When we work closely with communities, we help improve lives. Ayala Foundation
Our Vision Communities where people are productive, creative, self-reliant, and proud to be Filipino.
Our Mission Understanding community realities and engaging people in the change process
Acting as catalyst for inclusion to bridge community and business aspirations
Building and nurturing partnerships with public and private groups, civil society, and Ayala to achieve impact, scale, and sustainability for everyone involved.
Our Values We have a deep love of country. We believe in shared prosperity. We are creative and innovative. We act with integrity. We strive for excellence. We collaborate and work as a team.
2 AYALA FOUNDATION CONTENTS
4 13 MESSAGE FROM PROGRAM THE CO-CHAIRMEN HIGHLIGHTS
6 42 MESSAGE FROM HIGHLIGHTS FROM THE PRESIDENT OUR OPERATIONAL YEAR
8 OUR PROGRAMS 62 AYALA FOUNDATION BOARD OF TRUSTEES 10 OUR PROGRAM MAP 64 MANAGEMENT COMMITEE
12 65 REPORT OF OUR PROGRAM INDEPENDENT SPENDING AUDITORS MESSAGE FROM THE DEAR STAKEHOLDERS,
Over the years, Ayala has expanded its footprint We work closely with our communities and across the country, finding innovative and the Ayala group to create opportunities and sustainable business solutions for some of the meaningful experiences for Filipinos. We country’s most important challenges. chart our path in nation-building by helping improve people’s lives through education, Beyond just harnessing the potential of new youth leadership, sustainable livelihood, and industries, Ayala has long been involved the promotion of arts and culture. We continue in improving the lives of Filipinos. The to invest in the future with more focused and strong interaction—and in some instances, relevant programs that are adjusting to a integration—between our businesses and rapidly changing environment. community initiatives is an expression of our deeply held commitment to national We look forward to 2017, as we strengthen development. programs both in the communities where we are already located and in new areas in the As the social commitment arm of the Ayala country. In recent years, we have increased our group, Ayala Foundation has been in the involvement in leadership programs in Muslim business of improving lives over the past 55 Mindanao. We have also partnered with the years. In celebration of this anniversary, we look Marawi City government for the development back with gratitude to the men and women of the Siyapen Drug Rehabilitation Center in who laid the groundwork for our efforts to serve Marawi City—the very first drug rehabilitation people and communities. facility in the Autonomous Region of Muslim Mindanao. In recognition of the value and Through the pioneering work of our founders, beauty of Muslim art, history, and culture, early leaders and staff, partners, and donors, we are also preparing a special exhibition on Ayala Foundation has worked to uplift the life interactive Moro art at the Ayala Museum. of Filipinos. While we started as a philanthropic organization promoting science and research The success of the foundation’s efforts would in agriculture in the 1960s, Ayala Foundation’s not be possible without our donors and mandate, strategy, and program areas have program partners, our management team and evolved through the years. staff, and most importantly, the communities who trust us and work with us in our programs These changes notwithstanding, our goal and and projects. our dream for the Filipino people remain the same: to enable communities where people are As we keep the Filipino people at the heart productive, creative, self-reliant, and proud to of our transformation story, Ayala Foundation be Filipino. Today, Ayala Foundation continues looks to 2017 with an even stronger resolve its transformation story, as we strive to leave to push inclusive growth with accountability, a mark in the lives of Filipinos in virtually all sustainability, and integrity. • geographic regions in the country.
Jaime Augusto Zobel de Ayala Fernando Zobel de Ayala
Co-Chairmen, Ayala Foundation, Inc.
2016 ANNUAL REPORT 5 DEAR STAKEHOLDERS,
In 2016, we at Ayala Foundation stood by three Ayala’s sustained commitment for key principles in our approach to community communities affected by supertyphoon development: to align, focus, and innovate in Yolanda was demonstrated by the turnover order to create impact in the conglomerate, of five classrooms and a stage in Dayhagan community, and country that we serve. Elementary School, a library project in Carles Central School, infrastructure improvement for We are pleased with the milestones we have Cawayan Elementary School, school feeding reached in our continuing engagement with programs, and donations of fishing boats and Filipinos in different parts of the country, nets to the fisherfolk in Binuluangan Island. particularly in the fields of education, youth leadership, sustainable livelihood, and arts and The foundation also mobilized the Ayala group culture. and its partners for the “100 for 200” campaign for National Reading Month in November. The We embraced a more dynamic role in campaign raised over P17.07 million—enough expanding partnerships, among which is to provide 201,327 storybooks for public the Autonomous Region of Muslim Mindanao elementary schools nationwide. (ARMM) through the Bangsamoro Young Leaders Program–Leadership Communities The Ayala Museum and Filipinas Heritage (BYLP–LeadCom), paving the way for strategic Library continued to make themselves collaborative efforts that extend beyond 2016. accessible to different communities through In doing these, we are taking stock of more traveling exhibitions, and increased online than 50 years of involvement in Mindanao presence through the digitization of our development, as we look forward to bringing a resources and use of social media to promote similar kind of cooperation across the country. art, history, and culture.
The foundation also showed increased synergy All these efforts were fittingly captured in with the Ayala group. The Global Filipino Ayala’s new version of the national anthem Schools (GFS) program, which aims to provide which celebrates the lives of everyday 21st-century-ready learning for students and heroes, which the foundation produced and teachers, is a partnership with Globe Telecom the National Historical Commission of the and the Department of Education, and is being Philippines endorsed for public use. prepared for expansion by Globe in 2017. Now, Ayala Foundation is entering the next The partnership with Ayala Land (ALI) allowed phase of our community development the foundation to conduct community initiatives. Embodying the spirit of the Olympics, scanning and rapid appraisal in two barangays we are adopting “Better, Faster, Stronger” as our in El Nido, Palawan, to prepare both ALI and theme for 2017—committing ourselves to raising the residents for longer-term community the bar for our programs and engagement engagement. In addition, ALI’s construction initiatives. arm, the Makati Development Corporation, continued investing in Calauan, Laguna, by We count on you, our dear stakeholders, to join growing and nurturing ornamental plants for its us yet again in an exciting and fulfilling journey various developments. toward helping improve people’s lives. •
Ruel T. Maranan
President, Ayala Foundation, Inc.
6 AYALA FOUNDATION MESSAGE FROM THE OUR PROGRAMS
8 AYALA FOUNDATION Ayala Foundation believes in the importance of making an impact in the lives of Filipinos, as we reach out to different communities across the country. Among these communities are several OUR parts of Basilan (in photo), where our Education and Youth Leadership programs are present. PROGRAMS
2016 ANNUAL REPORT 9 AYALA FOUNDATION OUR PROGRAM MAP
I Education Youth Leadership CAR Education Youth Leadership
III II Education Education Youth Leadership Youth Leadership Arts & Culture Disaster Rehabilitation NCR Education Youth Leadership Arts & Culture
IV-A Education Youth Leadership Sustainable Livelihood V Education IV-B Youth Leadership Education Youth Leadership Sustainable Livelihood VIII Youth Leadership Disaster Rehabilitation
VI Education Youth Leadership Arts & Culture Disaster Rehabilitation
VII Education XIII Youth Leadership Youth Leadership Disaster Rehabilitation
X Education IX Youth Leadership Education XII ARMM Education Education Youth Leadership Youth Leadership
XI Education Youth Leadership Arts & Culture
10 AYALA FOUNDATION In 2016, Ayala Foundation's initiatives are present in 58 out of the country's 81 provinces, and in Metro Manila.
PROVINCE EDUCATION YOUTH LEADERSHIP SUSTAINABLE LIVELIHOOD AND ARTS CULTURE DISASTER REHABILITATION PROVINCE EDUCATION YOUTH LEADERSHIP SUSTAINABLE LIVELIHOOD AND ARTS CULTURE DISASTER REHABILITATION
I VIII Ilocos Norte ● Biliran Ilocos Sur ● Eastern Samar ● La Union Leyte ● ● Pangasinan ● ● Northern Samar Samar II Southern Leyte Batanes ● Cagayan ● ● IX Isabela ● ● Zamboanga del Norte Nueva Vizcaya ● Zamboanga del Sur Quirino Zamboanga Sibugay ●
III X Aurora ● Bukidnon Bataan ● Camiguin Bulacan ● Lanao del Norte ● Nueva Ecija ● ● ● Misamis Oriental ● ● Pampanga ● ● ● Misamis Occidental ● Tarlac ● Zambales ● XI Compostela Valley IV-A Davao del Norte ● Batangas ● ● Davao del Sur ● ● ● Cavite ● ● ● Davao Occidental Laguna ● ● Davao Oriental Quezon ● XII Rizal ● ● Cotabato ● ● IV-B Sarangani ● Marinduque South Cotabato ● Occidental Mindoro ● Sultan Kudarat Oriental Mindoro ● ● ● XIII Palawan ● ● Agusan del Norte ● V Agusan del Sur ● Dinagat Islands ● Albay ● ● Surigao del Norte ● Camarines Norte ● Surigao del Sur ● Camarines Sur ● ● Catanduanes ● ARMM Masbate ● Lanao del Sur ● Sorsogon ● Maguindanao ● ● VI Sulu Tawi-Tawi ● Aklan ● Basilan ● ● Antique ● Capiz ● CAR Guimaras Abra Iloilo ● ● ● ● Apayao ● ● ● Negros Occidental Benguet ● ● Ifugao VII Kalinga Bohol ● ● Mountain Province Cebu ● ● Negros Oriental ● NCR Siquijor Metro Manila ● ● ●
2016 ANNUAL REPORT 11 AYALA FOUNDATION OUR PROGRAM SPENDING
44.1 Million
Education 13.0 Million 15% Youth 45.5 Million Leadership 4% Corporate Support 15% 16.1 Million Sustainable Livelihood 5%
Disaster Response TOTAL PROGRAM Arts and Culture and Special Projects SPENDING 32% 29% 301.3 Million 96.5 Million 86.1 Million
12 AYALA FOUNDATION PROGRAM HIGHLIGHTS
2016 ANNUAL REPORT 13 EDUCATION
Global Filipino Schools (GFS) empowers schools to become 21st-century-ready educational institutions by providing them with support systems that meet UNESCO standards. These include sustainable ICT-proficiency training for teachers, an ICT-equipped school environment, and committed education stakeholders.
14 AYALA FOUNDATION YEAR STARTED
2015
PROGRAM SITES Cagayan de Oro City
Manila
Bauan and San Pascual, Batangas
New Washington, Aklan
Silay City, Negros Occidental
Ligao City, Albay
PROGRAM PARTNERS Globe Telecom
Department of Education
Local government units
Private donors (including Chevron, Mitsubishi, CLSA, Huawei)
QUICK STATS
Reached nine schools from four cities and GLOBAL FILIPINO three municipalities SCHOOLS 300 teachers trained 9,502 students given ICT access
2016 ANNUAL REPORT 15 EDUCATION
CENTER OF EXCELLENCE IN PUBLIC ELEMENTARY EDUCATION
The Center of Excellence in Public Elementary Education (CENTEX) provides holistic, quality education for bright children from economically disadvantaged families, honing their confidence and competencies not just inside the classroom but also through after-hours learning in the performing arts and other skill-building activities.
16 AYALA FOUNDATION YEAR STARTED 1998 (Manila)
2000 (Batangas)
PROGRAM SITES Tondo, Manila
Bauan, Batangas
PROGRAM PARTNERS Department of Education City Government of Manila Provincial Government of Batangas Private donors (including Macquarie, Children’s Hour, and individual donors)
QUICK STATS
Total enrollment (SY 2016–2017): 1,010
Promotion rate: 95% (v. 73.5% national average)
85% teacher proficiency rating
90% parent participation in special training sessions
25,250 volunteer hours rendered by parent
2016 ANNUAL REPORT 17 EDUCATION
TRAINING INSTITUTE
The two-year teacher and principal training program focuses on four essential elements for lifelong learning—classroom pedagogy, development of critical thinking skills, values clarification, and use of technology in the classroom. It also involves a yearlong mentoring component that allows teachers and principals to ensure they apply what they learned.
18 AYALA FOUNDATION YEAR STARTED
2012
PROGRAM SITES Iloilo
Basilan
Silang, Cavite
Puerto Galera, Oriental Mindoro
Albay
Aklan
Manila
Batangas
Cagayan de Oro City
Sagay, Negros Occidental
PROGRAM PARTNERS Department of Education Local government units Private donors
QUICK STATS
14,000 students served by Training Institute–trained teachers
374 teachers trained
2016 ANNUAL REPORT 19 YOUTH LEADERSHIP
The Bangsamoro Young Leaders Program–Leadership Communities seeks to harness the strengths of Bangsamoro youth as agents of positive change in their respective communities. It is an offshoot of the successful Basilan Young Leaders Program and Leadership Communities (LeadCom) Basilan, which was launched in 2015.
20 AYALA FOUNDATION YEAR STARTED
2016
PROGRAM SITES Lanao del Sur
Maguindanao
Sulu
Tawi-Tawi
Basilan
PROGRAM PARTNERS ARMM Office of the Regional Governor Eisenhower Fellows Association of the Philippines
QUICK STATS
35 participating BANGSAMORO young people (BYLP phase)
YOUNG LEADERS 140 young people to be included in PROGRAM LeadCom phase
2016 ANNUAL REPORT 21 YOUTH LEADERSHIP
LeadCom harnesses the youth’s potential for leadership and community service by helping them ideate and implement projects that address community issues.
22 AYALA FOUNDATION YEAR STARTED
2011
PROGRAM SITES Cagayan de Oro City
Kauswagan, Lanao del Norte
Basilan
Davao City
Bacolod City, Negros Occidental
Naga, Cebu
PROGRAM PARTNERS Local government units Youth organizations and youth-serving organizations Private funders (such as GN Power/AC Energy and Mitsubishi Corporation)
QUICK STATS
18 participating youth groups
LEADERSHIP 20 community projects implemented COMMUNITIES in 2015 and 2016 6 sites (excluding BYLP sites, but including LeadCom phase of Basilan Young Leaders Program) since 2011
825 participants since 2011
2016 ANNUAL REPORT 23 YOUTH LEADERSHIP
FILIPINO YOUNG LEADERS PROGRAM
FYLPro (formerly Filipino American Young Leaders Program) taps outstanding young Filipino Americans who possess a sincere desire to be engaged in their respective communities and promote the Philippines’ further development. They serve as partners in advancing interests of Filipino Americans, and forging closer Philippine-United States relations.
24 AYALA FOUNDATION YEAR STARTED
2012
PROGRAM SITES Key US states and territories with significant Filipino American communities
PROGRAM PARTNERS Embassy of the Philippines in Washington, DC Department of Foreign Affairs Philippines Consular Offices in the United States FYLPro alumni
QUICK STATS
10 delegates in 2016
50 alumni
2016 ANNUAL REPORT 25 YOUTH LEADERSHIP
AYALA YOUNG LEADERS CONGRESS
Ayala Young Leaders Congress (AYLC) is a student leadership summit designed to build confidence, hone leadership skills, nurture commitment, foster nationalism and idealism, and encourage faithful stewardship.
26 AYALA FOUNDATION YEAR STARTED
1999
PROGRAM SITES Nationwide
PROGRAM PARTNERS Ayala group of companies
QUICK STATS
22 alumni chapters 1,369 alumni
53 alumni implemented community projects
6,491 beneficiaries of community projects
P 10.6 million, the projected social value of AYLC alumni projects
2016 ANNUAL REPORT 27 SUSTAINABLE LIVELIHOOD
The Lio engagement is a prototype community development project for two communities in El Nido, Palawan—Villa Libertad and Pasadeña.
28 AYALA FOUNDATION YEAR STARTED
2016
PROGRAM SITE El Nido, Palawan
PROGRAM PARTNER Ayala Land, Inc.
QUICK STATS PROJECT LIO 2 barangays reached 3,498 combined population of Pasadeña and Villa Libertad
651 combined households of Pasadeña and Villa Libertad
39 combined direct participants in rapid appraisal and community consultations in Pasadeña and Villa Libertad
2016 ANNUAL REPORT 29 SUSTAINABLE LIVELIHOOD
Southville 7 in Calauan, Laguna, is a 107-hectare relocation site for families displaced by Typhoon Ondoy and the Pasig River rehabilitation. Owned by the National Housing Authority, the property is home to roughly 4,500 families. Together with our partners, we are implementing sustainable livelihood projects (through employment or enterprise) for families in the area. One such project is the MDC Greens project, which grows ornamental plants.
30 AYALA FOUNDATION YEAR STARTED
2012
PROGRAM SITE Calauan, Laguna
PROGRAM PARTNERS Municipal government of Calauan Salesians of Don Bosco Franciscan Sisters of the Sacred Heart Ayala group of companies, particularly Ayala Land and Makati Development Corporation
QUICK STATS
4 hectares farming area for MDC Greens
20 farmers initially included in MDC CALAUAN, Greens project
137% increase LAGUNA in average monthly income of participating PROGRAM farmers
2016 ANNUAL REPORT 31 SUSTAINABLE LIVELIHOOD
EL NIDO PROGRAM
We work with the women weavers of barangay Sibaltan, El Nido, Palawan, and leverage their weaving talents in producing beautiful buri bags and other buri products. Our goal is scaling their production of buri products, improving production processes, and connecting weavers to the market.
Aside from working with women weavers, we also helped the Sibaltan Heritage Council in their tourism initiatives.
32 AYALA FOUNDATION YEAR STARTED
2013
PROGRAM SITE Sibaltan, El Nido, Palawan
PROGRAM PARTNERS Department of Social Welfare and Development Local government of El Nido Barangay council of El Nido Sibaltan Heritage Council Sibaltan Women Weavers Association
QUICK STAT
2 organizations (Sibaltan Heritage Council and Sibaltan Women Weavers Association) formally registered and incorporated
2016 ANNUAL REPORT 33 SUSTAINABLE LIVELIHOOD
IRAYA MANGYAN PROGRAM
Our Iraya-Mangyan Program is committed to the education and skills training of the indigenous Iraya-Mangyan community of Puerto Galera, Oriental Mindoro. For Sustainable Livelihood, Ayala Foundation helps the Iraya-Mangyan community in Talipanan in reviving their tradition of weaving, particularly in the creation of beautiful and functional nito products. With the help of our donors and partners, we also provide training in dressmaking, electrical skills, masonry, and agriculture, among others.
34 AYALA FOUNDATION YEAR STARTED
1991
PROGRAM SITE Puerto Galera, Oriental Mindoro
PROGRAM PARTNERS Ayala group of companies Sisters of Charity of St. Anne Private donors
QUICK STATS
280 families reached
P5.2 million total sales of Iraya-Mangyan products
3 outlets where Iraya- Mangyan products are available (Glorietta, Greenbelt 5, and Alabang Town Center)
2016 ANNUAL REPORT 35 ARTS AND CULTURE
AYALA MUSEUM
As one of the leading private museums in the country, the Ayala Museum makes Philippine history, art, and culture accessible to the public through engaging exhibitions and exciting cultural programs. The Ayala Museum uses both traditional and nontraditional platforms to present our country’s rich heritage in fresh, engaging, and innovative ways.
36 AYALA FOUNDATION YEAR STARTED
1967
PROGRAM SITES Makati City Also nationwide (through traveling exhibits) and global (through items on loan)
PROGRAM PARTNERS Private collectors Ayala group of companies Local government units (for traveling exhibits)
QUICK STATS
130, 784 museum visitorship
1.4 million reached by traveling exhibitions
2016 ANNUAL REPORT 37 ARTS AND CULTURE
FILIPINAS HERITAGE LIBRARY
The Filipinas Heritage Library (FHL) houses contemporary and rare volumes on Philippine art, history, and culture; vintage recordings of Philippine music; vintage photographs; and maps, periodicals, and multimedia materials. The library has embarked on a digitization project to make a significant part of its collection available online. FHL also develops exhibitions and education programs on Philippine history and culture. In partnership with government and private groups, FHL develops community libraries through the OurLibrary program.
38 AYALA FOUNDATION YEAR STARTED
1996
PROGRAM SITES Makati City Also nationwide and global
PROGRAM PARTNERS Local government units BPI Foundation Ayala Land Globe Telecom Private organizations
QUICK STATS
2,994 library visitorship
22,243 visitors to FHL exhibits
2016 ANNUAL REPORT 39 SPECIAL PROJECT
SUPPORT FOR DISASTER REHABILITATION
We are helping communities severely damaged by Yolanda as they work toward complete recovery. We have also provided support for other areas hit by other disasters, such as the Bohol earthquake of 2013, as well as Typhoon Nina, which hit the Bicol region, and Typhoon Ferdie, which hit Northern Luzon in 2016. We have also formalized an engagement with the Philippine Disaster Resilience Foundation for various disaster response and rehabilitation initiatives.
40 AYALA FOUNDATION YEAR STARTED
2013
PROGRAM SITES Estancia and Carles, Iloilo Batanes Tacloban City Dauis, Bohol
PROGRAM PARTNERS Ayala group of companies Department of Education Local government units Diocese of Tagbilaran, Bohol Private funders (including Tetra Laval and CLSA) Philippine Disaster Resilience Foundation
QUICK STATS
5 new classrooms constructed for Yolanda-affected communities
33 new fishing boats provided for Yolanda affected communities
1 new library inaugurated under the OurLibrary program
2016 ANNUAL REPORT 41
Three years after the onslaught of Supertyphoon Yolanda, communities in Estancia and Carles (in photo) have steadily moved toward recovery and progress. These communities are among our program areas for 2016. IN THIS SECTION
How we align with Championing Enabling nine schools in ICT, the Ayala group, our partnerships bears working with youth leaders from program communities, fruit in our community the Philippines and the United States, and the nation’s development initiatives working more closely with Calauan development goals and El Nido communities
44 AYALA FOUNDATION Ayala Foundation is working closely with Ayala Land to understand the needs and aspirations of two communities in the picturesque town of El Nido, Palawan.
YOUR INITIATIVES WITH THE NEEDS OF YOUR STAKEHOLDERS
For the past few years we have used “As group? Are we aligned with the goals of the One We Can” as our tagline. This statement communities we serve? Are we aligned with crystallizes what Ayala Foundation has long the development thrust of our country? been committed to—working closely, in fact working side by side, with partners. In 2016 we strengthened the alignment of our initiatives with the growth and development To make the partnership work, we need to goals of our conglomerate, communities, and consistently align with our stakeholders. We country. ask ourselves relevant questions: Are we aligned with the strategic direction of the Ayala Here are some of those stories.
2016 ANNUAL REPORT 45 Students experience what it’s like to be in a “21st-century-ready” learning environment through Global Filipino Schools.
