” on pages 62 to meeting immediately following the completion of continuing professional development programs, social media, external auditors’ performance, 63 while the details on social and sustainability the survey. Matters identified by the independent applicable courses, conferences and seminars. and the e-commerce landscape of the Philippines. plans are shown in section “The Ayala Sustainability directors warranting further review and discussion Respective department heads were invited to Blueprint. Bridging the Filipino to 2030” on pages 78 are taken up in the meetings of the NEIDs of the It is the policy of the company that all directors discuss specific agenda items during the meeting. to 79. Company. Relevant Management Group heads are attend at least a four-hour annual continuing Additional information, documents, and materials also instructed to ensure that concerns raised are training program on corporate governance. Also, are provided to the directors as and when required Discussions during Board meetings are open, monitored and addressed. all new directors must undergo at the minimum an to enable them to make informed decisions. with independent views given due consideration. eight-hour orientation program on the company’s In accordance with the company policy, Board Role of the Non-Executive and members are required to abstain from participating Independent Directors in discussions on an agenda item in which they may The role of the NEID is to exercise independent have a conflict of interest. judgment, ensure the continuing soundness, effectiveness and adequacy of the company’s The details of the Directors’ attendance and number of control environment, and act in the best interest of Board meetings held in 2018 are shown on page 160. the company, the stockholders and the stakeholders All the Board members were present during the 2018 considering transparency, accountability and Annual Stockholders’ Meeting. The members of the fairness in all activities. management committees were also present during the meeting. BOARD PERFORMANCE (GRI 102-28) In fulfilling its duties and responsibilities, the Board Performance Assessment devotes ample time and attention to their duties Annually, the Board undergoes a formal assessment and attend the meetings. As fixed in the Articles of process to review and evaluate the performance Incorporation, the presence of at least two-thirds of the Board, its Committees, and its individual of the number of directors constitutes a quorum members. The purpose of the assessment is for the transaction of business. Each fiscal year, the to measure the effectiveness of the company’s Securities and Exchange Commission Chairman Emilio Aquino with Chairman and CEO Jaime Augusto Zobel de Ayala and Board meets at least six times, with the schedule of governance practices and identify areas for President and COO Fernando Zobel de Ayala at the 2018 Ayala Corporate Governance and Risk Management Summit. Board meetings determined before the start improvement; and to adopt new methodologies of each financial year. 156 AYALA CORPORATION 2018 INTEGRATED REPORT 157 business and structure, vision and mission, governance (CG) training. This is through the FEE STRUCTURE RETAINER FEE FOR BOARD FOR ALL COMMITTEES business strategy, Governance Codes and Policies, participation in the Corporate Governance and Risk Committee Chairman P0.2 million per P0.1 million per meeting Articles, By-Laws, Corporate Governance Manual, Management Summit administered by the ICD and P3 million per annum and Member meeting attended attended Board and Committee Charters, SEC-mandated attendance in other CG trainings administered topics on governance matters and other subjects by either the ICD or SGV & Co., both accredited In 2018, the following NEIDs received gross remuneration as follows: essential for the effective performance of their training providers of the SEC. NON-EXECUTIVE AND duties and responsibilities. Each year, the Chief RETAINER FEE MEETINGS’ ATTENDANCE FEES GROSS REMUNERATION INDEPENDENT DIRECTORS Compliance Officer ensures all directors undergo For the past five years, Ayala has partnered with the necessary trainings. ICD and continuously supported its advocacy to Xavier P. Loinaz P3,000,000 P2,000,000 P5,000,000 promote professional directorship in line with global Delfin L. Lazaro P3,000,000 P2,200,000 P5,200,000 As a group-wide initiative, a Corporate Governance principles. For the year, Ayala has sponsored ICD’s Ramon R. Del Rosario, Jr. P3,000,000 P2,400,000 P5,400,000 and Risk Management Summit has been held programs such as the Distinguished Corporate Keiichi Matsunaga P3,000,000 P2,400,000 P5,400,000 Governance Speaker Series and the Corporate annually since 2014. The summit serves as a venue Antonio Jose U. Periquet P3,000,000 P2,700,000 P5,700,000 for collaboration, promotes the importance of Governance Conference on Sustainability. strengthening our corporate governance structures, TOTAL P15,000,000 P11,700,000 P26,700,000 and acts as a continuing education program for DIRECTOR COMPENSATION the Board, CEOs, and senior management. On The Personnel and Compensation Committee None of the NEIDs receive compensation from Ayala for services other than those provided as a director. September 10, 2018, the group held its summit with recommends to the Board remuneration packages They are not entitled to stock options and performance bonuses from the company. the theme of “Into the Future”. It aims to provide for directors, ensuring that compensation is an overview of the changing role of the corporate consistent with the company’s culture, strategy, BOARD COMMITTEES (GRI 102-22) 6. Issuance of Common Shares to Caisse De Dépôt governance policies and practices, adapting to and control environment, and aligned with the The Board Committees are established to provide Et Placement Du Québec; evolving ways of doing business, and imparting the long-term interests of the company and its focus on specific Board functions, assist the 7. Execution of Lease Agreement with Pilipinas importance of the role of the Board in ensuring good stakeholders. Total remuneration or changes Board in the optimal performance of its roles and Shell Petroleum Corporation; corporate governance practices in the company. thereto are approved by the stockholders during responsibilities and to aid in good governance. 8. Filing of Petition for the Periodic Toll Rate the annual stockholders’ meeting. The rights and responsibilities of each Committee Adjustment of the Muntinlupa-Cavite Also, as part of the group’s efforts to provide the delegated by the Board are defined in the specific Expressway; board, senior leadership and executives with an Non-Executive and Independent Committee Charters duly approved by the Board, 9. Merger of AC Education, Inc. and iPeople, Inc.; understanding of the current business trends in Directors Remuneration all of which are available on the company’s website. 10. Appointment of New Treasurer; relation to risk and sustainability, the group held its On April 21, 2017, upon the recommendation of the 11. MCX Payment-in-Kind Lease Agreements; and first Integrated Risk Management and Sustainability Committee, the Board approved a resolution fixing Executive Committee 12. Additional Capital Allocation to AC Infra. Summit. More details of the summit can be found in the current remuneration of NEIDs. The power of The Executive Committee has the authority to section Risk and Opportunities on page 70. fixing the fees was delegated by the stockholders to exercise the powers and perform the duties of Finance Committee the Board during the Annual Stockholders’ Meeting the Board within the powers granted to them. The Finance Committee oversees, reviews, and In 2018, all directors and senior management in 2011 and is as provided for in the Amended By- It acts by majority vote of all its members evaluates the financial affairs of the company. met the SEC requirement to undertake corporate Laws. The existing remuneration framework for the during the intervening period between The Committee discussed, deliberated on and NEIDs adopted by the company consists of a fix scheduled Board meetings. approved various transactions in 2018: retainer fee and attendance fees. The Committee deliberated, reviewed and approved 1. Renewal of two Term Loan Facilities Ayala’s CEO and COO, Jaime Augusto Zobel de the following transactions in 2018: with BPI; Ayala and Fernando Zobel de Ayala respectively, 2. Increase of the amount of Term Loan Facility are executive directors and do not receive 1. Participation in the Stock Rights Offering of BPI; with Union Bank of the Philippines; remuneration for attending Board meetings 2. Additional ₱1.6 billion Capital Allocation 3. Re-characterization of the ₱3.3 billion capital nor the fix retainer fee for Board of Directors. to AC Industrials; allocation to AC Education as unrestricted and 3. Availment of a Term Loan Facility from the additional capital allocation to AC Industrials Only NEIDs who are not officers of the company Metropolitan Bank and Trust Company; of up to ₱2.1 billion for additional investments; receive director fees. Fee structure is as follows: 4. Amendment of the terms of the Term Loan 4. Re-allocation of the unutilized funds Facility with Bank of Tokyo - Mitsubishi UFJ; for the Stock Rights Offering to the General 5. Amendment of the terms of the Revolving Investment Fund; Ayala co-sponsored Corporate Governance Conference on Sustainability with Institute of Corporate Directors. Credit Facility with Sumitomo Mitsui Banking 5. Additional ₱12 billion Capital Allocation Corporation/Mizuho Bank, Ltd.; to AC Health;
158 AYALA CORPORATION 2018 INTEGRATED REPORT 159 sure that the Board is comprised of individuals and external auditors. Based on the assurance of whom are independent directors, including 6. Additional Capital Allocation to AC Infra; whose background, skills, experience and personal gathered from the auditors as a result of their 2018 the chairman. As appointed by the Board, this 7. Portfolio review of the Company, its affiliates characteristics will meet the needs of the company. reviews, the Committee assessed the company’s and associates; and Committee is tasked with ensuring that good systems of internal controls, risk management, and corporate governance principles and practices are 8. Options for the Company’s maturing bonds Annually and as necessary (i.e. upon vacancy of governance processes as adequate. The Committee complied with and observed by the company. This and its confidential credit rating. position or when additional directors are required), also reports annually to the Board, describing how includes the adoption of an effective Board process the Committee recommends to the Board qualified their responsibilities were discharged, as well as any in the nomination, election, or replacement of Board The Finance Committee had seven meetings in 2018. individuals for nomination and election as directors other information required by law. Refer to the Audit members and the review of the succession plans Refer to the table below for details on attendance. based on the established criteria to ensure Committee report on page 216 for the highlights of for members of the Board and senior executives. sufficient diversity in the Board and aligned with the its 2018 activities. Corporate Governance and Nomination The Committee strives to ensure that the Board company’s vision, mission, strategic directions, its Committee (GRI 102-24) composition allows it to exercise effective decision- By-Laws, Revised Manual of Corporate Governance, The Committee had four meetings in 2018, during The Corporate Governance and Nomination making powers by maintaining a suitable number of and the rules of the SEC. For this purpose, the which the Chairman and members were all present. Committee is composed of three members, all independent directors. The Committee also makes Committee may make use of professional search firms or other external sources of candidates to Risk Management and Related Party BOARD AND BOARD COMMITTEE MEMBERSHIP search for qualified candidates to the Board. Transactions Committee STOCKHOLDERS, BOARD, BOARD COMMITTEE MEETINGS, AND DIRECTORS’ ATTENDANCE The Risk Management and Related Party FOR THE YEAR ENDED DECEMBER 31, 2018 The Committee’s accomplishments in 2018 were: Transactions Committee is composed of three 1. The review of the qualifications of all persons members, the majority of whom are independent MEMBERSHIP AND ATTENDANCE nominated to positions requiring appointment directors, including the chairman. To assist the DETAILS by the Board; Board on risk governance processes, a board level STOCKHOLDERS & BOARD BOARD COMMITTEE 2. The approval of the final list of nominees Risk Management and Related Party Transactions MEETINGS AS BOD* NEID EC** FC CGNC AC RMRPTC PCC CIPB*** for directors for election at the 2018 Annual Committee was organized, which is responsible Stockholders’ Meeting after ensuring that for the oversight of the company’s enterprise risk NO. OF MEETINGS 1 6 2 7 2 4 4 2 2 all nominees to the Board have met all the management system. The Committee ensures that Jaime Augusto Zobel de Ayala, C C M - C - - - - - qualifications and none of the disqualifications management maintains a sound risk management Executive Director 1/1 6/6 7/7 as set forth in the Corporation’s By-Laws, Revised framework and internal control system to mitigate Fernando Zobel de Ayala, - VC M - M - - - - - Manual of Corporate Governance and the rules material risk exposures identified by the company. Executive Director 1/1 5/6 5/7 of the SEC; and Another responsibility of the Committee is to review Delfin L. Lazaro, - M M C M - - - - - Non-Executive Director 1/1 6/6 2/2 6/7 2/2 3. The review of the qualifications of the new all material RPTs for endorsement to the Board to ensure that these are at arm’s length, the terms are Xavier P. Loinaz, - M C M C Treasurer and recommendation of his - - - - - Lead Independent Director 1/1 6/6 2/2 2/2 4/4 appointment for approval by the Board. fair, and they will inure to the best interest of the Ramon R. Del Rosario, Jr., - M M C M M C company and its subsidiaries or affiliates and - - - Independent Director 1/1 5/6 2/2 2/2 4/4 4/4 2/2 The Committee had two meetings in 2018, during the shareholders. Antonio Jose U. Periquet, - M M M M C which the Chairman and members were all present. - - - - Independent Director 1/1 6/6 2/2 7/7 2/2 4/4 During the financial year, the Committee reviewed Keiichi Matsunaga, - M M M M M M - - - Audit Committee and confirmed that the company’s risk management Non-Executive Director 1/1 6/6 2/2 4/4 4/4 2/2 The Audit Committee is composed of three processes are effective. The Committee also Solomon M. Hermosura CS CS, CCO C ------members, the majority of whom are independent reviewed and approved changes to policies relating (Not a member of the Board) 1/1 2/2 2/2 directors, including the chairman. At least one of to enterprise risk management, related party Catherine H. Ang O CAE M ------(Not a member of the Board) 1/1 2/2 2/2 the members possesses a background and expertise transactions and business continuity management, in accounting. To assist the Board in fulfilling its including crisis management policy, business Josephine G. De Asis O M ------(Not a member of the Board) 1/1 2/2 responsibilities, the Audit Committee oversees continuity policy and IT disaster recovery policy, matters relating to the financial statements and which are then reported to the full Board for C - Chairman AS- Annual Stockholder VC - Vice Chairman BOD - Board of Directors financial reporting process, external auditors, ratification. The Committee also reviewed various M - Member NEID - Non-Executive and Independent Directors internal auditors, internal control, and compliance material RPTs and ensured that all the transactions O - Observer EC - Executive Committee with applicable legal and regulatory requirements. are at arm’s length prior to endorsement to the CS - Corporate Secretary FC - Finance Committee CCO - Chief Compliance Officer CGNC - Corporate Governance and Nomination Committee Board for approval. The Committee also reports CAE - Chief Audit Executive AC - Audit Committee As part of its function, the Audit Committee annually to the Board with descriptions on how it *In 2018 and during the incumbency of the director. RMRPTC - Risk Management and Related Party Transactions Committee **The actions of the Executive Committee PCC - Personnel and Compensation Committee reviewed the company’s consolidated financial carried out its responsibilities. Refer to the Risk were taken via digital/electronic means. CIPB - Committee of Inspectors of Proxies and Ballots statement and conducted a review on the work Management and RPT Committee report on page 217 ***May not be members of the Board of Directors. performed and reports provided by both internal for the highlights of its 2018 activities.
160 AYALA CORPORATION 2018 INTEGRATED REPORT 161 The Committee had four meetings in 2018, during The Committee had two meetings in 2018, during A culture of good governance is fostered throughout Chairman and CEO, the President and COO, and key which the Chairman and members were all present. which the Chairman and the members were all the organization, with the management and the members of the company’s senior management. The present. Board equally responsible for ensuring that the IC reviews, provides direction, and gives preliminary Personnel and Compensation Committee mechanisms and structures for good governance approval for initiatives that may originate from the The Personnel and Compensation Committee are securely in place. company or its subsidiaries specifically requiring is composed of three members, chaired by MANAGEMENT funding from the company. Once a project clears SENIOR EXECUTIVE COMPENSATION an independent director. The Personnel and ROLES AND RESPONSIBILITIES the IC, it is endorsed for approval to the appropriate Ayala provides market-competitive executive Compensation Committee is responsible for Management is responsible to the Board of Board Committee and to the full Board. compensation and benefits, which are aligned to establishing a formal and transparent procedure Directors for the operations of the company and its corporate goals, annual targets, and long-term Ayala Corporation Management Committee for the development of a policy on executive performance. remuneration and for fixing the remuneration strategic plans. It also adopts a performance- The Ayala Corporation Management Committee based variable compensation scheme using the includes the Chairman and CEO, the President and packages of corporate officers and directors, Furthermore, the management: Key Result Area scorecard accomplishments COO, and the five Group Heads. The Committee ensuring that compensation is consistent with • Defines the company’s business objectives and as metrics. In addition, Ayala provides a long- approves corporate, administrative, and the company’s culture, strategy, and control goals in concrete and specific terms; term incentive program for senior executives organizational matters that pertain exclusively to environment; and is aligned with the long-term • Executes the Board-approved strategies for and key talents. From the three percent of the the company, as well as group-wide affairs when interests of the company and its stakeholders, while achieving these targets; company’s authorized capital stock allocated by the relevant. remaining competitive against the market. The • Informs the Board in a regular and timely manner stockholders, the Board approved the grant under Committee is guided by the objective of ensuring about any issues concerning the company’s the stock ownership program to eligible executives that the level of compensation should fairly pay strategy, risk management, and compliance; and in April 2018. The basis for the grant is consistent INTERNAL GOVERNANCE for the work required, considering the company’s • Provides updates to the Board on the outstanding performance record over a period size and scope. implementation of the company’s strategy. MECHANISMS of three years. The grant price is based on the rounded-off volume weighted average prices of the STRATEGY FORMULATION AND EXECUTION The Committee’s accomplishments in 2018 were: The respective roles of the Chairman and CEO stock at the Philippine Stock Exchange over the last Ayala utilizes an inclusive and iterative approach in 1. The approval of the 2017 performance bonus and and the President and COO are complementary merit increase of the employees of the company; 10-day trading from April 5 to 19, 2018. crafting and executing a long-term strategic plan for and ensure a strategic distribution of leadership the entire Ayala Group. As these plans are finalized, 2. The approval of the 2018 Employee Stock functions with clearly defined accountabilities: MANAGEMENT COMMITTEES it also ensures that risks are managed appropriately Ownership Plan (ESOWN); • The CEO takes the lead on company strategy, Management has created committees to ensure that using a robust risk management process. Refer 3. The approval of the 2017 Performance Bonus visioning, and developing business partnerships. decision-making is always made in the best interest to pages 62 to 71 for Ayala’s risk management for the Chief Executive Officer and Chief • The President and COO is responsible for daily of the organization. Initiatives which are reviewed discussion. Operating Officer; and operations, new business initiatives, corporate and endorsed by management-level committees are 4. The approval of the 2018 Salary Adjustment for policies, and resource allocation. the Chief Executive Officer and Chief Operating discussed at length with the appropriate Board- ACCOUNTABILITY AND AUDIT level Committees for approval and consequently, External Auditors Officer. In all functions and critical issues, both coordinate for endorsement to the full Board for ratification. The external auditors are directly accountable closely with each other. The Chairman and CEO to the Audit Committee in helping ensure the The Committee had two meetings in 2018, during and the President and COO are supported by which the Chairman and members were all present. Ayala Group Management Committee integrity of the company’s financial statements and management committees composed of key (GRI 102-20) financial reporting process. Their responsibility is executives who meet regularly to discuss business Committee of Inspectors of Proxies and Ballots The Ayala Group Management Committee is to assess and provide an opinion on the conformity performance and issues critical to the growth of The Committee of Inspectors of Proxies and Ballots composed of the Chairman and CEO, the President of the audited financial statements with Philippine the company, and to facilitate the flow of strategic has the responsibility of ensuring that the validation and COO, the five Ayala Corporation Group Heads, Financial Reporting Standards and the overall and operational information among the company’s process of the proxies and ballots is transparent, and the CEOs of the Ayala group companies. The quality of the financial reporting process. The decision-makers. fair, and in accordance with applicable laws, Committee oversees the group strategic plan and Audit Committee oversees the work of the external regulations, and company policies. ensures the alignment of individual business unit auditors and ensures that they have unrestricted The Board, CEO, and senior leadership team are also priorities to the group-wide direction. It meets access to records, properties, and personnel to supported by the Chief Legal Officer. Through his The Committee’s accomplishments in 2018 were: regularly to review business performance, discuss enable performance of the required audit. deep knowledge of the law and regulations, he acts 1. The validation and tabulation of the proxy votes group-wide issues and events, and identify areas as an advisor on a range of issues and strategies received for the 2018 Annual Stockholders’ of possible synergy and collaboration. The full SyCip, Gorres, Velayo and Co. (SGV & Co.) is the to minimize legal risks and on legal matters Meeting; and profiles of the Ayala Group Management Committee external auditor of the company for the year 2018, and protocols that relate to their roles and the 2. The tabulation of the stockholders’ votes members can be found on pages 218 to 222. with Lucy L. Chan as the lead engagement partner. company’s operations. for items taken up during the 2018 Annual During the Annual Stockholders’ Meeting last April Stockholders’ Meeting. Investment Committee 20, 2018, the shareholders re-appointed SGV & Co. The Investment Committee (IC) is composed of the as the company’s external auditor.
