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TRANSFORM TOMORROW B 2017 Annual Report IMI IS MOVING to TRANSFORM TOMORROW

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TRANSFORM TOMORROW B 2017 Annual Report IMI IS MOVING to TRANSFORM TOMORROW TRANSFORM TOMORROW b 2017 Annual Report IMI IS MOVING TO TRANSFORM TOMORROW We believe that enlightened innovation is transforming IMI in positive, meaningful ways. We are fully committed to our vision of responsible growth as we move quickly to expand our global presence. Significant advances in areas like robotics, artificial intelligence, and augmented reality applications are perceived as emerging challenges to our industry. We, however, see these disruptions as opportunities to future-proof our business, stay ahead of our competitors, and preserve the momentum we now have to pursue not just market, but thought leadership in everything we do. 2017 Annual Report TRANSFORM TOMORROW 1 ABOUT IMI At Integrated Micro-Electronics Inc. (IMI), we are committed to delivering global manufacturing solutions, including innovative electronics manufacturing services (EMS) and power semiconductor assembly and test services (SATS), and primarily serving original equipment manufacturers (OEMs) for diversified markets such as those in the automotive, industrial, aerospace, and other industries. As the manufacturing arm of AC Industrial Technology Holdings Inc. (AC Industrials), we are part of Ayala Corporation’s vision to assemble a portfolio of businesses across various platforms to capture opportunities in the domestic and global markets. AC Industrials is Ayala’s newest subsidiary housing its current and future investments in automotive and industrial technologies. We rank 20th in the list of top 30 EMS providers in the world by the Manufacturing Market Insider, based on 2016 revenues. In the automotive segment, we are the sixth largest EMS provider in the world per New Venture Research. While specializing in highly reliable and quality electronics for long product life cycle segments such as automotive and industrial electronics, our presence is felt in eight countries with 19 manufacturing sites in the Philippines, China, Bulgaria, Czech Republic, Germany, United Kingdom, Mexico, and the United States along with its engineering facilities and sales offices across continents. OUR VISION The Leading INNOVATIVE Partner for CUSTOMIZED Solutions. Our PEOPLE deliver the HIGHEST quality experience. OUR MISSION Passionately create a unique product realization experience that our partners love. OUR CORE VALUES INTEGRITY Honesty, trustworthiness, and consistency in words and actions CUSTOMER FOCUS Building strong partnership with customers by providing excellent and mutually beneficial solutions CONCERN FOR OTHERS Caring for co-employees, community, and country EXCELLENCE Doing the best and continuously exceeding expectations 2 2017 Annual Report 04 PERFORMANCE HIGHLIGHTS How we delivered 06 GLOBAL FOOTPRINT Where we are now 08 OUR LEADERSHIP What we see ahead 25 PRESIDENT’S REPORT How we sustain growth 32 BUSINESS OVERVIEW How we increase our momentum 40 CORPORATE GOVERNANCE How we balance our approaches 48 VALUE CREATION What we commit to 55 FINANCIAL REPORT How we performed TRANSFORMTRANSFORM TOMORROWTOMORROW 3 PERFORMANCE HIGHLIGHTS REVENUE MILESTONES 2017 Acquired STI 2016 Enterprises Ltd. 2011 Acquired VIA 2010 Acquired EPIQ Optronics GmbH 2005 Acquired PSi Bulgaria, Czech Acquired Saturn Technologies, Inc. Republic, and Electronics and Mexico Speedy-Tech Electronics US$1B 2017 Revenues 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1,090.6 843.0 814.4 34.0 28.8 65.3 921.4 28.1 52.2 639.1 35.8 516.5 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 TOTAL REVENUES NET INCOME CAPITAL (All figures in ASSETS ATTRIBUTABLE EXPENDITURES US$ millions) TO PARENT 4 2017 Annual Report KEY PERFORMANCE INDICATORS 2017 2016 2015 Revenue growth 29% 4% -4% Gross profit margin 11.9% 12.0% 11.5% Net profit margin 3.1% 3.3% 3.5% EBITDA margin 6.4% 7.7% 7.2% Return on assets 3.7% 4.4% 5.6% Return on equity 13.3% 12.0% 12.8% Earnings per share $0.018 $0.015 $0.015 Current ratio 1.28 1.51 1.54 Debt/Equity ratio 1.08 0.74 0.48 REVENUE PER INDUSTRY 17% Consumer 11% Telecommunications 41% Automotive 2% Aerospace/Defense 21% Industrial 8% Multiple Markets/Others REVENUE BY CUSTOMER NATIONALITY EUROPE 48% 22% 4% 26% NORTH JAPAN AMERICA ASIA TRANSFORM TOMORROW 5 GLOBAL FOOTPRINT Not many Philippine-based multinational companies are able to stay strong and resilient after 37 years. Now with 19 manufacturing sites in eight countries, IMI has proved that it can develop its people across boundaries and beyond borders. USA Tustin, California MEXICO Guadalajara Total manufacturing space of +287,000m2 in 19 manufacturing sites across 8 countries 6 2017 AnnualAnnual ReportReport UNITED KINGDOM CHINA Poynton, Cheshire Kuichong, Shenzhen