Making education globally competitive Youth programs for change
As one of the leading telecommunications Ayala Foundation, together with the rest of the companies in the country, Globe Telecom can Ayala group of companies, has long believed reach out to many of the farthest communities, that the youth have the power to bring about and by harnessing this power, it can make a positive change in our communities. This is great difference in the lives of many Filipinos. why over the years, we have invested in youth For our part, we at Ayala Foundation have leadership programs—after all, the youth are been contributing to the cause of community not only our future leaders and change makers; development for the past 55 years. they can very well perform these roles even today. Global Filipino Schools (GFS) empowers schools to become 21st-century-ready educational One such program is Leadership Communities institutions by providing them with support (LeadCom), which empowers community- systems that meet UNESCO standards. These based youth to take an active role in include sustainable ICT-proficiency training for community transformation. LeadCom inspires teachers, an ICT-equipped school environment, the youth to get involved in addressing pressing and committed education stakeholders. needs and issues through projects they themselves will propose, plan, and implement. Under our partnership, nine schools now have Through LeadCom, the youth are guided GFS computer laboratories, which help improve through a process where they learn to have a the learning experience of 9,502 students. The greater understanding of the issues faced by construction of these laboratories, as well as the their communities, conceptualize a project provision for equipment and teacher training, that could help address these issues, and were made possible through the support of implement and monitor the impact of these other partners, which include Mitsubishi, CLSA, projects. Chevron, and Huawei. LeadCom was present in these major areas in Given how we have successfully implemented 2016—Cagayan de Oro City, Lanao del Norte, the program, which also counts the Department and Basilan and the Autonomous Region in of Education and local government units as its Muslim Mindanao. key partners, Globe and DepEd will continue their long-term commitment of bringing the The 10 youth groups that comprised LeadCom program to all DepEd divisions by 2020. Cagayan de Oro successfully implemented 10 community projects, which covered anti-illegal drug campaign, solid waste management, barangay-based agriculture,
46 AYALA FOUNDATION The Tabang sa Kalusugan project in Lamitan, Basilan, is one of the youth initiatives that emerged from Leadership Communities in 2016.
youth empowerment, and livelihood. These On its 18th year, the Ayala Young Leaders youth groups were strongly supported by our Congress (AYLC) added 80 new members to partners—the City Government of Cagayan its roster of alumni. To date, there are 1,369 de Oro, Balay Mindanao Foundation, and JCI AYLC alumni who are now part of the five Kagayhaan Gold. major chapters of the Ayala Young Leaders Alumni Association (AYLAA). The 2016 congress We also kicked off LeadCom in Lanao del carried the theme, Kabataan: Sabay-Sabay Norte in November. As a fellow believer in sa Bayan with Senator Bam Aquino serving youth power, GN Power Kauswagan (GNPK) as the keynote speaker. As the flagship youth partnered with us for this run of LeadCom, leadership program of the Ayala group, AYLC harnessing the passion for community service challenged the 2016 delegates to develop and among the youth of two barangays in Lanao del implement projects in their local communities. Norte. GNPK is part of AC Energy, Ayala’s power Sixty project proposals were submitted and are holdings arm. The eight youth groups engaged currently being monitored. for the program start their implementation phase in 2017. The full cycle of community development
LeadCom also made a mark on the youth of One of our commitments in the years ahead Basilan and the rest of the Autonomous Region is to hone our expertise in community of Muslim Mindanao. The details of the ARMM development, and this involves aligning our engagement are discussed in the IMPACT initiatives with the dreams and aspirations of section of this report (p. 54). the communities we are serving, and making sure that they are equipped to achieve their Aside from community-based youth, we also dreams and aspirations. We brought the strengthened our connection with young principles and methods of full-scale community Filipino Americans in the United States. On its development to Project Lio, whch reaches fifth year, the Filipino American Young Leaders out to two barangays in El Nido, Palawan— Program was transformed into the Filipino barangays Pasadeña and Villa Libertad. These Young Leaders Program (FYLPRO), to signify a are communities that are located close to stronger commitment to the Philippines and Ayala Land’s Lio Estate. As the new neighbors, its development. An additional 10 alumni were the Lio Project needs to make an effort added to the roster of FYLPRO alumni, rounding toward understanding the people living in out the number to 50. Today, the foundation the community, as well as their customs and is working toward institutionalizing FYLPRO traditions. Ayala Foundation, through a five-year in partnership with the Philippine Embassy in engagement that started with rapid appraisal, Washington, D.C. and the Makati Business Club. facilitated the process of the Lio Estate having an appreciation of as well as respect for, the
2016 ANNUAL REPORT 47 community. At the same time, the process Josefina Cajes, 65 years old, is one of the allowed the barangays to see opportunities farmers engaged by MDC Greens. She talks for their own growth, in terms of possible about how her life has improved as a result upgrading of skills, improvement in some of her participation in the project—“Maganda infrastructure concerns, and the protection of na po ang buhay di tulad dati. Nakakaluwag- natural resources. luwag na rin ako mula nang magtrabaho dito.… Nakakapag-ipon na. Di na umuutang.” (My life Ayala Land engaged Ayala Foundation now is better than before. I am able to save. I for Project Lio after our experience in don’t take out loans anymore.) barangay Sibaltan, also in El Nido. Through our sustainable livelihood and community Because of the promising results of the MDC development initiatives in Sibaltan, we have Greens farms, 20 more farmer-trainees were contributed to the growth of two organizations engaged, and an additional two hectares in the barangay—the Sibaltan Heritage Council of farmland tilled, bringing the total to 4 (SHC) and the Sibaltan Women Weavers hectares. We also committed to help find Association (SWWA). In 2016, the SHC and ways to address the relocation community’s SWWA were separately incorporated with the employment and livelihood concerns. guidance of the foundation. Both organizations have successfully evolved their marketing and Alignment as a key component to sustainability programs as the weavers, all community development belonging to the Cuyonon community of El Nido, Palawan, have substantially increased As we strive to refine our knowledge, their income by scaling their products and experience, and skills in community services, catering to a growing tourism market. development, we reaffirm the important role of alignment and consultation with the Our partnership with our farmer beneficiaries key stakeholders of our initiatives—our co- in Calauan, Laguna, was also scaled this year advocates in the Ayala group, the members of with the help of the Makati Development the communities we serve, and the custodians Corporation, Ayala Land’s construction arm. The of our country’s development agenda. And partnership led to the creation of a farmers’ by sticking close to our tagline—“As One We group under the MDC Greens Ornamental Can”—we hope to keep our initiatives aligned Farm, which initially engaged 20 residents who with the genuine needs and aspirations of our had been trained to become farmers, and later stakeholders. on enjoyed a rise in their monthly income.
Ayala Foundation’s partnership with the women weavers of Sibaltan, El Nido, Palawan, has helped formally incorporate and register the Sibaltan Women Weavers Association as a cooperative.
48 AYALA FOUNDATION Our commitment to contributing to the improvement of the quality of education remains strong, as can be seen here at Balas Elementary School in Lamitan, Basilan, one of the areas reached by our Training Institute program.
2016 ANNUAL REPORT 49 ON CENTERPIECE PROGRAMS
IN THIS SECTION
Enhancing program On the way to A joyful and wonderful celebration of outcomes and organizational becoming a more Philippine art and culture, serving our efficiencies by sharpening risk-aware and more students and teachers in a sustained our focus resilient organization and cohesive manner, an empowering relationship with an indigenous community
50 AYALA FOUNDATION The Ayala Museum continues to present dynamic, engaging programs not only for art enthusiasts, but for everyone interested in finding joy and wonder around them.
Harnessing our links and synergies with Through improved focus, we are able to stakeholders from the Ayala group and other enhance our efficiencies, thus making our sectors did not only cover new programs; it also people, programs, and organization more looked at how we could strengthen our existing robust, and therefore becoming more relevant initiatives. This strengthening often took the to our stakeholders, as well as showing form of sharpening the focus of our programs, improved results. whether in the form of targets, processes, or other program elements.
2016 ANNUAL REPORT 51 “The World We Live In,” featuring the works of top international photographers, was the Ayala Museum’s blockbuster show for the year.
A risk-aware culture Memberships also increased for both regular (400 new members; 78 percent increase The continuing changes on the economic, from 2015) and premier (39 new members; 59 political, social, and even environmental fronts percent increase from 2015) categories. provide a perfect opportunity for us to take Our significant reach across various social a critical look at our strength and stability as media platforms has also brought the “joy and an institution. This led us to formulate our wonder in art and culture” to areas far beyond Enterprise Risk Management (ERM) policy, the museum and library walls and even outside thus giving us a stronger understanding of operating hours. the possible risks we face as an organization. Through an ERM roadmap, we are embedding Through official Facebook, Twitter, and all elements of the policy into our operations, Instagram accounts, the museum and the The first phase of the roadmap was library reached a combined audience of at implemented in 2016, where we identified least 7 million in 2016, proving that cultural the foundation’s top risks, with the help of risk institutions are not bound by physical awareness briefings, interviews, workshops, structures, but can occupy active social prioritization, and analysis. By developing a risk- spaces online. More than institutions “about aware culture internally, we are gearing toward something,” museums and libraries are really becoming a more resilient organization—and “for someone”—showing the importance of ultimately able to serve our stakeholders in a nurturing strong bonds with audiences. sustained manner. One of the Ayala Museum’s efforts to bring Joy and wonder in art and culture the museum experience to areas beyond its walls are the Traveling Exhibitions. In 2016, In 2016, our Arts and Culture Division offered three traveling exhibits were brought to select creative ways to spark joy and wonder in locations in Luzon, Visayas, and Mindanao. Philippine art, history, and culture. These were “Images of Nation: Carlos ‘Botong’ Francisco,” displayed at the Adamson University With the help of dynamic programming, the Art Gallery, the Ayala Corporation Stockholders Ayala Museum and Filipinas Heritage Library Meeting, and the Lyceum of the Philippines (FHL) strove to transform themselves into University; “Kisame: Visions of Heaven on Earth,” community centers for arts and culture—able on display at Abreeza Mall in Davao City; and to engage both existing and new audiences, the doll collection, which toured Museo de la offering an inspiring and meaningful Salle–Dasmariñas, Adamson University Gallery, experience that can compete with other forms Museo Negrense de la Salle–Bacolod, and of leisure. Central Luzon State University in Nueva Ecija.
Audience engagement for both the Ayala Collectively, the traveling exhibits reached 1.4 Museum and FHL enjoyed a steady rise across million people, representing a 2,000-percent all programs, over the past year. Visitorship increase in reach. in 2016 was recorded at 130,784, registering a 13-percent increase from 2015’s 115,827. This Museum events, such as lectures and number reflects regular museum, library, and performances, continued to draw new and ArtistSpace guests, as well as participants in returning audiences. Of particular interest events and educational programs. were the “History Comes Alive” series with
52 AYALA FOUNDATION The Filipinas Heritage Library further strengthened its digitization efforts in 2016. historian Ambeth Ocampo, the “Rush Hour “Tinker Tales: Ang Ilustrador ng Kabataan’s Concerts” with the Manila Symphony Orchestra, 20th Anniversary Exhibition” and “Tree of and “Season’s Symphonies” with the Ateneo Life: The Fourth Southeast Asian Trade Chamber Singers, Aleron, and UP Singing Ceramics Festival.” Lastly, in partnership with Ambassadors. the Sundaram Tagore Gallery, the museum mounted “The World We Live in” featuring Programming was enhanced by the addition prints of the works of iconic photographers— of a new series of concerts, such as the “Jazz Steve McCurry, Annie Leibovitz, Robert Polidori, Sessions” and “Guitar Nights”; film talks by Edward Burtynsky, and Sebastiao Salgado. The Professor Nick Deocampo; and themed response from audiences made “The World We tours and “Art over Coffee,” with guest Live in” the Ayala Museum’s blockbuster show curators and artists, to supplement ongoing for the year. exhibitions. Holiday events such as “Art to Heart” (Valentine’s) and “Midnight Museum” Meanwhile, FHL celebrated its 20th year by (Halloween) were also a hit among audiences stepping up its efforts to build its digital young and old. resources, while also supplementing its traditional and electronic services with The museum also continued to offer free days educational programs, such as lectures, for its guests during the year, particularly during exhibits, and other events. the celebration of International Museum Day on May 20, and during the third installment of FHL’s digitization efforts were in full swing in “Inspire Every Day” on July 30. 2016, especially with regard to its collection of rare materials. During the year FHL made “Inspire Every Day,” in particular, continued to be available, through its online portal Filipiniana a crowd-drawer, with over 4,000 guests coming Online, 1,168 rare books and documents, to the museum to view the galleries; participate particularly documents from the presidential in workshops; enjoy performances by Ballet papers of President Elpidio Quirino. Philippines, Manila Symphony Orchestra, and Tago Jazz Café; and listen to talks by FHL also embarked on the digitization of the photographer BJ Pascual and filmmaker Jerrold papers of President Manuel Luis Quezon. During Tarrog. the year, 8,700 documents from the Quezon collection were digitized. The museum’s exhibitions calendar also remained full for the year, featuring such To further build up its Roderick Hall collection important artists as Ang Kiukok, Juvenal of World War 2 materials, FHL digitized 53 Sansó, and Fernando Zóbel, as well as the volumes of guerrilla papers from the Central Japanese printmaker Tetsuya Noda and the Philippine University WW2 collection, 19 of 27 contemporary Malaysian artist Yee I-Lann. folios from the WW2 issues of the Tribune; three Connoiseurship and the importance of material of General Fidel V. Segundo’s diaries; and eight heritage were explored in such exhibitions theses/studies on the Second World War. as “Object Travelogue/Dialogue” and “In My While the on-site library visits reached 2,994 Father’s Room: Stories and Small Objects during the year, its online research portals Near and Dear to Luis Ma. Araneta.” Unity in gained over 689,000 visits in 2016. the artistic community were highlighted in FHL also strengthened its services with special
2016 ANNUAL REPORT 53 exhibits and lectures, drawing a combined and raised as much as P1 million to help audience of 22,243. Among its key exhibits support the nutrition, teacher enrichment, and and events were “Secret Lives of Books” with after-hours programs in both the Manila and book designer Karl Castro; its 20th anniversary Batangas schools. exhibit “Color in History”; and “Doble Mirada” in partnership with the Geronimo Berenguer de Meanwhile, the Training Institute continued los Reyes Jr. Museum in Cavite. to reach out to teachers and principals within the public elementary school system. Through Enhancing the museum experience the program, the foundation is able to help through technology teachers in various parts of the country become more effective and empathetic educators, as Toward the Christmas holidays, we launched a result of its focus on four essential elements the Museum Online Store, as our way of making for lifelong learning—classroom pedagogy, the museum’s unique products available to development of critical-thinking skills, values audiences anywhere in the world. The store clarification, and use of technology in the featured an initial list of 75 items, and is set for classroom. expansion in 2017. During the year, Training Institute was brought We also laid the groundwork for the 2017 to 10 areas—Pandacan, Manila; San Pascual, Diorama Virtual Reality Project. The concept Batangas; Silang, Cavite; Puerto Galera, Oriental of piloting a virtual reality (VR) experience Mindoro; Ligao City, Albay; Carles and Estancia, for the Dioramas was developed as a means Iloilo; Silay City, Negros Occidental; New to modernize the exhibit, especially for the Washington, Aklan; Cagayan de Oro City; and millennial generation that has grown up with Basilan. The program provided training and technology. The target is to have the first mentoring for 374 teachers and school heads, Diorama VR experience ready for the public by who served as many as 14,000 students. The the middle of 2017. training sessions in some of these locations were conducted in connection with the Global Filipino Schools program. A stronger framework for education One positive outcome of Training Institute was On its 18th year, the Center of Excellence the improved engagement of the parents in in Public Elementary Education (CENTEX) the community in the children’s education. For continued to provide quality education for example, the parents of students in Cano-an underprivileged but bright children in Tondo, Elementary School in Iloilo also participated in Manila, and Bauan, Batangas. It continued learning sessions. to have a high cohort survival rate (or the rate of kindergarten students who reach sixth In addition, Training Institute facilitated a grade)—95 percent, versus the national average one-day socio-emotional learning session of 73.5 percent. for 107 Luzon principals, supervisors, and superintendents in Baguio City. In addition, Our partners also provided valuable support we held a half-day Philosophy for Children for CENTEX’s operations. The Third Macquarie workshop for 27 school heads and Education Charity Fun Run gathered over 1,200 runners majors at the UNESCO Philippine National Commission Karunungan Festival.
54 AYALA FOUNDATION Iraya-Mangyan women have learned the intricate art of beading, as part of our livelihood initiatives in Puerto Galera, Oriental Mindoro.
Ayala Foundation also helps connect some graduates of its programs (such as CENTEX) to many possible scholarship opportunities. In some instances, we also help administer the scholarships. In 2016, Ayala Foundation helped students from high school to postgraduate levels get one step closer to completing their education. The foundation’s scholars go to the Affordable Private Education Center (APEC) Schools, supported by the Ayala Multi-Purpose Cooperative (AMPC) and other private donors; CENTEX scholars under the Dreamcatcher program; college scholars (some from the Iraya-Mangyan community); a postgraduate scholar from the Iraya-Mangyan community; and those under the Ayala Master of Tri-Sector Collaboration Scholarship with the Singapore Management University.
The foundation also provided additional educational assistance for preschool students at Buklod Bahayan Daycare Center in Cavite.
Empowering the indigenous Iraya-Mangyan
Meanwhile, the community development program for the Iraya-Mangyan community in Puerto Galera, Oriental Mindoro, continued to serve 280 families from the indigenous Mangyan community. These services included educational support (in the form of scholarships and other educational input, covering preschool, grade school, high school, and college), nutrition, health, and livelihood. The weaving and beading projects for the Mangyans produced products featured in bazaars, as well as in the Iraya-Mangyan stores in Greenbelt, Glorietta, and Alabang Town Center.
CENTEX continues to promote holistic learning in Manila and Bauan, Batangas.
2016 ANNUAL REPORT 55 IN THIS SECTION
Measuring the impact Expanding our community- We honor the heroism of of our programs to based youth programs in ARMM, ordinary Filipinos understand exactly promoting a culture of reading, how we are improving fulfilling our commitments in people’s lives disaster rehabilitation
NEVER LOSE SIGHT OF YOUR
56 AYALA FOUNDATION We often hear people say that we are only as good as our results. And through our programs, we hope to make a lasting impact in the lives of the people, communities, and partners we work with.
We work toward improving people’s lives—through initiatives that result from aligning with stakeholders, and by sharpening the focus of our interventions.
Our “Maging Magiting” campaign promotes the value of loving our country, as it also honors the acts of heroism shown by ordinary Filipinos everywhere.
2016 ANNUAL REPORT 57 Vice President Leni Robredo joined Ayala Corporation President Fernando Zobel de Ayala, as well as our partners from the Ayala group, local government units, the House of Representatives, and the Department of Education for the launch of our “100 for 200” book drive.
Scaling up our Bangsamoro youth program decided to raise funds for the purchase of boats, which served as a vessel to transport the In June 2015, we had the opportunity to work students—not only did the boatmen earn an with the Office of the Regional Governor of income from the steady stream of passengers, the Autonomous Region of Muslim Mindanao schools also saw improvements in attendance (ARMM) and the Eisenhower Fellows rates. Association of the Philippines (EFAP) for the Basilan Young Leaders Program–Leadership Another group from the town of Maluso Communities. For many years, many people came up with the Kalusugan si Kauman sa mistakenly think of Basilan as constantly war- Taberlongan project. Recognizing that there torn. While there remain a few conflict sites was limited access to health services in the in surrounding areas, it is also true that many barangay, the project proponents partnered communities there are in need of help, from with a group of mothers and trained them in access to the most basic of services, as well the production of herbal medicines. as support for education, skills training and employment, and even cultural promotion. Because of the success of this program, the ARMM–ORG and EFAP once again partnered This is why our partnership with the ARMM– with us in 2016 to scale up the Basilan Young ORG and EFAP for the Basilan program was Leaders Program into the Bangsamoro Young an important step toward understanding the Leaders Program–Leadership Communities current situation of the communities, and (BYLP–LeadCom), a leadership training and finding a way to contribute to improving their immersion program for 35 young Muslim lives. leaders from Basilan, Sulu, Tawi-Tawi, Maguindanao, and Lanao del Sur. For the Basilan Young Leaders Program, we worked with 10 youth groups from different BYLP–LeadCom kicked off with a learning barangays, and they underwent a learning circuit, where young leaders went to various process where they identified key challenges parts of the country to learn from thought their respective barangays faced, and leaders and influencers from government, not- formulated the possible solutions for these for-profit, and other sectors. After their learning challenges, especially those under the ARMM– circuit, they went through a leadership camp, HELPS priority areas—Health, Education, where their leadership skills and capabilities Livelihood, Peace, and Synergy. were honed.
For instance, a youth group from barangay Each BYLP-LeadCom participant was also Sangkahan, Al Barka, Basilan, came up with tasked to recruit their own circle of fellows, the Bangka sa Sangkahan livelihood project. as they prepare to conceptualize, develop, Recognizing that many students are unable implement, and monitor their community to access their schools because of the lack of projects. On the whole, a total of 175 fellows transportation, the proponents of this project are expected to undertake community-based programs all over ARMM.
58 AYALA FOUNDATION Singing the National Anthem with all your heart is a sign of courage and heroism—this is one of the key messages of our National Anthem video currently being shown in all Ayala Malls Cinemas.
A country of readers Employee engagement through our programs
As part of our contribution to National Reading In collaboration with the Ayala Group Human Month in November, we rallied the entire Resources Council, we worked more closely Ayala group of companies to contribute to the with the Ayala group in providing volunteer promotion of literacy and love of reading in the programs as employee engagement activities. country. We rallied every citizen from the Ayala group, as well as our donors, to contribute at We recognized that a lot of Ayala citizens least P 100 to purchase 200,000 storybooks for look for opportunities to contribute to public elementary schools in the in the country. communities—as volunteers, as mentors, or just to have a better appreciation of the daily lives During the project launch at the Ayala Museum of ordinary Filipinos. Through our programs, on November 25, Vice President Leni Robredo Ayala group employees get the chance to noted: “What you’re doing today, providing become more familiar with our initiatives and children with storybooks that will begin communities. their journey of self-discovery and a lifetime of growth, is the best way to build a nation With closer alignment between Ayala of leaders. It will hone our kids to think for Foundation and the Ayala group, we were able themselves, guided by the thought processes of to scale up our participation in DepEd’s Brigada great men and women before them. Reading Eskwela activities, resulting in a 252-percent rise will enlarge their world, but more importantly in participation within the conglomerate. their hearts. And hopefully, the power of words will not just make them speak intelligently, but Other initiatives that engaged Ayala volunteers also act with integrity, choose with wisdom, and were the National Reading Month Book Drive embrace servant-leadership.” in November 2016, and the Macquarie Fun Run for CENTEX. In addition, Secretary of Education Leonor Briones relayed this message: “The Department “Maging Magiting” of Education appreciates the significant role of our stakeholders in promoting the indisputable All of us believe in the importance of loving our value of education. This campaign is an country, and that, regardless of the work we do inspiring effort of Ayala Foundation as our active or our status in life, we all have the potential to partner through the years in promoting quality, become heroes. accessible, inclusive, and liberating education.” With this in mind, we launched the “Maging Because of the support of the Ayala group and Magiting” campaign, a three-year campaign the rest of our donors and supporters, we were which started with the production of a able to raise P 17.07 million—enough to provide new National Anthem video, highlighting 201,327 books for public elementary schools in the heroism of ordinary Filipinos. Using the Luzon, Visayas, and Mindanao. word “magiting”—courageous, valiant—we demonstrated in the video that we can all show
2016 ANNUAL REPORT 59 Fishermen from Binuluangan Island, in Carles, Iloilo, were the recipients of fiberglass boats, as part of our continuing Yolanda initiative.
our love to our country by performing our daily efforts in Bohol. Three of the coop members activities with dignity, and standing resilient in are employed in the restoration of the Dauis the face of challenges. Through the video, we Church, three are employed in the restoration of also showed that FiIipinos can be valiant by the Panglao Church, six are employed in other singing the National Anthem with pride, and livelihood activities, four are helping set up the with all our hearts. The video was produced livelihood project of the cooperative, and the in partnership with the Ayala Malls Cinemas, remaining eight are being assisted to join the Ayala Corporation, and the National Historical labor pool in the restoration of the Maribojoc Commission of the Philippines. Church, a project of Escuela Taller.