162 AYALA CORPORATION 2018 INTEGRATED REPORT 163 The Audit Committee has the primary responsibility Internal Auditors The Institute of Internal Auditors Philippines and its 20th anniversary with the theme “AGIAN Gives to recommend the appointment and removal of Internal Audit supports the Audit Committee in adopt the International Professional Practices Back. Together we can make a difference”. The the external auditor. The Committee met with the effective discharge of its oversight role and Framework promulgated by The Institute of Internal group, in coordination with Ayala Foundation, the external auditors without the presence of the responsibility. The Chief Audit Executive, Catherine Auditors, Inc. The internal audit activities conform Inc. (AFI), hosted an outreach program at Center management team to discuss any issues or concern. H. Ang, reports functionally to the Audit Committee with the International Standards for the Professional of Excellence in Public Elementary Education of the Board of Directors, and administratively Practice of Internal Auditing and are continuously (CENTEX), Bauan, Batangas. CENTEX is the K to To ensure that the external auditor maintains the to the President and Chief Operating Officer or evaluated through an independent Quality 6 Education Program of AFI for children from highest level of independence from the company, his designate. The activities of Internal Audit are Assessment Review conducted every five years. economically disadvantaged families that produces both in fact and appearance, the Audit Committee governed by a separate Internal Audit Charter student achievers. As an effort to support the needs had approved all audit, audit-related, and permitted approved by the Audit Committee and the Board. Ayala Group Internal Auditors’ Network (AGIAN) of the school, AGIAN turned over a sound system, non-audit services rendered by the external continues to perform activities that strengthen gift checks, school kits and toys to all students. auditor. Non-audit services expressly prohibited by Internal Audit adopts a risk-based audit approach synergy within the group. Regular meetings are regulations of the SEC were awarded to other audit in developing its annual work plan, which is held by the AGIAN Council and the four AGIAN The AGIAN quarterly technical sessions were held to firms to ensure that the company’s external auditor reassessed quarterly to consider emerging risks. Circles to discuss activities that will enable effective provide the members with the knowledge, tools and carries out its work in an objective manner. The Audit Committee reviews and approves the teamwork, increase collaboration, sharing of required auditing skills to enable them to perform annual work plan and all deviations therefrom and resources, and best practices within the group. In their responsibilities. In 2018, AGIAN also partnered Total fees billed by SGV & Co. for the years ended ensures that internal audit examinations cover July 2018, AGIAN held its first teambuilding activity with The Institute of Internal Auditors Philippines December 31, 2018 and 2017 amounted to ₱11.04 the evaluation of adequacy and effectiveness of coupled by a planning session to formulate a two- to accredit the quarterly AGIAN trainings for million and ₱11.09 million, respectively, inclusive controls encompassing the company’s governance, year plan to ensure continuity of programs and Continuing Professional Development for renewal of VAT. The Audit Committee reviewed the nature of operations, and information systems; reliability and activities. On December 3, 2018, AGIAN celebrated of licenses and certifications. This is in addition to non-audit services rendered by SGV & Co. and the integrity of financial and operational information; the continuing training and development programs, corresponding fees and concluded that these are safeguarding of assets; and compliance with laws, from specific job skills to long-term professional not in conflict with their function as the company’s rules, and regulations. The Committee also ensures development provided by the respective companies external auditor. The breakdown of the fees for 2018 that audit resources are adequate and reasonably of the group to their employees. and 2017 are shown below: allocated to the areas of highest risk, including the effectiveness of the internal audit function. CHIEF COMPLIANCE OFFICER During the year, the Committee regularly met with As Ayala’s Chief Compliance Officer, Atty. Solomon EXTERNAL AMOUNT IN MILLIONS OF PESOS the Chief Audit Executive without the presence of M. Hermosura: AUDITOR FEES 2018 2017 management to discuss any issues or concern. Audit and P10.92 P10.97 Audit-Related Fees • Ensures the proper onboarding of new directors To strengthen corporate governance, Ayala’s and the attendance of Board members and key Non-Audit Fees .12 .12 Internal Audit adopted portfolio-based subsidiary officers to relevant trainings; Grand Total P11.04 P11.09 oversight to standardize the implementation of • Monitors, reviews, evaluates, and ensures good practices and ensure that critical issues are compliance by the company, its officers and directors with relevant laws, the Code of Audit and Audit-Related Fees include the audit of monitored and addressed across the Ayala group. Ayala’s annual financial statements and the mid-year Corporate Governance for Publicly-Listed review of financial statements in connection with the As of 2018, the audit team has an average of 13.4 Companies, and relevant rules and regulations, statutory and regulatory filings or engagements for the years ended 2018 and 2017. These also include years audit experience and an average of 8.5 years as well as all governance issuances of regulatory assurance services that are reasonably related to the tenure in the Ayala group. The audit team has the agencies; performance of the audit or review of Ayala’s financial statements pursuant to the regulatory requirements. following certifications and professional affiliations: • Reports to the Board if violations are found certified public accountants, certified internal and recommends the imposition of appropriate Non-Audit Fees include one-time, non-recurring special disciplinary action; projects / consulting services. auditors, certified risk management assurance practitioner, certified foreign exchange professional, • Ensures the integrity and accuracy of all There were no disagreements with the company’s IT auditors, crisis communication planner; certified documentary submissions to regulators; external auditor on any matter of accounting in ISO 9001, ISO 22301, ISO 27001, IT Infrastructure • Identifies and manages compliance risks; principles or practices, financial statement Library, COBIT 5 (F), and Global Innovation • Ensures that the company adheres to sound disclosures, or auditing scope or procedures. Management Institute Level 1; a member of the corporate governance and best practices; Financial Executives of the Philippines; and • Issues an Integrated Annual Corporate a fellow of the Institute of Corporate Directors. AGIAN celebrates it’s 20th anniversary at the Center Governance Report that is duly signed under of Excellence in Public Elementary Education (CENTEX), All the internal auditors are also members of Bauan, Batangas with the K to 6 students. oath by the Chairman, Chief Executive Officer,
164 AYALA CORPORATION 2018 INTEGRATED REPORT 165 or President, all independent directors, the Chief financial performance is of utmost importance to Compliance Officer, and the Corporate Secretary; the company. To ensure consistent implementation, 2018 DISCLOSURES • Facilitates a yearly performance assessment Ayala created procedures for internal reporting to In 2018, the company filed, among others, unstructured disclosures and clarifications of news articles of the Board, Board Committees, and individual provide the investing public with prompt disclosures involving the following: members of the Board using a formal self-rating on significant and market sensitive information that Unstructured Disclosures system; and may affect their decisions. Policies and procedures • Issuance of 8,810,000 Common Shares to Caisse • AC Industrials signs Distributorship Agreement De Dépôt Et Placement Du Québec with Kia Motors Corporation • Performs other duties and responsibilities are also in place to make sure that the company • 2018 ESOWN Grant • AC Industrials Technology Holdings Inc. as the as may be provided for by the SEC. constantly complies with disclosure requirements • Resignation and appointment of new treasurer official distributor of Maxus vehicles in the Philippines under the listing rules of the SEC, Philippine Stock • Participation of directors and key officers in Corporate • AC Industrials Technology Holdings acquires Governance Seminars a controlling stake in Merlin Solar Technologies On February 21, 2018, Atty. Solomon M. Hermosura Exchange (PSE), and Philippine Dealing • Notice and Agenda of the 2018 Annual • AC Infrastructure and Brillant 1257 GmbH & Co. participated as a panelist at the ECCP-EPBN and Exchange Corporation (PDEx). Stockholders’ Meeting Vierte Verwaltungs Kg. (“Brillant”) forms a holding • Results of 2018 Annual Stockholders’ Meeting company to invest in courier and freight forwarding services Competition Forum 2018 addressing the latest and Organizational Board of Directors’ Meeting • AC Infrastructure joins a consortium that submitted challenges facing the Philippine businesses and Investors, analysts, media and the press were • Declaration of cash dividends to outstanding unsolicited proposal under the BOT Law to the Philippine Common and Preferred Shares Statistics Authority operations on the implementation of the Philippine engaged by Ayala through conducting meetings and • Acquisition and sale of Company shares by the • AC Infrastructure signs Investment Agreement Competition Act. He also attended various fora on quarterly briefings, where the senior management directors, officers, and 10% owners with fulfillment solutions company governance, legal, and compliance, including the discusses the results of the company’s operations • Annual and Quarterly Press Statements on the • AC Infrastructure joins NAIA consortium that Company’s financial and operating results submitted unsolicited proposal for the rehabilitation, ASEAN Law Association General Assembly on with investment and financial analysts. More • Notice of Interest Payment for all outstanding upgrade, expansion, operation, and maintenance “The Power of One: Unlocking Opportunities details on management’s discussion and analysis Corporate Bonds of the Ninoy Aquino International Airport • Notice of Analysts’ Briefings in ASEAN Through Law”. of financial condition and results of operations • Notice of Special Analysts’ Briefing on AC Energy Clarification of News Articles are available on pages 178 to 181. • Public Ownership Reports • Ayala to Build Big Vietnam Wind Project DISCLOSURE AND TRANSPARENCY (GRI 102-5) • Top 100 Stockholders Reports • Ayala selling US$1billion coal plants Accurate and Timely Disclosures • Setting of 2019 Annual Stockholders’ Meeting • Ayala Group to acquire 65% of Columbian Autocar All relevant disclosures were filed in a timely • AC Education acquires of National Teachers College • Super consortium shapes up Providing quality, accurate, and timely disclosures manner with the SEC, PSE, and PDEx. All the 2018 • AC Education merges with iPeople, Inc. • Group taps Changi operator for airport plan to regulators and the investing public, including • AC Energy invests in renewable energy • Ayala set to acquire KIA Philippines, but PBA filings and relevant information were provided company The Blue Circle comeback not part of plan, says source information on the results of its operations and ahead of time. Details as follows: • AC Energy launches second renewable energy platform • Ayala to spend at least P200 billion in capex this year in Vietnam with 80 MW of solar projects • AC Energy partners with BIM Group to develop over 300 MW Ownership Structure • AC Energy and BIM Group scale up Vietnam solar project of solar power in Vietnam As of December 31, 2018, Ayala’s outstanding common shares were held as follows: • Aboitiz Power Corporation invests in AC Energy’s • Super consortium in NAIA bid eyes Changi as partner thermal platform company • Aboitiz ‘likely buyer’ of Ayala’s US$1 billion coal plant assets OUTSTANDING COMMON SHARES % OWNERSHIP • AC Health invests in Negros Grace Pharmacy, Inc. • AC Health expands health technology portfolio Mermac, Inc. 296.6 million 47.04 through investment in AIDE app PCD Nominee Corporation (Non-Filipino)* 162.7 million 25.79 PCD Nominee Corporation (Filipino)* 85.9 million 13.63 Mitsubishi Corporation 54.6 million 8.65 • On April 13, 2018, the Annual Report (SEC Form This information, past annual reports, and 17-A) together with the consolidated audited this Integrated Report and the consolidated Others 30.8 million 4.89 financial statements for 2017 were submitted to audited financial statements are disseminated TOTAL 630.6 million 100.00 the SEC, within 120 days after year-end. to shareholders through the company’s website *Out of the 248.6 million common shares registered under the name of PCD Nominee Corporation, 61.4 million • On February 20, 2018, the Notice of the Annual at www.ayala.com.ph and through media and shares or 9.74% are for the account of Deutsche Bank Manila while 55.8 million shares or 8.85% are for the Stockholders’ Meeting with a detailed explanation analysts’ briefings. account of Hongkong Shanghai Banking Corporation. of the Agenda items was released to the SEC and PSE, 59 days ahead of the scheduled annual Financial and Non-Financial Reports OUTSTANDING COMMON SHARES % FOREIGN OWNED meeting on April 20, 2018. The Board of Directors has a responsibility to the shareholders to ensure the integrity of the Common Shares 630.6 million - • On March 16, 2018, the audited financial statements as contained in the Definitive company’s consolidated financial statements Voting Preferred Shares 200.0 million - Information Statement were submitted to and non-financial information disclosed in the TOTAL VOTING SHARES 830.6 million 31.59 the SEC and PSE, 35 days before the annual company’s Integrated Report. The financial Preferred B Series 1 Shares 20.0 million - stockholders’ meeting. statements comply with the Philippine Financial Reporting Standards, with significant accounting Preferred B Series 2 Shares 27.0 million - • Interim or quarterly financial statements and results of operations were submitted to the judgments and estimates also disclosed. Non- TOTAL OUTSTANDING SHARES 877.6 million 29.91 regulators within 45 days from the end of the financial performance was prepared in line with There were no cross or pyramid shareholdings. financial period.
166 AYALA CORPORATION 2018 INTEGRATED REPORT 167 the guiding principles and content elements of the RPTs are discussed and quantified in the Notes to CHANGES IN SHAREHOLDINGS Integrated Reporting
168 AYALA CORPORATION 2018 INTEGRATED REPORT 169 For structured disclosures, blackout period Shareholder and Investor Relations water, power, industrial technologies, transactions to ensure that potential conflicts of commences from 10 trading days before and three It is the policy of the company to encourage infrastructure, healthcare, and education. The interest are reported and brought to the attention trading days after the disclosure of quarterly and active participation and regular dialogues with company has also entered disruptive sectors of management, whether actual or apparent. annual financial results. While for non-structured institutional and retail investors. Through Investor through investments in e-commerce and fintech. Management is responsible for enforcing and disclosures, blackout period commences from Relations, information requirements of the investing monitoring compliance with the Code and imposing three trading days before and three trading days public and minority shareholders are fully disclosed Ayala continues to explore dynamic and innovative sanctions for violations thereof. after the disclosure of any material information to securities’ regulators on time. business models, and introduce pioneering other than quarterly and financial results. products and services across its businesses. The It is the policy of Ayala that all directors, officers, Ayala continues to strengthen its investor relations company strives to maintain mutually beneficial and employees shall conduct business in During the year, notices of trading blackouts were framework. In 2018, the Investor Relations Unit relationships with its partners to generate value accordance with Philippine Laws and regulations, disseminated and issued to all personnel via e-mail. organized the fourth Ayala Group Investor Relations for its stakeholders. including Anti-Money Laundering Law. Employees Compliance was strictly enforced during these Summit to keep management abreast of the best shall consult with Corporate Governance and Legal trading blackout periods and there have been no practices, global trends, and external perspectives CODE OF CONDUCT AND ETHICS (GRI 102-16) Affairs whenever there is any doubt concerning violations of the company’s policy on insider trading on the evolving role of investor relations. In The Code of Conduct and Ethics was established the legality of any matter. Any suspected criminal in the past three years. addition, it organized the third Ayala Group Investor by the Board to guide all directors, officers, violations will be reported to the appropriate Days in Singapore, a two-day event where senior and employees in executing their roles and authorities and non-criminal violations will be STAKEHOLDER RELATIONS management and investor relations teams of Ayala responsibilities. As the overall governing body, investigated and addressed as appropriate. Ayala aims to adhere to the highest possible level group companies met with various institutional the Board ensures that all directors, officers, and of moral benchmarks and fairness in dealing with investors through group and one-on-one meetings. employees of the company adhere to the Code. ANTI-CORRUPTION POLICY (GRI 205-1) shareholders, customers, employees, and business Ayala is committed to doing its business with the partners to constantly strengthen its foundation for Please refer to pages 72 to 75 for further discussions All the company’s directors, officers and employees highest ethical standards and has adopted a zero- long-term beneficial relationships. on Ayala’s relationships with its stakeholders. are expected to avoid situations of conflicts of tolerance policy towards fraud, corruption, bribery interest or impropriety and are required to disclose in any form, and all unethical practices, and is Shareholder Meeting and Voting Procedures on an annual basis any business and family-related committed to complying with all relevant laws and Stockholders are informed at least 28 days before the scheduled date of meeting. The notice of regular or special meetings contains the agenda and sets the date, time, and place for validating proxies, which must be done at least five business days prior to the annual stockholders’ meeting.
Each outstanding common and voting preferred shares of stock entitles the registered holder to one vote. Ayala conducts press briefings to apprise the public and media with the developments in its businesses. In support of greater transparency and improved shareholder involvement, the company provided KEY PARTNERSHIPS multiple voting options such as appointing a proxy, Ayala is among the oldest, largest, and leading voting in-person, or through electronic voting in conglomerates in the Philippines. The company has absentia. Ayala established a secure Electronic been building businesses that transform industries, Voting in Absentia System that is accessible to all challenging the status quo, and introducing stockholders, easy to use, and allows stockholders innovations that contribute to the nation’s social to exercise their right if unable to attend the Annual and economic agenda. Stockholders’ Meeting. Equal effect is given to votes whether cast in person or in absentia. The Committed to the Filipino, Ayala combines its company also provides non-controlling or minority 185-years of experience in doing business in the shareholders the right to nominate candidates for country with its partners’ expertise and strengths to board of directors. grow its businesses. The company has interests in real estate, financial services, telecommunications, Ayala holds quarterly and annual analysts’ briefings on its financial and operating results, including business updates.
170 AYALA CORPORATION 2018 INTEGRATED REPORT 171 DATA PRIVACY POLICY (GRI 418-1) WEBSITE As part of its continuing commitment to protect Information on the company’s corporate and respect the right to personal data privacy of governance initiatives, this Integrated Report, stakeholders, Ayala appointed a Data Protection and all other relevant information is available on Officer, Atty. Solomon M. Hermosura, and the company’s website at www.ayala.com.ph. As Compliance Officers for Privacy, Atty. Charlene part of our stakeholder engagement, Ayala also Mae C. Tapic-Castro and Ms. Chris Angelica L. maintains social media accounts at Facebook.com/ Bustonera. With the support of the different AyalaCorporation and https://ph.linkedin.com/ business units, Ayala’s data privacy team regularly company/ayala-corporation. reviews the physical, technical, and organizational security measures that the company puts in place. The Annual Stockholders’ Meeting is held to provide the shareholders a venue to raise questions and to learn about the company’s performance and strategic plans to grow the business. This is to maintain the integrity, confidentiality and availability of the personal data that it collects and processes, and protect these against natural standards. The Anti-Corruption Policy embodied in faith, with utmost confidence that the whistleblower and human dangers, such as accidental loss or the Code provides guidance to all directors, officers, will be treated fairly and protected from reprisal, destruction, unauthorized access, fraudulent and employees on how to conduct business in a fair, harassment, disciplinary action, or victimization for misuse, and unlawful alteration. ethical, and legal manner. Seeking undue financial whistleblowing. and material advantage from any transaction is Inquiries or concerns regarding data privacy or data strictly prohibited. The policy also applies even if To further strengthen integrity, objectivity, subjects’ rights may be communicated in writing made through another person. confidentiality including ensuring the protection directly to the Office of the Data Protection Officer, of the whistleblower, Ayala has implemented an or by email to [email protected]. The company has also set guidelines for dealing outsourced receipt and processing of whistleblower with gifts and gratuities to protect the integrity reports to Punongbayan and Araullo through In 2018, the company updated its enterprise-wide of its employees and its business interests. Any the reporting channel https://proactivehotline. privacy policy and reviewed agreements with its offer or gift of value given to directors, officers, punongbayan-araullo.com/report/ayala- partners and third-party service providers to ensure and employees, or their immediate family, with corporation. The website allows anonymous strict compliance with the Data Privacy Act of 2012 a view to get favors or to influence business reporting and is accessible anytime and anywhere and other relevant issuances of the National Privacy recommendations are immediately reported to the via internet. Status of all reports are trackable with Commission. There were no reported data privacy appropriate reporting level. Directors, officers, and available monthly reports. breaches for Ayala during the year. employees are likewise instructed not to accept gifts or invitations of any form, except when it meets The whistleblower may still choose to submit a the criteria set by the company. written report directly to the Office of the Chief Compliance Officer, or by e-mail to WHISTLEBLOWER POLICY [email protected], or through a face- Integrity is one of the core values of Ayala. The to-face meeting with any member of the Disclosure company adheres to the ideals of justice, doing the Committee composed of one representative each right thing, fairness in doing its business and in all from the Office of the Chief Legal Officer, Strategic its dealings. Human Resources, Internal Audit, and Group Risk Management. In pursuit of integrity, Ayala strives to enhance the level of transparency within the company through There is an established Disclosure Committee and Ayala holds regular data privacy awareness programs for the establishment of the Whistleblower Policy to investigation process for reported violations of all Ayala employees to instill understanding and ensure encourage directors, officers, and employees and company policies, rules and regulations. All reports compliance with the company’s DPA policy. all suppliers, business partners, contractors and are treated in confidence and discussed with the subcontractors, and other third parties to report Audit Committee, which monitors the resolution and any perceived wrongdoing or malpractice involving closure of all reports. the company or its personnel. The policy is meant to encourage the reporting of such matters in good In 2018, there were no significant incidents reported through the whistleblower reporting channels.
172 AYALA CORPORATION 2018 INTEGRATED REPORT 173 AWARDS AND RECOGNITIONS
5 7
4 7
1. INSTITUTIONAL INVESTOR 2018 ALL-ASIA 4. STRATEGIC RISK AWARDS – ASIA PACIFIC EXECUTIVE TEAM SURVEY • 2018 Risk Manager of the Year Ma. Victoria Tan Ayala Corporation ranked second best among industrial • 2018 Risk Management Team of the Year Ayala Corporation companies in Asia for corporate governance and third best for metrics on environment, social, and governance (ESG) 5. 4TH ASIA SUSTAINABILITY REPORTING AWARD and socially responsible investing (SRI). Ayala was also among Asia’s Best Integrated Report – Highly Commended the emerging markets’ Most Honored Companies after figuring on top in two of the four main categories, and ranked 6. FINANCE ASIA second for Best IR Company. Under new categories, Ayala Ayala Corporation ranked number one as Best Managed ranked first for Best Corporate Governance and Best ESG SRI Company, Best Growth Story, and Best ESG. Ayala also ranked Metrics while Jaime Augusto Zobel de Ayala ranked third as third in Best Investor Relations, while Jaime Augusto Zobel de Ayala MANAGEMENT ASSOCIATION OF THE PHILIPPINES “This is the notion that I would like Best CEO. was cited Best CEO and Jose Teodoro K. Limcaoco as Best CFO. 2018 MANAGEMENT MAN OF THE YEAR to put forward today—that the ingredients to bring the country 2. 2017 ASEAN CORPORATE GOVERNANCE SCORECARD 7. ORDER OF THE RISING SUN, GOLD AND SILVER STAR In the world of business, there are few forces that are more powerful to the next level are already within • Eight PLCs in the Ayala group were named among the Top Jaime Zobel de Ayala received the Order of the Rising Sun, than a united group of people who passionately believe in creating Performing Companies, namely, Ayala Corporation, Gold and Silver Star from the Japanese government in our grasp. MAP and our individual Ayala Land, Globe Telecom, Manila Water, recognition of his contribution to the economic and cultural something great beyond corporate profit. organizations carry the challenge Bank of the Philippine Islands, Ayala Land subsidiaries Cebu relations between Japan and the Philippines. The Japanese and responsibility to properly harness Holdings Inc. and Cebu Property Ventures and Development government recognized Ayala’s efforts under JZA’s leadership, The collaborative spirit to effect transformative social change and the potentials of today and use them Corporation, and Integrated Micro-Electronics Inc. to develop the first industrial park which encouraged the entry achieve shared values is at the core of the entrepreneurial vision of to create a progressive, equitable, • Ayala Corporation also ranked in the Top Five in the Holding of Japanese businesses into the country, and Ayala’s continuing Fernando Zobel de Ayala, the 2018 MAP’s Management Man of the Year. Firm sector category. support to Japanese art and culture through various exhibitions and future-ready Philippines.” staged at the Ayala Museum. 3. 2ND ASEAN CORPORATE GOVERNANCE AWARDS Together with brother Jaime Augusto, and under the mentorship Fernando Zobel de Ayala Four of the nine Philippine companies, of their father Jaime Zobel, both of whom are previous MAP awardees, namely: Ayala Corporation, Ayala Land, Globe Telecom, and Fernando Zobel de Ayala ushered in a new era in the nearly Manila Water ranked among the Top 50 ASEAN PLCs 200-year history of the Ayala group by changing how the conglomerate understands and realizes profit and business gains. 174 AYALA CORPORATION 2018 INTEGRATED REPORT 175 AYALA SYNERGIES IN MOTION
ANNEXES
Integrated Risk and Sustainabily Summit, September 2018. Ayala People Summit, November 2018.
ICT Summit, August 2018. Corporate Governance and Risk Management Summit, September 2018.
Innovation Learning Program, June 2018. Ayala Group IR Summit, October 2018.