Hook, Hampshire Jiaxing Pingshan, Shenzhen Suzhou GERMANY Chengdu Nuremberg CZECH REPUBLIC Třemošná Botevgrad BULGARIA Lapu-Lapu, Cebu PHILIPPINES Biñan, Laguna Rosario, Cavite Calamba, Laguna 16,748 Employees worldwide TRANSFORM TOMORROWTOMORROW 7 8 2017 Annual Report Message from the Chairman MAINTAINING A POSITION OF STRENGTH Over the past year, IMI remained focused on expanding its capabilities in the light of digital transformations taking place globally. Through test systems, automation, robotics, customized process flows, and platform development, IMI is laying the groundwork that will allow it to take advantage of opportunities in a rapidly changing global manufacturing industry. IMI remains among the top 20 EMS providers in the world, and has maintained its rank as the world’s sixth largest automotive EMS provider. This position of strength bolsters IMI’s role as the foundation for AC Industrials, a new grouping we formalized in 2017 as the Ayala group’s platform in industrial technologies. TRANSFORMTRANSFORM TOMORROWTOMORROW 99 With the Ayala group’s industrial As a leading global manufacturing technologies and automotive interests solutions partner, IMI continues to consolidated under one pillar, AC be a conduit to tap different markets Industrials is well-positioned to and technologies around the world. capitalize on opportunities arising Our manufacturing plants in the from disruptive technological shifts, Philippines, China, Bulgaria, Czech changing industry landscapes, and Republic, Germany, United Kingdom, increasing demand from end-users. Mexico, and the United States have created a platform from which we can This new ownership structure provides expand and grow into other regions. IMI with opportunities to participate in global disruptions and megatrends, With the company’s global footprint, while building on its core expertise and a window into the disruptive in manufacturing. For instance, our technologies of the future, IMI is automotive manufacturing strategy primed to adapt to technological is anchored around trends that can transformation in the global dramatically transform the industry, manufacturing industry. This unique including rising electrification and vantage point—built around a strong increasing “intelligence” of vehicles. track record and an understanding of the new technologies and applications This is part of the company’s drive to reshaping business models, keep reinventing itself, ensuring that production systems, and even entire it stays relevant amid the volatility organizations—will be instrumental in of the global electronics industry our strategy for years to come. and the rapid pace of technological breakthroughs. IMI is determined to grow its high-value segments within automotive, industrial, and aerospace while further expanding its product offerings. 10 2017 Annual Report As a final word, IMI is doing its part in contributing to the Ayala group’s commitment to the United Nations’ Sustainable Development Goals. IMI’s “IMI is primed to adapt success as a company is anchored on to technological the relationships we have with our people, the communities in which we transformation in the operate, our customers, and the overall global manufacturing environment. Sustainability underpins our innovation philosophy—a industry.” forward-looking approach that allows us to stay ahead of the competition, while offering better products to our customers and providing solutions to today’s challenges. As we move into the future, IMI remains committed to creating and sharing value to all our stakeholders. What the company has achieved in the past year would not have been possibleble without the continued support of our Board of Directors, Management Committee, employees, partners, customers, and shareholders. It is thanks to you that IMI has become a formidable player in the electronics manufacturing space—with even JAIME AUGUSTO ZOBEL DE AYALA greater potential to be realized in the CHAIRMAN years to come. Thank you, as always, for your commitment. TRANSFORM TOMORROW 11 Message from the Chief Kʯeƺʍtiʤe Ýfˎƺer FORESIGHT, FOCUS, AND PASSION Indeed, 2017 was a robust year for IMI. We have evolved through the changing world of electronics and its challenging environment, while never losing sight of the reason we are here—to serve our customers and our communities across the globe and to maximize value for our shareholders. We have become stronger and more focused with a clear vision of how we intend to develop the business over the coming years. 2017: Another year of momentum The year 2017 was a milestone for IMI as we broke the billion-dollar threshold and grew by 29 percent from the previous year. We ended the year with 19 manufacturing sites in eight countries. Total shareholder return, a measure that combines the change in share price plus dividends, reached
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