The message of the video was resonant within We also established partnerships with the the Ayala group that it premiered at the Ayala Philippine Disaster Resilience Foundation, Group Town Hall on November 15. The following which serves as an important channel for day, the video started screening in 76 cinemas providing disaster response and immediate in all Ayala Malls across the country. recovery. PDRF served as a channel to assist communities damaged by Typhoon Ferdie in Disaster assistance Batanes last September, and Typhoon Nina last December. Ayala’s assistance in rehabilitation efforts for communities affected by supertyphoon Scaling up in 2017 Yolanda continued with the turnover of five classrooms and a stage in Dayhagan Aside from having the biggest youth leadership Elementary School, a library project in program in ARMM, Ayala Foundation is also Carles Central School, school infrastructure at the forefront of the continuing pursuit of improvement in Cawayan Elementary School, strategic partnerships in Muslim Mindanao, feeding programs for Carles and Cano-an together with Ayala business units, namely: Elementary School, and the donation of a total Siyapen Drug Rehabilitation Center together of 33 fishing boats with nets to the fishing with Ayala Corporation and Marawi City; and community of Binuluangan Island, Carles, Iloilo. the Moro Art exhibition which were all started Since Supertyphoon Yolanda struck in 2013, the in 2016, and to be implemented in 2017. Ayala group has invested close to half a billion pesos in relief, recovery, and rehabilitation The game plan is to be “Better, Faster, and assistance. Stronger” in 2017, harnessing the energy and passion of a team that can only be matched In Dauis, Bohol, the group of out-of-school by the strong purpose and dedication of youth who were trained in heritage partners and stakeholders with whom it seeks conservation was officially registered with to create greater alignment, focus, impact, and the Cooperative Development Authority as innovation. the Bohol Conservation Marketing Cooperative. After successfully rebuilding the historic We look to the future with renewed hope, watchtower of Dauis Church, the cooperative knowing that our projects, programs, and can now officially take on other conservation partnerships will help draw higher value not tasks. At present, members of the group are only for the organization, but the conglomerate, employed in various heritage conservation the communities, and ultimately, the country.
60 AYALA FOUNDATION A student from Lamitan, Basilan, is happy to receive a number of storybooks, as part of our “100 for 200” book drive.
2016 ANNUAL REPORT 61 AYALA FOUNDATION BOARD OF TRUSTEES
JAIME AUGUSTO ZOBEL DE AYALA CO-CHAIRMAN
GERARDO ABLAZA JR. ALFREDO AYALA TRUSTEE TRUSTEE
VICTORIA GARCHITORENA TRUSTEE
62 AYALA FOUNDATION JAIME LAYA TRUSTEE FERNANDO ZOBEL DE AYALA RUEL MARANAN CO-CHAIRMAN PRESIDENT
ERNEST LAWRENCE CU BERNARD VINCENT DY TRUSTEE TRUSTEE
JOHN PHILIP ORBETA TRUSTEE
2016 ANNUAL REPORT 63 MERCEDITA NOLLEDO TRUSTEE AYALA FOUNDATION MANAGEMENT COMMITTEE
Celerina Asuncion Amores Ruel Maranan Joanna Maria Duarte SENIOR DIRECTOR, PRESIDENT SENIOR DIRECTOR, CORPORATE COMMUNICATIONS PROGRAMS
Erwin Locsin Ma. Fatima Mijares Ma. Elizabeth Gustilo Romualdo Katigbak CHIEF INFORMATION SENIOR DIRECTOR, SENIOR DIRECTOR, CHIEF FINANCIAL OFFICER AND SENIOR DIRECTOR, HUMAN RESOURCES ARTS AND CULTURE OFFICER AND SENIOR INFORMATION SYSTEMS AND CORPORATE SERVICES DIRECTOR, FINANCE
64 AYALA FOUNDATION 2016 ANNUAL REPORT 65 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A), Philippines November 10, 2015, valid until November 9, 2018
STATEMENT OF MANAGEMENT’S RESPONSIBILITY INDEPENDENT AUDITOR’S REPORT FOR FINANCIAL STATEMENTS
The management of Ayala Foundation Inc. (the Foundation) is responsible for the preparation and fair The Board of Trustees presentation of the financial statements, including the schedules attached therein, for the years ended Ayala Foundation, Inc. December 31, 2016 and 2015, in accordance with the prescribed financial reporting framework indicated therein, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Report on the Audit of the Financial Statements
In preparing the financial statements, management is responsible for assessing the Foundation’s ability to Opinion continue as a going concern, disclosing, as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Foundation or to cease We have audited the accompanying financial statements of Ayala Foundation, Inc. (a non-stock, non- operations, or has no realistic alternative but to do so. profit corporation) (the Foundation), which comprise the statements of financial position as at December 31, 2016 and 2015, and the statements of activities, statements of changes in fund balances and The Board of Trustees (BOT) is responsible for overseeing the Foundation’s financial reporting process. statements of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies. The BOT reviews and approves the financial statements including the schedules attached therein. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial Sycip Gorres Velayo & Co., the independent auditor appointed by the management and approved by the BOT, position of the Foundation as at December 31, 2016 and 2015, and its financial performance and its cash has audited the financial statements of the Foundation in accordance with Philippine Standards of Auditing, flows for the years then ended in accordance with Philippine Financial Reporting Standards (PFRSs). and in its report has expressed its opinion on the fairness of presentation upon completion of such audit. Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit JAIME AUGUSTO ZOBEL DE AYALA of the Financial Statements section of our report. We are independent of the Foundation in accordance Co-Chairman with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audit of the financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a FERNANDO ZOBEL DE AYALA basis for our opinion. Co-Chairman Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in RUEL T. MARANAN accordance with PFRSs, and for such internal control as management determines is necessary to enable President the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Foundation’s ability to ROMUALDO L. KATIGBAK continue as a going concern, disclosing, as applicable, matters related to going concern and using the Chief Finance Officer going concern basis of accounting unless management either intends to liquidate the Foundation or to cease operations, or has no realistic alternative but to do so. Signed this 30th day of March, 2017
A member firm of Ernst & Young Global Limited
66 AYALA FOUNDATION SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A), Philippines November 10, 2015, valid until November 9, 2018
INDEPENDENT AUDITOR’S REPORT
The Board of Trustees Ayala Foundation, Inc.
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of Ayala Foundation, Inc. (a non-stock, non- profit corporation) (the Foundation), which comprise the statements of financial position as at December 31, 2016 and 2015, and the statements of activities, statements of changes in fund balances and statements of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Foundation as at December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards (PFRSs).
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Foundation in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audit of the financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with PFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Foundation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Foundation or to cease operations, or has no realistic alternative but to do so.
A member firm of Ernst & Young Global Limited
2016 ANNUAL REPORT 67 Those charged with governance are responsible for overseeing the Foundation’s financial reporting Report on the Supplementary Information Required Under Revenue Regulations 15-2010 process. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken Auditor’s Responsibilities for the Audit of the Financial Statements as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 17 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are a required part of the basic financial statements. Such information is the responsibility of the free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that management of the Foundation. The information has been subjected to the auditing procedures applied in includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material audit conducted in accordance with PSAs will always detect a material misstatement when it exists. respects, in relation to the basic financial statements taken as a whole. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. SYCIP GORRES VELAYO & CO.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
∂ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud Carlo Paolo V. Manalang or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that Partner is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material CPA Certificate No. 111947 misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve SEC Accreditation No. 1625-A (Group A), collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. March 28, 2017, valid until March 27, 2020 Tax Identification No. 210-730-804 ∂ Obtain an understanding of internal control relevant to the audit in order to design audit procedures BIR Accreditation No. 08-001998-127-2017, that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the February 9, 2017, valid until February 8, 2020 effectiveness of the Foundation’s internal control. PTR No. 5908722, January 3, 2017, Makati City
∂ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting March 30, 2017 estimates and related disclosures made by management.
∂ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Foundation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Foundation to cease to continue as a going concern.
∂ Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited
68 AYALA FOUNDATION Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 17 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of the Foundation. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Carlo Paolo V. Manalang Partner CPA Certificate No. 111947 SEC Accreditation No. 1625-A (Group A), March 28, 2017, valid until March 27, 2020 Tax Identification No. 210-730-804 BIR Accreditation No. 08-001998-127-2017, February 9, 2017, valid until February 8, 2020 PTR No. 5908722, January 3, 2017, Makati City
March 30, 2017
A member firm of Ernst & Young Global Limited
2016 ANNUAL REPORT 69 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018 AYALA FOUNDATION, INC. 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A), Philippines November 10, 2015, valid until November 9, 2018 (A Non-Stock, Non-Profit Corporation) STATEMENTS OF FINANCIAL POSITION
December 31 INDEPENDENT AUDITOR’S REPORT 2016 2015 ON SUPPLEMENTARY SCHEDULE ASSETS
Current Assets The Board of Trustees Cash and cash equivalents (Notes 4 and 15) P=117,523,532 P=99,924,707 Ayala Foundation, Inc. Receivables (Notes 5 and 15) 15,074,676 6,655,133 8th Floor, 111 Paseo de Roxas Building Merchandise inventories - net (Note 6) 13,341,772 14,989,308 Paseo de Roxas corner Legaspi Street Other current assets (Note 7) 10,703,290 10,976,697 Legaspi Village, Makati City Total Current Assets 156,643,270 132,545,845
Noncurrent Assets We have audited in accordance with Philippine Standards on Auditing, the financial statements of Ayala Property and equipment (Note 8) 189,045,428 193,053,397 Foundation, Inc. (a non-stock, non-profit corporation) (the Foundation), as at and for the years ended Software cost (Note 9) 690,833 1,335,312 December 31, 2016 and 2015, and have issued our report thereon dated March 30, 2017. Our audits were Available-for-sale financial assets (Notes 10 and 15) 2,303,325,764 2,399,188,215 made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Pension asset - net (Note 12) 4,630,596 6,236,931 accompanying schedule of all the effective standards and interpretations as of December 31, 2016 is the Deferred tax asset (Note 14) 241,670 – responsibility of the Foundation’s management. This schedule is presented for purposes of complying Total Noncurrent Assets 2,497,934,291 2,599,813,855 with Securities Regulation Code Rule 68, As Amended (2011) and is not part of the basic financial P=2,654,577,561 P=2,732,359,700 statements. This schedule have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state, in all material respects, the information required to be set forth therein in relation to the basic financial statements taken as a whole. LIABILITIES AND NET ASSETS
Current Liabilities SYCIP GORRES VELAYO & CO. Accounts and other payables (Notes 11 and 15) P=73,049,750 P=83,633,730
Net Assets (Note 13) Unrestricted 133,123,341 19,418,454 Temporarily restricted 283,219,085 317,090,206 Carlo Paolo V. Manalang Permanently restricted 2,187,714,273 2,187,714,273 Partner Net unrealized gain (loss) on available-for-sale CPA Certificate No. 111947 financial assets (Note 10) (28,497,128) 117,971,385 SEC Accreditation No. 1625-A (Group A), Remeasurement gain on defined benefit obligation March 28, 2017, valid until March 27, 2020 (Note 12) 5,968,240 6,531,652 Tax Identification No. 210-730-804 Total Net Assets 2,581,527,811 2,648,725,970 BIR Accreditation No. 08-001998-127-2017, P=2,654,577,561 P=2,732,359,700 February 9, 2017, valid until February 8, 2020 PTR No. 5908722, January 3, 2017, Makati City See accompanying Notes to Financial Statements. March 30, 2017
A member firm of Ernst & Young Global Limited
70 AYALA FOUNDATION AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF FINANCIAL POSITION
December 31 2016 2015
ASSETS
Current Assets Cash and cash equivalents (Notes 4 and 15) P=117,523,532 P=99,924,707 Receivables (Notes 5 and 15) 15,074,676 6,655,133 Merchandise inventories - net (Note 6) 13,341,772 14,989,308 Other current assets (Note 7) 10,703,290 10,976,697 Total Current Assets 156,643,270 132,545,845
Noncurrent Assets Property and equipment (Note 8) 189,045,428 193,053,397 Software cost (Note 9) 690,833 1,335,312 Available-for-sale financial assets (Notes 10 and 15) 2,303,325,764 2,399,188,215 Pension asset - net (Note 12) 4,630,596 6,236,931 Deferred tax asset (Note 14) 241,670 – Total Noncurrent Assets 2,497,934,291 2,599,813,855 P=2,654,577,561 P=2,732,359,700
LIABILITIES AND NET ASSETS
Current Liabilities Accounts and other payables (Notes 11 and 15) P=73,049,750 P=83,633,730
Net Assets (Note 13) Unrestricted 133,123,341 19,418,454 Temporarily restricted 283,219,085 317,090,206 Permanently restricted 2,187,714,273 2,187,714,273 Net unrealized gain (loss) on available-for-sale financial assets (Note 10) (28,497,128) 117,971,385 Remeasurement gain on defined benefit obligation (Note 12) 5,968,240 6,531,652 Total Net Assets 2,581,527,811 2,648,725,970 P=2,654,577,561 P=2,732,359,700
See accompanying Notes to Financial Statements.
2016 ANNUAL REPORT 71 72
AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF ACTIVITIES
December 31, 2016 Unrealized Remeasurement Gain (Loss) on Gain (Loss) on Temporarily Permanently AFS Financial Defined Benefit Unrestricted Restricted Restricted Assets Obligation (Note 13) (Note 13) (Note 13) (Note 10) (Note 12) Total Revenue, gains and other supports: Public support P= – P=157,985,049 P= – P= – P= – P=157,985,049 Investment and interest (Notes 4, 5 and 10) 100,000,000 83,966,192 – – – 183,966,192 Net assets released from restrictions 277,550,057 (277,550,057) – – – – Others – 4,852,377 – – – 4,852,377 377,550,057 (30,746,439) – – – 346,803,618 AYALA FOUNDATION Expenses and losses: Project (Note 13) 218,706,291 – – – – 218,706,291 General and administrative (Note 13) 45,586,858 – – – – 45,586,858 Net loss from other activities (Note 16) – 3,124,682 – – – 3,124,682 264,293,149 3,124,682 – – – 267,417,831 Excess (deficit) of revenue, gains and other supports over expenses and losses 113,256,908 (33,871,121) – – – 79,385,787 OTHER COMPREHENSIVE INCOME (LOSS) Other comprehensive income (loss) that may be reclassified to profit or loss in subsequent years: Net unrealized loss on available-for-sale financial assets – – – (146,020,534) – (146,020,534) Fund reclassification 447,979 – – (447,979) – – Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent years: Remeasurement loss on defined benefit obligation – – – – (563,412) (563,412) Total other comprehensive income (loss) 447,979 – – (146,468,513) (563,412) (146,583,946) CHANGES IN NET ASSETS 113,704,887 (33,871,121) – (146,468,513) (563,412) (67,198,159) NET ASSETS AT BEGINNING OF YEAR 19,418,454 317,090,206 2,187,714,273 117,971,385 6,531,652 2,648,725,970 NET ASSETS AT END OF YEAR P=133,123,341 P=283,219,085 P=2,187,714,273 (P=28,497,128) P=5,968,240 P=2,581,527,811 December 31, 2015 Remeasurement Unrealized Gain (Loss) on Temporarily Permanently Gain on AFS Defined Unrestricted Restricted Restricted Financial Assets Benefit Obligation (Note 13) (Note 13) (Note 13) (Note 10) (Note 12) Total Revenue, gains and other supports: Public support P= – P=212,373,634 P= – P= – P= – P=212,373,634 Investment and interest (Notes 4, 5 and 10) 90,000,000 7,684,500 – – – 97,684,500 Net assets released from restrictions 197,277,160 (197,277,160) – – – – Others – 3,869,547 – – – 3,869,547
2016 ANNUAL REPORT 287,277,160 26,650,521 – – – 313,927,681 Expenses and losses: Project (Note 13) 237,748,950 – – – – 237,748,950 General and administrative (Note 13) 49,877,786 – – – – 49,877,786 Net loss from other activities (Note 16) – 14,541,175 – – – 14,541,175 287,626,736 14,541,175 – – – 302,167,911 Excess (deficit) of revenue, gains and other supports over expenses and losses (349,576) 12,109,346 – – – 11,759,770 OTHER COMPREHENSIVE INCOME (LOSS) Other comprehensive income (loss) that may be reclassified to profit or loss in subsequent years: Net unrealized loss on available-for-sale financial assets – – – (46,089,212) – (46,089,212) Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent years: Remeasurement loss on defined benefit obligation – – – – (790,397) (790,397) Total other comprehensive income (loss) – – – (46,089,212) (790,397) (46,879,609) CHANGES IN NET ASSETS (349,576) 12,109,346 – (46,089,212) (790,397) (35,119,839) NET ASSETS AT BEGINNING OF YEAR 19,768,030 304,980,860 2,187,714,273 164,060,597 7,322,049 2,683,845,809 NET ASSETS AT END OF YEAR P=19,418,454 P=317,090,206 P=2,187,714,273 P=117,971,385 P=6,531,652 P=2,648,725,970
See accompanying Notes to Financial Statements. 73 74
AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF CHANGES IN FUND BALANCES
Year Ended December 31, 2016 Unrealized Remeasurement Gain (Loss) on Gain (Loss) on Temporarily Permanently AFS Defined Benefit Unrestricted Restricted Restricted Financial Assets Obligation Total FUND BALANCES Net assets at beginning of year P=19,418,454 P=317,090,206 P=2,187,714,273 P=117,971,385 P=6,531,652 P=2,648,725,970 Excess (deficit) of revenue, gains and other supports over expenses and losses 113,256,908 (33,871,121) – – – 79,385,787
AYALA FOUNDATION Net unrealized loss on available-for-sale financial assets – – – (146,020,534) – (146,020,534) Fund reclassification 447,979 – – (447,979) – – Remeasurement loss on defined benefit obligation – – – – (563,412) (563,412) Net assets at end of year P=133,123,341 P=283,219,085 P=2,187,714,273 (P=28,497,128) P=5,968,240 P=2,581,527,811
Year Ended December 31, 2015 Remeasurement Unrealized Gain(Loss) on Temporarily Permanently Gain on AFS Defined Unrestricted Restricted Restricted Financial Assets Benefit Obligation Total FUND BALANCES Net assets at beginning of year P=19,768,030 P=304,980,860 P=2,187,714,273 P=164,060,597 P=7,322,049 P=2,683,845,809 Excess (deficit) of revenue, gains and other supports over expenses and losses (349,576) 12,109,346 – – – 11,759,770 Net unrealized loss on available-for-sale financial assets – – – (46,089,212) – (46,089,212) Remeasurement loss on defined benefit obligation – – – – (790,397) (790,397) Net assets at end of year P= 19,418,454 P=317,090,206 P=2,187,714,273 P=117,971,385 P=6,531,652 P=2,648,725,970
See accompanying Notes to Financial Statements. See accompanying Notes to FinancialNotes Statements. accompanying See CASH AND CASH EQUIVALENTSAT CASH AND CASHEQUIVALENTSAT NET INCREASECASHAND IN (DECREASE) Net cash disposalsto: Net (additions) CASH FLOWS FROM INVESTINGACTIVITIES Net cash payablesaccounts andother Decrease in Decrease in: (increase) Changesnet inassets before changes capitalworking in Adjustments for: Changesnet inassets FLOWS OF CASH STATEMENTS Non-Stock,Corporation)(A Non-Profit INC. FOUNDATION, AYALA Proceeds on disposal of property and equipmentdisposal property Proceeds on of Investment andinterest income received CASHOPERATINGFROM FLOWS ACTIVITIES Property andProperty equipment8) (Note AFS financial assets (Note 10) 12)(Note Pension asset Merchandise inventories Gainproperty ondisposalof and equipment inventory 6) loss (Note Provision for accounts(Note doubtful 5) for provision Reversal of 12) Pension(Note expense Depreciation andamortization (Notes 8 and 9) obligation benefit Remeasurement defined loss on Investment andinterest income (Notes4, 5and10) Receivables financialAFS assetsunrealized 10) (Note Net on loss ENDOF YEAR BEGINNING YEAR OF CASH EQUIVALENTS Software cos Other currentassets (Note 12) providedby investing activities activities operating usedin t (Note (Note t (Note 4)
9 )
(P=67,198,159) P=117,523,532 (183,966,192) (10,583,980) (85,457,567) (98,008,812) 146,020,534 115,607,637 99,924,707 17,598,825 (9,521,003) 60,960,574 (4,657,309) 14,162,697 64,142,618 Years Ended December 31 December Years Ended 1,532,327 5,700,232 1,125,980 (840,606) (14,694) 115,209 563,412 25,448 31,737 2016 –
(P=35,119,839) P=99,924,707 (14,268,814) (11,894,730) (65,977,725) (67,244,809) (97,684,500) 114,193,521 51,708,911 67,250,830 (4,071,112) (5,400,383) 11,099,962 46,089,212 3,377,535 3,679,713 2,438,996 5,706,971 (225,000) (732,965) (603,999) 648,923 343,184 790,397 37,991 2015
AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) STATEMENTS OF CASH FLOWS
Years Ended December 31 2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES Changes in net assets (P=67,198,159) (P=35,119,839) Adjustments for: Net unrealized loss on AFS financial assets (Note 10) 146,020,534 46,089,212 Investment and interest income (Notes 4, 5 and 10) (183,966,192) (97,684,500) Remeasurement loss on defined benefit obligation (Note 12) 563,412 790,397 Depreciation and amortization (Notes 8 and 9) 14,162,697 11,099,962 Pension expense (Note 12) 5,700,232 5,706,971 Reversal of provision for doubtful accounts (Note 5) (840,606) 2,438,996 Provision for inventory loss (Note 6) 115,209 37,991 Gain on disposal of property and equipment (14,694) (603,999) Changes in net assets before changes in working capital (85,457,567) (67,244,809) Decrease (increase) in: Receivables 1,125,980 3,679,713 Merchandise inventories 1,532,327 343,184 Other current assets 31,737 3,377,535 Pension asset (Note 12) (4,657,309) (5,400,383) Decrease in accounts and other payables (10,583,980) (732,965) Net cash used in operating activities (98,008,812) (65,977,725)
CASH FLOWS FROM INVESTING ACTIVITIES Net disposals (additions) to: Property and equipment (Note 8) (9,521,003) (11,894,730) Software cost (Note 9) – (225,000) AFS financial assets (Note 10) 60,960,574 (4,071,112) Proceeds on disposal of property and equipment 25,448 648,923 Investment and interest income received 64,142,618 67,250,830 Net cash provided by investing activities 115,607,637 51,708,911
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17,598,825 (14,268,814)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 99,924,707 114,193,521
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) P=117,523,532 P=99,924,707
See accompanying Notes to Financial Statements.
2016 ANNUAL REPORT 75 AYALA FOUNDATION, INC. (A Non-Stock, Non-Profit Corporation) NOTES TO FINANCIAL STATEMENTS
1. Organization and Tax Exemption
Ayala Foundation, Inc. (the Foundation) was registered with the Securities and Exchange Commission (SEC) on December 28, 1961 as a non-stock, non-profit corporation primarily for the following purposes:
a. To provide financial support, within the Philippines and abroad, for the studies of selected students and for the attendance at scientific conferences by qualified and competent scholars;
b. To undertake community development and livelihood projects designed to improve the quality of life of disadvantaged Filipinos;
c. To undertake ventures that will transfer appropriate technology to urban and rural groups that will give them additional income and allow them to put up profitable enterprises that will benefit themselves and the community;
d. To provide scholarships to poor but deserving urban and rural youth in vocational, technical, livelihood and entrepreneurial courses;
e. To preserve and enhance Philippine Art and Culture by, among other things, establishing and maintaining museums, supporting ethnic artisans and craftsmen, and undertaking related activities that will encourage Filipinos, especially our youth, to appreciate their heritage;
f. To organize, staff and finance research projects which may be established in furtherance of the purposes and objectives of the Foundation; and
g. To promote, support, and finance the publication of reports prepared under the auspices of the Foundation.
On February 15, 2010, the Foundation amended its Articles of Incorporation: (a) extending the term for which the Foundation is to exist for another fifty (50) years from December 28, 2011 and (b) to declassify the Foundation as a science and research foundation.
As a non-stock, non-profit corporation, the Foundation falls under Section 30 (E) of the Republic Act No. 8424 entitled, “An Act Amending the National Internal Revenue Code, as Amended, and for Other Purposes”. The receipts from activities conducted in pursuit of the objectives for which the Foundation was established are exempt from income tax. However, any income arising from its real or personal properties, or from activities conducted for profit, regardless of the disposition made of such income, is subject to income tax.