Ayala Group Investor Day in Singapore, October 2018. 176 AYALA CORPORATION 2018 INTEGRATED REPORT 177 The Manila Concession posted steady growth, During the year, AC Energy generated 2,800GWh MANAGEMENT DISCUSSION AND with a three percent increase in billed volume to of attributable energy, of which 48 percent was 503 million cubic meters. This was supported by the from renewable sources. To support its strategy to ANALYSIS OF FINANCIAL CONDITION 28 percent positive tariff adjustment granted by the scale up its renewable portfolio, AC Energy raised Metropolitan Waterworks and Sewerage System to US$410 million in Green Bonds in January 2019, the AND RESULTS OF OPERATION be implemented on a staggered basis over a first publicly syndicated US dollar Green Bonds in GRI 102-45 five-year period from 2018 to 2022. Southeast Asia to be certified by the Climate Bonds Initiative. Ayala Corporation’s net income in 2018 grew lifted by sales from its estates in the Visayas and Outside the Manila Concession, revenues from five percent to ₱31.8 billion from the previous Mindanao region, Evo City in Cavite, Alviera in Manila Water Philippine Ventures rose six percent AC Energy continued to expand its international year, boosted by strong earnings contribution Pampanga, and Cavite Technopark. to ₱3.3 billion. Lowered billed volume across its footprint through strategic partnerships with from its real estate, telecommunications, and domestic subsidiaries as well as operational and developers and operating companies. AC Energy has power businesses. Meanwhile, the opening of new malls and office regulatory challenges, including the closure of identified the Philippines, Vietnam, Indonesia, and spaces as well as the launch of new hotel and resort Boracay island, weighed down MWPV’s performance Australia as key markets in its expansion strategy. CONSOLIDATED SALES OF GOODS AND rooms drove the 17 percent expansion in commercial during the year. The 330MWp Ninh Thuan solar farm in Vietnam, a SERVICES leasing revenues to ₱34.9 billion from its year-ago joint venture between AC Energy and the BIM Group, Sale of goods and services expanded 13 percent to level. In 2018, Ayala Land added 142,000 square Manila Water Asia Pacific’s overseas investments is expected to commence early in the second ₱274.9 billion of which three percent was a result of meters of mall space with the opening of three new continues to bear fruit. It booked a 53 percent surge quarter of 2019. Once completed, it will be one of the adoption of PFRS 15 (new accounting standard malls: the Circuit Mall in Makati, the Capitol Central in equity share in net income of associates to the largest solar farms in Southeast Asia, benefiting in 2018 pertaining to Revenues from Contracts Mall in Bacolod, One Bonifacio High Street in Taguig, ₱699 million. This was mainly driven by the two Ninh Thuan province with income generation and with Customers). Revenue growth was driven by bringing its total mall gross leasable area to platforms it acquired during the year, East Water in job creation. AC Energy also broke ground on the Ayala Land which posted higher sales across all its 1.9 million square meters. Moreover, the completion Thailand, and PT Sarana Tirta Ungaran in Indonesia, 80MWp solar farms located in the provinces of business segments, supported by higher sales from of Bacolod Capitol Corporate Center, Vertis North which contributed ₱262.7 million and ₱1.4 million Khanh Hoa and Dak Lak, in partnership with IMI’s Europe, China, Philippines, and Mexico units Corporate Center 3, and Ayala North Exchange in equity earnings, respectively. AMI Renewables Energy. In addition, AC Energy as well as contribution of VIA Optronics and Manila pushed up Ayala Land’s total office GLA to 1.1 million signed a memorandum of understanding with Water’s new business units. square meters. To support its diversification strategy, Manila Water Quang Binh Province to jointly develop a wind power continues to ramp up its domestic and international project with AMI Renewables. REAL ESTATE Ayala Land’s commercial leasing business was business development initiatives, securing Ayala Land sustained its growth momentum during further boosted by its hotels and resorts portfolio, 13 new businesses in 2018. These include the full AC Energy has also entered the Australian the year with net income expanding 16 percent which continues to benefit from the growth of the concession projects in Calbayog in Samar, San Jose renewables market through a joint venture with to ₱29.2 billion, primarily driven by the strong country’s tourism sector. In 2018, it added 390 in Nueva Ecija, and in Iloilo, Isabela, Pangasinan, international RE developer UPC Renewables, performance of its property development and rooms across its portfolio of branded hotels and its Batangas, Bulacan, and Laguna as well as the investing US$30 million for a 50 percent ownership commercial leasing businesses. own Seda brand as well as bed and breakfast rooms acquisition of a 19 percent stake in East Water and in UPC's Australian business. The platform is in its Lio and Sicogon eco-tourism estates, bringing a 20 percent stake in PT Sarana Tirta Ungaran. developing the 1,000MW Robbins Island and Jims Property development revenues jumped the total to 2,973 rooms. Plain projects in North West Tasmania and the 18 percent to ₱120.3 billion on strong sales across POWER 700MW New England Solar Farm located near its residential, office-for-sale, and commercial lot The sustained strong performance of its leasing AC Energy’s net earnings expanded 16 percent to Uralla in New South Wales. It also has a further segments. Residential revenues jumped 20 percent segment has supported the continued buildup of ₱4.1 billion in 2018, largely driven by its domestic development portfolio of another 3,000MW located to ₱101.1 billion, while reservation sales grew Ayala Land’s recurring income business, which thermal and renewable assets as well as higher in NSW, Tasmania and Victoria. 16 percent to ₱141.9 billion, bolstered by strong increased at a compounded annual rate of contribution from its Indonesia investments. demand from local and overseas Filipinos, which 26 percent since 2013. Meanwhile, its development In September, AC Energy announced the partial accounted for 82 percent of total sales during income, which comprises residential, office, and lot The strong performance and higher equity stake in the year. sell-down of its thermal platform to sales, grew at a compounded annual rate of GNPower Mariveles, strong wind regime, and fresh AboitizPower, which includes the GNPower 18 percent. contribution of its greenfield offshore project, the Mariveles and GNPower Dinginin assets in Bataan. Fresh bookings from One Vertis Plaza in Vertis 75MW Sidrap wind farm in Indonesia, as well as North, Quezon City, The Stiles East Enterprise Plaza The sale, valued at US$ 579.2 million, represents WATER the full-year recognition of SD Geothermal boosted approximately 35 percent of AC Energy’s attributable in Circuit Makati, and completion of Park Triangle Manila Water recorded a net income of ₱6.5 billion, AC Energy’s performance during the year. Equity Corporate Plaza in Bonifacio Global City lifted the thermal capacity and is part of the company’s sixpercent higher from the previous year, largely earnings from AC Energy’s investee companies strategy to actively recycle capital and will enable sale of office spaces, with revenues reaching driven by the Manila Concession, and boosted by reached ₱3.6 billion, 37 percent higher than the ₱11.4 billion, 14 percent higher year-on-year. In the expansion of AC Energy’s domestic and offshore the contribution of its newly acquired platforms in previous year. Recovery of the costs incurred due renewable energy businesses. In late February, addition, revenues from the sale of commercial Thailand and Indonesia. to adjustments in the construction schedule of and industrial lots grew 10 percent to ₱7.7 billion, AC Energy received approval on the transaction GNPower Kauswagan also lifted AC Energy’s net from the Philippine Competition Commission. earnings during the period.
178 AYALA CORPORATION 2018 INTEGRATED REPORT 179 INDUSTRIAL TECHNOLOGIES companies, namely GNPower Mariveles, ₱50 billion stock rights offering, the US$600 million our new subsidiaries namely MCT of Ayala Land, AC Industrials’ net income dropped 53 percent SD Geothermal, and Sidrap, as well as contribution in senior unsecured bonds, and the ₱25 billion in MT Technologies and Merlin Solar of AC Industirals, year-on-year to ₱578 million, largely due to the of Manila Water’s new overseas investments also peso fixed rate bonds - BPI’s total capital reached and VIA Optronics and STI of IMI drove the higher weaker performance of its automotive businesses drove the increase. However, this was partially offset ₱248.52 billion, up by 38 percent from its year-ago GAE during the period. This was further lifted and startup losses from newly acquired businesses. by Ayala Land’s consolidation of MCT, previously level. Capital adequacy ratio was at 16.09 percent by IMI‘s restructuring costs from its employee This decline was partially offset by a one-time gain reported as an associate, as well as and Common equity tier 1 ratio was at 15.19 percent. relocation in China prior to the property sale. in its electronics manufacturing services arm. AC Ventures’ share in net losses of Zalora and Mynt. Without the effect of these newly consolidated TELCO subsidiaries, GAE grew nine percent year-on-year. IMI’s revenues expanded 24 percent to ₱70.8 billion BANKING Data-driven demand across its business segments on the back of a 16 percent growth in revenues from Bank of the Philippine Islands reported a net bolstered Globe’s net profits, which reached BALANCE SHEET HIGHLIGHTS traditional businesses and a 61 percent growth in income of ₱23.1 billion, up three percent from the ₱18.6 billion during the year. At the end of 2018, Ayala’s total assets stood at recently acquired companies, VIA and STI. It likewise previous year, boosted by the robust growth of ₱1.2 trillion. Investments in associates and joint benefited from new programs in the industrial and its core banking business but tempered by higher On a post-PFRS basis, service revenues reached ventures expanded 19 percent to ₱240.1 billion automotive segments which grew 41 percent and provisioning and operational spending. ₱132.9 billion. Mobile revenues grew nine percent owing to Ayala parent’s subscription to BPI’s stock 21 percent, respectively. to ₱106.9 billion driven by mobile data services, rights offering as well as new investments of Manila The bank’s total revenues grew 11 percent to which accounted for 51 percent of the segment from Water in East Water in Thailand and PT Sarana in IMI reported a net income of ₱2.4 billion, up ₱78.5 billion on the back of a 16 percent growth in 44 percent a year ago. This was supported by the Indonesia, and AC Energy in renewable platforms in 34 percent from a year ago, boosted by net interest income, which reached ₱55.8 billion. sustained higher prepaid top-ups, indicating greater Australia and Vietnam. Furthermore, the growth was non-operating items such as net gains from the The increase in net interest income was a result of a consumer spending on mobile data. This in turn, lifted by additional investments of AC Infrastructure sale of a China entity and reversal of contingent nine percent improvement in average asset base and drove the mobile data traffic growth to in the LRT 1 project and higher share of net earnings consideration related to the STI acquisition, a 21-basis point expansion in net interest margin. 956 petabytes from 600 petabytes a year ago. in BPI and Globe, and investee companies of Ayala partially offset by impairment provisions on some Land, Manila Water, and AC Energy. This was partly offshore investments. The effect of the RMB and EUR Total loans stood at ₱1.35 trillion, reflecting a Globe’s home broadband business jumped offset by Ayala Land’s consolidation of MCT, which depreciation and higher interest rates also added 13 percent growth year-on-year, boosted by strong 19 percent to ₱18.5 billion on continued subscriber was previously reported as associate as well downward pressure to IMI’s performance during the performance of its corporate loans and credit card expansion in fixed wireless solutions, specifically the AC Ventures‘ equity losses in Zalora and Mynt. year. Excluding the impact of the one-time net gain, loans, which increased 13 percent and 24 percent, Home Prepaid Wi-Fi product. Similarly, its corporate IMI’s net income went down 49 percent respectively. Total deposits reached ₱1.59 trillion, data business expanded 15 percent to ₱11.8 billion Investments in properties jumped 12 percent to year-on-year. up 1.5 percent, with current and savings accounts amid increasing demand for fast, reliable, and ₱227.6 billion driven by Ayala Land’s expansion registering faster growth at 2.4 percent. The bank’s secure internet connectivity and modern projects in its malls, office properties, land AC Motors registered a 76 percent decline in net current account and savings account ratio stood at business solutions. development initiatives, and the impact of the earnings to ₱164 million owing to significantly 71.9 percent while the loan-to-deposit ratio was at consolidation of MCT. An adjustment in land lower earnings of the group’s Honda and Isuzu 85.4 percent. With a consistent strong revenue and well managed classification required under the PFRS 15 likewise dealerships, both hit by weaker sales amid an costs throughout the year, Globe’s EBITDA improved contributed to the increase. industry-wide slowdown. This was aggravated The bank recorded higher fee income from its 22 percent to ₱64.9 billion, with EBITDA margin at by lower contributions from AC Industrials’ transaction-based service charges, credit card, and 46 percent from its year-ago level of 42 percent. At the end of the year, total debt at the consolidated investments in the Philippine distribution companies rental businesses. However, lower trust, investment level stood at ₱412 billion, 18 percent higher from of Isuzu and Honda. Meanwhile, Volkswagen’s sales management, and corporate finance fees, and Globe continues to build its network capacities the end-2017 level. This was driven by higher volume was affected by the delay in delivery of its securities trading income during the year, tempered to address the increasing data traffic growth and borrowings of the parent as well as higher loan China-sourced vehicles. BPI’s non-interest income, which slid one percent to customer base as it ramped up its LTE rollout. It balances of Ayala Land, Manila Water, and ₱22.7 billion. spent ₱43.3 billion in capital expenditures in 2018, AC Energy. AC Industrials continues to ramp up its automotive equivalent to 32 percent of its service revenues. retail portfolio when it partnered with Kia Motors Operating expenses totaled ₱43.6 billion for Ayala’s balance sheet remained healthy with enough and China’s SAIC Motor for the distribution of Kia 2018, an increase of 13.2 percent year-on-year COSTS AND EXPENSES capacity to undertake investments and cover its and Maxus vehicles in the Philippines, respectively. on accelerated spending to support the bank’s Consolidated cost of sales and rendering services dividend and debt obligations. As of end-2018, digitalization strategy and investments in its rose 12 percent to ₱196.6 billion, tracking the parent level cash stood at ₱8.5 billion, while net SHARE OF PROFIT OF ASSOCIATES microfinance network. In 2018, BPI Direct BanKo, revenue growth. debt stood at ₱96 billion. Loan-to-value ratio, the AND JOINT VENTURES its microfinance arm, doubled its branch network ratio of its parent net debt to the total value of its Share of profits of associates and joint ventures to 200. These initiatives resulted in cost-to-income General and administrative expenses expanded assets, stood at 11 percent. grew 11 percent to ₱20.5 billion, lifted by Globe’s ratio of 55.5 percent in 2018 from 54.3 percent a 18 percent to ₱29.8 billion, primarily driven by the higher data-driven revenues plus the growth year ago. combined increments in the group’s expenses, The conglomerate’s peso-dollar debt split ended at in BPI’s core businesses. The adoption of the particularly Ayala Land’s taxes, contracted services, 64:36 for 2018. Ayala’s dollar denominated debts new accounting standards PFRS 9 (Financial At the end of 2018, the bank’s total assets stood depreciation; Manila Water’s management fees, are fully covered by foreign currency assets. Instruments) and PFRS 15 has minimal effect on at ₱2.1 trillion, up 9.5 percent from the previous manpower-related and selling expenses, and the net income of BPI and Globe in 2018. Higher year, with return on assets at 1.2 percent. With the Ayala parent’s higher business development and equity in net earnings from AC Energy’s investee success of its capital raising exercises - the manpower costs. Moreover, the consolidation of
180 AYALA CORPORATION 2018 INTEGRATED REPORT 181 We aligned our material factors with the relevant group-wide
ECONOMIC ECONOMIC
MATERIAL GRI TOPICS / SPECIFIC TOPICS REPORTING WHY IT IS MATERIAL POSITIVE IMPACT NEGATIVE IMPACT LINK TO PRINCIPAL RISKS MANAGEMENT APPROACH PERFORMANCE SCORECARD GRI FACTORS AND UN GLOBAL COMPANIES** (What kind of outcomes can be (What kind of outcomes can be INDICATOR DISCLOSURES RELEVANT
ECONOMIC 201:Economic Economic value Ayala Corporation This is our direct • Overall positive investment • Inability to execute • Portfolio Management • Conduct deep-dive analysis • Economic value generated, 201-1 PERFORMANCE Performance generated, and all companies group- contribution to the climate that supports the strategic agenda • Capital Market of macroeconomic and socio- distributed and retained Financial Capital distributed wide Philippine economy and to group’s health agenda • Business units failing • Funding political indicators and and retained our stakeholders • Sustained domestic consumption to deliver dividends • Partnerships and business units’ performance growth that benefits B1 businesses or income targets Alliances • Align funding strategy with • Positive financial trajectory • Increased cost of • Competition budgeted capital expenditure, for the Ayala group doing business • Brand and reputation operating expenses, and dividend payout
JOBS SUPPORTED 204: Procurement Indirect hires Ayala Corporation and all Managing our supply chain • Local sourcing as strategy • Increased cost of • Political and Regulatory • Due diligence of potential • Indirect hires or support staff 102-8 IN THE SUPPLY Practices companies groupwide is integral to business doing business • Operational partners through internal team • Spending on local suppliers CHAIN continuity • Higher cost of • Partnerships and or third-party assessments • Operating costs Human Capital supplier goods due Alliances • Implementation of vendor to new tax rulings • Brand & Reputation accreditation systems in Spending on At the group level: • Talent some companies local suppliers AC Automotive, AC • Business Resiliency Energy, AC Health, AC Infra, Ayala Land, BPI, 204-1 Globe, Manila Water
Supplier assessment At the group level: Ayala and accreditation Land, BPI, Globe, IMI 308-2, 414-2 (Phils), Manila Water
FOREIGN AND 203: Indirect Strategic acquisitions Ayala Corporation; Expansion of our portfolio • Strong contribution to national • Delay in investment • Portfolio Management • Strengthen relationships with • Spending on acquisitions of 203-2 INDIRECT Economic Impact At the group level: allows us to diversify, infrastructure spending strategy execution • Capital Market current partners and establish local and foreign companies INVESTMENTS AC Education, AC Energy, enter new markets and • Job creation • Delay in project execution • Funding networks with potential • Capital expenditures Financial Capital AC Health, industries, and increase • Increased cost of • Partnerships and Alliances business partners and advisers including investments AC Infra, IMI (Global), our sources of revenue doing business • Competition • Diversifying and expanding for local infrastructure Manila Water • Loss of potential revenues portfolio through strategic • Business partners’ failure to acquisitions synergize with group ideals
Capital expenses Ayala Corporation and all companies group- wide
IMPACT TO THE 203: Indirect Affordable education At the group level: AC We innovate on products • Creation of targeted inclusive • Limited access to • Portfolio Management • Investments in affordable • Student enrollees from 203-2 VULNERABLE Economic Impact and healthcare Education, AC Health, and services to make them business models for the vulnerable the vulnerable • Funding quality education and healthcare low-income segment SECTOR Ayala Foundation more available especially • Limited market • Innovation and Technology • Delivery of affordable water • Number of students covered Social and for the low-income reach for emerging • Synergy to marginalized communities by government subsidies Relationship segments. businesses • Partnerships and Alliances • Number of transactions of Capital • Brand and Reputation generic medicines sold • Number of unique patients • Number of households connected through Tubig Para Sa Barangay Program
182 AYALA CORPORATION 2018 INTEGRATED REPORT 183 ECONOMIC ECONOMIC
MATERIAL GRI TOPICS / SPECIFIC TOPICS REPORTING WHY IT IS MATERIAL POSITIVE IMPACT NEGATIVE IMPACT LINK TO PRINCIPAL RISKS MANAGEMENT APPROACH PERFORMANCE SCORECARD GRI FACTORS AND UN GLOBAL COMPANIES** (What kind of outcomes can be (What kind of outcomes can be INDICATOR DISCLOSURES RELEVANT
IMPACT OF USE 203: Indirect Increase in income At the group level: We espouse product and • Positive consumer outlook • Negative consumer outlook • Brand and Reputation • Continuous innovation to develop • Number of SMEs and start-ups 203-1, 203-2 OF PRODUCTS Economic Impact or productivity AC Infra, Ayala Land, BPI, service responsbility and • Improved productivity of • Decreased customer loyalty • Innovation and Technology relevant products and services financed and supported OR SERVICES of communities, Globe any negative impact is a organizations involved • Partnerships and Alliances • Volume of fintech-enabled loans Manufactured enterprises and reputational risk • Operational • Customer satisfaction ratings Capital companies served • Competition and net promoter scores • Portfolio management • Total number of LRT-1 Passengers • Synergy • Total man-hours and fuel savings due to MCX • Total number of contactless payments via beepTM
BUSINESS 201:Economic Climate proofing At the subsidiary level: Resiliency of our • More businesses resilient • Physical damage to • Business resiliency • Business continuity management • Energy efficiency initiatives 201-2 RESILIENCE TO Performance of infrastructure Ayala Land, BPI, Globe, infrastructure is important to climate change infrastructure • Operational systems include crisis • Amount insured for catastrophes CLIMATE CHANGE Manila Water for business continuity • New business models and • Loss of lives • Brand and Reputation management plan, business investments that address • Prolonged interruption or continuity plan, and IT disaster climate change issues inability to restore recovery plan • Increased demand for products operations • Insurance solutions and services that address climate change
ENVIRONMENTAL ENVIRONMENTAL
ENERGY AS 302: Energy / Power generation Power generation Through our energy • Robust contribution of energy • Lower revenue due to a • Portfolio Management • Diversify portfolio of thermal and • Total power generated N/A BUSINESS Principle 7, 8 & 9 business, we invest in business to group equity earnings highly competitive energy • Funding renewable energy businesses • Total renewable energy Natural Capital power generation to cater • Improved efficiency of market • Capital Market generated Manufactured to the region's energy conventional and renewable plants • Negative environmental • Political and Regulatory Capital demand. consequences • Innovation and Technology • Partnerships and Alliances • Competition • Brand & Reputatiion • Operational"
ENERGY AS 302: Energy / Electricity consumption All companies groupwide Energy, in the form of • Lower energy consumption • Increased group-wide • Operational • Continuous monitoring of • Energy consumed 302-1 CONSUMPTION Principle 7, 8 & 9 within the organization electricity and fuel, is used of companies energy consumption • Brand and reputation energy consumption • Energy intensity Natural Capital to run our operations. • Energy efficiency initiatives by some of our companiest
Electricity At the subsidiary level: 302-2 consumption outside Ayala Land the organization
Fuel consumption At the group level: 302-1 within the organization AC Automotive, AC Energy, AC Infra, Ayala Land, Globe, IMI (Phils and Global), Manila Water
Fuel consumption At the group level: 302-2 outside the AC Automotive, AC organization Energy, AC Health, AC Infra, Ayala Land, BPI, Globe, IMI (Phils and Global), Manila Water
184 AYALA CORPORATION 2018 INTEGRATED REPORT 185 ENVIRONMENTAL ENVIRONMENTAL
MATERIAL GRI TOPICS / SPECIFIC TOPICS REPORTING WHY IT IS MATERIAL POSITIVE IMPACT NEGATIVE IMPACT LINK TO PRINCIPAL RISKS MANAGEMENT APPROACH PERFORMANCE SCORECARD GRI FACTORS AND UN GLOBAL COMPANIES** (What kind of outcomes can be (What kind of outcomes can be INDICATOR DISCLOSURES RELEVANT
ENERGY AS Energy intensity All companies groupwide 302-3 CONSUMPTION (continued)
Reduction of energy At the group level: AC 302-4 consumption Infra (LRMC), Ayala Land, Globe, Manila Water
WATER AS 303: Water / Water distribution At the subsidiary level: As a business activity, • Improved water distribution in • Disruptions in water supply • Portfolio Management • Expansion in areas outside • Water abstracted N/A BUSINESS Principle 7 & 8 Manila Water water is abstracted from more homes, including those in • Higher cost of operations • Funding of Manila Concession • Billed volume Natural Capital nature, and is treated vulnerable areas • Termination of water • Capital Market • Used water treated Manufactured and distributed to our concession • Political and Regulatory Capital customers. • Innovation and Technology Used water treatment • Partnerships and Alliances 306-1 • Competition • Operational • Brand and Reputation
Water abstraction At the group level: Manila 303-1 Water, AC Energy
WATER AS 303: Water / Water consumption All companies groupwide Water is used in our • Lower water consumption • Increased group-wide • Operational • Continuous monitoring of water • Water consumed 303-1 CONSUMPTION Principle 7 & 8 business operations of companies water consumption • Brand & Reputation consumption • Water intensity Natural Capital as natural capital for • Improve water treatment industrial and worker operations in our industrial plants Water intensity consumption. N/A
Water recycled and AC Energy 303-3 reused
RESOURCE 301: Materials Construction materials At the subsidiary level: The materials we use in • Optimized purchases and use • Higher cost of compliance • Operational • Integrate resource efficiency • Volume of materials used 301-1 EFFICIENCY 306: Effluents and Ayala Land developing communities of materials to environmental standards • Brand and Reputation within the supply chain • Waste generated by type Natural Capital Waste and the wastes we • Proper control of waste • Higher cost of operations • Business Resiliency • Waste management disposal • Percent of waste diverted 308: Supplier generate in our operations • Political and Regulatory system, i.e. accredited third- from landfill Environmental pose significant • Partnerships and Alliances party waste disposal, storage, Assessment / environmental impacts. and treatment facility Principle 7 & 8 Hazardous wastes At the group level: AC We create efforts to 306-2, 306-4 Automotive, AC Energy, manage them efficiently. AC Health, AC Infra, Ayala Land, Globe, IMI (Phils and Global), Manila Water
Non-hazardous wastes At the group level: AC 306-2 Education, AC Health, AC Infra, Ayala Land, Globe, IMI (Phils and Global), Manila Water
186 AYALA CORPORATION 2018 INTEGRATED REPORT 187 ENVIRONMENTAL ENVIRONMENTAL
MATERIAL GRI TOPICS / SPECIFIC TOPICS REPORTING WHY IT IS MATERIAL POSITIVE IMPACT NEGATIVE IMPACT LINK TO PRINCIPAL RISKS MANAGEMENT APPROACH PERFORMANCE SCORECARD GRI FACTORS AND UN GLOBAL COMPANIES** (What kind of outcomes can be (What kind of outcomes can be INDICATOR DISCLOSURES RELEVANT
RESOURCE Recycling and landfill At the group level: IMI 306-2 EFFICIENCY diversion (Phils and Global), Globe (continued)
Effluents At the subsidiary level: 306-1, 306-5 Manila Water
Supplier environmental At the group level: IMI 308-1 assessment (Phils), Ayala Land, Manila Water
ECOSYSTEMS AND 304: Biodiversity / Biodiversity At the group level: Some of our operations • Potential increase in the • Continued decline of • Operational • Group-wide reforestation • Hectares of land and 304-1, 304-2, BIODIVERSITY Principle 8 AC Energy, Ayala Land are located near areas population of endemic fauna vulnerable fauna and • Brand & Reputation activities through Project watersheds protected 304-4 Natural Capital rich in biodiversity. and flora present in companies’ flora in owned or leased Kasibulan • Number of trees planted Protecting flora and fauna operational sites and adjacent sites, protected areas, • Biodiversity studies and • Number of IUCN Red List is a form of environmental biodiversity areas and external areas of watershed protection Species monitored stewardship, and high biodiversity value programs across operational Watershed At the subsidiary level: their presence in our sites of some companies 304-1, 304-3 management Manila Water sites is an indicator of good environmental management.