The Foundation is duly accredited by the Philippine Council for Non-Government Organization Certification (PCNC) and renewed its registration as a donee institution on August 10, 2015 in accordance with the provisions of Revenue Regulations No. 13-98. Donations received shall entitle the donors to full or limited deduction pursuant to Section 34 (H) (paragraphs 1 or 2) and exemption from donor’s tax pursuant to Section 101 (A) (3) of the National Internal Revenue Code of 1997. The Certificate of Registration shall be valid until February 17, 2018 unless sooner revoked by the Bureau of Internal Revenue (BIR) or upon withdrawal of the Certificate of Accreditation by PCNC.
76 AYALA FOUNDATION On March 31, 2015, during its regular meeting, the Board of Trustees approved the amendment of the Third Article of the Articles of Incorporation to change the Foundation’s registered office address to 8th Floor, 111 Paseo de Roxas Building, Paseo de Roxas corner Legaspi Street, Legaspi Village, 1229 Makati City.
The accompanying financial statements were approved and authorized for issue by the Board of Trustees on March 30, 2017.
2. Summary of Significant Accounting Policies
Basis of Preparation The financial statements of the Foundation have been prepared using the historical cost basis, except for available-for-sale (AFS) financial assets that have been measured at fair value. The accompanying financial statements are presented in Philippine Peso (P=) which is the Foundation’s presentation and functional currency. All amounts are rounded off to the nearest peso unit unless otherwise indicated.
Consistent with the requirement of Philippine Accounting Standard (PAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors, the Foundation applied Statement of Financial Accounting Standards No. 117, Financial Statements of Not-for-Profit Organizations. This Statement establishes standards for general-purpose external financial statements provided by a not-for-profit organization. It specifies that those statements include a statement of financial position, a statement of activities, statement of changes in fund balances and a statement of cash flows.
Statement of Compliance The accompanying financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).
Adoption of New and Amended Accounting Standards and Interpretations The accounting policies adopted are consistent with those of the previous financial year, except that the Foundation has adopted the following new accounting pronouncements starting January 1, 2016. Adoption of these pronouncements did not have any significant impact on the Foundation’s financial position or performance unless otherwise indicated.
Amendments to PFRS 10, PFRS 12 and PAS 28, Investment Entities: Applying the Consolidation Exception Amendments to PFRS 11, Accounting for Acquisitions of Interests in Joint Operations PFRS 14, Regulatory Deferral Accounts Amendments to PAS 1, Disclosure Initiative Amendments to PAS 16 and PAS 38, Clarification of Acceptable Methods of Depreciation and Amortization Amendments to PAS 16 and PAS 41, Agriculture: Bearer Plants Amendments to PAS 27, Equity Method in Separate Financial Statements Annual Improvements to PFRSs 2012 - 2014 Cycle • Amendment to PFRS 5, Changes in Methods of Disposal • Amendment to PFRS 7, Servicing Contracts • Amendment to PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim Financial Statements • Amendment to PAS 19, Discount Rate: Regional Market Issue
2016 ANNUAL REPORT 77 • Amendment to PAS 34, Disclosure of Information ‘Elsewhere in the Interim based payment transaction with net settlement features for withholding tax obligations; and Financial Report’ the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. Standards and Interpretations Issued but not yet Effective Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the On adoption, entities are required to apply the amendments without restating prior periods, but Foundation does not expect that the future adoption of the said pronouncements to have a retrospective application is permitted if elected for all three amendments and if other criteria significant impact on its financial statements. The Foundation intends to adopt the following are met. Early application of the amendments is permitted. pronouncements when they become effective. Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with Effective beginning on or after January 1, 2017 PFRS 4
Amendment to PFRS 12, Clarification of the Scope of the Standard (Part of Annual The amendments address concerns arising from implementing PFRS 9, the new financial Improvements to PFRSs 2014 - 2016 Cycle) instruments standard before implementing the forthcoming insurance contracts standard. They allow entities to choose between the overlay approach and the deferral approach to deal with The amendments clarify that the disclosure requirements in PFRS 12, other than those relating the transitional challenges. The overlay approach gives all entities that issue insurance to summarized financial information, apply to an entity’s interest in a subsidiary, a joint contracts the option to recognize in other comprehensive income, rather than profit or loss, the venture or an associate (or a portion of its interest in a joint venture or an associate) that is volatility that could arise when PFRS 9 is applied before the new insurance contracts standard classified (or included in a disposal group that is classified) as held for sale. is issued. On the other hand, the deferral approach gives entities whose activities are predominantly connected with insurance an optional temporary exemption from applying Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative PFRS 9 until the earlier of application of the forthcoming insurance contracts standard or January 1, 2021. The amendments to PAS 7 require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, The overlay approach and the deferral approach will only be available to an entity if it has not including both changes arising from cash flows and non-cash changes (such as foreign previously applied PFRS 9. exchange gains or losses). On initial application of the amendments, entities are not required to provide comparative information for preceding periods. Early application of the The amendments are not applicable to the Foundation since none of the entities within the amendments is permitted. Foundation have activities that are predominantly connected with insurance or issue insurance contracts. Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses PFRS 15, Revenue from Contracts with Customers
The amendments clarify that an entity needs to consider whether tax law restricts the sources PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts of taxable profits against which it may make deductions on the reversal of that deductible with customers. Under PFRS 15, revenue is recognized at an amount that reflects the temporary difference. Furthermore, the amendments provide guidance on how an entity consideration to which an entity expects to be entitled in exchange for transferring goods or should determine future taxable profits and explain the circumstances in which taxable profit services to a customer. The principles in PFRS 15 provide a more structured approach to may include the recovery of some assets for more than their carrying amount. measuring and recognizing revenue.
Entities are required to apply the amendments retrospectively. However, on initial application The new revenue standard is applicable to all entities and will supersede all current revenue of the amendments, the change in the opening equity of the earliest comparative period may recognition requirements under PFRSs. Either a full or modified retrospective application is be recognized in opening retained earnings (or in another component of equity, as required for annual periods beginning on or after January 1, 2018. appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. Early application of The Foundation is currently assessing the impact of PFRS 15 and plans to adopt the new the amendments is permitted. standard on the required effectivity date. Effective beginning on or after January 1, 2018 PFRS 9, Financial Instruments
Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share- PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial based Payment Transactions Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces new requirements for classification and measurement, impairment, and The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the hedge accounting. PFRS 9 is effective for annual periods beginning on or after January 1, measurement of a cash-settled share-based payment transaction; the classification of a share- 2018, with early application permitted. Retrospective application is required, but providing
78 AYALA FOUNDATION based payment transaction with net settlement features for withholding tax obligations; and the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled.
On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and if other criteria are met. Early application of the amendments is permitted.
Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with PFRS 4
The amendments address concerns arising from implementing PFRS 9, the new financial instruments standard before implementing the forthcoming insurance contracts standard. They allow entities to choose between the overlay approach and the deferral approach to deal with the transitional challenges. The overlay approach gives all entities that issue insurance contracts the option to recognize in other comprehensive income, rather than profit or loss, the volatility that could arise when PFRS 9 is applied before the new insurance contracts standard is issued. On the other hand, the deferral approach gives entities whose activities are predominantly connected with insurance an optional temporary exemption from applying PFRS 9 until the earlier of application of the forthcoming insurance contracts standard or January 1, 2021.
The overlay approach and the deferral approach will only be available to an entity if it has not previously applied PFRS 9.
The amendments are not applicable to the Foundation since none of the entities within the Foundation have activities that are predominantly connected with insurance or issue insurance contracts.
PFRS 15, Revenue from Contracts with Customers
PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in PFRS 15 provide a more structured approach to measuring and recognizing revenue.
The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under PFRSs. Either a full or modified retrospective application is required for annual periods beginning on or after January 1, 2018.
The Foundation is currently assessing the impact of PFRS 15 and plans to adopt the new standard on the required effectivity date.
PFRS 9, Financial Instruments
PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. PFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective application is required, but providing
2016 ANNUAL REPORT 79 comparative information is not compulsory. For hedge accounting, the requirements are as comparative information in the financial statements of the reporting period in which the generally applied prospectively, with some limited exceptions. entity first applies the interpretation.
The adoption of PFRS 9 will have an effect on the classification and measurement of the Effective beginning on or after January 1, 2019 Foundation’s financial assets and impairment methodology for financial assets, but will have no impact on the classification and measurement of the Foundation’s financial liabilities. The PFRS 16, Leases adoption will also have an effect on the Foundation’s application of hedge accounting and on the amount of its credit losses. The Foundation is currently assessing the impact of adopting Under the new standard, lessees will no longer classify their leases as either operating or this standard. finance leases in accordance with PAS 17, Leases. Rather, lessees will apply the single-asset model. Under this model, lessees will recognize the assets and related liabilities for most Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of leases on their balance sheets, and subsequently, will depreciate the lease assets and recognize Annual Improvements to PFRSs 2014 - 2016 Cycle) interest on the lease liabilities in their profit or loss. Leases with a term of 12 months or less or for which the underlying asset is of low value are exempted from these requirements. The amendments clarify that an entity that is a venture capital organization, or other qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to The accounting by lessors is substantially unchanged as the new standard carries forward the measure its investments in associates and joint ventures at fair value through profit or loss. principles of lessor accounting under PAS 17. Lessors, however, will be required to disclose They also clarify that if an entity that is not itself an investment entity has an interest in an more information in their financial statements, particularly on the risk exposure to residual associate or joint venture that is an investment entity, the entity may, when applying the equity value. method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. Entities may early adopt PFRS 16 but only if they have also adopted PFRS 15. When This election is made separately for each investment entity associate or joint venture, at the adopting PFRS 16, an entity is permitted to use either a full retrospective or a modified later of the date on which (a) the investment entity associate or joint venture is initially retrospective approach, with options to use certain transition reliefs. recognized; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent. The amendments should be The Foundation is currently assessing the impact of adopting PFRS 16. applied retrospectively, with earlier application permitted. Deferred effectivity Amendments to PAS 40, Investment Property, Transfers of Investment Property Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and The amendments clarify when an entity should transfer property, including property under its Associate or Joint Venture construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of intentions for the use of a property does not provide evidence of a change in use. The control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments should be applied prospectively to changes in use that occur on or after the amendments clarify that a full gain or loss is recognized when a transfer to an associate or beginning of the annual reporting period in which the entity first applies the amendments. joint venture involves a business as defined in PFRS 3, Business Combinations. Any gain or Retrospective application is only permitted if this is possible without the use of hindsight. loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance joint venture. Consideration On January 13, 2016, the Financial Reporting Standards Council postponed the original The interpretation clarifies that in determining the spot exchange rate to use on initial effective date of January 1, 2016 of the said amendments until the International Accounting recognition of the related asset, expense or income (or part of it) on the derecognition of a Standards Board has completed its broader review of the research project on equity accounting non-monetary asset or non-monetary liability relating to advance consideration, the date of the that may result in the simplification of accounting for such transactions and of other aspects of transaction is the date on which an entity initially recognizes the nonmonetary asset or non- accounting for associates and joint ventures. monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment Significant Accounting Policies or receipt of advance consideration. The interpretation may be applied on a fully retrospective basis. Entities may apply the interpretation prospectively to all assets, expenses and income in Cash and Cash Equivalents its scope that are initially recognized on or after the beginning of the reporting period in which Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid the entity first applies the interpretation or the beginning of a prior reporting period presented investments that are readily convertible to known amounts of cash with original maturities of three months or less from dates of acquisitions and that are subject to an insignificant risk of changes in value.
80 AYALA FOUNDATION as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation.
Effective beginning on or after January 1, 2019
PFRS 16, Leases
Under the new standard, lessees will no longer classify their leases as either operating or finance leases in accordance with PAS 17, Leases. Rather, lessees will apply the single-asset model. Under this model, lessees will recognize the assets and related liabilities for most leases on their balance sheets, and subsequently, will depreciate the lease assets and recognize interest on the lease liabilities in their profit or loss. Leases with a term of 12 months or less or for which the underlying asset is of low value are exempted from these requirements.
The accounting by lessors is substantially unchanged as the new standard carries forward the principles of lessor accounting under PAS 17. Lessors, however, will be required to disclose more information in their financial statements, particularly on the risk exposure to residual value.
Entities may early adopt PFRS 16 but only if they have also adopted PFRS 15. When adopting PFRS 16, an entity is permitted to use either a full retrospective or a modified retrospective approach, with options to use certain transition reliefs.
The Foundation is currently assessing the impact of adopting PFRS 16.
Deferred effectivity
Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves a business as defined in PFRS 3, Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture.
On January 13, 2016, the Financial Reporting Standards Council postponed the original effective date of January 1, 2016 of the said amendments until the International Accounting Standards Board has completed its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.
Significant Accounting Policies
Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less from dates of acquisitions and that are subject to an insignificant risk of changes in value.
2016 ANNUAL REPORT 81 Financial Instruments A committee usually composed of members of the Board of Trustees and officers of the Date of recognition Foundation determines the policies and procedures for the valuation of financial assets as well as The Foundation recognizes a financial asset or a financial liability in the statement of financial the allocation of the Foundation’s asset portfolio. position when it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame established by For the purpose of fair value disclosures, the Foundation has determined classes of assets and regulation or convention in the marketplace are recognized on the trade date. liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained in Note 15. Initial recognition of financial instruments All financial assets and financial liabilities are initially recognized at fair value. Except for “Day 1” difference financial assets and financial liabilities at fair value through profit or loss (FVPL), the initial Where the transaction price in a non-active market is different to the fair value from other measurement of financial assets and liabilities includes transaction costs. The Foundation observable current market transactions in the same instrument or based on a valuation technique classifies its financial assets in the following categories: financial assets at FVPL, held-to-maturity whose variables include only data from observable market, the Foundation recognizes the (HTM) financial assets, available-for-sale (AFS) financial assets, and loans and receivables. The difference between the transaction price and fair value (a “Day 1” difference) in the statement of Foundation classifies its financial liabilities into financial liabilities at FVPL and other financial activities under the “Investment and interest” account. In cases where use is made of data which liabilities. The classification depends on the purpose for which the investments were acquired or is not observable, the difference between the transaction price and model value is only recognized liabilities incurred and whether they are quoted in an active market. The Foundation determines in the statement of activities when the inputs become observable or when the instrument is the classification of its investments at initial recognition and, where allowed and appropriate, re- derecognized. For each transaction, the Foundation determines the appropriate method of evaluates such designation at every reporting date. recognizing the “Day 1” difference amount. The financial assets of the Foundation are of the nature of loans and receivables and AFS financial assets, while its financial liabilities are of the nature of other financial liabilities (other than Loans and receivables liabilities covered by other accounting standards such as pension liability). Loans and receivables are nonderivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the Determination of fair value intention of immediate or short-term resale and are not designated as AFS financial assets or The Foundation measures financial instruments at each statement of financial position date. Also, financial assets at FVPL. This accounting policy relates to the statement of financial position fair values of financial instruments measured at amortized cost are disclosed in Note 15. captions “Cash and cash equivalents” and “Receivables.”
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an After initial measurement, loans and receivables are subsequently measured at amortized cost orderly transaction between market participants at the measurement date. The fair value using the effective interest rate (EIR) method, less allowance for any impairment. Amortized cost measurement is based on the presumption that the transaction to sell the asset or transfer the is calculated by taking into account any discount or premium on acquisition and fees that are an liability takes place either: integral part of the EIR. The amortization is included in “Investment and interest” account in the statement of activities. The losses arising from impairment of such loans and receivables are in the principal market for the asset or liability, or recognized in the statement of activities. in the absence of a principal market, in the most advantageous market for the asset or liability Loans and receivables are included in current assets if maturity is within twelve (12) months from The principal or the most advantageous market must be accessible to by the Foundation. the reporting date, otherwise these are classified as noncurrent assets.
The fair value of an asset or a liability is measured using the assumptions that market participants AFS financial assets would use when pricing the asset or liability, assuming that market participants act in their AFS financial assets are those nonderivative financial assets which are designated as such or do economic best interest. not qualify to be classified in any of the other three categories. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market The Foundation uses valuation techniques that are appropriate in the circumstances and for which conditions. sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair After initial measurement, AFS financial assets are measured at fair value. The unrealized gains value is measured or disclosed in the financial statements are categorized within the fair value and losses arising from the fair valuation of AFS financial assets are excluded from reported hierarchy, as described in Note 15. earnings and are reported as “Net unrealized gain (loss) on AFS financial assets” account in the statement of activities. For assets and liabilities that are recognized in the financial statements on a recurring basis, the Foundation determines whether transfers have occurred between Levels in the hierarchy by When the security is disposed of, the cumulative gain or loss previously recognized in the reassessing categorization (based on the lowest level input that is significant to the fair value statement of activities are then included under the “Revenue, gains and other supports” account. measurement as a whole) at the end of each reporting period. Where the Foundation holds more than one investment in the same security these are deemed to be disposed of on a first-in first-out basis. Interest earned on holding AFS financial assets are reported as investment income using the EIR. Dividends earned on holding AFS financial assets
82 AYALA FOUNDATION A committee usually composed of members of the Board of Trustees and officers of the Foundation determines the policies and procedures for the valuation of financial assets as well as the allocation of the Foundation’s asset portfolio.
For the purpose of fair value disclosures, the Foundation has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained in Note 15.
“Day 1” difference Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Foundation recognizes the difference between the transaction price and fair value (a “Day 1” difference) in the statement of activities under the “Investment and interest” account. In cases where use is made of data which is not observable, the difference between the transaction price and model value is only recognized in the statement of activities when the inputs become observable or when the instrument is derecognized. For each transaction, the Foundation determines the appropriate method of recognizing the “Day 1” difference amount.
Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS financial assets or financial assets at FVPL. This accounting policy relates to the statement of financial position captions “Cash and cash equivalents” and “Receivables.”
After initial measurement, loans and receivables are subsequently measured at amortized cost using the effective interest rate (EIR) method, less allowance for any impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortization is included in “Investment and interest” account in the statement of activities. The losses arising from impairment of such loans and receivables are recognized in the statement of activities.
Loans and receivables are included in current assets if maturity is within twelve (12) months from the reporting date, otherwise these are classified as noncurrent assets.
AFS financial assets AFS financial assets are those nonderivative financial assets which are designated as such or do not qualify to be classified in any of the other three categories. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions.
After initial measurement, AFS financial assets are measured at fair value. The unrealized gains and losses arising from the fair valuation of AFS financial assets are excluded from reported earnings and are reported as “Net unrealized gain (loss) on AFS financial assets” account in the statement of activities.
When the security is disposed of, the cumulative gain or loss previously recognized in the statement of activities are then included under the “Revenue, gains and other supports” account. Where the Foundation holds more than one investment in the same security these are deemed to be disposed of on a first-in first-out basis. Interest earned on holding AFS financial assets are reported as investment income using the EIR. Dividends earned on holding AFS financial assets
2016 ANNUAL REPORT 83 are recognized in the statement of activities when the right to receive payment is established. The Impairment of Financial Assets losses arising from impairment of such investments are recognized under “Net unrealized gain The Foundation assesses at each reporting date whether there is objective evidence that a financial (loss) on AFS financial asset” account in the statement of activities. asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one When the fair value of AFS financial assets cannot be measured reliably because of lack of or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) reliable estimates of future cash flows and discount rates necessary to calculate the fair value of and that loss event (or events) has an impact on the estimated future cash flows of the financial unquoted equity instruments, these investments are carried at cost, less any allowance for asset or the group of financial assets that can be reliably estimated. impairment losses. Evidence of impairment may include indications that the borrower or a group of borrowers is AFS financial assets are classified as noncurrent assets unless the intention is to dispose such experiencing significant financial difficulty, default or delinquency in interest or principal assets within 12 months from reporting date. payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash Other financial liabilities flows, such as changes in arrears or economic conditions that correlate with defaults. Other financial liabilities are measured at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an Loans and receivables integral part of the EIR. For loans and receivables carried at amortized cost, the Foundation first assesses whether objective evidence of impairment exists individually for financial assets that are individually This accounting policy applies primarily to the Foundation’s “Accounts and other payables” significant, or collectively for financial assets that are not individually significant. If the (except statutory payables as these are not financial liabilities covered by any PFRS) and other Foundation determines that no objective evidence of impairment exists for individually assessed obligations that meet the above definition. financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics Derecognition of Financial Assets and Liabilities are relevant to the estimation of future cash flows for groups of such assets by being indicative of Financial asset the debtors’ ability to pay all amounts due according to the contractual terms of the assets being A financial asset (or, where applicable a part of a financial asset or part of a group of similar evaluated. Assets that are individually assessed for impairment and for which an impairment loss financial assets) is derecognized when: is, or continues to be recognized are not included in a collective assessment for impairment.
a. the rights to receive cash flows from the asset has expired; If there is objective evidence that an impairment loss has been incurred, the amount of the loss is b. the Foundation retains the right to receive cash flows from the asset, but has assumed an measured as the difference between the asset’s carrying amount and the present value of the obligation to pay them in full without material delay to a third party under a ‘pass-through’ estimated future cash flows (excluding future credit losses that have not been incurred). The arrangement; or carrying amount of the asset is reduced through the use of an allowance account and the amount of c. the Foundation has transferred its rights to receive cash flows from the asset and either (i) has loss is charged to the statement of activities. Interest income continues to be recognized based on transferred substantially all the risks and rewards of the asset, or (ii) has neither transferred nor the original EIR of the asset. Loans and receivables, together with the associated allowance retained substantially all the risks and rewards of the asset, but has transferred control of the accounts, are written off when there is no realistic prospect of future recovery and all collateral has asset. been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized Where the Foundation has transferred its rights to receive cash flows from an asset or has entered impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in into a pass-through arrangement, and has neither transferred nor retained substantially all the risks statement of activities, to the extent that the carrying value of the asset does not exceed its and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of amortized cost at the reversal date. the Foundation’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis the asset and the maximum amount of consideration that the Foundation could be required to of such credit risk characteristics as industry, past-due status and term. repay. Future cash flows in a group of financial assets that are collectively evaluated for impairment are Financial liability estimated on the basis of historical loss experience for assets with credit risk characteristics similar A financial liability is derecognized when the obligation under the liability is discharged or to those in the group. Historical loss experience is adjusted on the basis of current observable data cancelled or expired. Where an existing financial liability is replaced by another from the same to reflect the effects of current conditions that did not affect the period on which the historical loss lender on substantially different terms, or the terms of an existing liability are substantially experience is based and to remove the effects of conditions in the historical period that do not exist modified, such an exchange or modification is treated as a derecognition of the original liability currently. The methodology and assumptions used for estimating future cash flows are reviewed and the recognition of a new liability, and the difference in the respective carrying amounts is regularly by the Foundation to reduce any differences between loss estimates and actual loss recognized in the statement of activities. experience.
84 AYALA FOUNDATION Impairment of Financial Assets The Foundation assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Loans and receivables For loans and receivables carried at amortized cost, the Foundation first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Foundation determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognized are not included in a collective assessment for impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is charged to the statement of activities. Interest income continues to be recognized based on the original EIR of the asset. Loans and receivables, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in statement of activities, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry, past-due status and term.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Foundation to reduce any differences between loss estimates and actual loss experience.
2016 ANNUAL REPORT 85 AFS financial assets incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in For AFS financial assets, the Foundation assesses at each reporting date whether there is objective an increase in the future economic benefits expected to be obtained from the use of an item of evidence that a financial asset or group of financial assets is impaired. In case of equity property and equipment beyond its originally assessed standard of performance, the expenditures investments classified as AFS financial assets, this would include a significant or prolonged are capitalized as an additional cost of property and equipment. decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair Depreciation and amortization of property and equipment commences once the property and value, less any impairment loss on that financial asset previously recognized in the statement of equipment are available for use and is computed using the straight-line method over the following activities - is removed from the “Net unrealized gain (loss) on AFS financial assets” account and estimated useful lives (EUL) of the property and equipment: recognized as an expense. Impairment losses on equity investments are not reversed through revenue. Increases in fair value after impairment are recognized directly under “Net unrealized Years gain (loss) on AFS financial assets” account in the statement of activities. Leasehold and land improvements 5-20 Office furniture and equipment 3-5 In the case of debt instruments classified as AFS financial assets, impairment is assessed based on Transportation equipment 5 the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount future cash Leasehold improvements are amortized over the EUL of the improvements or the terms of the flows for the purpose of measuring impairment loss and is recorded as part of “Investment and lease, whichever is shorter. interest” account in the statement of activities. If, in subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the The EUL and depreciation and amortization methods are reviewed annually based on expected impairment loss was recognized in the statements of activities, the impairment loss is reversed asset utilization to ensure that the period and method of depreciation and amortization are through the statement of activities. consistent with the expected pattern of economic benefits from items of property and equipment.
Offsetting Financial Instruments Construction in progress is stated at cost. This includes cost of construction of property and Financial assets and financial liabilities are offset and the net amount reported in the statement of equipment and other direct costs. Construction in progress is not depreciated until such time the financial position if, and only if, there is a currently enforceable legal right to offset the recognized relevant assets are complete and are put into operational use. amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. When property and equipment are retired or otherwise disposed of, the cost and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain Merchandise Inventories or loss is credited to or charged against current operations. Merchandise inventories consist of books and other merchandise items held for sale. Merchandise inventories are valued at the lower of cost or net realizable value (NRV). Cost is determined using Fully depreciated property and equipment are retained in the accounts until they are no longer the first-in, first-out method. NRV is the estimated selling price in the ordinary course of business used and no further depreciation and amortization is charged against current operations. less estimated costs necessary to make the sale. Intangible Assets Value-Added Tax (VAT) The Foundation’s intangible assets include the value of network and software cost. Input VAT pertains to the indirect tax paid by the Foundation in the course of the Foundation’s trade or business on purchase of goods or services. An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Foundation. Output VAT pertains to the tax due on the sale of goods or services by the Foundation. Intangible assets acquired separately are measured on initial recognition at cost. Following initial If at the end of any reporting date, the output VAT exceeds the input VAT, the outstanding balance recognition, intangible assets are carried at cost less any accumulated amortization and any is included under “Accounts and other payables” account. If the input VAT exceeds the output accumulated impairment losses. VAT, the excess shall be carried over to the succeeding months and included under “Other current asset” account. The useful lives of intangible assets are assessed to be finite. Intangible assets’ lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the Property and Equipment intangible assets may be impaired. The amortization period and the amortization method for an Property and equipment except for land, are carried at cost less accumulated depreciation and intangible asset is reviewed at each financial year-end. Changes in the expected useful life or the amortization and any impairment in value. Land is carried at cost less any impairment in value. expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in The initial cost of property and equipment comprises its purchase price and any directly accounting estimates. The amortization expense on intangible assets is recognized in the attributable costs of bringing the asset to its working condition and location for its intended use. statement of activities allocated to “Project” and “General and administrative” under expenses and Expenditures incurred after the property and equipment have been put into operation, such as losses. repairs and maintenance, are normally charged to expense in the period in which the costs are
86 AYALA FOUNDATION incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property and equipment.
Depreciation and amortization of property and equipment commences once the property and equipment are available for use and is computed using the straight-line method over the following estimated useful lives (EUL) of the property and equipment:
Years Leasehold and land improvements 5-20 Office furniture and equipment 3-5 Transportation equipment 5
Leasehold improvements are amortized over the EUL of the improvements or the terms of the lease, whichever is shorter.
The EUL and depreciation and amortization methods are reviewed annually based on expected asset utilization to ensure that the period and method of depreciation and amortization are consistent with the expected pattern of economic benefits from items of property and equipment.
Construction in progress is stated at cost. This includes cost of construction of property and equipment and other direct costs. Construction in progress is not depreciated until such time the relevant assets are complete and are put into operational use.
When property and equipment are retired or otherwise disposed of, the cost and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is credited to or charged against current operations.
Fully depreciated property and equipment are retained in the accounts until they are no longer used and no further depreciation and amortization is charged against current operations.
Intangible Assets The Foundation’s intangible assets include the value of network and software cost.
An intangible asset is recognized only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Foundation.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be finite. Intangible assets’ lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortization period and the amortization method for an intangible asset is reviewed at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets is recognized in the statement of activities allocated to “Project” and “General and administrative” under expenses and losses.
2016 ANNUAL REPORT 87 Gains or losses arising from the derecognition of an intangible asset are measured as the difference Donations consisting of long-lived assets with explicit restrictions that specify how the assets are between the net disposal proceeds and the carrying amount of the asset and are recognized in the to be used and gifts of cash or other assets that must be used to acquire long-lived assets are statement of activities when the asset is derecognized. reported as restricted net assets.
Software cost Revenue Recognition Costs related to software purchase by the Foundation for use in operations are amortized on a Revenue is recognized when it is probable that the economic benefits associated with the straight line basis over the EUL of 2-5 years. transaction will flow to the Foundation and the amount of the revenue can be reliably measured.
Impairment of Non-Financial Assets Public support The Foundation assesses at each reporting date whether there is an indication that an asset may be Public support revenue represents contributions received by the Foundation. Unconditional impaired. If any such indication exists, or when annual impairment testing for an asset is required, contributions received, including unconditional promises to give cash or other assets, are the Foundation makes an estimate of the asset’s recoverable amount. An asset’s recoverable recognized as revenue in the period received at their fair value. Conditional promises to give are amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its recognized when the conditions are met. Assets received subject to conditions are accounted for value in use and is determined for an individual asset, unless the asset does not generate cash as refundable advances until the conditions are met. inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and Investment and interest income is written down to its recoverable amount. In assessing value in use, the estimated future cash Investment income represents interest income earned on cash and cash equivalents, and AFS flows are discounted to their present value using a pre-tax discount rate that reflects current market financial assets, dividend income and realized gains or losses on sale of investments. Interest assessments of the time value of money and the risks specific to the asset. Impairment losses of income is recognized on a time proportion basis computed on the outstanding principal using the continuing operations are recognized in the statement of activities in those expense categories applicable rate. Dividend income is recognized when the right to receive payment is established. consistent with the function of the impaired asset. Gain or loss on sale of investments is recognized in profit or loss if the Foundation disposes some of its available-for-sale investments. Gain or loss on sale of investments is computed as the An assessment is made at each reporting date as to whether there is any indication that previously difference between the proceeds of the disposal and its carrying amount. recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed Expenses and Losses only if there has been a change in the estimates used to determine the asset’s recoverable amount Expenses arise in the course of the ordinary operations of the Foundation. Expenses constitute since the last impairment loss was recognized. If that is the case the carrying amount of the asset costs of administering the Foundation’s activities and are recognized in the statement of activities is increased to its recoverable amount. That increased amount cannot exceed the carrying amount as incurred. that would have been determined, net of depreciation and amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of Museum Collections activities unless the asset is carried at revalued amount, in which case, the reversal is treated as a Artworks, ethnographic, archeological and rare book collections purchased for or donated to the revaluation increase. After such reversal the depreciation and amortization charge is adjusted in museum are not included in the accompanying financial statements. Gifts of cash or property used future periods to allocate the asset’s revised carrying amount, less any residual value, on a for the purchase of the museum collections are classified as public support revenue when systematic basis over its remaining EUL. acquisitions are made in accordance with the terms of the gifts. The cost of objects purchased or donated is reported as a project expense. Provisions Provisions are recognized when the Foundation has a present obligation (legal or constructive) as Defined Benefit Plan a result of a past event, it is probable (i.e., more likely than not) that an outflow of resources Pension cost and net defined benefit liability or asset is calculated annually by independent embodying economic benefits will be required to settle the obligation and a reliable estimate can actuaries using the projected unit credit method. be made of the amount of the obligation. Where the Foundation expects a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement Pension costs comprise the following: is virtually certain. Provisions, if any, are reviewed at each reporting date and adjusted to reflect Service cost the current best estimate. Net interest on the net defined benefit liability or asset Remeasurements of net defined benefit liability or asset Restricted Net Assets The Foundation reports gifts of cash and other assets as restricted support if they are received with Service costs which include current service costs, past service costs and gains or losses on non- donor stipulations that limit the use of the donated assets. When a donor restriction expires, that routine settlements are recognized as expense in the statement of activities. Past service costs are is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily recognized when plan amendment or curtailment occurs. These amounts are calculated restricted net assets are reclassified to unrestricted net assets and reported in the statement of periodically by independent actuaries. activities as net assets released from restrictions. Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by
88 AYALA FOUNDATION Donations consisting of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted net assets.
Revenue Recognition Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Foundation and the amount of the revenue can be reliably measured.
Public support Public support revenue represents contributions received by the Foundation. Unconditional contributions received, including unconditional promises to give cash or other assets, are recognized as revenue in the period received at their fair value. Conditional promises to give are recognized when the conditions are met. Assets received subject to conditions are accounted for as refundable advances until the conditions are met.
Investment and interest income Investment income represents interest income earned on cash and cash equivalents, and AFS financial assets, dividend income and realized gains or losses on sale of investments. Interest income is recognized on a time proportion basis computed on the outstanding principal using the applicable rate. Dividend income is recognized when the right to receive payment is established. Gain or loss on sale of investments is recognized in profit or loss if the Foundation disposes some of its available-for-sale investments. Gain or loss on sale of investments is computed as the difference between the proceeds of the disposal and its carrying amount.
Expenses and Losses Expenses arise in the course of the ordinary operations of the Foundation. Expenses constitute costs of administering the Foundation’s activities and are recognized in the statement of activities as incurred.
Museum Collections Artworks, ethnographic, archeological and rare book collections purchased for or donated to the museum are not included in the accompanying financial statements. Gifts of cash or property used for the purchase of the museum collections are classified as public support revenue when acquisitions are made in accordance with the terms of the gifts. The cost of objects purchased or donated is reported as a project expense.
Defined Benefit Plan Pension cost and net defined benefit liability or asset is calculated annually by independent actuaries using the projected unit credit method.
Pension costs comprise the following: Service cost Net interest on the net defined benefit liability or asset Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses on non- routine settlements are recognized as expense in the statement of activities. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent actuaries.
Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by
2016 ANNUAL REPORT 89 applying the discount rate based on the zero-coupon bond yields to the net defined liability or extent that it is probable that taxable income will be available against which the deductible assets. Net interest on the net defined benefit liability or asset is recognized as expense or income temporary differences and carryforward benefits of MCIT and NOLCO can be utilized. in statement of activities. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the Remeasurements comprising actuarial gains and losses and return on plan assets are recognized extent that it is no longer probable that sufficient taxable income will be available to allow all as immediately in the statement of activities in the period in which they arise. Remeasurements are part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at not reclassified to statement of activities in subsequent periods. each reporting date and are recognized to the extent that it has become probable that future taxable income will allow all as part of the deferred tax assets to be recovered. Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not available to the creditors of the Foundation, nor can they be paid directly to the Foundation. The Deferred tax assets and liabilities are measured at the tax rate that is expected to apply to the fair value of plan assets is based on market price information. When no market price is available, period when the asset is realized or the liability is settled, based on tax rates and tax laws that have the fair value of plan assets is estimated by discounting expected future cash flows using a been enacted or substantively enacted as at the end of the reporting period. Movements in the discount rate that reflects both the risk associated with the plan assets and the maturity or expected deferred income tax assets and liabilities arising from changes in tax rates are charged or credited disposal date of those assets. If the fair value of the plan assets is higher than the present value of to income for the period. the defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the present value of the economic benefits available in form of refunds from the plan or reductions Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set in the future contributions to the plan. off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same authority. The net defined benefit liability or asset recognized in the Foundation’s statement of financial position in respect of the defined benefit pension plan is the aggregate of the present value of the Foreign Currency Transactions defined benefit liability at the reporting date less the fair value of the plan assets. The present Transactions denominated in foreign currencies are recorded using the exchange rate at the date of value of the defined benefit liability is determined by discounting the estimated future cash the transactions. Outstanding foreign currency-denominated monetary assets and liabilities at outflows using risk-free interest rates of government bonds that have terms to maturity year-end are translated to Philippine peso at prevailing Philippine Dealing System (PDS) rate at approximating to the terms of the related pension liability. reporting dates. Exchange gains or losses arising from foreign currency transactions are credited to or charged against changes in net assets. Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either an entity’s decision to terminate an employee’s Contingencies employment before the normal retirement date, an employee’s decision to accept an offer of Contingent liabilities are not recognized in the financial statements. These are disclosed unless the benefits in exchange for the termination of employment or termination beyond the employee’s possibility of an outflow of resources embodying economic benefits is remote. Contingent assets control. are not recognized in the financial statements but disclosed when an inflow of economic benefits is probable. A liability or expense for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of those benefits and when the entity recognizes related restructuring Events After the Financial Reporting Period costs. Initial recognition and subsequent changes to termination benefits are measured in Post year-end events that provide additional information about the Foundation’s position at the accordance with the nature of the employee benefit, as either post-employment benefits or short- reporting date (adjusting events) are reflected in the financial statements. Post year-end events term employee benefits. that are not adjusting events are disclosed in the financial statements when material.
Income Tax Current tax 3. Significant Accounting Judgments and Estimates Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used The preparation of the accompanying financial statements in conformity with PFRS requires to compute the amount are those that are enacted or substantively enacted as of reporting date. management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The judgments, estimates and assumptions used in Deferred tax the accompanying financial statements are based upon management’s evaluation of relevant facts Deferred income tax is provided, using the liability method, on all temporary differences, with and circumstances as of the date of the financial statements. Actual results could differ from such certain exceptions, at the reporting date between the tax bases of assets and liabilities and their estimates. carrying amounts for financial reporting purposes. Judgments Deferred tax liabilities are recognized for all taxable temporary differences, with certain In the process of applying the Foundation’s accounting policies, management has made the exceptions. Deferred tax assets are recognized for all deductible temporary differences, following judgments, apart from those involving estimations, which have the most significant carryforward benefit of unused tax credits from excess of minimum corporate income tax (MCIT) effect on the amounts recognized in the financial statements: over the regular corporate income tax and unused net operating loss carryover (NOLCO), to the
90 AYALA FOUNDATION extent that it is probable that taxable income will be available against which the deductible temporary differences and carryforward benefits of MCIT and NOLCO can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all as part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable income will allow all as part of the deferred tax assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rate that is expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted as at the end of the reporting period. Movements in the deferred income tax assets and liabilities arising from changes in tax rates are charged or credited to income for the period.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same authority.
Foreign Currency Transactions Transactions denominated in foreign currencies are recorded using the exchange rate at the date of the transactions. Outstanding foreign currency-denominated monetary assets and liabilities at year-end are translated to Philippine peso at prevailing Philippine Dealing System (PDS) rate at reporting dates. Exchange gains or losses arising from foreign currency transactions are credited to or charged against changes in net assets.
Contingencies Contingent liabilities are not recognized in the financial statements. These are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but disclosed when an inflow of economic benefits is probable.
Events After the Financial Reporting Period Post year-end events that provide additional information about the Foundation’s position at the reporting date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the financial statements when material.
3. Significant Accounting Judgments and Estimates
The preparation of the accompanying financial statements in conformity with PFRS requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The judgments, estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of relevant facts and circumstances as of the date of the financial statements. Actual results could differ from such estimates.
Judgments In the process of applying the Foundation’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognized in the financial statements:
2016 ANNUAL REPORT 91 Classification of financial instruments The Foundation exercise judgment in classifying a financial instrument, or its component parts, on initial recognition as a financial asset, financial liability or an equity instrument in accordance with the substance of the contractual agreement and the definitions of a financial asset, financial liability or an equity instrument. The substance of a financial instrument, rather than its legal form, governs its classification in the statement of financial position.
Financial assets not quoted in an active market The Foundation classifies financial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in the evaluation on whether a financial asset is quoted in an active market is the determination on whether quoted prices are readily and regularly available, and whether these prices represent actual and regularly occurring market transaction on an arm’s length basis.
Impairment of AFS financial assets The Foundation treats AFS financial assets as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. The Foundation treats ‘significant’ generally as 20% or more and ‘prolonged’ as greater than 6 months for quoted equity securities. In addition, the Foundation evaluates other factors, including normal volatility in share price for quoted equities and the future cash flows and the discount factors for unquoted equities.
If there is an objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.
Management’s Use of Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below:
Estimating allowance for impairment losses The Foundation maintains allowance for impairment losses based on the result of the individual and collective assessment under PAS 39. Under the individual assessment, the Foundation is required to obtain the present value of estimated cash flows using the receivable’s original EIR. Impairment loss is determined as the difference between the receivables’ carrying balance and the computed present value. The collective assessment would require the Foundation to group its receivables based on the credit risk characteristics (industry, past-due status and term) of the customers. Impairment loss is then determined based on historical loss experience of the receivables grouped per credit risk profile. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for the individual and collective assessments are based on management's judgment and estimate. Therefore, the amount and timing of recorded expense for any period would differ depending on the judgments and estimates made for the year.
The carrying values of receivables amounted to P=15.07 million and P=6.66 million as of December 31, 2016 and 2015, respectively (see Note 5).
92 AYALA FOUNDATION Estimating useful lives of property and equipment and software costs The Foundation estimates the useful lives of its property and equipment and software cost based on the period over which these assets are expected to be available for use. The estimated useful lives of property and equipment and software costs are reviewed at least annually and are updated if expectations differ from previous estimates due to physical wear and tear and technical or commercial obsolescence on the use of these assets. It is possible that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above.
As of December 31, 2016 and 2015, the carrying values of the Foundation’s property and equipment and software cost follow:
2016 2015 Property and equipment (Note 8) P=189,045,426 P=193,053,397 Software cost (Note 9) 690,833 1,335,312
Estimating pension obligation and other retirement benefits The cost of defined benefit pension plans and other retirement benefits as well as the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation involves making various assumptions. Those assumptions are described in Note 12 and include, among others, discount rates, future salary increases, mortality rates and turn-over rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, defined benefit liability are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting dates. Net pension asset amounts to P=4.63 million and P=6.24 million as of December 31, 2016 and 2015, respectively (see Note 12).
The discount rate used is the single-weighted uniform discount rate using bootstrapped-derived zero rates from PDST-R2 index, which when applied to the same cash flows, results in the same present value as of reporting date. Present values of cash flows as of reporting date was determined using the rates from derived zero yield curve.
The mortality rate is based on unisex annuity table and is modified accordingly with estimates of mortality improvements (if any). The turn-over rates used are based on actual data on employee turn-over for the prior year. Future salary increases are derived from the Foundation’s estimated long-term yearly salary increase rate. Further details about the assumptions used are provided in Note 12.
Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded and disclosed in the statement of financial position cannot be derived from active markets, they are determined using internal valuation techniques using generally accepted market valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimates are used in establishing fair values. These estimates may include considerations of liquidity, volatility, and correlation. See Note 15 for the related balances.
Recognition of deferred tax asset The Foundation reviews the carrying amounts of deferred income taxes at each reporting date and reduces deferred tax assets to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax assets to be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable income.
2016 ANNUAL REPORT 93 Based on management’s assessment, the Foundation recognized deferred tax assets on MCIT amounting to P=0.24 million and nil as of December 31, 2016 and 2015, respectively (see Note 14). As of December 31, 2016 and 2015, interest income earned on advances to employees amounted to P=0.15 million and P=0.06 million, respectively.
4. Cash and Cash Equivalents Advances to cooperative pertain to cash advance to Ayala cooperative which are collectible within one year. This account consists of: Others receivables are non-interest bearing and are due and demandable. 2016 2015 Cash on hand and in banks P=62,802,021 P=53,175,207 Receivables amounting to P=4.32 million and P=5.30 million as of December 31, 2016 and 2015, Cash equivalents 54,721,511 46,749,500 respectively, were assessed to be individually impaired and provided for with an impairment P=117,523,532 P=99,924,707 allowance in accordance with the Foundation’s policy on receivables. Movements in the allowance for impairment losses follow: Cash in banks earn interests at the respective bank deposit rates. Cash equivalents are made for varying periods of up to three months depending on the immediate cash requirements of the 2016 2015 Foundation and earn interest at the respective short-term investment rates of 0.50% to 2.125% and Balance at beginning of year P=5,298,442 P=8,011,254 0.875% to 2.125% in 2016 and 2015, respectively. Reversal during the year (840,606) (2,438,996) Written off during the year (140,340) (273,816) As of December 31, 2016 and 2015, interest income earned on cash in banks and cash equivalents Balance at end of year P=4,317,496 P=5,298,442 amounted to P=2.07 million and P=2.62 million, respectively. Reversals of provision are included in “Others” in the Foundation’s statements of activities.
5. Receivables
This account consists of the following: 6. Merchandise Inventories This account consists of the following: 2016 2015 Trade: 2016 2015 Services P=3,356,379 P=2,623,164 Non-book merchandise P=10,346,268 Products 1,041,372 1,280,951 P=9,351,741 Books 5,350,257 Accrued interest 9,019,429 314,512 4,812,457 Nontrade 2,512,123 2,852,462 14,164,198 15,696,525 Advances to officers and employees 2,029,697 1,293,909 Less: allowance for inventory loss 822,426 707,217 Advances to cooperative 1,405,581 1,328,820 P=13,341,772 P=14,989,308 Others 27,591 2,259,757 19,392,172 11,953,575 Inventories recognized as cost of sales amounted to P=1.86 million and P=2.00 million in 2016 and Less allowance for impairment losses 4,317,496 5,298,442 2015, respectively and were included under “Net loss from other activities” in the Foundation’s P=15,074,676 P=6,655,133 statements of activities.
Trade receivables are collectibles from various entities arising from purchase of products and of The Foundation recognized provision for inventory obsolescence amounting to P=0.12 million and program services provided by the Foundation. These are collectible within one year. P=0.04 million in 2016 and 2015, respectively and were included under “Net loss from other activities” in the Foundation’s statements of activities. Accrued interest pertains to interest receivable from its investments in debt securities. These are collectible within one year.
Nontrade receivables pertain to collectibles for activities outside the main revenue-generating projects of the Foundation which are noninterest bearing and are due and demandable.
Advances to officers and employees pertain to salary loans and advances made to regular employees of the Foundation for business related expenses and are subject for liquidation. This amount is collectible within one year.
94 AYALA FOUNDATION As of December 31, 2016 and 2015, interest income earned on advances to employees amounted to P=0.15 million and P=0.06 million, respectively.
Advances to cooperative pertain to cash advance to Ayala cooperative which are collectible within one year.
Others receivables are non-interest bearing and are due and demandable.
Receivables amounting to P=4.32 million and P=5.30 million as of December 31, 2016 and 2015, respectively, were assessed to be individually impaired and provided for with an impairment allowance in accordance with the Foundation’s policy on receivables. Movements in the allowance for impairment losses follow:
2016 2015 Balance at beginning of year P=5,298,442 P=8,011,254 Reversal during the year (840,606) (2,438,996) Written off during the year (140,340) (273,816) Balance at end of year P=4,317,496 P=5,298,442
Reversals of provision are included in “Others” in the Foundation’s statements of activities.
6. Merchandise Inventories
This account consists of the following:
2016 2015 Non-book merchandise P=9,351,741 P=10,346,268 Books 4,812,457 5,350,257 14,164,198 15,696,525 Less: allowance for inventory loss 822,426 707,217 P=13,341,772 P=14,989,308
Inventories recognized as cost of sales amounted to P=1.86 million and P=2.00 million in 2016 and 2015, respectively and were included under “Net loss from other activities” in the Foundation’s statements of activities.
The Foundation recognized provision for inventory obsolescence amounting to P=0.12 million and P=0.04 million in 2016 and 2015, respectively and were included under “Net loss from other activities” in the Foundation’s statements of activities.