Tree planting Ayala Corporation 304-3 and all companies group- wide
GREENHOUSE GAS 305: Emissions / Scope 1 GHG emissions At the group level: AC This is a by-product of our • Reduced emissions according to • Higher greenhouse gas • Operational • GHG Emission mitigation efforts • GHG Emissions 305-1 EMISSIONS Principle 7, 8 & 9 Automotive, AC Energy, business operations and acceptable global standards emissions • Brand and Reputation through Project Kasibulan • GHG Intensity AC Infra, Ayala Land, managing and reducing • Regulatory fines and • Partnerships and Alliances • Energy efficiency initiatives Globe, IMI (Phils and GHG emissions are penalties Global), Manila Water important towards a low- • Stakeholder complaints carbon economy. Scope 1 Intensity 305-4
Scope 2 GHG emissions Ayala Corporation 305-2 and all companies group- wide
Scope 2 Intensity 305-4
Scope 3 GHG emissions At the group level: AC 305-3 Automotive, AC Energy, AC Health, AC Infra, Ayala Land, BPI, Globe, IMI (Phils and Global), Manila Water
188 AYALA CORPORATION 2018 INTEGRATED REPORT 189 SOCIAL SOCIAL
MATERIAL GRI TOPICS / SPECIFIC TOPICS REPORTING WHY IT IS MATERIAL POSITIVE IMPACT NEGATIVE IMPACT LINK TO PRINCIPAL RISKS MANAGEMENT APPROACH PERFORMANCE SCORECARD GRI FACTORS AND UN GLOBAL COMPANIES** (What kind of outcomes can be (What kind of outcomes can be INDICATOR DISCLOSURES RELEVANT
EMPLOYEE 401: Employment / Total employee Ayala Corporation Our businesses create • Strong reputation and ability to • Inadequate mix of skills • Talent • Approach talent management • Direct employee headcount 102-7 ENGAGEMENT Principle 6 headcount and all companies group- meaningful and gainful attract diverse and qualified talent and expertise for the • Political and Regulatory comprehensively at all stages • Employee engagement score Human Capital wide jobs. • Strong employee engagement workforce • Operational • Conduct of employee • Employee turnover score • Higher recruitment • Competition engagement surveys expenses • Brand and Reputation • Annual discussion of succession • Prevalence of labor planning by senior leaders New hires and turnover 401-1 disputes • Regular dialogue and communication with labor groups • Annual benchmarking of compensation and benefits
Indirect hires 102-7
Employee engagement 102-43, 401-2 score, Employee benefits
Collective bargaining At the group level: AC 407-1 agreements Energy (GMCP), BPI, Globe, Manila Water
WORKPLACE 408: Child Labor Child labor Ayala Corporation Our businesses comply • Improved well-being of • Dissatisfied employees • Operational • Due diligence of potential • Employee engagement score 408-1, 414-2 CONDITIONS 409: Forced or and all companies group- with labor standards employees and partners and partners across • Political and Regulatory partners through internal team Human Capital Compulsory Labor wide across the supply chain the supply chain • Brand and Reputation or third-party assessments Social and 205: Anti- • Enhanced brand and reputation • Regulatory fines and • Talent • Policies related to human rights Relationship Corruption / Forced or compulsory penalties • Governance and Control and child/forced labor 409-1, 414-2 Capital Principle 2, 4, 5 & 10 labor • Increased complaints • Eroded brand and reputation
Anti-corruption 205-1, 205-3
DIVERSITY, EQUAL 405: Diversity and Breakdown of Ayala Corporation A highly engaged, • Engaged workforce • Possibility of • Operational • Group-wide policies on equal • Employee headcount by gender, 405-1 OPPORTUNITY Equal Opportunity employees by age, and all companies group- diverse, and talented • Enhanced brand and reputation discrimination in the • Political and Regulatory opportunity employment and by age group, and by rank & ANTI- 406: Non- gender and rank wide workforce enables us to workplace • Brand and Reputation diversity • Employee engagement score DISCRIMINATION discrimination continue and expand our • Eroded brand and • Talent Human Capital 414: Supplier Social operations. reputation • Governance and Controls Social and Assessment Relationship / Principle 2, 5 & 6 Capital Non-discrimination 406-1
COMMUNITY 413: Local Sustainable livelihood At the subsidiary level: We strongly believe • Continued license to operate • Adverse impact on • Political and Regulatory • Development and • Community investments 413-1 RELATIONSHIP Communities / programs Ayala Foundation in the need to play an within the community vulnerable groups • Funding implementation of sustainable • Total number of Mangyan Social and Principle 1 active part in national • Well-managed social impact • Eroded brand and • Synergy programs for youth, culture, weavers, and sales of Mangyan Relationship development. reputation • Partnerships and Alliances education, and livelihood products Capital • Limited license of • Operational • Monthly income of farmers in operations • Brand and Reputation the MDC Greens farms
190 AYALA CORPORATION 2018 INTEGRATED REPORT 191 SOCIAL SOCIAL
MATERIAL GRI TOPICS / SPECIFIC TOPICS REPORTING WHY IT IS MATERIAL POSITIVE IMPACT NEGATIVE IMPACT LINK TO PRINCIPAL RISKS MANAGEMENT APPROACH PERFORMANCE SCORECARD GRI FACTORS AND UN GLOBAL COMPANIES** (What kind of outcomes can be (What kind of outcomes can be INDICATOR DISCLOSURES RELEVANT
TRAINING AND 404: Training Training hours and Ayala Corporation The sustainability of our • Highly capable workforce • Lack of future-proofing • Talent • Employee engagement • Total number of training hours 404-1, 404-2 DEVELOPMENT and Education / training programs and all companies group- businesses are directly • Established career path skills among employees • Political and Regulatory • Leadership development • Average training hours per Human Capital Principle 6 wide related to the knowledge for employees • Operational program employee Intellectual Capital and skills • Competition of our employees. • Brand and Reputation
OCCUPATIONAL 403: Occupational Types of injuries At the group level: AC A healthy workforce and a • Engaged workforce • Dissatisfied workforce • Talent • Employee health and wellness • Number and types of injuries 403-2 HEALTH AND Health and Safety Automotive, AC Energy, safe working environment • Political and Regulatory programs SAFETY AC Infra, Ayala Land, are integral in the • Operational • Continous monitoring of Human Capital Globe, IMI (Phils and daily operation of our • Brand and Reputation incidences and injuries Global), Manila Water businesses. • Governance and Controls
CUSTOMER 102: General "Customer satisfaction At the group level: Ayala Customer satisfaction • Enhanced brand and reputation • Eroded brand • Operational • Quality management system • Customer satisfaction ratings 102-43 MANAGEMENT Disclosure Land, Globe, Manila indicates quality of our • Increased customer loyalty and reputation • Competition • Customer satisfaction surveys and net promoter scores Social and Product quality" Water, AC Automotive, products and services, • Customer complaints • Brand and Reputation • Customer feedback and • Customer complaints resolved Relationship AC Health, AC Infra, IMI and drives customer grievance mechanisms Capital (Phils) loyalty and revenue growth.
SECURITY 410: Security Security practices Ayala Corporation We aim to ensure safety • Stronger customer confidence • Eroded brand and • Information Security and Cyber • Policies on data privacy • Security practices and 410-1 PRACTICES Practices and all companies group- of individuals within our in products and services reputation • Innovation and Technology and IT security data privacy policy AND PRIVACY wide business scope against • Regulatory fines • Operational • Centralized 24/7 security 418: Customer external dangers. We and penalties • Brand and Reputation operations Privacy also comply to the Data • Higher cost of operations • Governance and Controls Privacy Act. • Business Resiliency Data privacy Ayala Corporation 418-1 and all companies group- wide
*The 10 UN Global Compact Principles **The reporting companies represent Ayala companies with whom the respective topics are material and disclosed in the report. 1. Businesses should support and respect the protection of internationally proclaimed human rights. These are defined whether at the holdings level (i.e Ayala Corporation), or at the group level (i.e. companies that represent 2. Businesses should make sure that they are not complicit in human right abuses. the Ayala group on the material factor), or at the subsidiary level (i.e. individual companies with whom the topic is material) 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. All geographic locations in the Philippines where our local companies have operations are covered in the reporting boundary. 4. Businesses should uphold the elimination of all forms of forced and compulsory labour. For global companies, the boundaries are as follows: IMI Global includes its operations in Bulgaria, China, Czech Republic, 5. Businesses should uphold the effective abolition of child labour. Japan, Mexico, Serbia, and the United Kingdom. Manila Water includes its facilities in Vietnam and Thailand. AC Energy's RE 6. Businesses should uphold the elimination of discrimination in respect of employment and occupation. plants in Indonesia disclosed their economic performance. 7. Business should support a precautionary approach to environmental challenges. 8. Businesses should undertake initiatives to promote greater environmental responsibility. 9. Businesses should encourage the development and diffusion of environmentally friendly technologies. 10. Business should work against corruption in all its forms, including extortion and bribery.
192 AYALA CORPORATION 2018 INTEGRATED REPORT 193 In this table, we restate some information about our sustainability performance in 2016 and 2017 TABLE OF RESTATEMENTS that we have disclosed in the 2017 report. These restatements came from changes in reporting (GRI 102-48, 102-49) boundaries due to mergers and acquisitions, and changes in measurement methods.
2016 PERFORMANCE 2017 PERFORMANCE DICLOSURE DISCLOSURE TITLE 2016 2017 UNIT PAGE REASON NUMBER PERFORMANCE FIGURE IN 2018 PERFORMANCE FIGURE IN 2018 AS REPORTED
201-1 Economic Value Generated - - 463,842.87 462,700.65 Million peso 201 Updated numbers from Manila Water
Economic Value Distributed 201-1 191,682.98 191,670.04 235,037.69 230,327.83 Million peso 201 Updated numbers from Manila Water (Operating Cost)
Economic Value Distributed 201-1 39,870.51 39,872.51 45,027.10 47,062.23 Million peso 201 Updated numbers from Manila Water (Payments to Employees)
Economic Value Distributed 201-1 55,138.44 54,826.55 58,238.45 59,473.71 Million peso 201 Updated numbers from Manila Water (Payment to Providers of Capital)
Economic Value Distributed 201-1 34,302.27 34,449.79 38,718.50 39,072.07 Million peso 201 Updated numbers from Manila Water (Payment to Government)
Economic Value Distributed 201-1 - - 167.62 177.62 Million peso 201 Updated numbers from Manila Water (Payment to Communities)
302-1 Diesel 19,321,868.50 18,613,548.92 17,718,238.60 19,118,644.15 liters 198 Updated numbers from IMI Phils and IMI Global, and removal of BPI from the boundary
302-1 Gasoline - - 4,265,544.30 4,300,727.30 liters 198 Updated numbers from IMI Phils and IMI Global
302-1 Electricity Consumption 985,605,142.50 1,147,892,919.38 1,284,297,140.70 1,315,819,006.27 Kwh 199 Updated numbers from Ayala Land, Globe, IMI Phils and IMI Global, Manila Water
303-1 Water Consumption 11,358,780.20 11,401,327.21 14,525,775.40 14,784,055.39 cubic meters 197 Updated numbers from IMI Phils and IMI Global
305-1 Total GHG Emission Scope 1 1,728,161.50 1,727,888.58 2,183,230.20 7,492,256.97 tonnes of co2e 200 Recomputed using updated emission factors for diesel and gasoline
Recomputed using updated grid emission factors from the Department of Energy; 305-2 Total GHG Emission Scope 2 675,593.30 721,949.75 767,551.50 794,121.20 tonnes of co2e 200 updated numbers from Ayala Land, Globe, IMI Phils and IMI Global, and Manila Water
305-3 Total GHG Emission Scope 3 258,650.80 585,015.67 275,041.40 12,747,621.21 tonnes of co2e 200 Recomputed using updated emission factors for diesel and gasoline
306-2 Total Non-Hazardous Waste - - 36,167.10 37,767.16 kg 196 Updated numbers from IMI Phils and IMI Global
306-2 Total Hazardous Waste 1,207,789.60 1,205,822.20 1,788,670.50 1,790,981.50 kg 196 Updated numbers from IMI Phils and IMI Global
401-1 New hires 15,271.00 15,271.00 7,991.00 12,249.00 head count 204 Updated numbers from IMI Phils and IMI Global
401-1 Employee turnover 11,980.00 11,780.00 4,148.00 4,148.00 head count 204 Updated numbers from IMI Phils and IMI Global
102-7 Headcount of support staff 75,617.00 62,966.00 83,810.00 67,360.00 head count 202 Updated numbers from IMI Phils and IMI Global, reviewed and recalculated Globe data
Total training hours 404-1 - - 879,234.00 1,283,192.24 hours 205 Updated numbers from IMI Phils and IMI Global (rank and file)
Total training hours 404-1 - - 378,337.00 393,515.60 hours 205 Updated numbers from IMI Phils and IMI Global (middle management)
Total training hours 404-1 - - 31,304.00 25,859.00 hours 205 Updated numbers from IMI Phils and IMI Global (senior management)
404-1 Average training hours 17.40 23.30 23.30 22.12 hours 204 Updated numbers from IMI Phils and IMI Global
194 AYALA CORPORATION 2018 INTEGRATED REPORT 195 BATTERIES IN KG 2016 2017 2018 CONTAMINATED WASTES 2016 2017 2018 IN KG AC Automotive 12,778.0 14,922.0 34,585.2 PERFORMANCE INDICES IMI Global - 2,793.00 6,771.00 AC Energy - - 4,436.5 IMI Phils 13,700.00 - 21,024.26 MATERIALS AND NON-HAZARDOUS WASTE AC Infra - - 474.1 Manila Water - - 232.03 MATERIALS USED RESIDUALS Ayala Land - 19,927.1 11,602.1 2016 2017 2018 TOTAL 13,700.0 2,793.0 28,027.3 AND WEIGHT BY TYPE IN 2016 2017 2018 IN TONS Globe 167,360.0 116,298.0 150,720.0 TONNES (301-1) AC Education - - 1.9 IMI Global - 1,488.0 1,314.0 BUSTED FLUORESCENT 2016 2017 2018 Rebar/steel 253,928.0 165,625.0 171,755.7 LAMPS IN KG AC Health - - 315.0 IMI Phils 900.0 1,720.0 3,345.0 Consumed cement 295,710.0 355,876.0 277,718.1 AC Energy - - 105.8 AC Infra - - 61.2 Manila Water 3,180.0 7,533.5 2,047.2 TOTAL 549,638.0 521,501.0 449,473.8 AC Infra - - 3,730.5 Ayala Land 16,359.9 16,867.0 25,866.7 TOTAL 184,218.0 161,888.6 208,524.1 Rebar consumption Ayala Land - 52,626.5 16,406.2 intensity Globe 178.9 155.5 150.9 ELECTRONIC WASTES 2.0 1.2 1.0 2016 2017 2018 Globe - - - (Tons per million pesos IN KG revenue) IMI Global - 151.9 199.1 IMI Global - 30.0 400.0 AC Automotive - - 0.1 Cement consumption IMI Phils 21.9 - 279.7 IMI Phils 400.0 300.0 782.0 intensity AC Energy - - 625.0 2.4 2.5 1.0 (Tons per million pesos TOTAL 16,560.7 17,174.4 26,874.5 Manila Water 2,670.0 16,564.0 7,449.0 AC Infra 746.0 153.5 58.0 revenue) Recyclable construction TOTAL 3,070.0 69,520.5 28,873.5 922,560.0 1,546,272.0 1,460,284.5 Ayala Land - 4,399.8 2,349.4 This table refers to the materials used by the Makati Development Corporation, waste from Ayala Land Ayala Land's construction arm Globe 22,812.9 224,290.7 288,242.6 OTHER HAZARDOUS This table refers to the non-hazardous wastes generated by Ayala companies 2016 2017 2018 WASTES IN KG which can no longer be recycled, reused, or composted. IMI Global - 156,890.0 229,355.3 NON-HAZARDOUS WASTE AC Automotive - - 31,619.0 GENERATED IN TONNES 2016 2017 2018 IMI Phils 4,700.0 15,570.0 53,441.2 HAZARDOUS WASTE AC Energy - - 17,048.5 (306-2) Manila Water 21,590.0 1,140.0 27.6 AC Infra - - 60,380.4 Recyclables 6,638.6 6,363.2 8,735.9 HAZARDOUS WASTE TOTAL 49,848.9 402,444.0 574,099.1 GENERATED BY TYPE IN 2016 2017 2018 Residual 16,560.7 17,174.4 26,874.5 IMI Global - - 86,214.3 KG (306-4) USED OIL IN KG 2016 2017 2018 Compostable and Food IMI Phils 131,600.0 529,186.0 150,978.7 16,353.5 14,229.6 15,346.8 Used Oil 339,910.3 z 523,748.4 726,600.3 Waste AC Automotive 306,832.6 415,231.0 210,702.5 Manila Water 424,360.0 53,500.0 45,002.3 Electronic Wastes 49,848.9 402,444.0 574,099.1 TOTAL 39,552.8 37,767.2 50,957.2 AC Energy - - 394,617.0 TOTAL 555,960.0 582,686.0 391,243.2 Used Batteries 184,218.0 161,888.6 208,524.1 AC Infra 3,539.0 1,226.4 10,029.5 Waste productivity (Million pesos revenue per ton Chemical waste 48,800.0 35,638.0 131,029.7 7.4 8.9 7.6 Ayala Land - 20,494.8 82,403.5 WATER non-hazardous waste generated) Grease Waste 10,315.0 12,263.0 42,809.0 Globe 3,498.7 8,462.2 4,750.0 WATER CONSUMPTION Contaminated Waste 13,700.0 2,793.0 28,027.3 IMI Global - 2,787.0 7,010.0 This table refers to the non-hazardous wastes generated by Ayala companies FROM WATER UTILITIES IN 2016 2017 2018 (see reporting companies below) Busted Fluorescent Lamps 3,070.0 69,520.5 28,873.5 IMI Phils - 11,417.0 10,524.9 CUBIC METERS (303-1) Medical Waste - - 3,452.2 Manila Water 26,040.0 64,130.0 6,563.0 AC Automotive - 38,818.0 73,594.1 COMPOSTABLE AND 2016 2017 2018 Expired Medicines - - 231.6 TOTAL 339,910.3 523,748.4 726,600.3 AC Education - 43,933.0 79,148.3 FOOD IN TONS Other Hazardous Wastes 555,960.0 582,686.0 391,243.2 AC Energy 160,337.0 161,499.0 232,439.4 Ayala Land 16,353.5 14,229.6 16,626.9 CHEMICAL WASTE IN KG 2016 2017 2018 TOTAL 1,205,822.2 1,790,981.5 2,134,890.1 AC Health - 21,179.1 125,734.4 This table refers to the non-hazardous wastes generated by Ayala companies IMI Phils 48,800.0 19,018.0 63,926.6 Other hazardous wastes include industry-specific wastes such as spent resins AC Infra 42,547.0 80,950.0 80,938.5 which can be composted, including food waste for water treatment plants of Manila Water and IMI. IMI Global - 16,460.0 66,903.6 Ayala Land 9,834,866.1 12,868,284.2 14,235,297.0 Manila Water - 160.0 233.1 RECYCLABLES HAZARDOUS WASTE BPI 414,902.2 387,087.1 381,442.6 2016 2017 2018 IN TONS GENERATED BY COMPANY 2016 2017 2018 TOTAL 48,800.0 35,638.0 131,063.3 IN KG (306-4) Globe 125,340.8 104,129.9 383,261.2 AC Education - - 11.2 AC Automotive 319,610.6 430,153.0 276,906.8 GREASE WASTE IN KG 2016 2017 2018 IMI Global - 177,330.0 1,057,071.0 AC Health - - 0.0 AC Energy - - 416,832.8 Globe 5,115.0 12,263.0 6,067.0 IMI Phils 823,334.1 900,845.0 1,265,118.3 AC Infra - - 41.3 AC Health - - 3,683.8 IMI Global - - 3,687.0 TOTAL 11,401,327.2 14,784,055.4 17,914,044.9 Ayala Land 5,542.3 4,899.2 6,137.9 AC Infra 4,285.0 1,379.9 74,672.5 IMI Phils 5,200.0 - 26,680.0 Water Intensity (cubic Globe 24.4 15.8 20.7 meters/million pesos 31.80 33.46 35.53 Ayala Land - 97,448.2 112,761.1 Manila Water - - 6,375.0 revenue) IMI Global - 1,448.2 1,690.6 Globe 198,786.6 361,313.9 449,779.6 TOTAL 10,315.0 12,263.0 42,809.0 Water Productivity (million 0.03 0.03 0.03 IMI Phils 1,071.9 - 834.1 pesos revenue/cubic meters) IMI Global - 180,448.0 401,655.2 TOTAL 6,638.6 6,363.2 8,735.9 EXPIRED MEDICINES IN KG 2016 2017 2018 IMI Phils 205,300.0 577,211.0 330,702.7 Recyclable construction AC Health - - 231.6 This table refers to the water consumed by Ayala companies from utility providers, 398,160.0 466,176.0 457,592.7 waste from Ayala Land Manila Water 477,840.0 143,027.5 67,929.2 including Manila Water. Manila Water's consumption is reported under Water Abstraction from Natural Sources. The increase in water consumption in 2018 MEDICAL WASTES IN KG 2016 2017 2018 This table refers to the non-hazardous wastes generated by Ayala companies TOTAL 1,205,822.2 1,790,981.5 2,134,890.1 is primarily due to the increase in MDC's construction projects from 174 in 2017 which can be recycled or reused AC Health - - 3,452.2 to 248 in 2018. The concrete batching plants used in these projects require high IMI Global sites in China, Mexico and Bulgaria started reporting in 2017. amounts of water. IMI's global sites in Japan (VIA), London (STI), Czech Republic AC Energy, AC Health and IMI Global sites in Czech Republic, Serbia, and Serbia also started reporting water consumption in 2018. Japan (VIA), and London (STI) and Cebu (Phils) started reporting in 2018.