2016 ANNUAL REPORT 95 7. Other Current Assets December 31, 2015 Leasehold and Office This account consists of: Land Furniture and Transportation Construction- Land Improvements Equipment Equipment in-Progress Total Cost 2016 2015 At January 1 P=102,869,175 P=59,400,655 P=82,184,453 P=4,818,000 P=29,090,710 P=278,362,993 Input VAT P=5,882,189 P=6,186,823 Additions – 2,864,027 4,045,594 – 4,985,109 11,894,730 Creditable withholding tax 3,237,101 3,023,625 Disposals – (317,273) (3,405,588) (1,828,000) – (5,550,861) Transfers (Note 9) – 27,378,740 212,500 – (27,378,740) 212,500 Deposits 915,020 950,220 At December 31 102,869,175 89,326,149 83,036,959 2,990,000 6,697,079 284,919,362 Prepaid expenses 668,980 794,899 Accumulated Depreciation Others – 21,130 and Amortization At January 1 − 14,557,203 70,073,203 2,213,617 – 86,844,023 P=10,703,290 P=10,976,697 Depreciation and amortization (Notes 13 and 16) – 5,217,890 4,640,489 669,500 – 10,527,879 Disposals – (317,273) (3,360,664) (1,828,000) – (5,505,937) Input VAT is applied against output VAT. The input VAT is recoverable in future periods. At December 31 – 19,457,820 71,353,028 1,055,117 – 91,865,965 Net Book Value P=102,869,175 P=69,868,329 P=11,683,931 P=1,934,883 P=6,697,079 P=193,053,397 Creditable withholding tax consists of tax withheld by customers and is creditable against any future income tax due from the Foundation. Construction-in-progress includes the ongoing renovations in the Ayala Museum and construction work in Laguna for its livelihood programs. Deposits pertain to advance payments made by the Foundation to suppliers and other entities. Land amounting to P=92.65 million, which was donated in 2003, is subject to a leasehold right Prepaid expenses include prepayments for office space and parking rental, subscription fees and existing thereon with a third party. other expenses. Depreciation and amortization charged against unrestricted net assets (included under “Project”, “General and administrative” and “Net loss from other activities” in statement of activities) 8. Property and Equipment amounted to P=13.52 million and P=10.53 million in 2016 and 2015, respectively.
The rollforward analysis of this account follows: Fully depreciated property and equipment still being used by the Foundation amounted to P=64.32 million and P=62.69 million as of December 31, 2016 and 2015, respectively. December 31, 2016 Leasehold and Office Land Furniture and Transportation Construction- Land Improvements Equipment Equipment in-Progress Total Cost 9. Software Cost At January 1 P=102,869,175 P=89,326,149 P=83,036,959 P=2,990,000 P=6,697,079 P=284,919,362 Additions – 6,361,921 1,885,522 – 1,273,560 9,521,003 Disposals – – (3,591,567) – – (3,591,567) The rollforward analysis of this account follows: Transfers – 6,568,278 – – (6,568,278) – At December 31 102,869,175 102,256,348 81,330,914 2,990,000 1,402,361 290,848,798 2016 2015 Accumulated Depreciation and Amortization Cost At January 1 − 19,457,820 71,353,028 1,055,117 – 91,865,965 At January 1 P=8,287,679 P=8,812,144 Depreciation and amortization Additions – 225,000 (Notes 13 and 16) – 7,992,627 4,927,591 598,000 – 13,518,218 Disposals – – (3,580,813) – – (3,580,813) Transfers – (212,500) At December 31 – 27,450,447 72,699,806 1,653,117 – 101,803,370 Disposals (479,300) (536,965) Net Book Value P=102,869,175 P=74,805,901 P=8,631,108 P=1,336,883 P=1,402,361 P=189,045,428 At December 31 7,808,379 8,287,679 Accumulated Amortization At January 1 6,952,367 6,917,249 Amortization 644,479 572,083 Disposals (479,300) (536,965) At December 31 7,117,546 6,952,367 Net Book Value P=690,833 P=1,335,312
Amortization charged against unrestricted net assets (included under “Project”, “General and administrative” and “Net loss from other activities” in statement of activities) amounted to P=0.64 million and P=0.57 million in 2016 and 2015, respectively.
96 AYALA FOUNDATION December 31, 2015 Leasehold and Office Land Furniture and Transportation Construction- Land Improvements Equipment Equipment in-Progress Total Cost At January 1 P=102,869,175 P=59,400,655 P=82,184,453 P=4,818,000 P=29,090,710 P=278,362,993 Additions – 2,864,027 4,045,594 – 4,985,109 11,894,730 Disposals – (317,273) (3,405,588) (1,828,000) – (5,550,861) Transfers (Note 9) – 27,378,740 212,500 – (27,378,740) 212,500 At December 31 102,869,175 89,326,149 83,036,959 2,990,000 6,697,079 284,919,362 Accumulated Depreciation and Amortization At January 1 − 14,557,203 70,073,203 2,213,617 – 86,844,023 Depreciation and amortization (Notes 13 and 16) – 5,217,890 4,640,489 669,500 – 10,527,879 Disposals – (317,273) (3,360,664) (1,828,000) – (5,505,937) At December 31 – 19,457,820 71,353,028 1,055,117 – 91,865,965 Net Book Value P=102,869,175 P=69,868,329 P=11,683,931 P=1,934,883 P=6,697,079 P=193,053,397
Construction-in-progress includes the ongoing renovations in the Ayala Museum and construction work in Laguna for its livelihood programs.
Land amounting to P=92.65 million, which was donated in 2003, is subject to a leasehold right existing thereon with a third party.
Depreciation and amortization charged against unrestricted net assets (included under “Project”, “General and administrative” and “Net loss from other activities” in statement of activities) amounted to P=13.52 million and P=10.53 million in 2016 and 2015, respectively.
Fully depreciated property and equipment still being used by the Foundation amounted to P=64.32 million and P=62.69 million as of December 31, 2016 and 2015, respectively.
9. Software Cost
The rollforward analysis of this account follows:
2016 2015 Cost At January 1 P=8,287,679 P=8,812,144 Additions – 225,000 Transfers – (212,500) Disposals (479,300) (536,965) At December 31 7,808,379 8,287,679 Accumulated Amortization At January 1 6,952,367 6,917,249 Amortization 644,479 572,083 Disposals (479,300) (536,965) At December 31 7,117,546 6,952,367 Net Book Value P=690,833 P=1,335,312
Amortization charged against unrestricted net assets (included under “Project”, “General and administrative” and “Net loss from other activities” in statement of activities) amounted to P=0.64 million and P=0.57 million in 2016 and 2015, respectively.
2016 ANNUAL REPORT 97 Cost of fully amortized software cost still being used by the Foundation amounted to P=5.96 Trade payables include payables to suppliers that are noninterest-bearing and are normally settled million and P=6.35 million as of December 31, 2016 and 2015, respectively. on 30- to 60-day terms.
Accrued expenses pertain to the unbilled balances for charges associated with the renovations and 10. Available-for-sale Financial Assets maintenance of the Ayala Museum building and other expenses incurred by the Foundation for its activities. This account consists of investments in: Payable to consignors pertain to the amount due to consignors for sale of goods consigned to the 2016 2015 Foundation. Common trust fund P=875,006,860 P=956,026,042 Equity securities Other payables are non-interest bearing and are normally settled within one year. Quoted 391,403,280 352,242,634 Unquoted 575,409 575,409 Debt securities 12. Defined Benefit Plan Quoted 949,948,445 953,961,329 Unquoted 86,391,770 136,382,801 The Foundation has funded, noncontributory defined benefit retirement plan covering substantially P=2,303,325,764 P=2,399,188,215 all of its regular permanent employees. The benefits are generally based on defined contribution formula with minimum lump-sum guarantee of 1.5 months’ basic salary per year of service. The rollforward of net unrealized gain (loss) on AFS financial assets are as follows: The Foundation’s annual contributions to the plan consist principally of payments which covers 2016 2015 the current service cost for the year and the required funding relative to the guaranteed minimum Balance at beginning of year P=117,971,385 P=164,060,597 benefits as applicable. The funds are administered by a trustee bank of the Foundation and subject Net unrealized loss recognized directly in net assets (34,901,877) (15,655,542) to the investment objectives and guidelines established by the Foundation’s Employee Welfare Realized gain transferred to investment income and Retirement Fund Investment Committee (the Committee) and rules and regulations issued by (Note 10) (111,118,657) (30,433,670) Bangko Sentral ng Pilipinas (BSP) covering assets under trust and fiduciary agreements. The Fund reclassification (447,979) – Committee is responsible for the investment strategy of the plan. Balance at end of year (P=28,497,128) P=117,971,385 Republic Act 7641, The New Retirement Law, requires a provision for retirement pay to qualified The breakdown of investment income is as follow: private sector employees in the absence of any retirement plan in the entity, provided however that the employee’s retirement benefits under any collective bargaining and other agreements shall not 2016 2015 be less than those provided under the law. The law does not require minimum funding of the plan. Realized gain from AFS P=111,118,657 P=30,433,670 Debt instruments 38,706,489 36,420,501 The components of pension expense included in “Personnel costs” under “General and Dividends 22,433,631 18,568,955 administrative expenses” in the statements of activities are as follows (see Note 13): Government securities 4,795,506 5,671,604 Loans 2,579,898 2,507,973 2016 2015 Others 2,104,083 1,401,701 Current service cost P=6,005,842 P=6,044,331 P=181,738,264 P=95,004,404 Net interest income (305,610) (337,360) Total pension expense P=5,700,232 P=5,706,971
11. Accounts and Other Payables The remeasurement effects recognized in other comprehensive income in the statements of activities follow: This account consists of: 2016 2015 2016 2015 Actuarial gain (loss) due to experience adjustment P=10,822,276 (P=6,046,450) Trade P=36,964,714 P=39,120,298 Actuarial gain (loss) due to change in financial Accrued expenses 26,672,794 34,113,929 assumption (9,440,794) 1,491,003 Payable to consignors 7,085,295 7,571,461 Return on plan assets (excluding amount included in net interest) (1,944,894) 3,765,050 Others 2,326,947 2,828,042 ( P= 563,412) (P=790,397) P=73,049,750 P=83,633,730
98 AYALA FOUNDATION Trade payables include payables to suppliers that are noninterest-bearing and are normally settled on 30- to 60-day terms.
Accrued expenses pertain to the unbilled balances for charges associated with the renovations and maintenance of the Ayala Museum building and other expenses incurred by the Foundation for its activities.
Payable to consignors pertain to the amount due to consignors for sale of goods consigned to the Foundation.
Other payables are non-interest bearing and are normally settled within one year.
12. Defined Benefit Plan
The Foundation has funded, noncontributory defined benefit retirement plan covering substantially all of its regular permanent employees. The benefits are generally based on defined contribution formula with minimum lump-sum guarantee of 1.5 months’ basic salary per year of service.
The Foundation’s annual contributions to the plan consist principally of payments which covers the current service cost for the year and the required funding relative to the guaranteed minimum benefits as applicable. The funds are administered by a trustee bank of the Foundation and subject to the investment objectives and guidelines established by the Foundation’s Employee Welfare and Retirement Fund Investment Committee (the Committee) and rules and regulations issued by Bangko Sentral ng Pilipinas (BSP) covering assets under trust and fiduciary agreements. The Committee is responsible for the investment strategy of the plan.
Republic Act 7641, The New Retirement Law, requires a provision for retirement pay to qualified private sector employees in the absence of any retirement plan in the entity, provided however that the employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided under the law. The law does not require minimum funding of the plan.
The components of pension expense included in “Personnel costs” under “General and administrative expenses” in the statements of activities are as follows (see Note 13):
2016 2015 Current service cost P=6,005,842 P=6,044,331 Net interest income (305,610) (337,360) Total pension expense P=5,700,232 P=5,706,971
The remeasurement effects recognized in other comprehensive income in the statements of activities follow:
2016 2015 Actuarial gain (loss) due to experience adjustment P=10,822,276 (P=6,046,450) Actuarial gain (loss) due to change in financial assumption (9,440,794) 1,491,003 Return on plan assets (excluding amount included in net interest) (1,944,894) 3,765,050 ( P= 563,412) (P=790,397)
2016 ANNUAL REPORT 99 The amounts recognized under pension asset - net in the statements of financial position are as 2016 2015 follows: Liabilities Trust fee payable 42,051 39,569 2016 2015 Total value of plan assets P=56,142,061 P=52,453,470 Plan assets P=57,736,105 P=52,453,470 * The difference of P=1.59 million in the fair value of plan assets as of December 31, 2016 pertains to movements after Benefit obligations (53,105,509) (46,216,539) the valuation date Asset to be recognized P=4,630,596 P=6,236,931 The plan assets do not have any concentration on risk. The assumptions used to determine pension benefits for the Foundation for the years ended December 31, 2016 and 2015 are as Changes in the present value of the defined benefit obligation are as follows: follows:
2016 2015 2016 2015 Balance at January 1 P=46,216,539 P=42,399,103 Discount rate 4.10% 4.90% Current service cost 6,005,842 6,044,331 Salary increase rate 6.00% 5.00% Interest expense 2,264,610 1,950,359 Turn-over rate nil to 100.00% nil to 100.00% Remeasurement loss (gain) on obligation (1,381,482) 4,555,447 Mortality rate 0.05 to 0.74% 0.05 to 0.74% Benefits paid – (4,928,092) Transferred-out liabilities – (3,804,609) There were no changes from the previous period in the methods and assumptions used in Balance at December 31 P=53,105,509 P=46,216,539 preparing sensitivity analysis.
Changes in the fair value of plan assets are as follows: Below shows the sensitivity analysis determined based on reasonably possible changes of each significant assumptions stated above, assuming all other assumptions were held constant: 2016 2015 Balance at January 1 P=52,453,470 P=49,733,019 2016 Contributions 4,657,309 5,400,383 Discount Rate Salary Increase Rate Interest income on plan assets 2,570,220 2,287,719 +0.50% (0.50%) +0.50% (0.50%) Remeasurement gain (loss) on plan assets (1,944,894) 3,765,050 Accrued liability P=50,072,440 P=56,418,501 P=56,117,428 P=50,314,763 Current fund assets (57,736,105) (57,736,105) (57,736,105) (57,736,105) Benefits paid – (4,928,092) Unfunded accrued liability (P=7,663,665) (P=1,317,604) (P=1,618,677) (P=7,421,342) Transferred-out assets – (3,804,609) Balance at December 31 P=52,453,470 P=57,736,105 2015 Discount Rate Discount Rate The fair value of plan assets by each class and by industry type as at the end of the reporting +0.50% +0.50% +0.50% +0.50% period are as follows: Accrued liability P=43,883,144 P=48,742,050 P=48,529,775 P=44,056,232 Current fund assets (52,453,470) (52,453,470) (52,453,470) (52,453,470) 2016 2015 Unfunded accrued liability (P=8,570,326) (P=3,711,420) (P=3,923,695) (P=8,397,238) Assets Cash P=234 P=142 The Foundation does not perform any Asset-Liability Matching Study. The overall investment Receivables 406,684 37 policy and strategy of the retirement plan is based on the suitability assessment, as provided by its Debt instruments: trust bank, in compliance with the BSP requirements. It does, however, ensure that there will be Holding firms 10,500,000 10,589,421 sufficient assets to pay the retirement benefits as they fall due while attempting to mitigate the Government securities 9,385,567 7,245,593 various risks of the plan. The plan assets consist of 74.44% of equity instruments, 24.84% of Property 8,000,000 7,046,355 equity instruments and 0.72% others in 2016 and 73.30% of equity instruments, 26.70% of debt Financials 6,117,159 5,029,244 instruments in 2015. Services 4,000,000 4,041,904 Pooled funds 3,815,872 4,526,344 The Foundation expects to make additional contributions of P=6.10 million to its retirement fund in Equity instruments: 2017. Pooled funds 11,237,596 11,346,999 Holding firms 2,721,000 2,667,000 56,184,112 52,493,039 (Forward)
100 AYALA FOUNDATION 2016 2015 Liabilities Trust fee payable 42,051 39,569 Total value of plan assets P=56,142,061 P=52,453,470 * The difference of P=1.59 million in the fair value of plan assets as of December 31, 2016 pertains to movements after the valuation date The plan assets do not have any concentration on risk. The assumptions used to determine pension benefits for the Foundation for the years ended December 31, 2016 and 2015 are as follows:
2016 2015 Discount rate 4.10% 4.90% Salary increase rate 6.00% 5.00% Turn-over rate nil to 100.00% nil to 100.00% Mortality rate 0.05 to 0.74% 0.05 to 0.74%
There were no changes from the previous period in the methods and assumptions used in preparing sensitivity analysis.
Below shows the sensitivity analysis determined based on reasonably possible changes of each significant assumptions stated above, assuming all other assumptions were held constant:
2016 Discount Rate Salary Increase Rate +0.50% (0.50%) +0.50% (0.50%) Accrued liability P=50,072,440 P=56,418,501 P=56,117,428 P=50,314,763 Current fund assets (57,736,105) (57,736,105) (57,736,105) (57,736,105) Unfunded accrued liability (P=7,663,665) (P=1,317,604) (P=1,618,677) (P=7,421,342)
2015 Discount Rate Discount Rate +0.50% +0.50% +0.50% +0.50% Accrued liability P=43,883,144 P=48,742,050 P=48,529,775 P=44,056,232 Current fund assets (52,453,470) (52,453,470) (52,453,470) (52,453,470) Unfunded accrued liability (P=8,570,326) (P=3,711,420) (P=3,923,695) (P=8,397,238)
The Foundation does not perform any Asset-Liability Matching Study. The overall investment policy and strategy of the retirement plan is based on the suitability assessment, as provided by its trust bank, in compliance with the BSP requirements. It does, however, ensure that there will be sufficient assets to pay the retirement benefits as they fall due while attempting to mitigate the various risks of the plan. The plan assets consist of 74.44% of equity instruments, 24.84% of equity instruments and 0.72% others in 2016 and 73.30% of equity instruments, 26.70% of debt instruments in 2015.
The Foundation expects to make additional contributions of P=6.10 million to its retirement fund in 2017.
2016 ANNUAL REPORT 101 The average duration of the defined benefit liability at the end of the reporting period is 13 years. 2016 2015 Amounts for the current and the previous periods follow: Permanently restricted: Investment in perpetuity, the income of which is 2016 2015 expendable to support education and other Benefit obligation P=53,105,509 P=46,216,539 programs 2,187,714,273 2,187,714,273 Plan assets (57,736,105) (52,453,470) Remeasurement gain (loss) on defined benefit Deficit (excess) ( P= 4,630,596) (P=6,236,931) obligation 5,968,240 6,531,652 Net unrealized gain (loss) on AFS financial assets (28,497,128) 117,971,385 P=2,581,527,811 P=2,648,725,970 The following table shows the maturity profile of the Foundation’s defined benefit obligation based on undiscounted benefit payments: Details of the Foundation’s expenses follow:
2016 2015 Project Expenses More than 1 year to 5 years P=14,620,409 P=16,274,685 More than 5 years to 10 years 34,368,523 39,647,519 2016 2015 P=48,988,932 P=55,922,204 Project implementation: Disaster relief and other special projects P=81,514,246 P=116,535,437 Education 29,441,569 24,573,789 Arts and culture 18,435,753 11,232,498 13. Net Assets Youth leadership 9,173,251 8,401,628 Sustainable livelihood 3,476,660 5,578,807 Unrestricted net assets are those net assets that are neither temporarily restricted nor permanently Project management: restricted. It includes all net assets with uses not restricted by donors, by the Board of Trustees or Salaries, wages and employee benefits 43,883,894 41,073,378 by law. Monitoring and administrative 8,465,782 5,663,429 Building overhead 24,315,136 24,689,984 Temporarily restricted net assets refer to those net assets whose use by the Foundation is limited P=218,706,291 P=237,748,950 by donors to later periods of time or after specified dates or specified purposes.
Net assets were released from donor restrictions by incurring expenses satisfying the restricted General and Administrative Expenses purposes or by occurrence of other events specified by donors. 2016 2015 Permanently restricted net assets are those assets that the donor stipulates must be maintained by Personnel costs (Note 12) P=28,856,118 P=28,883,087 the Foundation in perpetuity. Permanently restricted net assets increase when Foundation receives Professional and service fees 4,460,823 9,390,521 contributions for which donor-imposed restrictions limiting the Foundation’s use of an asset or its Premises, utilities and maintenance 4,051,031 3,603,324 economic benefits neither expire with the passage of time nor can be removed by the Foundation’s Depreciation and amortization (Notes 8 and 9) 2,731,680 1,797,431 meeting certain requirements. Permanently restricted net assets generally come from: Advocacy and public information services 1,289,083 1,579,691 (1) contributions, with donor-imposed permanent restrictions; (2) increase or decrease in existing Communication and postage 1,058,861 1,241,403 assets that are subject to permanent restrictions by donor or by law (such as unrealized gains, and Transportation and travel 988,890 775,736 interest income); and (3) reclassification from another net asset class as a result of donor Supplies 311,305 406,501 stipulation or by law. Trainings and seminars 154,830 177,851 Taxes and licenses 148,536 196,270 Details of the Foundation’s net assets as of December 31 are as follows: Others 1,535,701 1,825,971 P=45,586,858 P=49,877,786 2016 2015 Unrestricted P=133,123,341 P=19,418,454 Capital management Temporarily restricted: The primary objectives of the Foundation’s capital management policies are to devote its funds to Property and equipment 189,736,261 194,388,707 charitable projects, scholarship grants and cultural activities, to afford the financial flexibility to Livelihood and other community development support its operations and to protect and preserve capital to ensure financial sustainability of the programs 71,544,589 102,511,397 Foundation. Education and youth leadership programs 21,938,235 20,190,102 283,219,085 317,090,206 The Foundation’s source of capital is its total net assets, which is composed of unrestricted, (Forward) temporarily restricted and permanently restricted net assets, plus the net unrealized gain on AFS financial assets.
102 AYALA FOUNDATION 2016 2015 Permanently restricted: Investment in perpetuity, the income of which is expendable to support education and other programs 2,187,714,273 2,187,714,273 Remeasurement gain (loss) on defined benefit obligation 5,968,240 6,531,652 Net unrealized gain (loss) on AFS financial assets (28,497,128) 117,971,385 P=2,581,527,811 P=2,648,725,970
Details of the Foundation’s expenses follow:
Project Expenses
2016 2015 Project implementation: Disaster relief and other special projects P=81,514,246 P=116,535,437 Education 29,441,569 24,573,789 Arts and culture 18,435,753 11,232,498 Youth leadership 9,173,251 8,401,628 Sustainable livelihood 3,476,660 5,578,807 Project management: Salaries, wages and employee benefits 43,883,894 41,073,378 Monitoring and administrative 8,465,782 5,663,429 Building overhead 24,315,136 24,689,984 P=218,706,291 P=237,748,950
General and Administrative Expenses
2016 2015 Personnel costs (Note 12) P=28,856,118 P=28,883,087 Professional and service fees 4,460,823 9,390,521 Premises, utilities and maintenance 4,051,031 3,603,324 Depreciation and amortization (Notes 8 and 9) 2,731,680 1,797,431 Advocacy and public information services 1,289,083 1,579,691 Communication and postage 1,058,861 1,241,403 Transportation and travel 988,890 775,736 Supplies 311,305 406,501 Trainings and seminars 154,830 177,851 Taxes and licenses 148,536 196,270 Others 1,535,701 1,825,971 P=45,586,858 P=49,877,786
Capital management The primary objectives of the Foundation’s capital management policies are to devote its funds to charitable projects, scholarship grants and cultural activities, to afford the financial flexibility to support its operations and to protect and preserve capital to ensure financial sustainability of the Foundation.
The Foundation’s source of capital is its total net assets, which is composed of unrestricted, temporarily restricted and permanently restricted net assets, plus the net unrealized gain on AFS financial assets.