196 AYALA CORPORATION 2018 INTEGRATED REPORT 197 WATER ABSTRACTION FROM NATURAL GASOLINE PURCHASED ENERGY CONSUMED SOURCES IN MILLION CUBIC METERS 2016 2017 2018 CONSUMPTION 2016 2017 2018 ELECTRICITY OUTSIDE THE 2016 2017 2018 2016 2017 2018 (303-1) IN LITERS IN KILOWATT- ORGANIZATION IN GIGA HOURS JOULES (302-2) Water abstracted from ground water 76.5 89.0 85.2 AC Automotive 202,838.9 242,132.6 140,521.7 AC Automotive 7,062,238.9 7,418,881.0 7,401,169.5 AC Automotive (initial fuel 5,342.6 5,238.5 2,534.3 Water abstracted from surface water 753.5 768.4 779.5 AC Energy 2,579.6 8,660.0 15,407.3 load of sold vehicles) AC Education 1,464,463.7 2,725,524.0 4,402,754.9 TOTAL WATER ABSTRACTED FROM AC Infra 2,310.9 2,933.2 2,917.7 830.0 857.4 864.8 AC Energy (fuel of NATURAL SOURCES AC Energy 3,457.8 5,590.9 12,829.5 2,464,411.3 outsourced fleet) Ayala Land 186,948.0 213,392.9 333,654.0 (houseload) Percent abstracted from groundwater 9% 10% 10% AC Health (fuel of Globe 3,616,301.0 3,656,970.6 3,726,733.4 AC Health 1,193,468.9 1,364,502.4 2,379,785.0 0.0 0.0 1,499.3 Percent abstracted from surface water 91% 90% 90% outsourced fleet) IMI Global 35,183.0 34,015.9 AC Infra 42,660,890.0 49,460,939.0 50,688,587.1 AC Infra (fuel of 0.0 826.4 2,283.6 ENERGY IMI Phils 17,050.9 10,842.0 2,124.0 Ayala Land 339,881,038.6 377,904,443.3 405,575,881.4 outsourced fleet) Manila Water 190,795.7 130,613.0 165,953.7 Ayala Land (electricity BPI 52,566,069.4 48,832,505.6 50,061,550.7 1,399,928.7 1,477,827.7 1,735,214.1 consumption of tenants) ENERGY CONSUMED TOTAL 4,218,825.0 4,300,727.3 4,428,786.8 WITHIN THE Globe 446,318,966.1 482,360,321.0 484,421,708.0 2016 2017 2018 BPI (fuel of leased ORGANIZATION IN 32,150.0 29,476.1 13,607.8 IMI Global 71,161,061.6 94,859,167.2 armored vehicles) GIGAJOULES (302-1) ENERGY CONSUMPTION FROM GASOLINE IN 2016 2017 2018 IMI Phils 50,355,209.3 54,517,618.0 79,201,531.2 IMI Global (fuel of Diesel 712,778.1 732,119.9 939,166.0 GIGAJOULES 0.0 3,127.7 4,770.1 Manila Water 206,390,574.4 223,693,094.7 228,577,259.6 outsoured fleet) Gasoline 146,221.0 149,059.7 153,210.3 AC Automotive 7,030.2 8,392.1 4,870.4 IMI Phils (fuel of HCX 103,000.0 114,230.0 34,208.7 33,138.6 15,358.3 Sub-bituminous coal 62,234,158.0 69,600,117.0 67,949,427.6 AC Energy 89.4 300.1 534.0 outsourced fleet) AffinityX 173,968.0 238,336.0 Purchased electricity 3,724,397.0 4,617,355.6 5,080,313.2 AC Infra 80.1 101.7 101.1 Manila Water (fuel of 0.0 22,888.7 23,016.2 TOTAL desludging trucks) TOTAL DIRECT ENERGY Ayala Land 6,479.5 7,396.0 11,564.2 66,817,554.1 75,218,245.0 74,122,404.9 PURCHASED 1,147,892,919.4 1,315,819,006.3 1,411,198,097.5 CONSUMPTION TOTAL 1,475,087.8 1,578,114.6 1,816,692.9 GLOBE 125,338.0 126,747.6 129,165.5 ELECTRICITY Total Energy Intensity IMI Global - 1,219.4 1,179.0 Electricity (Gigajoules/million 167.1 162.2 140.8 Intensity in GWh 2.9 2.9 2.7 DIESEL CONSUMED pesos revenue) IMI Phils 591.0 375.8 73.6 per million peso OUTSIDE THE 2016 2017 2018 Total Energy Productivity Manila Water 6,612.8 4,526.9 5,751.8 ORGANIZATION IN LITERS (million pesos revenue/ 0.01 0.01 0.01 ELECTRICITY/ gigajoules) TOTAL 146,221.0 149,059.7 153,498.1 INDIRECT ENERGY 2016 2017 2018 IN GIGAJOULES AC Automotive 139,301.0 135,489.8 64,160.1 The increase in diesel and gasoline consumption in 2018 is primarily due to DIESEL high consumption in MDC's construction projects. MDC's project on Ayala Land's AC Automotive 25,424.1 26,708.0 26,644 .0 AC Energy 90,298.5 146,000.0 310,244.4 CONSUMPTION 2016 2017 2018 developments that are located on remote areas or those that have no permanent AC Health - - 39,154.0 IN LITERS connection to electricity use diesel gensets to supply power during construction. AC Education 5,272.1 9,811.9 15,849.9 AC Automotive 28,040.0 62,059.9 181,840.0 Concrete batching plants operating 24 hours and the concrete delivery trucks AC Energy AC Infra - 20,753.9 19,843.4 - - 8,871.9 assigned to transport concrete to different project locations also contributed to (houseload) AC Energy 1,047,996.1 596,865.0 2,762,126.8 Ayala Land's high fuel consumption. The Inclusion of AC Energy companies GMCP, BPI 839,566.9 769,741.9 355,354.8 Northwind, NLR, Montesol, Islasol and Sacasol in 2018 reporting also contributed AC Health 4,296.5 4,912.2 8,567 .0 AC Infra 70,989.9 74,891.7 72,835.9 IMI Global - 50,000.0 83,594.0 to the increase. AC Infra 153,579.2 178,059.4 182,478.9 Ayala Land 6,076,208.3 7,117,510.9 10,812,952.0 IMI Phils 893,328.1 865,385.0 392,829.0 Ayala Land 1,223,571.7 1,360,456 1,460,073.0 Globe 10,185,751.8 9,922,205.6 9,371,930.5 FUEL CONSUMPTION OF Manila Water - 597,717.4 601,046.2 AC ENERGY'S THERMAL 2016 2017 2018 BPI 189,237.8 175,797.0 180,222.0 IMI Global - 18,322.0 12,125.0 PLANTS IN TONNES TOTAL 1,962,494.5 2,585,087.9 1,866,225.8 Globe 1,606,748.3 1,736,497.2 1,743,918.1 IMI Phils 22,947.9 80,379.0 101,017.3 SLTEC 959,381.0 1,239,802.0 837,305.8 The decrease in diesel consumption outside the organization in 2018 is primarily IMI Global - 256,179.8 341,493.0 due to lower utilization of IMI's outsource vehicles. Additionally, BPI's Central Manila Water 1,181,615.0 1,246,410.0 1,210,377.8 GMCP - 2,867,062.0 3,161,711.0 Operations Group which oversees armored vehicles has changed their contract IMI Phils 181,278.8 196,263.4 285,126 .0 with the armored car agency from leased to outsourced starting July 2018. This TOTAL 18,613,548.9 19,118,644.1 24,525,463.2 Total 959,381.0 4,106,864.0 3,999,016.8 shifts the management of fuel from BPI to the agency and resulted to lower diesel Manila Water 743,006.1 805,295.1 822,878.1 consumption. ENERGY CONSUMPTION ENERGY CONSUMPTION HCX - 370.8 411.2 FROM DIESEL IN 2016 2017 2018 OF AC ENERGY'S GASOLINE CONSUMED 2016 2017 2018 AffinityX - 626.3 858.0 GIGAJOULES THERMAL PLANTS OUTSIDE THE 2016 2017 2018 IN GIGAJOULES AC Automotive 1,073.7 2,376.5 6,963.3 TOTAL ENERGY ORGANIZATION IN LITERS CONSUMPTION SLTEC 17,339,968.0 22,437,639.0 15,002,349.9 AC Automotive 240.0 1,445.1 2,233.9 AC Energy 40,131.4 22,856.1 105,771.5 FROM PURCHASED 4,132,414.5 4,736,948.4 5,080,313.2 GMCP 44,894,190.0 47,162,478.0 52,947,077.7 ELECTRICITY IN AC Infra 2,718.5 2,867.9 2,789.1 AC Energy - - 27,386.7 GIGAJOULES Total 62,234,158.0 69,600,117.0 67,949,427.6 Ayala Land 232,679.3 272,554.5 414,065.8 AC Infra - 913.2 43,963.0 The increase in electricity consumption in 2018 is primarily due to additional GMCP started reporting its coal consumption to AC in 2017. Energy consumption Globe 390,048.2 379,956.0 358,884.1 reporting of IMI's Serbia and Japan sites IMI Global - 35,000.0 45,269.0 was computed based on actual net heat rate of coal used in each plant. SLTEC IMI Global - 701.6 464.3 have lower energy consumption due to shutdown of its Unit 2 boiler in Q3 of 2018. IMI Phils - - 9,102.0 IMI Phils 878.8 3,078.0 3,868.3 ELECTRICITY TOTAL 240.0 37,358.3 127,954.5 CONSUMED OUTSIDE 2016 2017 2018 TOTAL 712,778.1 732,119.9 939,166.0 THE ORGANIZATION The increase in gasoline consumption outside the organization in 2018 is primarily IN KILOWATT-HOURS due to additional reporting by AC Energy companies GMCP, Montesol, Islasol and Sacasol and AC Infra's new logisitics business, Entrego. Ayala Land (tenants) 388,869,075.2 410,507,701.4 482,003,903.0
198 AYALA CORPORATION 2018 INTEGRATED REPORT 199 EMISSIONS ECONOMIC VALUE GENERATED, DISTRIBUTED AND RETAINED (201-1)
SCOPE 1 DIRECT ENERGY SCOPE 1 DIRECT ENERGY PAYMENTS TO PROVIDERS GHG EMISSIONS (TOTAL) 2016 2017 2018 GHG EMISSIONS (EQUITY) 2016 2017 2018 ECONOMIC OF CAPITAL - DIVIDENDS 305-1 305-1 VALUE GENERATED - 2016 2017 2018 2016 2017 2018 AND INTEREST IN IN MILLION PESOS AC Automotive 980.5 1,131.3 769.1 AC Automotive 980.5 1,131.3 769.1 MILLION PESOS AC Energy 1,640,366.0 7,359,204.3 6,949,775.3 AC Energy 574,128.1 1,790,232.1 1,603,275.9 AC Automotive 23,805.05 33,698.38 23,156.29 AC Automotive 112.47 144.81 (60.78) AC Infra 48.1 147.0 198.2 AC Infra 51.0 51.4 69.4 AC Education 20.97 34.96 48.45 AC Education - - - Ayala Land 43,360.1 89,171.6 31,388.1 Ayala Land 20,422.6 41,999.8 14,749.3 AC Energy 960.92 2,215.64 6,547.66 AC Energy - 40.34 165.73 Globe 39,081.2 38,531.8 36,167.2 Globe 12,115.2 11,944.8 11,186.5 AC Health 40.36 16.30 34.39 AC Health - - - IMI Global - 129.0 109.7 IMI Global 0.0 65.8 56.0 AC Infra 0.74 6.83 22.82 AC Infra - - - IMI Phils 100.2 240.0 275.5 IMI Phils 51.1 122.4 140.5 Ayala Land 124,628.80 142,297.00 163,746.80 Ayala Land 14,375.60 15,041.67 17,079.90 Manila Water 3,952.6 3,702.1 3,620.5 Manila Water 2,039.5 1,910.3 1,860.9 BPI 66,551.00 71,020.00 78,522.00 BPI 20,552.11 22,226.30 27,761.00 AC Energy (renewables) (160,476.0) (196,224.2) (342,070.6) AC Energy (renewables) (75,235.9) (92,192.6) (115,669.7) Globe 126,436.00 137,550.40 151,910.07 Globe 15,504.30 17,538.90 19,274.00 TOTAL 1,727,888.6 7,492,257.0 7,022,321.2 TOTAL 609,831.1 1,847,457.9 1,632,116.5 IMI 39,993.39 55,028.26 69,731.03 IMI 595.08 768.65 519.62 Scope 1 Intensity 5.2 19.2 15.7 Scope 1 Intensity 1.83 4.73 3.66 Manila Water 17,971.21 18,877.51 20,266.82 Manila Water 3,202.44 3,679.95 3,792.87 As a holding company, Ayala Corporation's greenhouse gas emissions are reported based on equity ownership. By doing so, we are able to make informed investment decisions based on the carbon footprint of the assets we own. Our Scope 1 emissions include the direct combustion of various diesel and gasoline among our companies' HCX 335.06 208.69 202.53 HCX - - - generator sets and company-owned vehicles, as well as, the combustion of coal in AC Energy's thermal plants. Standards used for the computations are based on the GHG AffinityX 1,594.53 1,746.67 1,784.01 AffinityX 484.55 33.10 40.66 Protocol Corporate Accouting and Reporting Standard. The gases reported include carbon dioxide, methane, and nitrous oxide. TOTAL 402,338.02 462,700.65 515,972.87 TOTAL 54,826.55 59,473.71 68,573.00 SCOPE 2 INDIRECT SCOPE 2 INDIRECT ENERGY GHG EMISSIONS 2016 2017 2018 ENERGY GHG EMISSIONS 2016 2017 2018 PAYMENTS TO SUPPLIERS PAYMENTS TO (TOTAL) 305-2 (EQUITY) 305-2 - OPERATING COSTS IN 2016 2017 2018 GOVERNMENT - TAXES 2016 2017 2018 MILLION PESOS IN MILLION PESOS AC Automotive 3,886.5 4,444.5 5,365.9 AC Automotive 3,886.5 4,444.5 5,365.9 AC Automotive 21,985.31 31,148.60 21,486.71 AC Automotive 141.78 206.50 261.21 AC Education 883.4 1,644.0 3,135.6 AC Education 883.4 1,644.0 3,135.6 AC Education 32.00 82.60 50.94 AC Education 8.46 0.37 1.01 AC Energy - - 765.5 AC Energy - - 765.5 AC Energy 255.69 1,134.34 3,194.80 AC Energy 69.89 167.86 59.72 AC Health 719.9 823.1 1,717.1 AC Health 719.9 823.1 1,717.1 AC Health 89.00 82.45 92.61 AC Health 12.50 2.79 6.32 AC Infra 42,016.8 29,385.1 30,181.5 AC Infra 42,016.8 29,385.1 30,181.5 AC Infra 35.98 79.62 48.98 AC Infra 14.06 18.34 4.44 Ayala Land 197,214.3 210,931.0 242,275.7 Ayala Land 93,085.2 99,348.5 113,845.4 Ayala Land 68,157.06 76,931.36 93,611.70 Ayala Land 11,200.97 13,296.10 15,675.90 BPI 36,247.1 28,700.6 35,860.7 BPI 17,471.1 13,833.7 17,435.5 BPI 11,229.20 13,380.13 16,106.00 BPI 12,115.17 13,578.03 16,358.00 Globe 251,047.8 271,458.8 352,389.6 Globe 77,824.8 84,152.2 108,994.1 Globe 55,729.80 60,458.40 38,852.60 Globe 7,209.10 8,020.10 5,328.72 IMI Global - 50,680.9 67,558.7 IMI Global - 25,847.3 34,454.9 IMI 29,628.75 41,979.81 56,722.25 IMI 515.85 682.25 657.15 IMI Phils 35,863.0 38,827.4 56,407.3 IMI Phils 18,182.5 19,802.0 28,767.7 Manila Water 4,039. 41 4,481.38 5,211.61 Manila Water 3,128.61 3,082.86 3,237.64 Manila Water 153,842.8 157,058.6 164,014.3 Manila Water 79,382.9 81,042.2 84,303.4 HCX 3.28 6.93 87.75 HCX 2.27 1.85 1.67 HCX 109.4 62.1 81.4 HCX 109.4 62.1 81.4 AffinityX 484.55 562.21 594.59 AffinityX 31.11 15.02 43.81 AffinityX 118.9 104.9 169.7 AffinityX 118.9 104.9 169.7 TOTAL 191,670.04 230,327.83 236,060.54 TOTAL 34,449.79 39,072.07 41,635.60 TOTAL 721,949.7 794,121.2 959,923.1 TOTAL 333,717.5 360,489.7 429,217.7 Scope 2 Intensity 1.8 1.7 1.9 Scope 2 Intensity 0.8 0.8 0.9 PAYMENTS TO EMPLOYEES PAYMENTS TO - WAGES AND BENEFITS 2016 2017 2018 COMMUNITIES 2016 2017 2018 Our Scope 2 emissions include the indirect energy emissions from the purchase of electricity from the national grid. Location-based grid emission factors used for IN MILLION PESOS IN MILLION PESOS local facilities are based on the Department of Energy (Philippines). Factors used for global sites are based on the GHG Protocol Corporate Accouting and Reporting Standard. The gases reported include carbon dioxide, methane, and nitrous oxide. AC Automotive 900.31 1,416.73 671.25 AC Automotive - - - AC Education 42.07 47.05 47.19 AC Education 0.22 0.20 0.03 SCOPE 3 OTHER INDIRECT SCOPE 3 OTHER INDIRECT AC Energy 51.71 115.00 176.86 AC Energy - - 4.15 GHG EMISSIONS (TOTAL) 2016 2017 2018 GHG EMISSIONS (EQUITY) 2016 2017 2018 305-3 305-3 AC Health 22.60 34.03 38.45 AC Health - - - AC Automotive 377.5 367.2 177.0 AC Automotive 377.5 367.2 177.0 AC Infra 26.45 24.81 28.57 AC Infra 0.03 - - AC Energy 328,416.6 12,472,719.3 12,040,202.9 AC Energy 114,945.8 2,597,166.9 2,452,032.1 Ayala Land 5,458.79 7,007.24 6,485.60 Ayala Land 84.83 52.67 76.10 AC Health 0.0 0.0 104.9 AC Health 0.0 0.0 104.9 BPI 13,266.30 13,652.65 15,161.00 BPI 109.20 87.21 24.00 AC Infra 0.0 0.0 153.0 AC Infra 0.0 0.0 153.0 Globe 10,109.60 12,236.30 13,163.66 Globe - 5.00 77.83 Ayala Land 248,406.5 266,780.1 295,756.4 Ayala Land 117,247.9 125,653.4 138,975.9 IMI 6,971.61 9,319.86 11,310.67 IMI 0.50 0.65 0.66 BPI 2,063.1 1,958.7 952.9 BPI 996.5 944.1 463.3 Manila Water 1,926.02 2,081.64 2,342.74 Manila Water 26.67 31.84 44.27 Globe 1,893.7 1,610.4 0.0 Globe 587.0 499.2 0.0 HCX 211.96 123.15 118.56 HCX - - 0.02 Manila Water 1,464.2 1,652.9 1,610.8 Manila Water 755.5 852.9 828.0 AffinityX 885.09 1,003.76 1,049.42 AffinityX 0.03 0.04 - IMI Global 0.0 213.5 326.8 IMI Global 0.0 108.9 166.7 TOTAL 39,872.51 47,062.23 50,593.97 TOTAL 221.46 177.62 227.06 IMI Phils 2,394.1 2,319.2 1,073.4 IMI Phils 1,213.8 1,182.8 547.5 TOTAL 585,015.7 12,747,621.2 12,340,748.7 TOTAL 236,124.0 2,726,775.4 2,593,647.5
Our Scope 3 emissions cover the equivalent fuel combustion emissions of diesel and gasoline of outsourced and third-party vehicles, as well as, the equivalent fuel consumed in the transport of coal by AC Energy's thermal plants. This also covers the electricity consumption of tenants of Ayala Land properties. Standards used for the computations are based on the GHG Protocol Corporate Accouting and Reporting Standard. The gases reported include carbon dioxide, methane, and nitrous oxide.