2016 ANNUAL REPORT 103 The reconciliation of statutory income tax to the provision for income tax follows: 2016 2015 Net Assets 2016 2015 Unrestricted P=133,123,341 P=19,418,454 Statutory income tax P=23,815,736 P=3,527,931 Temporarily restricted 283,219,085 317,090,206 Tax effects of: Permanently restricted 2,187,714,273 2,187,714,273 Non-taxable income (104,041,085) (94,178,304) Unrealized gain on AFS financial assets (Note 10) (28,497,128) 117,971,385 Non-deductible expenses 79,287,945 86,568,283 P=2,575,559,571 P=2,642,194,318 Change in unrecognized deferred tax assets 937,404 4,082,090 Provision for income tax P=– P=–
14. Income Tax 15. Financial Instruments The Foundation has NOLCO and MCIT that are available for offset against future taxable income or tax payable, for which deferred tax assets have not been recognized. Deferred tax assets are Fair Value Measurement recognized only to the extent that taxable income will be available against which the deferred tax assets can be used. As of December 31, 2016, total recognized MCIT amounted to P=241,670. The following table shows an analysis of the Foundation’s financial assets and liabilities by level of the fair value hierarchy: As of December 31, 2016 and 2015, total unrecognized deferred tax on NOLCO and MCIT are shown below: December 31, 2016 2015 Fair value measurement using 2016 Significant Significant NOLCO P=8,651,090 P=10,432,683 Quoted prices in observable unobservable MCIT 306,352 306,352 active markets inputs inputs Total (Level 1) (Level 2) (Level 3) As of December 31, 2016, MCIT and NOLCO that can be claimed as deduction from future Assets measured at fair value: Available-for-sale financial assets income tax liabilities or taxable income, respectively, are as follows: Common trust fund P=875,006,860 P=– P=875,006,860 P= − Quoted equity securities 391,403,280 391,403,280 − − Year incurred MCIT NOLCO Expiry year Unquoted equity securities 575,409 – − 575,409 2014 P=139,311 P=12,105,319 2017 Quoted debt securities 949,948,445 949,948,445 − − 2015 167,041 13,606,965 2018 Unquoted debt securities 86,391,770 − 26,860,082 59,531,688 P=2,303,325,764 P=1,341,351,725 P=901,866,942 P=60,107,097 2016 241,670 3,124,682 2019 P=548,022 P=28,836,966 December 31, 2015 Fair value measurement using The movements in NOLCO and MCIT are as follows: Quoted prices in Significant Significant active markets observable inputsunobservable inputs NOLCO: Total (Level 1) (Level 2) (Level 3) 2016 2015 Assets measured at fair value: Available-for-sale financial assets At January 1 P=34,775,610 P=30,211,601 Common trust fund P=956,026,042 P=– P=956,026,042 =−P Additions 3,124,682 13,606,965 Quoted equity securities 352,242,634 352,242,634 − − Expiration (9,063,326) (9,042,956) Unquoted equity securities 575,409 – − 575,409 At December 31 P=28,836,966 P=34,775,610 Quoted debt securities 953,961,329 953,961,329 − − Unquoted debt securities 136,382,801 − 37,331,273 99,051,528 MCIT: P=2,399,188,215 P=1,306,203,963 P=993,357,315 P=99,626,937 2016 2015 At January 1 P=306,352 P=139,311 Additions 241,670 167,041 At December 31 P=548,022 P=306,352
104 AYALA FOUNDATION The reconciliation of statutory income tax to the provision for income tax follows:
2016 2015 Statutory income tax P=23,815,736 P=3,527,931 Tax effects of: Non-taxable income (104,041,085) (94,178,304) Non-deductible expenses 79,287,945 86,568,283 Change in unrecognized deferred tax assets 937,404 4,082,090 Provision for income tax P=– P=–
15. Financial Instruments
Fair Value Measurement
The following table shows an analysis of the Foundation’s financial assets and liabilities by level of the fair value hierarchy:
December 31, 2016 Fair value measurement using Significant Significant Quoted prices in observable unobservable active markets inputs inputs Total (Level 1) (Level 2) (Level 3) Assets measured at fair value: Available-for-sale financial assets Common trust fund P=875,006,860 P=– P=875,006,860 P= − Quoted equity securities 391,403,280 391,403,280 − − Unquoted equity securities 575,409 – − 575,409 Quoted debt securities 949,948,445 949,948,445 − − Unquoted debt securities 86,391,770 − 26,860,082 59,531,688 P=2,303,325,764 P=1,341,351,725 P=901,866,942 P=60,107,097
December 31, 2015 Fair value measurement using Quoted prices in Significant Significant active markets observable inputsunobservable inputs Total (Level 1) (Level 2) (Level 3) Assets measured at fair value: Available-for-sale financial assets Common trust fund P=956,026,042 P=– P=956,026,042 =−P Quoted equity securities 352,242,634 352,242,634 − − Unquoted equity securities 575,409 – − 575,409 Quoted debt securities 953,961,329 953,961,329 − − Unquoted debt securities 136,382,801 − 37,331,273 99,051,528 P=2,399,188,215 P=1,306,203,963 P=993,357,315 P=99,626,937
2016 ANNUAL REPORT 105 The Foundation uses the following hierarchy for determining and disclosing the fair value of its As of December 31, 2016 and 2015, the carrying amounts of accounts and other payables will be assets and liabilities by valuation technique: settled within one year.
Level 1: quoted (unadjusted prices) in active markets for identical assets and liabilities The following table shows the maturity profile of the Foundation’s financial assets and liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded based on contractual undiscounted payments: fair value are observable, either directly or indirectly Level 3: techniques which use inputs which have a significant effect on the recorded fair value December 31, 2016 that are not based on observable market data More than 1 Within 1 Year Year No Term Total Gross The fair value of the financial assets and liabilities is included at the amount at which the Financial Assets Loans and receivables instrument could be exchanged in a current transaction between willing parties, other than in a Cash and cash equivalents P=117,523,532 P= – P= – P=117,523,532 forced or liquidation sale. The following methods and assumptions were used to estimate the fair Receivables values: Accrued interest 9,019,429 − − 9,019,429 Trade 4,397,751 − − 4,397,751 AFS quoted debt and equity investments - Fair values are based on quoted prices published in Advances to officers and markets. employees 1,651,458 − − 1,651,458 Nontrade 2,512,123 − − 2,512,123 AFS unquoted investments – Fair value of common trust funds are based on the net asset value per Advances to cooperative 1,405,581 − − 1,405,581 share. For other unquoted equity shares and bonds where the fair value is not reasonably Others 27,591 – – 27,591 determinable due to the unpredictable nature of future cash flows and the lack of suitable method 136,537,465 – – 136,537,465 of arriving at a reliable fair value, these are carried at cost less impairment, if any. AFS financial assets Common trust fund – 875,006,860 – 875,006,860 Equity securities – – 391,978,689 391,978,689 Management assessed that the fair values of loans and receivables and other financial liabilities Debt securities – 1,036,340,215 – 1,036,340,215 approximate their carrying amounts largely due to the short-term maturities of these instruments. – 1,911,347,075 391,978,689 2,303,325,764 Total Financial Assets P=136,537,465 P=1,911,347,075 P=391,978,689 P=2,439,863,229 There were no transfers between fair value categories for assets and liabilities measured at fair value in 2016 and 2015. Other Financial Liabilities Accounts and other payables Financial Risk Management Objectives and Policies Trade P=36,964,714 P= – P= – P=36,964,714 Accrued expenses 26,672,794 – – 26,672,794 Payable to consignors 7,085,295 – – 7,085,295 The Foundation has various financial instruments such as cash and cash equivalents, receivables, Others 459,941 – – 459,941 AFS financial assets, and accounts and other payables which arise directly from its operations. Total Other Financial Liabilities P=71,182,744 P= – P= – P=71,182,744 The main purpose of the Foundation’s financial instruments is to fund its operational and capital expenditures. The main risks arising from the use of financial instruments are liquidity risk, credit December 31, 2015 risk, interest rate risk and equity price risk. More than 1 Within 1 Year year No Term Total Gross The Foundation’s risk management policies are summarized below: Financial Assets Loans and receivables Liquidity risk Cash and cash equivalents P=99,924,707 P=– P=– P=99,924,707 Receivables Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet Trade 3,904,115 − − 3,904,115 commitments associated with financial instruments. Liquidity risk may result from either the Nontrade 2,852,462 − − 2,852,462 inability to sell financial assets quickly at their fair values; or the counterparty failing on Advances to cooperative 1,328,820 − − 1,328,820 repayment of a contractual obligation; or inability to generate cash inflows as anticipated. Advances to officers and employees 1,184,389 − − 1,184,389 The Foundation maintains a level of cash and cash equivalents deemed sufficient to finance Accrued interest 314,512 − − 314,512 operations. As part of its liquidity risk management, the Foundation regularly evaluates its Others 2,259,757 – – 2,259,757 projected and actual cash flows. It also continuously assesses conditions in the financial markets 111,768,762 – – 111,768,762 for opportunities to pursue fund-raising activities. Fund-raising activities include investments in (Forward) quoted and unquoted securities.
106 AYALA FOUNDATION As of December 31, 2016 and 2015, the carrying amounts of accounts and other payables will be settled within one year.
The following table shows the maturity profile of the Foundation’s financial assets and liabilities based on contractual undiscounted payments:
December 31, 2016 More than 1 Within 1 Year Year No Term Total Gross Financial Assets Loans and receivables Cash and cash equivalents P=117,523,532 P= – P= – P=117,523,532 Receivables Accrued interest 9,019,429 − − 9,019,429 Trade 4,397,751 − − 4,397,751 Advances to officers and employees 1,651,458 − − 1,651,458 Nontrade 2,512,123 − − 2,512,123 Advances to cooperative 1,405,581 − − 1,405,581 Others 27,591 – – 27,591 136,537,465 – – 136,537,465 AFS financial assets Common trust fund – 875,006,860 – 875,006,860 Equity securities – – 391,978,689 391,978,689 Debt securities – 1,036,340,215 – 1,036,340,215 – 1,911,347,075 391,978,689 2,303,325,764 Total Financial Assets P=136,537,465 P=1,911,347,075 P=391,978,689 P=2,439,863,229 Other Financial Liabilities Accounts and other payables Trade P=36,964,714 P= – P= – P=36,964,714 Accrued expenses 26,672,794 – – 26,672,794 Payable to consignors 7,085,295 – – 7,085,295 Others 459,941 – – 459,941 Total Other Financial Liabilities P=71,182,744 P= – P= – P=71,182,744
December 31, 2015 More than 1 Within 1 Year year No Term Total Gross Financial Assets Loans and receivables Cash and cash equivalents P=99,924,707 P=– P=– P=99,924,707 Receivables Trade 3,904,115 − − 3,904,115 Nontrade 2,852,462 − − 2,852,462 Advances to cooperative 1,328,820 − − 1,328,820 Advances to officers and employees 1,184,389 − − 1,184,389 Accrued interest 314,512 − − 314,512 Others 2,259,757 – – 2,259,757 111,768,762 – – 111,768,762 (Forward)
2016 ANNUAL REPORT 107 AFS financial assets Common trust fund – 956,026,042 – 956,026,042 Equity securities – – 352,818,043 352,818,043 Debt securities – 1,090,344,130 – 1,090,344,130 – 2,046,370,172 352,818,043 2,399,188,215 Total Financial Assets P=111,768,762 P=2,046,370,172 P=352,818,043 P=2,510,956,977 Other Financial Liabilities Accounts and other payables Accrued expenses P=39,120,298 P=– P=– P=39,120,298 Trade 34,113,929 – – 34,113,929 Advances 7,571,461 – – 7,571,461 Others 225,470 – – 225,470 Total Other Financial Liabilities P=81,031,158 P=– P=– P=81,031,158
Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Foundation’s holding of cash and cash equivalents exposes the Foundation to credit risk of the counterparty. Credit risk management involves dealing only with institutions for which credit limits have been established. The treasury policy sets credit limits for each counterparty. Given the Foundation’s diverse base of counterparties, it is not exposed to large concentrations of credit risk.
The maximum exposure to credit risk for the components of the statements of financial position is equal to the carrying values.
108 AYALA FOUNDATION The aging analysis of receivables presented per class, are as follows:
December 31, 2016 Neither Past Due nor Past Due but not Impaired Individually Impaired <30 Days 30-60 Days 61-90 Days 91-120 Days >120 Days Total Impaired Total Accrued interest P=9,019,429 P= – P= – P= – P= – P= – P= – P= – P=9,019,429 Trade 968,156 1,383,725 816,747 − – 65,481 2,265,953 1,163,642 4,397,751 Nontrade 264,766 287,927 42,988 26,133 10,145 95,130 462,323 1,785,034 2,512,123 Advances to officers and employees − – – – – 1,619,320 1,619,320 32,138 1,651,458 Advances to cooperative − – – – – 70,279 70,279 1,335,302 1,405,581
2016 ANNUAL REPORT Others 26,211 – – – – – – 1,380 27,591 P=10,278,562 P=1,671,652 P=859,735 P=26,133 P=10,145 P=1,850,210 P=4,417,875 P=4,317,496 P=19,013,933
December 31, 2015 Neither Past Due nor Past Due but not Impaired Individually Impaired <30 Days 30-60 Days 61-90 Days 91-120 Days >120 Days Total Impaired Total Trade P=1,684,706 P=– P=52,611 P=9,105 P=– P=– P=61,716 P=2,157,693 P=3,904,115 Nontrade 461,048 139,358 121,671 71,340 50,548 209,689 592,606 1,798,808 2,852,462 Advances to cooperative − – – – – – − 1,328,820 1,328,820 Advances to officers and employees 1,157,139 14,129 – – – – 14,129 13,121 1,293,909 Accrued interest 314,512 – – – – – − – 314,512 Others 2,259,757 − − − − − − − 2,259,757 P=5,877,162 P=153,487 P=174,282 P=80,445 P=50,548 P=209,689 P=668,451 P=5,298,442 P=11,953,575 109 110
The table below shows the credit quality of the Foundation’s financial assets:
December 31, 2016 Neither Past Due nor Impaired Past Due but Individually High Grade Medium Grade Low Grade Total Not Impaired Impaired Total Cash and cash equivalents P=117,523,532 P= – P=– P=117,523,532 P= – P=– P=117,523,532 Receivables: Accrued interest 9,019,429 − – 9,019,429 − − 9,019,429 Trade 195,610 769,382 3,164 968,156 2,265,953 1,163,642 4,397,751 Nontrade 135,732 129,034 − 264,766 462,323 1,785,034 2,512,123 Advances to officers and employees – − − – 1,619,320 32,138 1,651,458 Advances to cooperative – – – – 70,279 1,335,302 1,405,581 Others 26,211 – – 26,211 – 1,380 27,591 AFS financial assets:
AYALA FOUNDATION Common trust fund 875,006,860 – – 875,006,860 – – 875,006,860 Quoted securities 391,978,689 – – 391,978,689 – – 391,978,689 Unquoted securities 1,036,340,215 – – 1,036,340,215 – – 1,036,340,215 P=2,430,226,278 P=898,416 P=3,164 P=2,431,127,858 P=4,417,875 P=4,317,496 P=2,439,863,229
December 31, 2015 Neither Past Due nor Impaired Past Due but Individually High Grade Medium Grade Low Grade Total Not Impaired Impaired Total Cash and cash equivalents =99,924,707P P=– =–P =99,616,207P P=– =–P =99,924,707P Receivables: Trade 1,679,761 4,945 – 1,684,706 61,716 2,157,693 3,904,115 Nontrade 272,213 188,835 − 461,048 592,606 1,798,808 2,852,462 Advances to cooperative – – – – – 1,328,820 1,328,820 Advances to officers and employees 1,157,139 − − 1,157,139 14,129 13,121 1,184,389 Accrued interest 314,512 − – 314,512 − − 314,512 Others 2,259,757 − – 2,259,757 − − 2,259,757 AFS financial assets: Common trust fund 956,026,042 – – 956,026,042 – – 956,026,042 Equity securities 352,818,043 – – 352,818,043 – – 352,818,043 Debt securities 1,090,344,130 – – 1,090,344,130 – – 1,090,344,130 =2,504,796,304P P=193,780 –P=2,504,681,584 P=668,451 =5,298,442P =2,510,956,977P AFS financial asset - - asset financial AFS Receivables AFS financial asset - - asset financial AFS Receivables Receivables equivalents cash and Cash equivalents cash and Cash The credit quality of the financial assets was determined as follows: follows: asdetermined was financialof the assets quality credit The priceEquity risk December 31,2015 December 31, 2016 correspondingits nominalamounts and carrying values(amounts follows: thousands) in The terms and profile maturity theinterest-bearingof financial assetsand liabilities, together with Foundation’s investments in debt securities. The Foundation’s tomarket exposure changes risk for interest in rates relates to the primarily rateInterest risk bank.trustee Foundation’s AFS financial assets. The Foundation’s AFS financial assets aremanaged by a The Foundation’s the exposure forto risk change in market value relates primarily tothe andrisk equity price risk. Foundation’s includesrisk market rate market The changes interest becauseprices. in fluctuate of Market risk the that theis risk value fair cash or future a financial flows of instrument will Market Risk 2015. prices,variables all with constant, of held the Foundation’s assetsnet onDecember 31,2016 and The followingtable demonstrates sensitivitya the to reasonably change the possible market in view developments.participantsmarket the performance,stability,political anddomestic rates,inflation change, these prices reflectinghow market. Dependingon several factors as such rateinterest movements, theeconomic country’s individual specific to instruments issuers, ortheir factorsaffectingor instruments tradedall in the subject priceto due to risk changes marketin values of instrumentsarising fromeither factors securitiesare Suchinvestment prices market.atcertainthe in acquired are AFSfinancial assets ecuigcs nhn) Fxda h aeo netet aiu P Various Fixed at the of date investment (excluding onhand)cash ecuigcs nhn) Fxda h aeo netet Various Fixed at the of date investment (excluding on hand)cash Quoted debt investments debtQuoted Quoted debt investmentsQuoted debt Increase (decrease) (5%) 5%
Interest termsInterest (p.a.) termsInterest (p.a.) Fixed at the date of investment or transaction or of sale date the at Fixed Fixed at the date of investment or Fixed at the date of sale or of sale date the at Fixed transaction revaluation cut-off revaluation cut-off
Rate FixingRate FixingRate Various Various Various 11,844,055 11,844,055 Various Various Period Within 1 year year Within 1 Period year Within 1 Period
P=115,166,288 (115,166,288) P=136,163,965 P=117,150,032 =111,460,262 P P=111,460,262 =99,616,207 =99,616,207 19,013,933 19,013,933 Effect Neton Effect Assets 2016 2016 – 953,961,329 953,961,329 953,961,329 – 953,961,329 – 949,948,445 949,948,445 949,948,445 – 949,948,445
P=949,948,445 P=1,086,112,410 =953,961,329 P =953,961,329
More than More than More P=118,702,383 1 year 1 year (118,702,383) P=– P=117,150,032 P =– P – 11,844,055 11,844,055 – – 19,013,933 – 19,013,933
=1,065,421,591 =1,065,421,591 2015 =99,616,207 =99,616,207 Carrying Carrying Value Value Value
Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Foundation’s market risk includes interest rate risk and equity price risk.
The Foundation’s exposure to the risk for change in market value relates primarily to the Foundation’s AFS financial assets. The Foundation’s AFS financial assets are managed by a trustee bank.
Interest rate risk The Foundation’s exposure to market risk for changes in interest rates relates primarily to the Foundation’s investments in debt securities. The terms and maturity profile of the interest-bearing financial assets and liabilities, together with its corresponding nominal amounts and carrying values follows: (amounts in thousands)
December 31, 2016 Rate Fixing More than Carrying Interest terms (p.a.) Period Within 1 year 1 year Value Cash and cash equivalents (excluding cash on hand) Fixed at the date of investment Various P=117,150,032 P=– P=117,150,032 Fixed at the date of sale or Receivables transaction Various 19,013,933 – 19,013,933 AFS financial asset - Fixed at the date of investment or Quoted debt investments revaluation cut-off Various – 949,948,445 949,948,445 P=136,163,965 P=949,948,445 P=1,086,112,410
December 31, 2015 Rate Fixing More than Carrying Interest terms (p.a.) Period Within 1 year 1 year Value Cash and cash equivalents (excluding cash on hand) Fixed at the date of investment Various P=99,616,207 P=– P=99,616,207 Fixed at the date of sale or Receivables transaction Various 11,844,055 – 11,844,055 AFS financial asset - Fixed at the date of investment or Quoted debt investments revaluation cut-off Various – 953,961,329 953,961,329 P=111,460,262 P=953,961,329 P=1,065,421,591
Equity price risk AFS financial assets are acquired at certain prices in the market. Such investment securities are subject to price risk due to changes in market values of instruments arising either from factors specific to individual instruments or their issuers, or factors affecting all instruments traded in the market. Depending on several factors such as interest rate movements, the country’s economic performance, political stability, and domestic inflation rates, these prices change, reflecting how market participants view the developments.
The following table demonstrates the sensitivity to a reasonably possible change in the market prices, with all variables held constant, of the Foundation’s net assets on December 31, 2016 and 2015.
Effect on Net Assets Increase (decrease) 2016 2015 5% P=115,166,288 P=118,702,383 (5%) (115,166,288) (118,702,383)
The credit quality of the financial assets was determined as follows:
2016 ANNUAL REPORT 111 Cash and cash equivalents - based on the nature of the counterparty. These are held by b. Input VAT counterparty banks with minimal risk of bankruptcy and are therefore classified as high grade. Balance at January 1 P=6,186,823 Receivables - high grade pertains to receivables from Ayala Group of Companies and debtors Current year’s domestic purchases/payments for: without past due accounts; medium grade pertains to receivables with past due accounts not Services lodged under other accounts 3,344,868 exceeding 12 months; and low grade pertains to receivables with past due accounts exceeding Goods other than for resale or manufacture 390,020 12 months. 9,921,711 Claims for tax credit/refund and other adjustments (4,039,521) AFS financial assets – high grade pertains to quoted financial assets and unquoted financial assets Balance at December 31 P=5,882,190 are unrated. c. Importations
16. Other Activities Dutiable value P=126,508 Duties and taxes 24,725 Details of revenue and expenses of the Foundation’s museum, library and other revenue-earning Storage and handling fee 22,350 community development projects are as follows: Total landed cost P=173,583 2016 2015 d. Excise tax Revenue P=35,147,420 P=34,181,318 Expenses (38,272,102) (48,722,493) The Foundation did not enter into any transaction subject to excise tax. Net loss P=3,124,682 P=14,541,175 e. Documentary stamp tax
17. Supplementary Tax Information Under Revenue Regulations (RR) 15-2010 The Foundation paid documentary stamp taxes amounting to P=250.
In compliance with the requirements set forth by RR 15-2010 hereunder are the information on taxes, duties and license fees paid or accrued during the taxable year. : f. All other local and national taxes
Value-added Tax (VAT) This includes all other taxes, local and national, including real estate taxes, licenses and permit fees lodged under the ‘Project’ and ‘General and administrative’ accounts both in the a. Output VAT Foundation’s statement of activities:
Net Sales/ Details consist of the following: Receipts Output VAT Taxable sales General and Leasing income P=14,488,128 P=1,738,575 Project Administrative Sales of services 12,430,466 1,491,656 Expenses Expenses Total Sale of goods 6,744,085 809,290 Real estate taxes P=462,193 P=4,671 =466,864P P=33,662,679 P=4,039,521 License and permits fees 239,768 37,175 276,943 Others 890 125,172 126,062 The Foundation’s sales of services are based on actual collections received, and sale of goods P=702,851 P=167,018 P=869,869 include those from consignment, hence, may not be the same as amounts accrued in the statement of activities.