200 AYALA CORPORATION 2018 INTEGRATED REPORT 201 GROUP-WIDE ECONOMIC HEADCOUNT 2016 2017 2018 AGE DISTRIBUTION PERFORMANCE OF PERMANENT 2016 2017 2018 2016 2017 2018 (405-1) EMPLOYEES Economic Value Generated 402,338.02 462,700.65 515,972.87 (102-7) below 30 30-50 years over 50 years below 30 30-50 years over 50 years below 30 30-50 years over 50 years Payments to Suppliers - Operating Costs 191,670.04 230,327.83 236,060.54 years old old old years old old old years old old old MALE FEMALE MALE FEMALE MALE FEMALE Payments to Employees - Wages and AC Automotive 842 828 80 863 800 96 858 824 119 39,872.51 47,062.23 50,593.97 Benefits AC Automotive 1,035 715 1,042 717 1,070 731 AC Education 517 437 141 700 465 132 370 401 130 Payments to Providers of Capital - 54,826.55 59,473.71 68,573.00 AC Education 432 663 481 816 349 552 Dividends and Interests AC Energy 91 107 9 197 359 50 156 350 44 Payments to Government - Taxes 34,449.79 39,072.07 41,635.60 AC Energy 128 79 438 168 413 137 AC Health 385 242 10 636 441 16 781 612 17
Payments to Communities 221.46 177.62 227.06 AC Health 270 367 606 487 590 1,377 AC Infra 288 981 223 383 959 211 375 1,058 235 Economic Value Distributed 321,040.35 376,113.46 397,090.16 AC Infra 1,001 491 1,064 489 1,101 567 AFI 29 48 10 23 43 12 17 42 16 Economic Value Retained 81,297.68 86,587.19 118,882.71 AFI 30 57 27 51 25 50 ALI 1,765 2,297 307 2,144 2,552 344 2,316 2,739 303 BPI 7,270 6,892 1,039 8,484 7,494 1,058 9,543 8,206 1,162 AT THE PARENT COMPANY 2016 2017 2018 ALI 2,128 2,241 2,461 2,579 2,571 2,787 - AYALA CORPORATION Globe 1,641 5,291 248 1,609 5,304 293 1,908 5,490 318 BPI 4,514 10,687 5,214 11,822 6,037 12,874 Economic Value Generated 217,610.27 259,656.58 293,487.79 IMI Global 5,871 7,575 700 5,308 4,313 685 4,055 4,653 963 Payments to Suppliers - Operating Costs 132,761.25 168,029.26 189,661.58 Globe 3,806 3,374 3,860 3,346 4,143 3,573 IMI Phils - - - 1,563 3,281 122 2,362 4,142 182 Payments to Employees - Wages and 17,161.38 21,274.78 23,786.59 IMI Global 5,581 8,565 4,823 5,483 6,280 6,456 Benefits Manila Water 491 711 551 600 907 515 646 968 504 Payments to Providers of Capital - IMI Phils - - 1,438 3,528 2,151 4,535 AffinityX 379 191 4 379 181 4 265 176 4 19,108.19 20,025.44 24,719.56 Dividends and Interests Manila Water 1,120 633 1,250 772 1,351 767 HCX 62 50 2 52 59 2 59 61 2 Payments to Government - Taxes 44,528.39 50,492.09 60,866.93 AffinityX 292 282 292 272 229 216 Ayala Corporation 19 70 59 16 76 57 17 84 51 Payments to Communities 406.72 254.89 565.30 GROUP-WIDE Economic Value Distributed 213,965.93 260,076.46 299,599.96 HCX 49 65 50 63 53 69 HEADCOUNT BY AGE 19,650 25,720 3,383 22,957 27,234 3,597 23,728 29,806 4,050 GROUP Economic Value Retained 3,644.34 (419.88) (6,112.17) Ayala 70 78 70 79 69 83 Corporation This table headcount of full time employees below 30 years old, between 30 to 50 years old, and above 50 years old in local and global operations GROUP-WIDE 20,456 28,297 23,116 30,672 26,432 34,744 HEADCOUNT This table includes headcount of full time male and female employees in local DISTRIBUTION BY HR PERFORMANCE and global operations 2016 2017 2018 POSITION (405-1)
HEADCOUNT OF HEADCOUNT OF SUPPORT Management Management Management PERMANENT EMPLOYEES 2016 2017 2018 2016 2017 2018 STAFF Rank and file Rank and file Rank and file (102-7) Middle Senior Middle Senior Middle Senior
AC Automotive 1,750 1,759 1,801 AC Automotive 0 698 295 AC Automotive 1,591 112 47 1,588 128 43 1,622 125 54
AC Education 1,095 1,297 901 AC Education 104 105 165 AC Education 0 0 0 1,127 149 21 712 167 24
AC Energy 207 606 550 AC Energy 308 820 760 AC Energy 143 52 12 278 278 50 264 242 44
AC Health 637 1,093 1,967 AC Health 0 90 210 AC Health 543 85 9 70 18 3 1,242 151 17
AC Infra 1,492 1,553 1,668 AC Infra 91 162 4,076 AC Infra 1,384 71 37 1,091 397 65 1,119 491 58 AFI 87 78 75 AFI 64 68 51 AFI 48 36 3 55 20 3 3 22 50 ALI 4,369 5,040 5,358 ALI 54,241 53,774 54,369 ALI 3,167 1,138 64 3,700 1,276 64 4,249 1,081 28 BPI 15,201 17,036 18,911 BPI 2,634 2,415 2,725 BPI 10,095 4,913 193 10,427 6,411 198 12,250 6,442 219 Globe 7,180 7,206 7,716 Globe 4,439 8,173 4,025 Globe 2,617 4,086 477 2,527 4,203 476 2,790 4,446 480 IMI Global 14,146 11,782 9,672 IMI Global - - 1,251 IMI Global 12,171 1,577 398 8,910 1,158 238 14,360 1,595 438 IMI Phils - 4,966 6,686 IMI Phils 413 567 144 IMI Phils - - - 4,227 589 150 5,766 737 183 Manila Water 1,753 2,022 2,118 Manila Water 647 405 660 Manila Water 255 1,375 123 444 1,444 134 513 1,462 143 AffinityX 574 564 445 AffinityX 14 19 0 AffinityX 506 62 6 491 67 6 418 22 5 HCX 114 113 122 HCX 11 11 10 HCX 70 42 2 69 42 2 72 47 3 Ayala Corporation 148 149 152 Ayala Corporation - 53 56 Ayala Corporation 56 66 26 54 71 24 58 70 24 GROUP-WIDE TOTAL HEADCOUNT OF 48,753 55,264 58,142 62,966 67,360 68,797 HEADCOUNT SUPPORT STAFF GROUP-WIDE HEADCOUNT BY AGE 32,646 13,615 1,397 35,058 16,251 1,477 45,438 17,100 1,770 This table includes headcount of permanent full time employees in local and This table includes the support staff from the group-wide supply chain in local GROUP global operations. Headcount for IMI Global in 2016 includes Philippine sites. and global operations This table of total permanent employees distributed by position only includes headcount of full time rank and file, middle management, and senior management employees in local and global operations.
202 AYALA CORPORATION 2018 INTEGRATED REPORT 203 TOTAL NEW EMPLOYEE HIRES TOTAL TRAINING HOURS TOTAL TRAINING 2016 2017 2018 2016 2017 2018 (401-1) (404-1) HOURS BY RANK 2016 2017 2018 (404-1) AC Automotive 547 450 470 AC Automotive 41,623.0 29,249.0 49,979.0 Management Management Management AC Education 697 444 478 AC Education 0 37,605.5 68,485.5 Rank and file Rank and file Rank and file AC Energy 103 146 87 AC Energy 9,500.0 7,447.0 18,171.0 Middle Senior Middle Senior Middle Senior
AC Health 271 23 931 AC Health 0 4,332.0 10,682.0 AC Automotive 38,898 1,573 1,152 27,664 1,271 314 46,946 2,082 951
AC Infra 213 188 260 AC Infra 662.0 10,719.0 43,754.5 AC Education - - - 32,187 4,065 1,354 62,090 5,593 804 AFI 16 16 31 AFI 571.0 1,638.0 1,504.5 AC Energy 2,084 6,884 532 1,569 5,638 240 7,256 8,821 1,544 ALI 848 1,199 1,109 ALI 104,889.7 132,337.3 134,683.3 AC Health - - - 2,844 1,416 72 7,710 1,188 1,784 BPI 3,630 3,652 3,649 BPI 418,012.5 342,344.0 277,679.0 AC Infra 406 236 20 2,127 7,730 862 17,788 25,204 518 Globe 1,009 753 1,220 Globe 176,584.0 124,602.0 193,203.0 AFI 309 215 48 1,027 554 57 857 453 195 IMI Global 7,512 4,516 6,067 IMI Global 33,301.0 751,770.0 756,827.0 ALI 67,981 35,599 1,311 89,275 39,725 3,337 105,314 29,057 312 IMI Phils - 375 706 IMI Phils 0.0 187,155.0 179,142.0 BPI 286,533 129,680 1,800 250,360 90,848 1,136 206,047 70,680 952 Manila Water 133 414 432 Manila Water 36,009.5 43,854.0 45,006.5 AffinityX 228 35 124 AffinityX 0 24,515.1 53,173.0 Globe 45,156 121,772 9,656 30,884 91,953 1,765 57,440 128,959 6,196 HCX 36 28 59 HCX 76.0 701.0 1,701.0 IMI Global 11,141 18,901 3,260 653,633 89,235 8,902 632,162 114,664 10,701 Ayala Corporation 28 10 23 Ayala Corporation 1,970.0 4,298.0 0 IMI Phils - - - 164,091 18,431 4,633 155,115 20,050 3,565 GROUP-WIDE TOTAL GROUP-WIDE TOTAL 15,271 12,249 15,646 823,198.0 1,702,566.8 1,833,991.3 Manila Water 2,350 31,311 2,350 2,351 38,735 2,768 3,123 35,863 6,021 NEW HIRES TRAINING HOURS AffinityX 25,055 1,647 28 23,039 1,177 300 52,725 362 86 This table includes the newly-hired employees of the Ayala group in local and This table includes the total number of training hours provided to the employees global operations of the Ayala group in local and global operations HCX 28 48 0 156 521 24 819 851 32 Ayala Corporation 1,084 884 2 1,985 2,217 96 - - -
TOTAL EMPLOYEE TURNOVER AVERAGE TRAINING GROUP-WIDE TOTAL 481,023 348,748 20,157 1,283,192 393,516 25,859 1,355,392 443,826 33,660 2016 2017 2018 2016 2017 2018 (401-1) HOURS (404-1) AC Automotive 397 309 386 AC Automotive 23.8 16.6 27.8 TOTAL NUMBER OF OCCUPATIONAL HEALTH AND TOTAL NUMBER OF DISABLING TOTAL NUMBER OF AC Education 156 213 417 AC Education - 29.0 76.0 NON-DISABLING INJURIES SAFE MAN-HOURS SAFETY (EMPLOYEES) INJURIES FOR EMPLOYEES FATALITIES AC Energy 112 58 47 AC Energy 45.9 12.3 33.0 FOR EMPLOYEES
AC Health 173 90 455 AC Health - 4.0 7.6 AC Automotive 66 2 0 - AC Infra 101 69 100 AC Infra 0.4 6.9 26.2 AC Energy 175 0 0 2,723,272 AFI 13 13 14 AFI 6.6 21.0 20.1 AC Infra 14 1 0 4,542,045 ALI 566 611 668 ALI 24.0 26.3 25.1 BPI 2,064 1,943 1,786 BPI 27.5 20.1 14.7 ALI 421 14 5 193,498,481
Globe 666 155 678 Globe 24.6 17.3 25.0 Globe 124 1 0 - IMI Global 7,355 5,013 5,544 IMI Global 2.4 56.1 57.2 IMI Global 31 24 0 22,994,657 IMI Philippines 0 528 837 IMI Phils - 37.7 26.8 Manila Water 123 186 362 Manila Water 20.5 21.7 21.2 IMI Phils 37 0 0 16,860,195 AffinityX 41 31 35 AffinityX - 43.5 119.5 Manila Water 2 1 0 16,247,826 HCX 35 158 HCX 0.7 6.2 13.9 TOTAL 870 43 5 256,866,475 Ayala Corporation 13 8 18 Ayala Corporation 13.3 28.8 - GROUP-WIDE TOTAL GROUP-WIDE AVERAGE 11,780 9,262 11,505 16.9 30.8 31.5 TURNOVER TRAINING HOURS This table includes direct employees who retired, ended their contracts, left voluntarily, and left involuntarily
204 AYALA CORPORATION 2018 INTEGRATED REPORT 205
INDEPENDENT ASSURANCE STATEMENT Basis of our opinion A multi-disciplinary team of sustainability and assurance specialists performed assurance at Head office Introduction and selected sites of the Ayala Corporation. We undertook the following activities: DNV GL Business Assurance Philippines Branch (“DNV GL”), part of DNV GL Group has been commissioned by the management of Ayala Corporation (“Ayala Corp.” (SEC Identification Number: • Review of the non–financial sustainability disclosures in this Report; 34218)) to undertake independent assurance of sustainability/non-financial disclosures in Ayala Corp.’s • Review of approach to materiality determination and stakeholder engagement and recent outputs 2018 Integrated Report (the “Report”) in its printed format for the year ended 31st December 2018. The although DNV GL have no direct engagement with external stakeholders; intended users of this assurance statement are the management of the Company. • Review of information provided to us by the Company on its reporting and management processes related to sustainability performance for the reporting year based on the reporting framework We performed our work using DNV GL’s assurance methodology VeriSustainTM1, which is based on our adopted by Ayala Corp.; professional experience, international assurance best practice including International Standard on • Interviews with selected members of leadership team, and senior managers responsible for Assurance Engagements (ISAE) 3000 Revised*, along with GRI Reporting content and quality principles. management of sustainability issues and review of selected evidence to support issues discussed. The verification engagement was carried out during February 2019 – April 2019. We were free to choose interviewees and interviewed those with overall responsibility for the programmes to deliver the targets for medium and long term vision, mission and milestones; • We understand that the reported financial data and related information are based on statutory Performed desk review of selected sustainability parameters for sampled entities and findings were disclosures, which are subject to a separate independent statutory audit process. We did not review discussed with Corporate Sustainability Team; financial disclosures and data as it was not within the scope of our work. • Planned site visits based on identified material topics as well as geographical and divisional spread. During site visits data proofing and site level material issues were discussed; We planned and performed our work to obtain the evidence we considered necessary to provide a basis • Review of supporting evidence for key claims and data disclosed in the Report. Our verification for our assurance opinion related to non-financial sustainability disclosures in this Report. We are processes were prioritised based on our risk-based approach i.e. relevance of identified material providing a ‘limited level’ of assurance based on DNV GL VeriSustain and no external stakeholders were topics and sustainability context of the business; interviewed as part of this assurance engagement. • Review of the processes for gathering and consolidating the performance data and, for a sample, checking the data consolidation at site and corporate level; The engagement excludes the sustainability management, performance and reporting practices of Ayala • The reporting topic boundary is based on the materiality assessment covering the operations of Corp.’s associated companies, suppliers, contractors and any third-parties mentioned in the Report. The various businesses under Ayala Corporation. company position statements, the statements for the management approach, and case studies and examples are excluded from the scope of our work. The procedures performed in a limited assurance engagement vary in nature and timing, and are less in extent than for a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained if a reasonable assurance engagement had been performed. During the assurance process, we did not Responsibilities of the Management of Ayala Corp. and of the Assurance come across limitations to the scope of the agreed assurance engagement.
Provider The Board of Ayala Corp. has sole responsibility for the preparation of the Report and responsible for all information provided in the Report as well as the processes for collecting, analysing and reporting the Opinion and Observations information presented in the Report. Ayala Corp. has stated in this Report that this report is based on On the basis of the work undertaken, we provide a limited level of assurance over non-financial disclosure the
based on reporting requirements of the International
by the Company to us as part of our review have been provided in good faith, true and free from material Without affecting our assurance opinion, we also provide the following observations. We have evaluated misstatements. Because of the selected nature (sampling) and other inherent limitation of both the Report’s adherence to the following Principles: procedures and systems of internal control, there remains the unavoidable risk that errors or
irregularities, possibly significant, may not have been detected. DNV GL was not involved in the Stakeholder Inclusiveness preparation of any statements or data included in the Report except for this Assurance Statement. DNV The participation of stakeholders in developing and achieving an accountable and strategic response to GL expressly disclaims any liability or co-responsibility for any decision a person or an entity may make Sustainability. based on this Assurance Statement.
In our opinion the stakeholder engagement process is fairly established to identify key stakeholders, Our verification engagement included limited level of verification of Sustainability performance sustainability challenges and concerns of diverse stakeholder groups considering the operations of Ayala disclosures for identified material topics of Ayala Corp. as identified under reporting boundary in “About Corp., i.e. Ayala Corp. has identified key internal and external stakeholder groups including investors the Report Section”. Our verification applies a ±5% uncertainty threshold towards errors and omissions. and shareholders, business partners and affiliates, creditors and suppliers, government agencies and regulators, customers, employees, communities, industry associations, and other stakeholders. Ayala Corp. engages with the stakeholders at the Conglomerate/ Group and business unit levels through various channels to identify sustainability concerns and expectations. The Report discloses how Ayala Corporation engages with stakeholders, what are their concerns with relevant material topics and how Ayala Corporation responds to significant material topics.
1 The VeriSustain protocol is available on dnvgl.com. * Assurance Engagements other than Audits or Reviews of Historical Financial Information. Page 1 of 4 Page 2 of 4 206 AYALA CORPORATION 2018 INTEGRATED REPORT 207
Materiality StatementStatement of Competence of Competence and Independence and Independence DNV GL applies its own management standards and compliance policies for quality control, in accordance The process of determining the issues that are most relevant to an organization and its stakeholders. DNV GL applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment Requirements for bodies providing audit and with ISO/IEC 17021:2011 - Conformity Assessment Requirements for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality The report brings out the application of
This engagement work was carried out by an independent team of sustainability assurance professionals. This engagement work was carried out by an independent team of sustainability assurance professionals. Responsiveness DNV GL was not involved in the preparation of any statements or data included in the Report except for DNV GL was not involved in the preparation of any statements or data included in the Report except for The extent to which an organization responds to stakeholder issues. this Assurance Statement. DNV GL maintains complete impartiality toward internal stakeholders this Assurance Statement. DNV GL maintains complete impartiality toward internal stakeholders interviewed during the assurance process. interviewed during the assurance process. The Report discloses how Ayala Corp. engages with identified stakeholders, what are their key concerns
with relevant material topics. Further the Report has brought out responses to the identified material DNV GL has provided assurance to Ayala Land, Inc., Globe Telecom, Inc, Bank of Philippine Islands and DNV GL has provided assurance to Ayala Land, Inc., Globe Telecom, Inc, Bank of Philippine Islands and topics and fairly disclosed the strategies, approach and challenges considering the overall sustainability Manila Water which are business units of Ayala Corp. In our opinion, there is no conflict of interest in the Manila Water which are business units of Ayala Corp. In our opinion, there is no conflict of interest in the context and external environment of its business within the identified reporting boundary. The Report assurance engagement provided to the business units. DNV GL did not provide any services to Ayala assurance engagement provided to the business units. DNV GL did not provide any services to Ayala could further bring out the long and medium term targets related to identified material topics. Corp. during 2018 that could compromise the independence or impartiality of our work. Corp. during 2018 that could compromise the independence or impartiality of our work.
For and on behalf of DNV GL Business Assurance AS Philippines Branch For and on behalf of DNV GL Business Assurance AS Philippines Branch Reliability and Accuracy The accuracy and comparability of information presented in the report, as well as the quality of
underlying data management systems.
The majority of data and information verified at the Corporate Office, and sampled sites and those resulting out of desk review were found to be identifiable and traceable to the source and nothing came to our attention to suggest that reported data have not been properly collated and consolidated at group
level, nor that the assumptions used were inappropriate. Some of the data inaccuracies identified during
the verification process at sampled locations were found to be attributable to interpretation and Vadakepatth Nandkumar Heng Chwin Mak Prasun Kundu aggregation errors and the errors have been communicated for correction and corrected upon. Vadakepatth Nandkumar Heng Chwin Mak Prasun Kundu Lead Verifier, Operations Manager – Assurance Reviewer, Lead Verifier, Operations Manager – Assurance Reviewer, Head - Sustainability South East Asia DNV GL – Business Assurance Head - Sustainability South East Asia DNV GL – Business Assurance Operations, DNV GL Technology Centre. India Private Limited. Operations, DNV GL Technology Centre. India Private Limited. DNV GL – Business Assurance IndiaSingapore Private 118227 Completeness DNV GL – Business Assurance IndiaSingapore Private 118227 Limited. How much of all the information that has been identified as material to the organization and its Limited. stakeholders is reported. 1st April 2019, Philippines 1st April 2019, Philippines ------The Report has fairly attempted to disclose the sustainability disclosures covering economic, ------DNV GL Business Assurance AS Philippines Branch is part of DNV GL – Business Assurance, a global provider of environment, social topics along with governance, risks and opportunities for key material topics based DNV GL Business Assurance AS Philippines Branch is part of DNV GL – Business Assurance, a global provider of certification, verification, assessment and training services, helping customers to build sustainable business certification, verification, assessment and training services, helping customers to build sustainable business on
Neutrality The extent to which a report provides a balanced account of an organization’s performance, delivered in a neutral tone.
Nothing has come to our attention to suggest that the Report does not bring out disclosures related to sustainability issues and performances in a neutral tone, in terms of content and presentation related to the challenges faced across the Philippines and other global sites during the reporting period for the Ayala Corporation. It is suggested that the future Reports may explicitly bring out sustainability challenges at various geographical locations of operations.
2 The DNV GL Code of Conduct is available from DNV GL website (2 www.dnvgl.com) The DNV GL Code of Conduct is available from DNV GL website (www.dnvgl.com) Page 4 of 4 Page 3 of 4 Page 4 of 4 208 AYALA CORPORATION 2018 INTEGRATED REPORT 209
This Integrated Report references disclosures listed in the GRI Content Index below. The GRI Content Index GRI CONTENT indicates the reported disclosures, the location of information in this report, and reference pages to the INDEX independent assurance statement for relevant indicators.
GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS GRI 101: FOUNDATION 2016 GRI 101: FOUNDATION 2016 GENERAL DISCLOSURES GENERAL DISCLOSURES GRI 102: STAKEHOLDER ENGAGEMENT GENERAL GRI 102: ORGANIZATIONAL PROFILE GENERAL DISCLOSURES 102-40 List of stakeholder groups 72-75 2016016 DISCLOSURES 102-1 Name of the organization Ayala Corporation 102-42 Identifying and selecting stakeholders 72-75 2016016 102-2 Activities, brands, products, and services 8, 40-41 102-43 Approach to stakeholder engagement 72-75 102-44 Key topics and concerns raised 72-75 102-3 Location of headquarters 8, 224 REPORTING PRACTICE 102-4 Location of operations 12-13 102-45 Entities included in the consolidated financial statements 178-181 102-5 Ownership and legal form 166 102-46 Defining report content and topic Boundaries 182-193 102-6 Markets served 8, 12-13 102-47 List of material topics 182-193
102-7 Scale of the organization 86, 202 102-48 Restatements of information 194-195
102-11 Precautionary Principle or approach 68 102-49 Changes in reporting 194-195
102-50 Reporting period 4-5 102-12 External initiatives Founding Member of UN Global Compact Network Philippines 102-51 Date of most recent report 4-5
Membership to other associations and advocacy organizations 102-52 Reporting cycle 4-5 102-13 Membership of associations are held in a personal capacity by AC Citizens. 102-53 Contact point for questions regarding the report 4-5
102-55 GRI content index 210-215 STRATEGY 102-56 External assurance 4, 206-209 102-14 Statement from senior decision-maker 22-29
102-15 Key impacts, risks, and opportunities 62-66
ETHICS AND INTEGRITY
102-16 Values, principles, standards, and norms of behavior 171
GOVERNANCE MATERIAL TOPICS 102-18 Governance structure 152-156
Executive-level responsibility for economic, environmental, and GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS 102-20 36, 163 social topics ECONOMIC
Consulting stakeholders on economic, environmental, and social ECONOMIC PERFORMANCE 102-21 72-75 topics GRI 103: 103-1 Explanation of the material topic and its Boundary 182-185 MANAGEMENT 102-22 Composition of the highest governance body and its committees 30-37, 86, 159-160 APPROACH 2016 103-2 The management approach and its components 182-185 103-3 Evaluation of the management approach 96 102-23 Chair of the highest governance body 155 GRI 201: 201-1 Direct economic value generated and distributed 96, 201-202 102-24 Nominating and selecting the highest governance body 160 ECONOMIC PERFORMANCE Financial implications and other risks and opportunities due to 201-2 98 102-27 Collective knowledge of highest governance body 157-158 2016 climate change
102-28 Evaluating the highest governance body’s performance 156-157 INDIRECT ECONOMIC IMPACTS
Identifying and managing economic, environmental, and social GRI 103: 103-1 Explanation of the material topic and its Boundary 182-185 102-29 76 impacts MANAGEMENT APPROACH 103-2 The management approach and its components 80-92 2016 102-30 Effectiveness of risk management processes 67 103-3 Evaluation of the management approach 80-92
102-31 Review of economic, environmental, and social topics 77 GRI 203: INDIRECT 203-1 Infrastructure investments and services supported 88-90 102-32 Highest governance body’s role in sustainability reporting 3 ECONOMIC IMPACTS 2016 203-2 Significant indirect economic impacts 80-92
210 AYALA CORPORATION 2018 INTEGRATED REPORT 211 GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS
ECONOMIC ENVIRONMENT
PROCUREMENT PRACTICES BIODIVERSITY GRI 103: 103-1 Explanation of the material topic and its Boundary 188-189 GRI 103: 103-1 Explanation of the material topic and its Boundary 182-183 MANAGEMENT MANAGEMENT APPROACH 2016 103-2 The management approach and its components 99-100, 188-189 APPROACH 2016 103-2 The management approach and its components 182-183 103-3 Evaluation of the management approach 99-100 103-3 Evaluation of the management approach 96 GRI 304: Operational sites owned, leased, managed in, GRI 204: BIODIVERSITY 304-1 or adjacent to, protected areas and areas of high biodiversity value 99-100 PROCUREMENT 2016 outside protected areas PRACTICES 204-1 Proportion of spending on local suppliers 96 2016 Significant impacts of activities, products 304-2 99-100 and services on biodiversity ANTI-CORRUPTION 304-3 Habitats protected or restored 99-100 GRI 103: 103-1 Explanation of the material topic and its Boundary 192-193 IUCN Red List species and national conservation list species with MANAGEMENT 304-4 99-100 habitats in areas affected by operations APPROACH 103-2 The management approach and its components 171-172 2016 EMISSIONS Existing management approach successful as no cases 103-3 Evaluation of the management approach were filed against the Ayala Group for corruption in the GRI 103: 103-1 Explanation of the material topic and its Boundary 93-95, 188-189 workplace MANAGEMENT APPROACH 2016 103-2 The management approach and its components 93-95, 188-189 205-1 Operations assessed for risks related to corruption 171-172 GRI 205: 103-3 Evaluation of the management approach 93-95 ANTI- No incidents reported, no aspect of operations within our CORRUPTION 2016 205-3 Confirmed incidents of corruption and actions taken GRI 305: Sustainability Blueprint, Performance Index 93-95,200 organization was identified to have existence of corruption EMISSIONS 2016 Standards used for the computation are based on the GHG 305-1 Direct (Scope 1) GHG emissions Protocol Corporate Accouting and Reporting Standard. ENVIRONMENT The gases reported include carbon dioxide, methane, and nitrous oxide MATERIALS Sustainability Blueprint, Performance Index 93-95,200 103-1 Explanation of the material topic and its Boundary 186-187 GRI 103: Standards used for the computation are based on the MANAGEMENT 103-2 The management approach and its components 186-187 305-2 Energy indirect (Scope 2) GHG emissions GHG Protocol Corporate Protocol and Reporting Standard. APPROACH 2016 Location-based grid emission factors are based on the 103-3 Evaluation of the management approach 92 Department of Energy (Philippines). The gases reported include carbon dioxide, methane, and nitrous oxide. GRI 301: 301-1 Materials used by weight or volume 92, 196-197 MATERIALS 2016 Sustainability Blueprint, Performance Index 93-95,200
ENERGY Standards used for the computation are based on the 305-3 Other indirect (Scope 3) GHG emissions GHG Protocol Corporate Protocol and Reporting Standard. Location-based grid emission factors are based on the 103-1 Explanation of the material topic and its Boundary 184-187 Department of Energy (Philippines). The gases reported GRI 103: include carbon dioxide, methane, and nitrous oxide. MANAGEMENT 103-2 The management approach and its components 184-187 APPROACH 2016 305-4 GHG emissions intensity 200 103-3 Evaluation of the management approach 97-98 305-5 Reduction of GHG emissions 94-95 302-1 Energy consumption within the organization 97-98, 199-200 EFFLUENTS AND WASTE 302-2 Energy consumption outside of the organization 199 GRI 302: GRI 103: 103-1 Explanation of the material topic and its Boundary 86, 92-93, 186-189 ENERGY 2016 302-3 Energy intensity 97-98, 199-200 MANAGEMENT APPROACH 2016 103-2 The management approach and its components 86, 92-93, 186-189 302-4 Reduction of energy consumption 98-99 All local companies are compliant with DENR laws on Total power generated 91 AYALA 103-3 Evaluation of the management approach transportation and treatment of hazardous waste by hiring SPECIFIC an accredited third party transporter and treater. DISCLOSURES Total power generated from renewable energy sources 91
GRI 306: 306-1 Water discharge by quality and destination 86 WATER EFFLUENTS AND WASTE 2016 306-2 Waste by type and disposal method 92-93, 196-198 103-1 Explanation of the material topic and its Boundary 98-99, 186-187 GRI 103: 306-4 Transport of hazardous waste 92-93, 196-198 MANAGEMENT 103-2 The management approach and its components 98-99 APPROACH 2016 SUPPLIER ENVIRONMENTAL ASSESSMENT 103-3 Evaluation of the management approach 98-99 GRI 103: 103-1 Explanation of the material topic and its Boundary 188-189 303-1 Water withdrawal by source 98-99, 186-187 MANAGEMENT APPROACH 2016 103-2 The management approach and its components 97, 188-189 GRI 303: Water sources significantly affected 303-2 98-99, 186-187 WATER 2016 by withdrawal of water 103-3 Evaluation of the management approach 97 303-3 Water recycled and reused 98-99, 186-187
AYALA Volume of water delivered (billed volume) 86 SPECIFIC GRI 308: DISCLOSURES Water loss (non-revenue water) 86 SUPPLIER There were no reported cases of negative environmental ENVIRONMETAL Negative environmental impacts in the 308-2 impacts in our companies' ASSESSMENT 2016 supply chain and actions taken supply chain.
212 AYALA CORPORATION 2018 INTEGRATED REPORT 213 GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS GRI STANDARD DISCLOSURE PAGE NUMBER OR DIRECT ANSWERS
SOCIAL SOCIAL
EMPLOYMENT CHILD LABOR
GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 MANAGEMENT MANAGEMENT APPROACH 2016 103-2 The management approach and its components 87, 102-103, 190-191 APPROACH 2016 A Policy on Child Labor can be viewed at 103-2 The management approach and its components www.ayala.com.ph. Moreover, the group ensures that child 103-3 Evaluation of the management approach 102-103 labor is non-existent in the companies and supply chain.
GRI 401: 401-1 New employee hires and employee turnover 103, 204 Existing management approach is successful as no cases EMPLOYMENT 103-3 Evaluation of the management approach were filed against the Ayala group for child labor in the 2016 Benefits provided to full-time employees that are not provided to workplace. 401-2 87, 102-103 temporary or part-time employees GRI 401: OCCUPATIONAL HEALTH AND SAFETY EMPLOYMENT 408-1 Operations and suppliers at significant risk for incidents of child labor 103 2016 GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 MANAGEMENT FORCED OR COMPULSORY LABOR APPROACH 2016 103-2 The management approach and its components 102-103, 190-191 GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 103-3 Evaluation of the management approach 102-103 MANAGEMENT APPROACH 2016 A Policy on Forced or Compulsory Labor can be viewed at www.ayala.com.ph. Moreover, the group ensures GRI 403: 103-2 The management approach and its components that forced or compulsory labor is non-existent in the OCCUPATIONAL Types of injury and rates of injury, occupational diseases, lost days, 403-2 101-103, 205 companies and supply chain. HEALTH AND and absenteeism, and number of work-related fatalities SAFETY 2016 Existing management approach is successful as no cases 103-3 Evaluation of the management approach were filed against the Ayala group for forced or compulsory TRAINING AND EDUCATION labor in the workplace.
GRI 103: 103-1 Explanation of the material topic and its Boundary 192-193 GRI 409: MANAGEMENT FORCED OR Operations and suppliers at significant risk for incidents of forced or 409-1 103 APPROACH 2016 103-2 The management approach and its components 101, 192-193 COMPULSORY compulsory labor LABOR 2016 103-3 Evaluation of the management approach 101, 192-193 SECURITY PRACTICES GRI 404: 404-1 Average hours of training per year per employee 101, 204-205 TRAINING AND GRI 103: 103-1 Explanation of the material topic and its Boundary 192-193 EDUCATION 2016 MANAGEMENT Programs for upgrading employee skills and transition assistance 404-2 101 APPROACH 2016 103-2 The management approach and its components 102 programs Management approach is successful as there were no DIVERSITY AND EQUAL OPPORTUNITY 103-3 Evaluation of the management approach reported cases of security personnel violation of human rights. GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 MANAGEMENT GRI 410: APPROACH 2016 103-2 The management approach and its components 86-87, 190-192 SECURITY 410-1 Security personnel trained in human rights policies or procedures 102 PRACTICES 2016 103-3 Evaluation of the management approach 86-87 LOCAL COMMUNITIES GRI 405: DIVERSITY GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 405-1 Diversity of governance bodies and employees 86-87, 203 AND EQUAL MANAGEMENT OPPORTUNITY APPROACH 2016 103-2 The management approach and its components 80-81, 100
NON-DISCRIMINATION 103-3 Evaluation of the management approach 80-81, 100
GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 GRI 413: LOCAL Operations with local community engagement, impact assessments, MANAGEMENT COMMUNITIES 413-1 80-81, 100 APPROACH 2016 2016 and development programs An Employee Development and Industrial Relations Policy 103-2 The management approach and its components can be viewed at www.ayala.com.ph. Moreover, non- SUPPLIER SOCIAL ASSESSMENT discrimination is observed by the group. GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 MANAGEMENT Existing management approach is successful as no cases APPROACH 2016 103-2 The management approach and its components 87 103-3 Evaluation of the management approach were filed against the Ayala group for discrimination in the workplace. Social impacts in the supply chain were identified and 103-3 Evaluation of the management approach managed accordingly. GRI 406: NON- GRI 414: 406-1 Incidents of discrimination and corrective actions taken 103 SUPPLIER Negative social impacts in the supply chain There were no reported cases of negative social impacts in DISCRIMINATION 414-2 2016 SOCIAL and actions taken our companies' supply chain. ASSESSMENT 2016 FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING CUSTOMER PRIVACY GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 MANAGEMENT GRI 103: 103-1 Explanation of the material topic and its Boundary 190-191 APPROACH 2016 103-2 The management approach and its components 102 MANAGEMENT APPROACH 2016 103-2 The management approach and its components 173 Existing management approach is successful as no parts of operations and suppliers were found to be at risk of Our Privacy policy can be viewed at ayala.com.ph/privacy- 103-3 Evaluation of the management approach 103-3 Evaluation of the management approach violating right to freedom of association and collective policy. bargaining GRI 418: Substantiated complaints concerning breaches of customer privacy Ayala Corporation has not identified any substantiated GRI 407: CUSTOMER 418-1 No incidents reported, no aspect of operations within and losses of customer data complaints. FREEDOM OF PRIVACY 2016 Operations and suppliers in which the right to freedom of association our organization and suppliers were found to be at risk ASSOCIATION 407-1 and collective bargaining may be at risk of violating right to freedom of association and collective AND COLLECTIVE bargaining BARGAINING 2016
214 AYALA CORPORATION 2018 INTEGRATED REPORT 215 REPORT OF THE AUDIT COMMITTEE REPORT OF THE RISK MANAGEMENT TO THE BOARD OF DIRECTORS AND RELATED PARTY TRANSACTIONS FOR THE YEAR ENDED 31 DECEMBER 2018 COMMITTEE TO THE BOARD OF DIRECTORS The Board-approved Audit Committee Charter defines the duties and responsibilities of the Audit Committee. In accordance with the Charter, the FOR THE YEAR ENDED 31 DECEMBER 2018 Committee assists the Board of Directors in fulfilling its oversight responsibilities to the shareholders with respect to the: The Risk Management and Related Party Transactions Committee assists the board in fulfilling its oversight mandate • Integrity of the Company’s financial statements and the financial reporting process; with respect to risk governance and related party transactions. Its objectives are to ascertain that there exists a sound • Appointment, remuneration, qualifications, independence and performance of the external auditors and the integrity of the audit process as a whole; risk management culture and supporting infrastructure within the company, as well as to ensure that all related party • Effectiveness of the system of internal control; • Performance and leadership of the internal audit function; and transactions are pursued in the best interest of its shareholders. • Company’s compliance with applicable legal and regulatory requirements. The Committee held four meetings in 2018, during which, it: In compliance with the Audit Committee Charter, we confirm that: • Reviewed management’s adopted risk management framework and its ongoing programs to promote risk awareness within the company. • The Chairman and another member of the Committee are independent directors; • Reviewed its committee charter and risk governance policies, including those for enterprise-wide risk and business continuity management. • We had four regular meetings and executive meetings with the internal auditors and external auditors; • Evaluated and recommended for approval proposed investments, divestments and leases involving related parties. • We have recommended for approval of the Board and endorsement to the shareholders the reappointment of SGV & Co. as the Company’s 2018 external • Identified sources of downside risk and their possible effects on the company. auditor and the related audit fee; • We have reviewed and discussed the quarterly unaudited consolidated financial statements and the annual audited consolidated financial statements March 4, 2019 of Ayala Corporation and Subsidiaries, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the significant impact of new accounting standards, with management, internal auditors and SGV & Co. We also reviewed and discussed the annual Parent Company Financial Statements. These activities were performed in the following context: - Management has the primary responsibility for the financial statements and the financial reporting process; and - SGV & Co. is responsible for expressing an opinion on the conformity of the Ayala Corporation’s audited consolidated financial statements with the ANTONIO JOSE U. PERIQUET RAMON R. DEL ROSARIO, JR. KEIICHI MATSUNAGA Philippine Financial Reporting Standards. Chairman Member Member • We have approved the overall scope and the respective audit plans of the Company’s internal auditors and SGV & Co. We have reviewed the adequacy of resources, the competencies of staff and the effectiveness of the auditors to execute the audit plans ensuring that resources are reasonably allocated to the areas of highest risks. We have also discussed the results of their audits, their assessment of the Company’s internal controls, and the overall quality of the financial reporting process including their management letter of comments; • We have evaluated the performance of the Chief Audit Executive and the effectiveness of the internal audit function, including compliance with the International Standards for the Professional Practice of Internal Auditing; • We have reviewed the reports and updates of the internal auditors ensuring that management is taking appropriate corrective actions in a timely manner, including addressing internal control and compliance issues. Based on the assurance provided by the internal audit as well as SGV & Co. as a result of their audit activities, the Committee assessed that the Company’s system of internal controls, risk management, compliance, and governance processes are adequate; • We have reviewed and approved the proposal to outsource the Company’s whistleblower channel to Punongbayan & Araullo, aligned with the recommendation of the Non-Executive Directors to outsource the receipt and processing of whistleblower reports. This channel allows anonymous reporting of fraud, violations of Company policies, laws, rules, and regulations; • We have reviewed and approved all audit, audit-related and non-audit services provided by SGV & Co. to Ayala Corporation and the related fees for such services. We have also assessed the compatibility of non-audit services with the auditors’ independence to ensure that such services will not impair their independence; • We have conducted an annual assessment of our performance, in accordance with Securities and Exchange Commission guidelines, and confirmed that the Committee had satisfactorily performed its responsibilities based on the requirements of its Charter; and • We have reviewed the Audit Committee Charter to ensure that it is updated and aligned with regulatory requirements.
Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities referred to above, the Audit Committee recommends to the Board of Directors that the audited consolidated financial statements be included in the Annual Report for the year ended December 31, 2018 for filing with the Securities and Exchange Commission and the Philippine Stock Exchange. We are also recommending the reappointment of SGV & Co. as Ayala Corporation’s external auditor and the related audit fee for 2019 based on their performance and qualifications.