112 AYALA FOUNDATION b. Input VAT
Balance at January 1 P=6,186,823 Current year’s domestic purchases/payments for: Services lodged under other accounts 3,344,868 Goods other than for resale or manufacture 390,020 9,921,711 Claims for tax credit/refund and other adjustments (4,039,521) Balance at December 31 P=5,882,190 c. Importations
Dutiable value P=126,508 Duties and taxes 24,725 Storage and handling fee 22,350 Total landed cost P=173,583 d. Excise tax
The Foundation did not enter into any transaction subject to excise tax. e. Documentary stamp tax
The Foundation paid documentary stamp taxes amounting to P=250. f. All other local and national taxes
This includes all other taxes, local and national, including real estate taxes, licenses and permit fees lodged under the ‘Project’ and ‘General and administrative’ accounts both in the Foundation’s statement of activities:
Details consist of the following:
General and Project Administrative Expenses Expenses Total Real estate taxes P=462,193 P=4,671 =466,864P License and permits fees 239,768 37,175 276,943 Others 890 125,172 126,062 P=702,851 P=167,018 P=869,869
2016 ANNUAL REPORT 113 AYALA FOUNDATION, INC. SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS g. Withholding taxes
Withholding taxes on compensation and benefits P=11,436,697 Expanded withholding taxes 5,265,102 PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Final withholding taxes 266,201 Applicable Withholding VAT 103,169 Effective as of December 31, 2016 P=17,071,169 Framework for the Preparation and Presentation of Financial Statements Conceptual Framework Phase A: Objectives and qualitative h. Tax assessments characteristics In 2016, the Foundation has received a final assessment notice for the calendar year 2009 from PFRSs Practice Statement Management Commentary the BIR amounting as follows: Philippine Financial Reporting Standards PFRS 1 First-time Adoption of Philippine Financial Reporting Basic deficiency tax P=42,077 (Revised) Standards Interest 58,908 Compromise penalty 25,000 Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or P=125,985 Associate Amendments to PFRS 1: Additional Exemptions for This has been paid and closed out in 2016. First-time Adopters Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time Adopters Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First-time Adopters Amendments to PFRS 1: Government Loans Amendments to PFRS 1: Borrowing costs Amendments to PFRS 1: Meaning of ‘Effective PFRSs PFRS 2 Share-based Payment Amendments to PFRS 2: Vesting Conditions and Cancellations Amendments to PFRS 2: Group Cash-settled Share- based Payment Transactions Amendments to PFRS 2: Definition of Vesting Condition Amendments to PFRS 2: Share-based Payment, Classification and Measurement of Share-based Not early adopted Payment Transactions PFRS 3 Business Combinations (Revised) Amendments to PFRS 3: Accounting for Contingent Consideration in a Business Combination Amendments to PFRS 3: Scope Exceptions for Joint Arrangements
114 AYALA FOUNDATION AYALA FOUNDATION, INC. SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS
PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2016 Framework for the Preparation and Presentation of Financial Statements Conceptual Framework Phase A: Objectives and qualitative characteristics PFRSs Practice Statement Management Commentary Philippine Financial Reporting Standards PFRS 1 First-time Adoption of Philippine Financial Reporting (Revised) Standards Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Amendments to PFRS 1: Additional Exemptions for First-time Adopters Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time Adopters Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First-time Adopters Amendments to PFRS 1: Government Loans Amendments to PFRS 1: Borrowing costs Amendments to PFRS 1: Meaning of ‘Effective PFRSs PFRS 2 Share-based Payment Amendments to PFRS 2: Vesting Conditions and Cancellations Amendments to PFRS 2: Group Cash-settled Share- based Payment Transactions Amendments to PFRS 2: Definition of Vesting Condition Amendments to PFRS 2: Share-based Payment, Classification and Measurement of Share-based Not early adopted Payment Transactions PFRS 3 Business Combinations (Revised) Amendments to PFRS 3: Accounting for Contingent Consideration in a Business Combination Amendments to PFRS 3: Scope Exceptions for Joint Arrangements
2016 ANNUAL REPORT 115 PHILIPPINE FINANCIAL REPORTING STANDARDS AND PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Not Adopted INTERPRETATIONS Adopted Not Adopted Applicable Applicable Effective as of December 31, 2016 Effective as of December 31, 2016 PFRS 4 Insurance Contracts PFRS 10 Consolidated Financial Statements Amendments to PAS 39 and PFRS 4: Financial Amendment to PFRS 10: Investment Entities: Applying Guarantee Contracts the Consolidation Exception Amendments to PFRS 4, Insurance Contracts, Amendment to PFRS 10 and PAS 28: Sale or Not early adopted Applying PFRS 9, Financial Instruments, with PFRS 4 Contribution of Assets between an Investor and its Not early adopted Associate or Joint Venture* PFRS 5 Non-current Assets Held for Sale and Discontinued Operations PFRS 11 Joint Arrangements Amendments to PFRS 5: Changes in Methods of Amendment to PFRS 11: Accounting for Acquisitions Disposal of Interests in Joint Operations PFRS 6 Exploration for and Evaluation of Mineral Resources PFRS 12 Disclosure of Interests in Other Entities PFRS 7 Financial Instruments: Disclosures Amendments to PFRS 12: Investment Entities: Applying the Consolidation Exception Amendments to PFRS 7: Transition PFRS 12, Clarification of the Scope of the Standard Not early adopted Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets PFRS 13 Fair Value Measurement Amendments to PAS 39 and PFRS 7: Reclassification Amendments to PFRS 13: Short-term receivable and of Financial Assets – Effective Date and Transition payables Amendments to PFRS 7: Improving Disclosures about Amendments to PFRS 13: Portfolio Exception Financial Instruments PFRS 14 Regulatory Deferral Accounts Amendments to PFRS 7: Disclosures - Transfers of Revenue from Contracts with Customers Not early adopted Financial Assets PFRS 15 Leases Not early adopted Amendments to PFRS 7: Disclosures – Offsetting PFRS 16 Financial Assets and Financial Liabilities Philippine Accounting Standards Amendments to PFRS 7: Mandatory Effective Date of Presentation of Financial Statements PAS 1 PFRS 9 and Transition Disclosures (Revised) Amendment to PAS 1: Capital Disclosures Amendments to PFRS 7: Amendments to PFRS 7: Amendments to PAS 32 and PAS 1: Puttable Financial Servicing Contracts Instruments and Obligations Arising on Liquidation Applicability of the Amendments to PFRS 7 to Amendments to PAS 1: Presentation of Items of Other Condensed Interim Financial Statements Comprehensive Income PFRS 8 Operating Segments Amendments to PAS 1: Clarification of the Amendments to PFRS 8: Aggregation of Operating requirements for comparative information Segments and Reconciliation of the Total of the Reportable Segments’ Assets to the Entity’s Assets Amendment to PAS 1: Disclosure Initiative PFRS 9 Financial Instruments: Classification and Measurement PAS 2 Inventories Not early adopted (2010 version) PAS 7 Statement of Cash Flows Financial Instruments - Hedge Accounting and Amendments to PAS 7, Statement of Cash Flows, Not early adopted amendments to PFRS 9, PFRS 7 and PAS 39 (2013 Not early adopted Disclosure Initiative version) PAS 8 Accounting Policies, Changes in Accounting Estimates Financial Instruments (2014 or final version) Not early adopted and Errors PAS 10 Events after the Reporting Period PAS 11 Construction Contracts
116 AYALA FOUNDATION PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2016 PFRS 10 Consolidated Financial Statements Amendment to PFRS 10: Investment Entities: Applying the Consolidation Exception Amendment to PFRS 10 and PAS 28: Sale or Contribution of Assets between an Investor and its Not early adopted Associate or Joint Venture* PFRS 11 Joint Arrangements Amendment to PFRS 11: Accounting for Acquisitions of Interests in Joint Operations PFRS 12 Disclosure of Interests in Other Entities Amendments to PFRS 12: Investment Entities: Applying the Consolidation Exception PFRS 12, Clarification of the Scope of the Standard Not early adopted PFRS 13 Fair Value Measurement Amendments to PFRS 13: Short-term receivable and payables Amendments to PFRS 13: Portfolio Exception PFRS 14 Regulatory Deferral Accounts PFRS 15 Revenue from Contracts with Customers Not early adopted PFRS 16 Leases Not early adopted Philippine Accounting Standards PAS 1 Presentation of Financial Statements (Revised) Amendment to PAS 1: Capital Disclosures Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation Amendments to PAS 1: Presentation of Items of Other Comprehensive Income Amendments to PAS 1: Clarification of the requirements for comparative information Amendment to PAS 1: Disclosure Initiative PAS 2 Inventories PAS 7 Statement of Cash Flows Amendments to PAS 7, Statement of Cash Flows, Not early adopted Disclosure Initiative PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors PAS 10 Events after the Reporting Period PAS 11 Construction Contracts
2016 ANNUAL REPORT 117 PHILIPPINE FINANCIAL REPORTING STANDARDS AND PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Not Adopted INTERPRETATIONS Adopted Not Adopted Applicable Applicable Effective as of December 31, 2016 Effective as of December 31, 2016 PAS 12 Income Taxes PAS 28 Amendments to PAS 28, Sale or Contribution of Assets (Amended) between an Investor and its Associate or Joint Not early adopted Amendment to PAS 12 - Deferred Tax: Recovery of (cont’d) Venture * Underlying Assets PAS 29 Financial Reporting in Hyperinflationary Economies Amendments to PAS 12, Income Taxes, Recognition of Not early adopted Deferred Tax Assets for Unrealized Losses PAS 31 Interests in Joint Ventures PAS 16 Property, Plant and Equipment PAS 32 Financial Instruments: Disclosure and Presentation Amendment to PAS 16: Classification of servicing Amendments to PAS 32 and PAS 1: Puttable Financial equipment Instruments and Obligations Arising on Liquidation Amendment to PAS 16 and PAS 38: Revaluation Amendment to PAS 32: Classification of Rights Issues Method - Proportionate Restatement of Accumulated Amendment to PAS 32: Presentation – Tax effect of Depreciation distribution to holders of equity instrument Amendment to PAS 16 and PAS 38: Clarification of Amendments to PAS 32: Offsetting Financial Assets Acceptable Methods of Depreciation and Amortization and Financial Liabilities Amendments to PAS 16 and PAS 41: Bearer Plants PAS 33 Earnings per Share PAS 17 Leases PAS 34 Interim Financial Reporting PAS 18 Revenue Amendments to PAS 34: Interim financial reporting PAS 19 Employee Benefits and segment information for total assets and liabilities (Amended) Amendments to PAS 19: Defined Benefit Plans - Amendments to PAS 34: Disclosure of Information Employee Contributions ‘elsewhere in the interim financial report’ Amendments to PAS 19: Regional Market Issue PAS 36 Impairment of Assets regarding Discount Rate Amendments to PAS 36: Recoverable Amount PAS 20 Accounting for Government Grants and Disclosure of Disclosures for Non-Financial Assets Government Assistance PAS 37 Provisions, Contingent Liabilities and Contingent PAS 21 The Effects of Changes in Foreign Exchange Rates Assets Amendment: Net Investment in a Foreign Operation PAS 38 Intangible Assets PAS 23 Borrowing Costs Amendments to PAS 16 and PAS 38: Revaluation (Revised) Method - Proportionate Restatement of Accumulated Amortization PAS 24 Related Party Disclosures Amendments to PAS 16 and PAS 38: Clarification of (Revised) Amendments to PAS 24: Key Management Personnel Acceptable Methods of Depreciation and Amortization PAS 26 Accounting and Reporting by Retirement Benefit Plans PAS 39 Financial Instruments: Recognition and Measurement PAS 27 Separate Financial Statements Amendments to PAS 39: Transition and Initial (Amended) Amendment to PAS 27: Equity Method in Separate Recognition of Financial Assets and Financial Financial Statements Liabilities Amendments to PAS 39: Cash Flow Hedge Accounting PAS 28 Investments in Associates and Joint Ventures of Forecast Intragroup Transactions (Amended) Amendments to PAS 28: Investment Entities: Applying the Consolidation Exception Amendments to PAS 39: The Fair Value Option Amendments to PAS 39 and PFRS 4: Financial Amendments to PAS 28, Measuring an Associate or Not early adopted Joint Venture at Fair Value Guarantee Contracts
118 AYALA FOUNDATION PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2016 PAS 28 Amendments to PAS 28, Sale or Contribution of Assets (Amended) between an Investor and its Associate or Joint Not early adopted (cont’d) Venture * PAS 29 Financial Reporting in Hyperinflationary Economies PAS 31 Interests in Joint Ventures PAS 32 Financial Instruments: Disclosure and Presentation Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation Amendment to PAS 32: Classification of Rights Issues Amendment to PAS 32: Presentation – Tax effect of distribution to holders of equity instrument Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities PAS 33 Earnings per Share PAS 34 Interim Financial Reporting Amendments to PAS 34: Interim financial reporting and segment information for total assets and liabilities Amendments to PAS 34: Disclosure of Information ‘elsewhere in the interim financial report’ PAS 36 Impairment of Assets Amendments to PAS 36: Recoverable Amount Disclosures for Non-Financial Assets PAS 37 Provisions, Contingent Liabilities and Contingent Assets PAS 38 Intangible Assets Amendments to PAS 16 and PAS 38: Revaluation Method - Proportionate Restatement of Accumulated Amortization Amendments to PAS 16 and PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization PAS 39 Financial Instruments: Recognition and Measurement Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and Financial Liabilities Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions Amendments to PAS 39: The Fair Value Option Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts
2016 ANNUAL REPORT 119 PHILIPPINE FINANCIAL REPORTING STANDARDS AND PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not Not INTERPRETATIONS Adopted Not Adopted INTERPRETATIONS Adopted Not Adopted Applicable Applicable Effective as of December 31, 2016 Effective as of December 31, 2016 PAS 39 Amendments to PAS 39 and PFRS 7: Reclassification IFRIC 14 The Limit on a Defined Benefit Asset, Minimum (cont’d) of Financial Assets Funding Requirements and their Interaction Amendments to PAS 39 and PFRS 7: Reclassification Amendments to Philippine Interpretations IFRIC- 14, of Financial Assets – Effective Date and Transition Prepayments of a Minimum Funding Requirement Amendments to Philippine Interpretation IFRIC–9 and IFRIC 15 Agreements for the Construction of Real Estate* PAS 39: Embedded Derivatives IFRIC 16 Hedges of a Net Investment in a Foreign Operation Amendment to PAS 39: Eligible Hedged Items IFRIC 17 Distributions of Non-cash Assets to Owners Amendment to PAS 39: Novation of Derivatives and Transfers of Assets from Customers Continuation of Hedge Accounting IFRIC 18 IFRIC 19 Extinguishing Financial Liabilities with Equity PAS 40 Investment Property Instruments Amendment to PAS 40: Interrelationship between IFRIC 20 Stripping Costs in the Production Phase of a Surface PFRS 3 and PAS 40 Mine Amendment to PAS 40: Transfer of Investment Not early adopted Levies Property IFRIC 21 IFRIC 22 Foreign Currency Transactions and Advance PAS 41 Agriculture Not early adopted Consideration Amendment to PAS 16 and PAS 41: Bearer Plants SIC-7 Introduction of the Euro Philippine Interpretations SIC-10 Government Assistance - No Specific Relation to IFRIC 1 Changes in Existing Decommissioning, Restoration Operating Activities and Similar Liabilities SIC-12 Consolidation - Special Purpose Entities IFRIC 2 Members' Share in Co-operative Entities and Similar Amendment to SIC - 12: Scope of SIC 12 Instruments SIC-13 Jointly Controlled Entities - Non-Monetary IFRIC 4 Determining Whether an Arrangement Contains a Contributions by Venturers Lease SIC-15 Operating Leases - Incentives IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies SIC-29 Service Concession Arrangements: Disclosures IFRIC 8 Scope of PFRS 2 SIC-31 Revenue - Barter Transactions Involving Advertising Services IFRIC 9 Reassessment of Embedded Derivatives Intangible Assets - Web Site Costs Amendments to Philippine Interpretation IFRIC–9 and SIC-32 PAS 39: Embedded Derivatives ** Effectivity has been deferred by the SEC and FRSC IFRIC 10 Interim Financial Reporting and Impairment IFRIC 11 PFRS 2- Group and Treasury Share Transactions IFRIC 12 Service Concession Arrangements IFRIC 13 Customer Loyalty Programmes
120 AYALA FOUNDATION PHILIPPINE FINANCIAL REPORTING STANDARDS AND Not INTERPRETATIONS Adopted Not Adopted Applicable Effective as of December 31, 2016 IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Amendments to Philippine Interpretations IFRIC- 14, Prepayments of a Minimum Funding Requirement IFRIC 15 Agreements for the Construction of Real Estate* IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC 17 Distributions of Non-cash Assets to Owners IFRIC 18 Transfers of Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 21 Levies IFRIC 22 Foreign Currency Transactions and Advance Not early adopted Consideration SIC-7 Introduction of the Euro SIC-10 Government Assistance - No Specific Relation to Operating Activities SIC-12 Consolidation - Special Purpose Entities Amendment to SIC - 12: Scope of SIC 12 SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers SIC-15 Operating Leases - Incentives SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease SIC-29 Service Concession Arrangements: Disclosures SIC-31 Revenue - Barter Transactions Involving Advertising Services SIC-32 Intangible Assets - Web Site Costs ** Effectivity has been deferred by the SEC and FRSC
2016 ANNUAL REPORT 121 AYALA FOUNDATION AYALA GROUP DIRECTORY NETWORK
Ayala Foundation, Inc. Ayala Corporation 8F 111 Paseo Building 34F Tower One, Ayala Triangle, Paseo de Roxas corner Ayala Avenue Legaspi Street Makati City 1226 Philippines Legaspi Village 1229 Tel: +632 908 3000 Makati City, Philippines Fax: +632 848 5846 Tel (632) 717 5800 www.ayala.com.ph Fax (632) 813 4488 www.ayalafoundation.org INVESTOR RELATIONS [email protected] Ayala Museum Makati Avenue corner SUSTAINABILITY De la Rosa Street [email protected] Greenbelt Park Makati City, Philippines Tel (632) 759 8288 REAL ESTATE Fax (632) 757 2787 www.ayalamuseum.org Ayala Land 30F Tower One and Exchange Plaza Filipinas Heritage Library Ayala Triangle, Ayala Avenue 6F Ayala Museum Makati City 1226 Philippines Makati Avenue corner Tel +632 908 3000 De la Rosa Street Fax +632 848 5336 Greenbelt Park www.ayalaland.com.ph Makati City, Philippines Tel (632) 759-8288 local 36 INVESTOR RELATIONS www.filipinaslibrary.org.ph [email protected]
SUSTAINABILITY Visayas Operations [email protected] A Space Cebu Crossroads, Gov. M. Cuenco Avenue Banilad, Cebu City, Philippines FINANCIAL SERVICES Tel/Fax (632) 888 7656 Bank Of The Philippine Islands Mindanao Operations 6768 Ayala Avenue 2F Climbs Building, Tiano Brothers Makati City 0720 Philippines cor. Cayetano Pacana Street Tel +632 818 5541 to 48 Cagayan de Oro City, Philippines Express Phone Banking +632 89 100 Tel (638822) 729 497 www.bpiexpressonline.com
INVESTOR RELATIONS [email protected]
SUSTAINABILITY [email protected]
122 AYALA FOUNDATION TELECOMMUNICATIONS AC AUTOMOTIVE INFRASTRUCTURE
Globe Telecom, Inc. Ayala Automotive AC Infrastructure The Globe Tower Holdings Corporation 32F Tower One 32nd Street corner 7th Avenue 11F Bonifacio One Technology Tower, Ayala Triangle Ayala Avenue Bonifacio Global City 1634 3030 Rizal Drive West cor. 31st Street, Makati City 1226 Philippines Taguig, Philippines Bonifacio Global City, 1634 Taguig Tel +632 908 3000 Landline: +632 730 2000 Tel +632 459 4504 Fax +632 759 4881 (Trunk Line for Corporate Office) www.ayala-energyinfra.com +632 730 1000 (Customer Care) SUSTAINABILITY +632 730 1010 (Sales) [email protected] SUSTAINABILITY +632 730 1300 (Loyalty) [email protected] Mobile: 211 www.globe.com.ph Honda Cars Makati, Inc. 1 Pres. Sergio Osmeña Highway SOCIAL INFRASTRUCTURE Magallanes, Makati City 1232 INVESTOR RELATIONS Philippines AC Health [email protected] Tel +632 902 9393 3F Makati Stock Exchange Bldg. Fax +632 852 6593 6767 Ayala Avenue SUSTAINABILITY www.hondamakati.com.ph Makati City 1226 Philippines [email protected] Tel +632 754 8027 Isuzu Automotive [email protected] www.achealth.com.ph WATER Dealership, Inc. Alabang-Zapote Road corner SUSTAINABILITY Manila Water Company, Inc. Acacia Avenue [email protected] MWSS Administration Building Ayala Alabang Muntinlupa City 489 Katipunan Road, Balara 1780 Philippines Tel +632 807 1788 AC Education Quezon City 1105 Philippines 33F Tower One, Ayala Triangle, Tel +632 917 5900 Fax +632 807 6011 www.isuzuautodealer.com.ph Ayala Avenue, Makati City Hotline +632 1627 1226 Philippines www.manilawater.com Tel +632 744 5370; +632 908 3455 Automobile Central Fax +632 892 5112 INVESTOR RELATIONS Enterprise, Inc. www.ayalaeducation.com [email protected] 11F Bonifacio One Technology Tower 3030 Rizal Drive West cor. 31st Street SUSTAINABILITY SUSTAINABILITY Bonifacio Global City, Taguig City [email protected] [email protected] 1634 Philippines Tel +632 459 4555 www.volkswagen.com.ph INTERNATIONAL INDUSTRIAL TECHNOLOGIES AG Holdings Limited Integrated POWER 250 North Bridge Road Micro-Electronics Inc. #32-03A Raffles City Tower North Science Ave., AC Energy Singapore 179101 Special Export Processing Zone 32F Tower One Tel +65 6311 5151 Laguna Technopark, Binan 4024 Ayala Triangle, Ayala Avenue Fax +65 6311 5160 Laguna, Philippines Makati City 1226 Philippines Tel: +632 756 6840 Tel +632 908 3032 Fax: +6349 544 0322 Fax +632 751 6511 SOCIAL COMMITMENT www.global-imi.com www.ayala-energyinfra.com Ayala Foundation, Inc. INVESTOR RELATIONS SUSTAINABILITY 8F 111 Paseo Building [email protected] [email protected] Paseo de Roxas corner Legaspi Street SUSTAINABILITY Legaspi Village, Makati City 1229 [email protected] Philippines Tel (632) 717 5800 Fax (632) 813 4488 www.ayalafoundation.org
SUSTAINABILITY [email protected]
2016 ANNUAL REPORT 123 ABOUT THE COVER
Ways We Are Creating Opportunities for Progressive Communities
Diverse cultures, diverse identities, diverse dreams and aspirations— but all solidly Filipino. We at Ayala Foundation help improve the lives of Filipinos by nurturing the growth and development of communities from virtually all regions in the country.
In this year’s Ayala group unified annual reports, we present how our collective achievements are resonating not just within our businesses, but also across the Philippines and Southeast Asia—transforming industries and contributing to society.
124 AYALA FOUNDATION ACKNOWLEDGEMENTS
Editorial and Design Direction Ayala Foundation, Inc.
Photography Erwin Mascariñas (Operations) Cyrus Panganiban (Management) Wig Tysmans (Additional Management) Vincent Coscolluela, Peck Imson, Erik Liongoren, and Ayala Foundation (Additional Operations) Jamie Dichavez/El Nido Resorts (underwater photo on pp. 28–29)
Cover Concept and Design Publicis JimenezBasic and Ayala Foundation, Inc. Hannah Marcelo/Ayala Foundation, Inc. (Cover photography)
Design and Layout Studio Dialogo