March 7, 2019
XAVIER P. LOINAZ RAMON R. DEL ROSARIO, JR. KEIICHI MATSUNAGA Chairman Member Member
216 AYALA CORPORATION 2018 INTEGRATED REPORT 217 • Director of Avida Land Corp., Amicassa Process ACADEMIC / PROFESSIONAL QUALIFICATIONS Solutions, Inc., Whiteknight Holdings, Inc., • BS Industrial Management Engineering from AYALA GROUP MANAGEMENT AyalaLand Medical Facilities Leasing, Inc., Serendra, De La Salle University in 1982 Inc., Alveo-Federal Land Communities, Inc., ALI • Master’s Degree in Business Administration at the Eton Property Development Corporation and AKL JL Kellogg Graduate School of Management in 1984 COMMITTEE MEMBERS Properties, Inc.; • President and CEO of SPI Technologies, Inc. in 2017 • Trustee of Ayala Foundation, Inc. and Ayala Group PRESENT DIRECTORSHIP(S)/ POSITION(S) Club, Inc. • Trustee of Ayala Foundation, Inc. and Hero CEZAR P. CONSING / FILIPINO / 59 BERNARD VINCENT O. DY / FILIPINO / 55 • Member of the Advisory Council of the National Foundation, Inc. SENIOR MANAGING DIRECTOR SENIOR MANAGING DIRECTOR Advisory Group for the Police Transformation • Director of various subsidiaries of Globe Telecom, Inc. • President and CEO of Bank of the Philippine • President and Chief Executive Officer of Ayala Development of the Philippine National Police AWARDS Islands and Member of the Ayala Group Land, Inc. and member of the Ayala Group • Best CEO by Finance Asia in 2017 and 2010 Management Committee since April 2013 Management Committee since April 2014 ARTHUR R. TAN / FILIPINO / 59 • One of 100 most influential telecom leaders ACADEMIC / PROFESSIONAL QUALIFICATIONS ACADEMIC / PROFESSIONAL QUALIFICATIONS SENIOR MANAGING DIRECTOR worldwide by London-based Global-Telecoms • A.B (Accelerated Program) Economics (Magna • B.B.A Accountancy from the University of • President and Chief Executive Officer of AC Business Magazine Power 100 from 2013 to 2017 Cum Laude) from De La Salle University in 1979 Notre Dame in 1985 Industrial Technology Holdings, Inc. Chief Executive • CEO of the Year by Frost & Sullivan Asia Pacific • M.A. Applied Economics from the University • Master’s Degree in Business Administration in 1997 Officer of Integrated Micro-Electronics, Inc. (IMI) in 2017 and 2012 of Michigan, Ann Arbor, in 1980 and in International Relations in 1989, both at the and has been a member of the Ayala Group • BPI’s corporate planning and corporate banking University of Chicago Management Committee since 2002 FERDINAND M. DELA CRUZ / FILIPINO / 51 from 1980 – 1985 • Head of the Ayala Land, Inc.’ Residential Business, ACADEMIC / PROFESSIONAL QUALIFICATIONS MANAGING DIRECTOR • Senior Managing Director J.P. Morgan & Co. in Hong Commercial Business and Corporate Marketing • B.S. in Electronics Communications Engineering • President and CEO of Manila Water Company, Kong and Singapore from 1985 – 2004; co-head of and Sales degree from Mapua Institute of Technology in 1982 Inc. and a member of the Ayala Group the firm’s investment banking business in Asia PRESENT DIRECTORSHIP(S)/ POSITION(S) • Post-graduate programs at the University Management Committee since April 2017 Pacific from 1997 – 2004; member of the firm's • Chairman of Prime Orion Philippines, Inc. and of Idaho, Singapore Institute of Management, ACADEMIC / PROFESSIONAL QUALIFICATIONS global investment banking management committee Director of Cebu Holdings, Inc; MCT Bhd of Malaysia; IMD and Harvard Business School • BS Mechanical Engineer (cum laude and board and its Asia Pacific management committee; • Chairman of Alveo Land Corp., Ayala Property • President of IMI from April 2002 to June 2016 top-notcher) from the University of the Philippines President of J.P. Morgan Securities (Asia Pacific) Management Corporation; Makati Development • Northeast Area Sales Manager and Acting Design • Former Chief Operating Officer, East Zone Business Ltd.from 1999-2004 Corporation; Amaia Land Corporation; Avencosouth Center Manager of American Microsystems Inc. Operations Group Director and for Corporate • Partner at The Rohatyn Group from 2004 – 2013, Corp., Ayala Land Commercial Reit, Inc., Bellavita (Massachusetts, USA) from 1994 to 1998 Strategic Affairs Group Director of MWC ran its Hong Kong office and its private investing Land Corporation, Ayagold Retailers, Inc., Station • Managing Director for Asia Pacific Region/ • Head of Consumer Sales Group of Globe Telecom business in Asia, and was a board director of its Square East Commercial Corporation, Aviana Japan of American Microsystems Inc. from from 2009 to 2011 real estate, and energy and infrastructure private Development Corp.,Cagayan De Oro Gateway Corp., 1998 to 2001 • Head of Wireless Business Group of Globe Telecom equity investing subsidiaries BGSouth Properties, Inc., BGNorth Properties, PRESENT DIRECTORSHIP(S)/ POSITION(S) from October 2002 to June 2009 PRESENT DIRECTORSHIP(S)/ POSITION(S) Inc., BGWest Properties, Inc., Nuevocentro, Inc., • Chairman of the Board and Chief Executive Officer • Former President and General Manager of Kraft Foods • Independent Director of Jollibee Foods Corporation Portico Land Corp. and Philippine Integrated Energy of PSi Technologies Inc. and Merlin Solar (Philippines) Inc. and Country General Manager and Chairman of National Reinsurance Corporation Solutions, Inc.; Technologies (Phils.), Inc; of Kraft Foods (Indonesia) of the Philippines • Vice Chairman of Ayala Greenfield Development • Chairman of the Board of Surface Technology • Former member of the Senior Leadership teams • President of Bancnet, Inc. Corporation and Alviera Country Club, Inc. International (STI), Ltd of Ayala Land, Inc., San Miguel Brewing Philippines, • Director of LGU Guarantee Corporation, • Director and President of Bonifacio Land • President and Chief Executive Officer of Inbisco Philippines and Unilever Philippines Filgifts.com., The Rohatyn Group, Sqreem Corporation, Emerging City Holdings, Inc., Speedy-Tech Electronics Ltd.; PRESENT DIRECTORSHIP(S)/ POSITION(S) Technologies and Endeavor Philippines. He is Columbus Holdings, Inc., Berkshires Holdings, Inc., • Chairman of the Advisory Board of Via Optronics • Director of various subsidiaries of MWC also a board director of the US-Philippines Society, Fort Bonifacio Development Corporation, Aurora GmbH and MT Technologies GmbH Trustee of the Manila Golf Club Foundation, and a Properties, Inc.; Vesta Property Holdings, Inc., Ceci JOSE RENE GREGORY D. ALMENDRAS / FILIPINO / 58 member of the Trilateral Commission. Realty Inc., Alabang Commercial Corporation and ERNEST LAWRENCE L. CU / FILIPINO / 58 MANAGING DIRECTOR Accendo Commercial Corp.; • President and Chief Executive Officer of Globe • Public Affairs Group Head, President and Chief • President of the Hero Foundation Incorporated Telecom, Inc and has been a member of the Ayala Executive Officer of AC Infrastructure Holdings and Bonifacio Art Foundation, Inc. Group Management Committee since January 2009 Corporation (AC Infra) and has been a member of the Ayala Corporation Management Committee and the Ayala Group Management Committee since August 2016
218 AYALA CORPORATION 2018 INTEGRATED REPORT 219 ACADEMIC / PROFESSIONAL QUALIFICATIONS ALFREDO I. AYALA / FILIPINO / 57 Ventures Holding Corp., AC Industrial Technology Corporation Management Committee since 2009 • B.S. in Business Management degree from the MANAGING DIRECTOR Holdings Inc., HCX Technology Partners, Inc.; Ayala and the Ayala Group Management Committee since Ateneo de Manila University in 1981 • President and Chief Executive Officer of LiveIt International Holdings Limited; AG Holdings Limited 2010. • Strategic Business Economics Program from Investments Limited and AC Education, Inc and LiveIt Investments Limited ACADEMIC/PROFESSIONAL QUALIFICATIONS University of Asia & the Pacific in 1999 and has been a member of the Ayala Group • Bachelor of Laws (Valedictorian and top 3 • Former President of Manila Water Company, Inc. Management Committee since June 2006 JOHN ERIC T. FRANCIA / FILIPINO / 47 in the 1986 Bar Examination) from San Beda • Former officer in Ayala Land, Inc. ACADEMIC / PROFESSIONAL QUALIFICATIONS MANAGING DIRECTOR College in 1986 • Secretary of Foreign Affairs for the Republic • B.A. in Development Studies (Honors) and • President and Chief Executive Officer of AC Energy, PRESENT DIRECTORSHIP(S)/ POSITION(S) of the Philippines from March to June 2016 Economics from Brown University in 1982 Inc and has been a member of the Ayala Corporation • President and Chief Executive Officer • Cabinet Secretary under the Office of the President • MBA from the Harvard Graduate School of Management Committee and the Ayala Group of Ayala Group Legal. from November 2012 to March 2016 Business Administration in 1987 Management Committee since January 2009 • Corporate Secretary and Group General Counsel • Secretary of the Department of Energy from July PRESENT DIRECTORSHIP(S)/ POSITION(S) ACADEMIC/PROFESSIONAL QUALIFICATIONS of Ayala Land, Inc. 2010 to October 2012 • Chairman and President of AC College of Enterprise • BA in Humanities and Political Economy (magna • Corporate Secretary of Globe Telecom, Inc., Manila • Co-chair of the Long-Term Strategy for the and Technology, Inc., National Teachers College, cum laude) from the University of Asia & the Pacific Water Company, Inc., Integrated Micro-Electronics, International Renewable Energy Agency (IRENA) and LINC Institute; in 1993 Inc. and Ayala Foundation, Inc. held in Abu Dhabi in 2011 • Chairman of Affordable Private Education Center, • Master’s Degree in Management Studies (First Class • Corporate Secretary and a member of the Board • Member of the Executive Board of the International Inc. and Newbridge International Investments Honors) at the University of Cambridge in the United of Directors of a number of companies in Energy Forum (IEF) in 2011 Limited Kingdom in 1995 the Ayala group PRESENT DIRECTORSHIP(S)/ POSITION(S) • Vice Chairman and Vice President of Affinity Express • Former Corporate Strategy and Development • Member of the faculty of the College of Law • Chairman of Light Rail Manila Holdings 6, Philippines, Inc. Group Head of Ayala Corporation of San Beda University Inc. and MCX Tollway, Inc.; • Vice Chairman of University of Nueva Caceres • Former Senior consultant and member of the • Executive Vice President of Asiacom Philippines, Inc. • Director of Affinity Express Holdings, Ltd., and management team of Monitor Group in JOSE TEODORO K. LIMCAOCO / FILIPINO / 56, • Director of Light Rail Manila Holdings, Inc., Azalea International Venture Partners Limited Massachusetts, USA MANAGING DIRECTOR Light Rail Manila Holdings 2, Inc., AC Energy, Inc. • Trustee of Ayala Foundation, Inc. and Philippine PRESENT DIRECTORSHIP(S)/ POSITION(S) • Chief Finance Officer, Chief Risk Officer, Chief and A2 Airport Partners, Inc. Business for Education • Director of Manila Water Company, Inc. Sustainability Officer, Finance Group Head, AWARDS • Board of Director of Purefoods International Limited; and Member of Ayala Corporation Management • ASEAN Individual Excellence in Energy PAOLO MAXIMO F. BORROMEO / FILIPINO / 41 Ayala Healthcare Holding, Inc.; AC Education, Inc., Committee and the Ayala Group Management Management in 2013 MANAGING DIRECTOR AC College of Enterprise and Technology, Inc.; LINC Committee since 2015 • Order of Lakandula and Rank of Gold • Corporate Strategy and Development Group Institute, Inc.; AC Ventures Holding Corp., Ayala ACADEMIC/PROFESSIONAL QUALIFICATIONS Cross Bayani awardee in 2016 Head, President and Chief Executive Officer of Aviation Corporation; Zapfam, Inc.; Northwind • BS Mathematical Sciences (Honors Program) ACHIEVEMENTS Ayala Healthcare Holdings, Inc. and Member of Power Development Corporation; North Luzon from Stanford University in 1984 • Under his leadership, the Department of Energy Ayala Corporation Management Committee and Renewable Energy Corporation; Light Rail Manila • MBA (Finance and Investment Management) ranked as one of the Top 10 Performers, in a survey the Ayala Group Management Committee since Corporation; AC Infrastructure Holdings from the Wharton School of the University of among government agencies on government September 2014 Corporation; MCX Tollway, Inc., Ayala Hotels, Inc,, Pennsylvania in 1988 performance specifically in ensuring integrity in ACADEMIC / PROFESSIONAL QUALIFICATIONS Michigan Holdings, Inc., and other various • Former President of BPI Family Savings Bank, and public service • B.S. degree in Management Engineering from companies under the AC Energy Group BPI Capital Corporation; Officer-in-Charge for Ayala • In June 2013, he was given the rare privilege of the Ateneo de Manila University ACHIEVEMENTS Life Assurance, Inc. and Ayala Plans, Inc., Trustee; addressing the United Nations Economic and Social • Master’s in Business Administration with honors • In 2011 has Head of Ayala’s Corporate Strategy and • Treasurer of Ayala Foundation, Inc.; President Council (ECOSOC) at the Palais des Nations, Geneva from the Wharton School at the University of Development group, he led Ayala’s entry into the of myAyala.com, and CFO of Azalea Technology and then again in December 2013 for the United Pennsylvania energy and transport infrastructure sectors in 2011. Investments, Inc. Nations’ Special Meeting of the ECOSOC in New York • Former Principal at Booz & Company, a global Under his leadership, Ayala invested in over 1,000MW • President of the Chamber of Thrift Banks from 2013- • During his term as the President and CEO of MWC, strategy consulting firm, based in San Francisco, of attributable capacity in the energy sector, and 2015 the company was awarded as one of the Best California, USA secured over $1 billion worth of PPP projects in the • Worked with JP Morgan & Co. and with BZW Asia Managed Companies in Asia, the Best in Corporate PRESENT DIRECTORSHIP(S)/ POSITION(S) transport infrastructure space. PRESENT DIRECTORSHIP(S)/ POSITION(S) Governance, one of the Greenest Companies in the • Vice Chairman of the Generika Group of Companies • Director of Globe Telecom, Inc. and Integrated Philippines and hailed as the world’s Most Efficient • President and Chief Executive Officer of Zapfam, Inc. SOLOMON M. HERMOSURA / FILIPINO / 56 Micro-Electronics, Inc. Water Company • Director of AC Education, Inc.; Affordable MANAGING DIRECTOR • Independent director of SSI Group, Inc. Private Education Center, Inc.: AC College of • Chief Legal Officer, Corporate Secretary, Chief • Chairman of Darong Agricultural and Development Enterprise and Technology Holdings, Inc., LINC Compliance Officer, Data Protection and Corporate Corporation and Zapfam Inc. Institute, Inc., National Teachers College; AC Governance Group Head, and member of the Ayala • Vice Chairman of Lagdigan Land Corporation.
220 AYALA CORPORATION 2018 INTEGRATED REPORT 221 • President and CEO of AC Ventures Holding Corp., JOHN PHILIP S. ORBETA / FILIPINO / 57 AYC Finance Limited, Bestfull Holdings Limited, MANAGING DIRECTOR Purefoods International Limited • Chief Human Resources Officer and Group Head SENIOR LEADERSHIP • President of Liontide Holdings, Inc. and Philwater for Corporate Resources, covering Strategic Human Holdings Company, Inc. Resources, Knowledge Management, Information • Director of Ayala Hotels, Inc., AC Energy, Inc., & Communications Technology, AC Synergy and ASSOCIATE DIRECTORS MANAGING DIRECTORS Ayala Healthcare Holdings, Inc., AC Infrastructure Corporate Support Services. He has served as a Yla Patricia G. Alcantara Emmanuel A. Aligada* Holdings Corporation, Ayala Aviation Corporation, member of the Ayala Corporation Management AC Education, Inc., Asiacom Philippines, Inc., Ayala Committee since May 2005 and the Ayala Group Maria Susana S. Bables Gil B. Genio* (Retired effective Dec 31 2018) Group Legal, Michigan Holdings, Inc., AC Industrial Management Committee since April 2009. Robert Michael N. Baffrey* Ginaflor C. Oris* Technology Holdings, Inc., A.C.S.T Business ACADEMIC/PROFESSIONAL QUALIFICATIONS Guillermo M. Luz Virgilio C. Rivera Jr. * Holdings, • A.B. Economics from the Ateneo de Manila Gabino Ramon G. Mejia* Jaime E. Ysmael* Inc., LICA Management Inc., and Just For Kids, Inc. University in 1982 Aditas Vivian L. Santamaria • Treasurer of Ayala Retirement Fund Holdings, Inc. • Former President and CEO of AC Industrial Gabriel Q. Villaluz III CONSULTANTS/ADVISERS AWARDS Technology Holdings, Inc.; and Automobile Central Gerardo C. Ablaza • CFO of the Year by ING-Finex in 2018 Enterprise, Inc. (Philippine importer of Volkswagen) EXECUTIVE DIRECTORS Simon C. Mossesgeld* • Former Chairman and CEO of Honda Cars Makati, Josette Adrienne A. Abarca* Marciano A. Paynor Jr. RUEL T. MARANAN / FILIPINO / 56 Inc., Isuzu Automotive Dealership, Inc. and Iconic Fatima P. Agbayani* MANAGING DIRECTOR Dealership, Inc. • President of Ayala Foundation, Inc. • Former Vice President and Global Practice Director Catherine H. Ang ACADEMIC/PROFESSIONAL QUALIFICATIONS of the Human Capital Consulting Group at Watson Estelito C. Biacora • AB Social Sciences degree from the Ateneo de Wyatt Worldwide (now Willis Towers Watson) Ruby P. Chiong* Manila University PRESENT DIRECTORSHIP(S)/ POSITION(S) Ma. Cecilia T. Cruzabra* • Bachelor of Laws degree from the University of • Chairman of Ayala Aviation Corporation, Ayala Josephine G. De Asis Santo Tomas Leadership Group HR Council, Ayla Group Corporate Security Emily C. De Lara • Management Program from Harvard University Council, and Ayala Business Clubs; Rosallie A. Dimaano* • Group Director of Manila Water Company, Inc. • Chairman and President of HCX Technology Felipe Antonio P. Estrella (MWC)’s Corporate Human Resources Group Partners, Inc.; Romualdo L. Katigbak* from 2004 to 2014 • Vice Chairman of Ayala Group Club, Inc. Noel Eli B. Kintanar* PRESENT DIRECTORSHIP(S)/ POSITION(S) • Director of Ayala Group Legal, AC Industrial • Director of Asticom Technology, Inc. Technology Holdings, Inc., Ayala Healthcare Jenara Rosanna F. Ong* • Member of the Board of representatives Holdings, Inc., Ayala Retirement Fund Holdings, Maria Angelica B. Rapadas of CIFAL Philippines Inc., Zapfam, Inc., BPI Family Bank, Inc., ALFM Alfonso Javier D. Reyes* ACHIEVEMENTS Growth Fund, Inc., ALFM Money Market Fund, Inc., Ma. Victoria P. Sugapong* • He introduced numerous innovations which led ALFM Peso Bond Fund, Inc., ALFM Dollar Bond Ma. Victoria A. Tan MWC to be the first Filipino company to win the Fund, Inc., ALFM Euro Bond Fund, Inc. and the Sheila Marie U. Tan* prestigious Asian Human Capital Award in 2011, Philippine Stock Index Fund Corp. Norma P. Torres* an award sponsored by the Singapore Ministry of • Trustee of Ayala Foundation, Inc. Manpower, CNBC Asia-Pacific, and INSEAD. Also though his leadership, MWC was vested the 2006 Outstanding Employer of the Year by the People Management Association of the Philippines. • Awarded as UST 2016 Outstanding Alumni Award under Private Sector
*seconded to subsidiaries
222 AYALA CORPORATION 2018 INTEGRATED REPORT 223 AYALA GROUP NETWORK
AYALA CORPORATION GLOBE TELECOM INTEGRATED MICROELECTRONICS, INC AC VENTURES 34F Tower One Ayala Triangle and Exchange Plaza The Globe Tower North Science Avenue, Laguna Technopark 33F Tower One Ayala Ave., Makati City 1226, Philippines 32nd Street cor 7th Avenue Bonifacio Global City Special Export Processing Zone, Ayala Triangle and Exchange Plaza Tel: +63 2 908 3000 Taguig 1634, Philippines Biñan Laguna 4024 Philippines Ayala Avenue Makati 1226 Philippines www.ayala.com.ph Tel: +63 2 730 2000 (Trunkline for Corporate Office) Tel: +63 2 756 6840 +63 2 730 1000 (Customer Care) www.global-imi.com AC INFRASTRUCTURE Investor Relations: +63 2 7301010 (Sales) 32F Tower One Email: [email protected] +63 2 1300 (Loyalty) Investor Relations: Ayala Triangle and Exchange Plaza Mobile: 211 Email: [email protected] Ayala Ave., Makati 1226 Philippines Sustainability: www.globe.com.ph Tel: +63 2 908 3032 Email: [email protected] Sustainability: Fax: +63 2 759 4881 [email protected] Investor Relations: Email: [email protected] www.acinfra.com.ph Email: [email protected] AYALA LAND AC AUTOMOTIVE Sustainability: 31F Tower One Ayala Triangle and Exchange Plaza Sustainability: 11F Bonifacio One Technology Tower Email: [email protected] Ayala Ave., Makati City 1226, Philippines Email: [email protected] 3030 Rizal Drive West corner 31st Street Tel: +63 2 9083111 Bonifacio Global City AC HEALTH www.ayalaland.com.ph MANILA WATER Taguig 1634 Philippines 3F Makati Stock Exchange Building 2F MWSS Administration Building Tel: +63 2 459 4504 6767 Ayala Avenue Makati 1226 Philippines Investor Relations: 489 Katipunan Road Balara Tel: +63 2 745 2508 Email: [email protected] Quezon City 1105, Philippines Sustainability: www.achealth.com.ph Tel: +63 2 917 5900 Email: cruzag@hondamakati,com.ph Sustainability: Hotline: +63 2 1627 Sustainability: Email: [email protected] www.manilawater.com HONDA CARS MAKATI, INC Email: [email protected] 1 Pres Sergio Osmeña Highway BANK OF THE PHILIPPINE ISLANDS Investor Relations: Magallanes, Makati 1232 Philippines AC EDUCATION Tower One, Ayala North Exchange Email: [email protected] Tel: +63 2 902 9393 33F Tower One 6796 Ayala Avenue cor. Salcedo Streets www.hondamakati.com.ph Ayala Triangle and Exchange Plaza Legaspi Village Makati 1226, Philippines Sustainability: Ayala Avenue, Makati 1226 Philippines Tel: +63 2 818 5541 to 48 Email: [email protected] ISUZU AUTOMOTIVE DEALERSHIP, INC Tel: +63 2 908 3455 Express Phone Banking: +63 2 89 100 Alabang Zapote Road corner Acacia Avenue www.aceducation.ph www.bpiexpressonline.com AC ENERGY Ayala Alabang Munitnlupa City 1780 Philippines 4F 6750 Building Ayala Avenue Tel: +63 2 807 1788 Sustainability: Investor Relations: Makati City 1226, Philippines Fax: +63 2 807 6011 Email: [email protected] Email: [email protected] Tel: +63 2 730 6300 www.isuzuautodealer.com.ph www.acenergy.com.ph AYALA FOUNDATION Sustainability: AUTOMOBILE CENTRAL ENTERPRISE INC. 8f 111 Paseo de Roxas corner Legaspi Street Email: [email protected] Sustainability: 11F Binifacio One technology Tower Legaspi Village Makati 1229 Philippines Email: maranan@[email protected] 3030 Rizal Drive West cor 31st Street Tel: +63 2 717 5800 Bonifacio Global City Fax: +63 2 813 4488 Taguig City, 1634 Philippines www.ayalafoundation.org Tel: +63 2 459 4555 www.volkswagen.com.ph Sustainability: Email: [email protected]
224 AYALA CORPORATION 2018 INTEGRATED REPORT 225 THE AYALA GROUP CORPORATE INFORMATION AS CATALYST FOR
SUSTAINABLE DEVELOPMENT STAKEHOLDER INQUIRIES SHAREHOLDER SERVICES AND ASSISTANCE Ayala Corporation welcomes inquiries from For inquiries regarding dividend payments, analysts, the financial community, institutional change of address and account status, and lost or 2018 AYALA GROUP UNIFIED INTEGRATED AND ANNUAL REPORTS and retail investors, customers, media, and the damaged stock certificates, please write or call: The Ayala group is deeply committed to the United Nations’ 2030 agenda for sustainable development. general public. Please contact: Together with like-minded organizations and individuals, we have responded with initiatives, innovations, BPI Stock Transfer Office and advocacies to help drive this vision forward. We are proud to be part of this progressive community Investors: [email protected] 3F BPI Buendia Center whose efforts seek to introduce transformational change to tackle urgent global issues such as economic Sustainability: [email protected] 372 Sen. Gil Puyat Avenue and social inequality, climate change, and all forms of poverty. This year, the Ayala group integrated and Governance: [email protected] Makati City, 1226, Philippines annual reports showcase some of the widely recognized thought leaders on this front whose groundbreaking Data Privacy: [email protected] ideas are actively shaping the future, and providing the world with a roadmap for action—and hope. Customers: [email protected] Tel +632 5804693 to 95 Media: [email protected] [email protected] Careers: [email protected] [email protected] [email protected] ABOUT THE COVER Our cover illustrates our theme on managing ABOUT OUR PAPER disruption. While today’s business challenges may The Ayala Corporation Integrated Report cover seem impenetrable at times, an innovative mindset and main pages were printed on Toccata 270g and can open up new opportunities and help companies 100g White, both of which are FSC Certified papers. eliminate barriers to future growth. Primex Printers, Inc. utilized a carbon neutral XL 75 offset press in the production of this report. FINANCIAL STATEMENTS Ayala’s 2018 Financial Statements are available for download on its website: www.ayala.com.ph
AYALA AYALA LAND BPI GLOBE www.heidelberg.com/co2 · 100000 Developed and produced by Ayala Corporation Investor Relations and Sustainability units.
Concept and design by Publicis JimenezBasic Execution by Whitewall Design Studio
Portraits by Cyrus Panganiban Operational photography by Rolly Barayang Additional photographs from the Ayala group of companies
MANILA WATER IMI AYALA FOUNDATION
226 AYALA CORPORATION 2018 INTEGRATED REPORT 227 “We live in a world that is very volatile, uncertain, complex, and ambiguous. But while current developments appear bleak, today’s dynamic times have likewise given birth to impressive advances and amazing possibilities. We live in an era where technological innovation, new business models, and new ways of thinking can be used to benefit a larger number of our population.”
Fernando Zobel de Ayala
AYALA CORPORATION
34F Tower One Ayala Triangle, Ayala Avenue Makati City 1226 Philippines Tel: +632 908 3000 Fax: +632 848 5846